September 2017 Issue of Wines & Vines

Navigating a Changing Wholesale Landscape 

Wineries from Paso Robles to the Willamette Valley share their strategies for success 

by Andrew Adams 

For those opening a new winery or trying to get a brand to the next level, the news of every additional distributor merger may seem like another obstacle on an already challenging road.  As difficult as it may seem, there are proven ways to find the freeway to wholesale success. 

Adam Lee, founder of 30,000-case Siduri Wines of Santa Rosa, Calif., navigated the wholesale market and the direct-to-consumer route for years as he built a brand he’d eventually sell to Jackson Family Wines (JFW) in 2015. Despite his success, Lee, who enjoyed excellent reviews and was in the right place to catch the rising wave of Pinot Noir’s popularity, still recalled the challenges of working the wholesale sales channel. 

In addition to his ongoing work with Siduri for JFW, Lee said his non-compete agreement allows him to consult for a few small wineries in sales and marketing. He agreed that consolidation and a changing wine media landscape have made it even harder to gain distribution. Positive reviews don’t carry the same weight they used to. He mentioned one of his clients recently earned stellar scores from The Wine Advocate; while it helped sales, it wasn’t the guaranteed, instant sell-out that such reviews used to bring. “No one writer possesses the weight that they used to,” he said. 

But good press and reviews are still valuable, so Lee said wineries should get as many as possible from traditional publications and bloggers, then use those to create a sheet of testimonials that can help convince retailers and restaurants to carry their wine. If a winery owner can land a few accounts himself, then it makes that brand much more desirable to a distributor. “That helps tremendously,” Lee said. 

Direct-to-consumer (DtC) sales are often branded as the best way around the three-tier system. Lee agreed, but to a point. “I think it’s ideal, but it doesn’t always work that way, depending on how much wine you have and what you have to sell,” he said. 

A winery shouldn’t be in the business of competing with its distributors on price through DtC. And in the wake of a tough harvest or a sudden windfall of publicity that sends demand skyrocketing, he advised keeping a portion back for wholesale even if the profits are tempting. “Don’t cut out the distributors entirely,” he said. “Even if you could sell it all direct at a higher margin, screwing them around in one year to make a quick dollar is not smart.”   

Lee said one strategy that worked for him in distant markets was renting a house through Airbnb or a similar service and throwing a party. He said one could hold a tasting for consumers early in the day and then keep the party going until 10 p.m. or later for sommeliers and sales reps when they are done with their shifts. He said he frequently could cover the cost of the house with DtC sales while bolstering trade relations, too.

Build wholesale and DtC 
As more states have opened up to DtC sales, Jason Haas, partner and general manager of Tablas Creek Winery in Paso Robles, Calif., said that trend also improved his wholesale sales. Haas said despite the large mergers, one should consider that several key states now allow DtC shipments for the first time. “With states opening up to DtC, it makes it more attractive to do wholesale and DtC there,” he said. 

For a state like Massachusetts, which changed its laws to allow direct shipping in 2014, Haas can work the market with distributor reps during the day and host a dinner for consumers that evening. “We can make much more efficient use of a trip,” he said. “That’s something we’ve found in every state that has opened to direct shipping: Our wholesale business has improved.” 

He doesn’t see a need to choose one or the other. “If a state is worth focusing on for DtC, it’s worth focusing on wholesale,” he said. “That’s just because you only have a certain number of hours in the day.” 

Tablas Creek produces around 30,000 cases per year using Rhone grape varieties, and that’s split about evenly between DtC sales and distribution. The wines are distributed in all 50 states through 40 companies.

Haas said the winery’s sales infrastructure has been affected by consolidation, although the effects of a merger aren’t always the same. Sometimes a smaller company is acquired by a larger one and continues operating as it always has; other times staff and territories change, and it may take six months or a year before wineries can make any headway in a market. 
Haas was part of a panel discussion about distributor consolidation at the 2013 Unified Grape & Wine Symposium and said since then it has become more challenging to find a distributor, but it’s not impossible. He said he regularly participates in tastings held by the Paso Robles Wine Alliance in major markets outside of California, and he encourages new and smaller wineries to join. “In almost every case they find distribution when they’re looking for it,” he said. “There’s still opportunity out there, it’s crowded, noisier, and you need to be a more active participant.” 

