The Eight-Point System to get a better distributor relation.
All over the world in the alcohol beverage industry, for any brand to have solid growth potential, they need to connect with the distributor on 8 most common, yet major factors.
We call it the Eight Point System. In this article, we would be discussing those 8 pointers which we always focus on whenever a new brand associates with Tipping Glass for their market and consumer expansion globally.
1. Win-Win Margin
As a brand owner/producer, when you collaborate with medium and/or small-sized distributors, they put in a lot of trust and effort in growing your brands, and in return, they look for a respectable profit margin which falls in between 30%-40%, as per the industry standards. But for the distributor to make benefits from the product and that your product does not get too high priced on the shelf, the brand owners/producers need to hit the sweet pricing spot for their targeted market segment. This will bring in the right crowd for your brand, and generate value for your products.
We always recommend our clients to ensure a price point that would allow them to make a good profit margin, allow the distributors to have a good profit, and allow investment for marketing. Marketing is as important as having the product in the bottle.
2. Marketing Strategy
How can a brand have a great success story? By successfully telling their story to the world. Marketing is often neglected by new brands, from the fear of losing money, or no ROI. But this creates an impact in long term. If you are not targeting your consumers with a proper marketing strategy, then you are losing their interest.
Marketing does not always have to be expensive. Sure, you can do it as big as getting a celebrity to launch your product, or as small as doing private tastings with retailers and targeted consumers. We always recommend our clients generally consider a minimum of 10% of the FOB value as their marketing budget, because the distributors would always want to know about the efforts you are doing by targeting the right audience and engaging with them, to see a repeat consumer pattern.
It is by human nature that we always desire the best! Now, how is an alcoholic beverage categorized as the best? With all the awards and ratings that they might have received over time. The quality of your product, as important as it is, is still secondary. What talks to the distributor first are the awards and ratings for your drink.
If your brand has received awards or ratings in trade shows, or with sommeliers, or magazines, we say “let that star shine”. Display your awards and ratings as much as you can. On your bottle, marketing campaigns, everywhere. The price of your product would matter less when your consumer can see the assurance of quality.
Finding a good distributor and then building growth requires strong support from the end of the producer/brand owner. From delivering the samples with all possible marketing and sales materials to backing up with proper POS materials. And if possible, a team that is equally dedicated to building and growing the consumer target for the brand.
Doing this would create a level of confidence amongst your distributors, and also helps the brand owners/producers to gain distributors in new markets. A lack of backing up your distributors with proper support may lead to your brand becoming cold in their books.
Whether you are a brand deciding to enter one state at a time or 10 countries at one go, you need to make sure that you have regular communication with the distributing partner in each region. You can either have a dedicated team that works to maintain that bridge between the distributors and, your brand or alternatively and less expensively, hire the services of Beverage Trade Consultancies. Working with trade consultancies would not only reduce your efforts but also reduce the expenses.
4. Money Talk
From the moment a deal is finalized between a distributor and a brand owner, starts the wait for the financial transaction. But to have a smooth transaction between the parties involved, flexible terms of payment need to be designed and agreed upon between the distributor and the brand owner.
As a brand owner this is very crucial because if the pressure of payment is less, or a flexible payment term is agreed with the distributor, it is more likely to increase the chances of the brand getting a better spot in their portfolio. Usually, as per the industry standards, the payment terms are usually between 30-45 days of receipt of the product by the distributor. But as a brand owner, it becomes your responsibility to design more flexible payment terms and conditions to maintain a long-term collaboration with distributors.
5. Consumer Segmentation
Generally, when producers/brands owners launch their product, they do it on their home turf. A place where they are more aware of the customs and demands. This is also very common for distributors to find such brands.
But when you cross borders, to different states or countries, the whole game changes. You need to have a well-targeted consumer segmentation. Once you start collaborating with distributors, you can begin to learn about you the market and the behaviours of the segmented consumers.
Organizing or attending local tasting sessions builds a great benefit for your brand. An event that would focus on your consumer section would automatically build confidence amongst your buyers. Also, you get a first-hand review of your product.
6. Demand & Supply
Low expectations and high delivery are better than high promises and low delivery. It is very important for brand owners to understand their target market and the scope of sales their product has in the market. The last thing you’d want is a growth in demand and a fall in supply. This is one of the major reasons that many growing brands usually invest in inventory.
If your product has the potential to grow, you need to indicate it with proper inventory supply. There are a lot of factors that can affect the inventory supply. Financial turmoil, unstable currency exchange rates, delay at borders, held up at the port, etc. Distributors wouldn’t want to be slowed down on their promises to the retailers/buyers because of any such reasons.
This would not only make a deep impact on your delivery capabilities but also the retailer would lose interest in your brand as an empty spot on their shelves can be filled by another brand. Generally, the retailers have a waiting period of a maximum of two weeks post which they would look for a replacement for that slot, and at the end indirectly/directly recommending another brand to your potential consumers.
7. Display Packaging
In the case of alcoholic beverages, the first impression is not the last impression, but it can be a very important one. How your products look is as important as how it tastes! The length, breadth, height of your bottles, along with the labels on them make a huge impact on how they are placed on the shelves. For example, too wide bottles may be placed sideways on the shelves, which means you must make the sides equally attractive, and informative.
In case of any awards or accolades, you might want to include that information, as briefly as possible, too. This would add value to the buyers, as these days people really like to know that their choice of drink has had well recognitions, building up your marketing value too.
This makes the distributor pay a great amount of attention to how the bottles are “packed”. And not just the inner packaging but also the outer packaging matters to the distributors. The quality of the boxes and how they are designed for display at retail stores. The contents and markings play a vital role for the distributors and the retailers to read the SKUs reducing their efforts.
8. Your Story
The most delicate part of a brand is the story behind it. People these days like to know about their beverage. They like to understand the backstory, the production process, and as much information as you can provide.
To have this effect on your consumers, you need to have a story that would talk not just about the drink, but the emotions attached to the craft of production. Establishing that emotion with your buyers allows them to learn the reason behind the presence of the brand in the market and backs up the pricing of your products.
All these factors, considered and applied in practicality would help your sales team bring in more confidence with the distributors. There are various other factors that you can work upon to build sustainable and growing relations in the market.
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