I used to love getting certified letters from a lawyer representing one of our distributors informing me of a pending sale to a new distributor. The letters always asked for my signature “approving” the transaction and had little to no details. What is really frustrating was that the transaction was to take place at the end of the current month. Sometimes that was in just 10 days! Really?
Short notice aside, in the past 7 years or so, I was probably involved in about 40 to 50 distributor changes, mostly due to a buy/sell or a swap of brands. These covered all types including, small selling to a bigger house, a big house dividing up to many smaller ones, and even some statewide selling the brand up to many others and keeping some markets. Of course, in some circumstances, we had asked to be sold and the distributor was willing to do so.
As I saw it, most of the acquiring distributors were not prepared for the brands. Either they didn’t have the internal skill sets to manage imports/crafts and were unwilling to go outside and find the talent, or they determined which of the new brands got the focus, and the others were just added to the pad. The impact of this on the vendor is dramatic, in fact, so much so, that the distributor really has little to no idea of the impact. The importer/brewery has financial and sales numbers to achieve, goals to meet, employees to support, and of course, ROI to its owners. I can recall four major changes, all of which appeared to be for the best, (e.g. moving into a “better distribution system”) that turned into a disaster. In one major market, when the brand was sold from a wine and spirit house to an ABI house, sales dropped 70% over the previous year. The brand left a large W&S distriutor due to termination and was acquired by the ABI network. In less than a year, it was swapped out for other ABI brands. Three networks within one year. The brand is just now recovering and finally growing after four years.
The worst scenario any vendor can have occurs when a distributor is appointed, then at some point shortly after introduction, decides to DQ the brand and there is no other distributor or option in the market. It does occur, more frequently than you know.
Today, small vendors, both importers and especially crafts, should really consider a system which provides statewide coverage. This is well documented. By following this practice, you have consistent pricing, critical mass in volume, better focus and inventory control. In Texas, for instance, Ben E. Keith and L&F (Favorite Brands) now offer statewide distribution. Of course the downside to this system is the potential of one distributor becoming a large percentage of your business.
When the brand moves, regardless of the situation, with the loss of volume, revenue and market share you can anticipate supplier pull backs, budget cuts, employee layoffs, a reduction in marketing spend, and strained relationships. Collteral damage, everyone loses.
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