Find your ‘brand champions’
Sokol Blosser Winery produces nearly 90,000 cases in the Willamette Valley of Oregon. Alison Sokol Blosser is the CEO of the winery and daughter of founder Susan Sokol Blosser. She said in an email that the winery has distribution in all 50 states and is exported to about 18 countries, yet she still considers her family’s business a small brand and said it’s a challenge to get the attention of wholesalers and retailers. “There is consolidation happening not just at the distribution level but also at the retail level and the supplier level,” she said. “This makes it harder for small brands like Sokol Blosser to get attention and traction.” 

Events like Oregon Pinot Camp, which brings buyers from all over the nation to the wineries of the Willamette Valley, are vital for Sokol Blosser to build successful sales relationships. “Social media has also been a helpful tool to talk directly with buyers, and to track their comings and goings,” she said.

The winery has three sales managers who work directly with distributors, and she referred to the best distributor reps as “champions.” Because of the differences in people and markets, Sokol Blosser said she has to focus sales resources where they achieve the maximum effect.

“Like most other wineries, we put a lot of emphasis on the markets that are traditionally big wine markets (New York, Illinois, California, Florida and Texas), but we typically have better success in smaller markets,” she said. “Often this is due to the relationship and the fact that we can get more attention in smaller markets.  For instance, we sell more Pinot Noir in South Carolina than we do in Florida.”

L’Ecole No. 41 winery in Walla Walla, Wash., produces around 50,000 cases per year. The winery has landed on Wine & Spirits magazine’s Top 100 Wineries list for 14 consecutive years and has earned favorable reviews in other national and international publications. “Without trying to brag about it, you really can’t get much better in respect and reputation than what we have, and it’s still challenging,” owner and managing winemaker Martin Clubb said about distribution. “We’re still trying to make it work under the old classic model, and I’ll tell you: It’s challenging.” 

The producer’s wine is distributed in 47 states through a number of companies, and most of those are smaller operations. “Generally speaking we try and not be with the really giant distributors, simply because we’re not important enough,” he said. 

While small compared to many other U.S. wineries in the wholesale market, Clubb said L’Ecole No. 41 still produces plenty of wine to supply all their major markets and enjoy good sales. “If we can get people behind us, we’re big enough to feed them inventory,” he said. 

That’s the key challenge: Getting the people who are willing to be, as Clubb and Sokol Blosser call them, brand champions. Clubb has found the largest distributors don’t have the staff or interest to do this, and he doesn’t want to expand his production to the point where he could support a dozen or more winery sales representatives. Right now, he says he essentially has a two-person sales team. 

What does work, he said, is getting distributors to visit the winery or successfully telling the winery’s story when given the opportunity. He said when they make it to eastern Washington and learn about the vineyards, the soils and terroir, they often become that champion the winery needs. “If we don’t do that, we’re definitely not going to win the day. We don’t have a squeaky enough voice to make a difference,” he said. “We have to take our story out to them. We’ve spent a lot of time developing educational materials in terms of our sustainable farming, in terms of our geology and soils and how that affects micro-terroir.”

He said he sees the results. After making an impression, it’s not uncommon to all of a sudden sell two to three pallets of wine. Sales stay strong for a while but then will slowly taper off, and that’s when Clubb knows it’s time to renew the personal connection. “It’s kind of an unending thing: constantly going in and trying to stay on top of their mind,” he said. “We work on these issues all the time and every year, and it does get frustrating, but what’s really fun is finding those champions. There are a handful of markets where those people really make such a big difference.”

Even owners of successful wholesale brands still describe the three-tier system as a challenge, but all said it’s not impossible. One’s best bet is to stay true and consistent to what their winery does best. While it may seem harder than ever to know exactly who to call, email or try to meet at ever-larger distributors, forging those personal relationships is crucial to finding wholesale success. As Siduri’s Lee says, “Some of it is just getting in front of people. It’s being tenacious and easily forgetting rejection. It’s really a relationship business.”

Print this page   PRINTER-FRIENDLY VERSION   »
E-mail this article   E-MAIL THIS ARTICLE   »
Currently no comments posted for this article.