Considerations brand owners should be aware of when developing their brand launch and distribution strategy.
You’ve finally done it, congratulations! You have created your product, developed your brand identity and packaging and now you are ready to get your finished labor of love into the hands (and mouths) of your consumers. While it may seem like the bulk of your work is behind you, you still have some big decisions to make with how your brand will be put into distribution.
Reaching Your Consumer: Leveraging “Home Field Advantage”
Whether your aspiration is to become a national brand or a regional favorite, often times the best place to launch your product is in your back yard. Multinational “Goliaths” who have huge market share dominate the alcohol beverage category nationally. The majority of these Goliaths concentrate on the high-end image markets (Vegas, New York, etc.), which has left a growing opportunity in 2nd tier markets.
Every brand is different, but typically the most cost effective, and easiest product placement is in independent on-premise accounts. While volumes may be low at first, they will offer new brands excellent visibility and there’s likely to be a mutually beneficial relationship between your brand and on-premise accounts seeking to have something unique first. As you grow into more complex retail environments like chain accounts, you’ll have a solid local launch with loyal customers you can point to and leverage.
I wrote an entire piece about maximizing DTC sales for wineries that I encourage you to read, but the DTC channel is a relatively new and rapidly growing channel for wineries and spirits brands. The benefit of increased margin by eliminating the middleman is obvious, but perhaps the greatest benefit of DTC sales is “face time” with your consumer. Direct interaction with your consumer has never been more important! If your state allows, set up a visitor center at your production facility, offer tours and tastings to guests, and get yourself in front of your consumers. Build an experience around your brand, at it will pay huge dividends.
If DTC isn’t an option, some states allow producers to distribute directly to retailers. Like DTC, producers that self distribute get a better price without the middleman, but as your brand continues to grow, you’ll want to make sure you can handle the logistics to serve your existing accounts, and earn new ones.
Navigating the 3-Tier System
The three tiered system for the selling and distribution of alcohol has been around since the repeal of prohibition, with the original intent of making excise tax easier to collect. While the 3-Tier system has its challenges, the regulations surrounding the industry continue to evolve, especially at the state level. Producers now have more market channels available to them than ever before. Usually, a healthy balance of DTC and 3-tier distribution is the best route for most brands. Tread carefully though, as the laws in each state can be radically different! Do your homework long before your launch to ensure you are in compliance with both Federal and State laws and choose your distributor carefully. Not sure what type of distributor to approach? Read about the basics here.
Franchise vs. Non-Franchise Markets
Some states give distributors a high level of protection, making it almost impossible for producers to terminate their distributor. Take extra caution when entering these markets, and choose your distributor wisely. One benefit of franchise protected distributors is that they are often more willing to take on a new product or supplier, given the marginal risk they assume.
In some states, the sale of alcohol is completely, or partially controlled by the state government. When entering these states, research the requirements and process of each state’s alcohol beverage control board before you develop your distribution strategy.
Don’t expect success overnight
The process to market success is a long and arduous task. Establishing your brand, gaining customer acceptance and vendor loyalty will take time. Provide your distributors and retailers with the tools and support they will need to sell your brand is crucial. Always remember that the retailer and distributors are invested in your brand’s success as well. It doesn’t do them much good to push a brand that won’t sell. An investment of time and money with some good old-fashioned legwork is a strong step towards making your launch a success.
photo credit: Vancouver Transfer Company baggage horse drawn wagon (ca1900) via photopin (license)
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