Is DIY the Solution to the On-Premise Wine Problem?
I recently saw some great insights from my old colleague, Charles Gill from Winemetrics, regarding a downward trend in wine in the on-premise. Craft beer and cocktails are clearly hot categories for consumers, but sales execution has something to do with it, too. Charles’ analysis is focused on on-premise chain business and their beverage menus/promotions, but is indicative of what’s happening all over the on-premise universe. So, why are wine offerings and visibility slipping in the on-premise? Perhaps it’s due in part to the inability of small wine companies to execute in key accounts and, more specifically, their inability to DIY.
We all know that how well you execute your sales strategy in key accounts is critical to your brand’s success or failure. Just having a great tasting wine with a nice package and a good rating isn’t going to get you poured by-the-glass at the best restaurant in town. And we also know that distributors are far too busy to execute well for all of the brands in their large portfolios. How many by-the-glass placements can a distributor rep pitch to a key account in a given time period? Maybe 5 or 10 out of their 2,000 brand portfolio? Mid- and small-sized suppliers are left to do it themselves. The DIY model clearly helps drive not only your brand visibility on menus and BTG in key accounts, but subsequently your sales volume. Executing these strategic brand building initiatives has a lasting effect on the trade and consumers alike, which is why on-premise execution is critical to a wine brand’s success.
This is where wine companies struggle. I have noticed that wine companies, especially small ones, don’t have the resources to DIY like craft beer and spirits suppliers are doing. Craft brewers (who sell every drop of beer they can make) tend to focus on their home markets, and limit their expansion to markets they know they can DIY in. They don’t sign up a distributor in Kansas without sending a person into the market to do the work required to penetrate and promote their brand in key on-premise accounts. They DIY it. The successful small spirits companies do the same, but small wineries struggle to deploy these resources. Yes, it is expensive, but perhaps the only way to be successful, and small wine companies just don’t seem to have the funds to do it.
I’m not sure if or why wine margins aren’t strong enough to support a DIY model the way craft beer can, but it’s clear that the DIY’d brands are winning. There is a reason the new head of Pernod Ricard has declared war on “craft products”. They are trending, and doing so through their own hard work in the on-premise. Perhaps trends are forming in the wrong direction for wine, and more DIY is required to keep the category growing.
I want to know what you think! Please share your thoughts in the comments thread below.
