September 2017 Issue of Wines & Vines
 
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Help for Gaining Entrée

Marketing companies act as sales arm and advisor for wineries seeking better distribution

 
by Ben Narasin
 
 

The three-tier system has long created complexity for wineries trying to get their product to market. Recent consolidation among major distributors and the ever-increasing number of wine brands vying for on- and off-premise attention has made the job even harder. To navigate this complexity without building out a national sales force, many wine brands have relied on outside sales and marketing companies—sometimes known as “brand aggregators” or the “fourth tier”—to represent them. 

Marketing companies aggregate brands to offer a complete range to buyers and better capture their attention. By maintaining relationships with disparate distributors and maintaining a staff more varied in size and geography than all but the largest wine producers could provide on their own, they do a service to both wineries and distributors.

Marketing companies make money either through taking a percentage of the sale or by buying products in advance at volume prices and marking them up. Some focus purely on imported brands, others on domestic, but most focus on both. 

Marketing companies that are also importers, where the concept started, help navigate the realities of importing. “We provide legal entrée to the vast and extremely complicated U.S. market,” says Dennis Kreps, co-owner of Quintessential. “We have an experienced compliance department that helps our producers navigate the many rules and regulations governing beverage alcohol sales, from labeling issues through U.S. Customs clearance, not to mention the different laws in every state.”

Access and sales to all states is a strong draw for domestic producers as well, but the model requires partnership and brand building on the part of the producer. “Our partnership with Wilson Daniels has worked well reciprocally, as we provide them with a brand to work with that has an established fan base gradually built since 1965,” says Hugh Davies, vintner at Schramsberg Vineyards & Davies Vineyards in Napa Valley. “They have strong roots in the national wholesale distribution system and have been a good fit for us over these past 21 years. We’ve steadily grown our business, distributing to over 10,000 accounts in all 50 states.” 

Not everyone feels marketing companies can effectively represent smaller brands. Cheryl Murphy Durzy, CEO of startup digital distributor LibDib (see page 52 for more details) worked with a marketing company while managing Clos la Chance’s wholesale sales and dubbed the effort a “massive failure.”

Clos la Chance, an 80,000-case winery in San Martin, Calif., had “done everything from our own sales force,” Durzy says, “but distributor consolidation increased. We couldn’t get the attention of the distributors; that’s when we decided to go with fourth tier. We figured they’d have more clout with a bigger book, but consolidation continued, and even those guys had a hard time getting attention.”

Even strong brands need help telling their story to the domestic distributor market, and many value the service that marketing companies offer. Stephen Leroux, general manager of Champagne Charles Heidsieck, which is represented by Folio Fine Wine Partners, said: “We value ethics and a more traditional way to do business. The entire Folio ownership and management are a fully committed, professional and experienced team who convey our values in the U.S. market.” 

Marketing companies are motivated to have the best possible portfolio to represent the most compelling story to the increasingly powerful distributors they work with. “We have a great weight with the distributors because we come with the cumulative value of the portfolio,” says Rocco Lombardo, president of Napa Valley-based Wilson Daniels.

Because marketing companies represent multiple brands, they have a finite amount of time to work with each one. So they benefit from brands that have intrinsic brand strength that will appeal both to distributors and their own clients: the restaurants, bars, retailers and ultimately the consumers that buy them. “We have brands that distributor, wholesalers and buyers know, respect and are interested in,” says Paolo Battegazzore, CEO of Folio Fine Wine Partners. “They also are wines consumers ask for at a retail and restaurant level.”

Some marketing companies also own some of the brands they sell, or have equity stakes in them. To some producers, offering similar products can be seen as a conflict. “If I could give one piece of advice,” says Durzy, “don’t go with anyone that owns their own brands. When push comes to shove, you’ll get pushed aside.”

The model requires balance, where the marketing companies act as the sales arm and advisor to brands and products that fit distinctly in their assortment, and the producer focuses on their product and brand. “There’s a lot of added value that we bring for that added step up in margin,” Lombardo says, “allowing wineries to focus on product, quality control and marketing.”

Distributors have become increasingly picky about the brands they represent; some industry insiders have mentioned their belief that they reject far more brands than they accept. Lombardo says Wilson Daniels is still looking for new brands with “a focus on France and Italy,” but multiple marketing companies we contacted chose not to offer comment or “participate” in this article, likely because they were not actively looking for new brands or were hesitant to be deluged by wineries seeking their aid. 

Ben Narasin is a venture capitalist and freelance wine journalist. His work has appeared in the San Francisco Chronicle, Wine Enthusiast and other media outlets.

 
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