Wine Distributors’ Frail Egos

,Distribution seems to be the unknown force in the wine industry, and it would appear as if distributors would like keep it this way. These forces generally have the wine producers by the short and curlies, buying at a discount and then slapping on an average of 30% when selling to the retailer, who then still has to whack on a mark-up.

They move in mysterious way, as U2 sang, justifying their mark-ups with claims of superb connections in the trade and a lot of travel and hard-selling. All good and well, despite one wondering why so many distributors have gone belly-up recently if they were so shit-hot.

Recently, however, I have come across a situation which may just see distributors accused of uncompetitive practices. And once again we turn to the broad church of the internet.

A client briefed in a new website, which a bunch of tekkies in Observatory designed to perfection. We decided to go the whole hog and, following Paul Cluver and Waterford, added a shopping site. You know… customer clicks on wines, adds to shopping basket, pays cellar door prices by credit card and wine gets delivered. Boom. Convenience that we support.

Lo and behold if our distributor doesn’t give us a call to inform us that he will not be distributing his wine if we are going to be flogging it on the website. By taking orders and despatching the wine ourselves, he claims, we are entering the distribution game and taking business away from him.

Funny one this: cellar door prices (as sold on the web) are pretty much the same as retail prices. The distributor is still getting his discounted price. So where could the threat lie?

We still depend on distributors to bash down doors and use their contacts. That is what they are good at, and that is why we are willing to discount. But by trying to prevent wineries from using the web to drive sales themselves, distributors are entering dangerous territory that is not going to make them popular at all. Especially once the authorities are alerted to this, seeing they are so eager to pounce on dodgy practices in the agricultural sector.

Darian Morgan

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2 thoughts on “Wine Distributors’ Frail Egos

  1. The strong trend around the world is for more direct buying via eStores and wine-clubs. We launched a full fledged eStore for our European clients more than a year ago and the South African store (www.vnlshop.co.za) in December.
    We do not undercut retailers but ensure that our wines are as widely available as possible. This is our job and we are more focussed on doing that well than any distributor will ever be (most of the large ones have too many fingers in various brands of their own anyway).
    The eStore also offers volume discounts on larger purchases and knows the special discounts available to our wine-club members.
    We will soon start rolling out the eStore as order platform for our trade clients who wish to use such a service.
    For a winery it is a crucial channel, as you get to know your customers, get paid immediately via the credit card companies and make a better margin. We use the extra margin to subsidize delivery so that we can deliver to all the major cities and towns at around R50 per case of 6 or 12 bottles.
    We have to adapt to how our customers want to buy. We also have to ensure that our products are available in a market with massive brand selection and thus easy substitution.
    In the rest of the world, this is already the way that most wineries have gone.

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