Suppliers - Not Wholesalers -- Key to Brand Building Success

The collapse of Republic National Distributing Co., which was triggered by Sazerac Co.'s decision in late 2022 to leave RNDC for a network of 12 wholesalers in roughly 30 states, has triggered a major shift in the way brands go to market.

Boucard Nesin, beverage indusry XXXX for Rabobank, in his latest analysis reviews the lessons learned and concludes wholesalers can support execution, but despite all the talk at Wine & Spirits Wholesalers of America conventions over the years about building brands, brand success depends on the supplier's selling capabilities, not the distributor's.

To a large extent, beginning with Diageo, suppliers have pushed huge costs and a large share of brand-building responsibility onto wholesalers. The wholesalers have been happy to provide this in return for being richly compensated. But to a large extent, the iincentives of suppliers and wholesalers have ceased to be aligned, leaving the agent to act in his own interest.

"In the context of alcohol, that would mean brands stop paying for dedicated staff and special divisions and bring those capabilities back in-house – shifting key functions from agents back into the hands of principals," Nesin writes.

"Once a supplier has those capabilities, the bells and whistles of a national agreement matter less,." he explains. "If above-market resources are no longer decisive, why not choose the distributor with the best coverage, execution, and economics? By building their own in-market sales and marketing capabilities, suppliers like Sazerac and Gallo have been able to prioritize these fundamentals in their route-to-market strategy."

Unlike Gallo, Diageo, ABInBev, most suppliers don't have the scale and resources to become category captains overnight, Nesin writes. "Still, there are practical first steps brands should consider, regardless of route-to-market strategy, but especially if they are moving to a more fragmented network:

1. Reinforce your national accounts team. If a supplier can only afford to invest in one area, this is the one.
2. Invest in commercial analytics and market intelligence. Brands that leave a national agreement with a supplier need tool to target accounts for new placements, prioritize markets by brand, assess which promotions are working, and track how those decisions affect the bottom line.
3. Adding boots on the ground becomes part of a supplier's distributor management function. "A surprising amount of distributor management still comes down to showing up: replacing a faceless brand with a personal relationship, educating distributor staff, and – just as often – reminding that staff about products and marketing plans." Nesin says.
4. Develop more shared-service agreements. A smaller brand can hand over commercial executions to a larger brand, as Korbel has done with Freixenet-Mionetto. Or, similarly sized brands with clear synergiiescan combine sales force. "For example, a brand with strong national account coverage may partner with another that performs
   well on-premise" Nesin says.

“We don’t see wholesalers as brand builders,” the CEO of one supplier that signed a national agreement told Nesin. “Their job is to increase points of distribution, especially outside major national accounts, but brand building and velocity must come from the supplier.”

You can download the entire report, “Best athlete” versus national alignment: The strategy upending US alcohol distribution. It well worth reading and pondering.