The Definitive Guide to Sales Success with On-Premise Chains

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The on-premise national accounts arena is one of the most complex, expensive, and time-consuming channels to pursue in the wine sales game — it’s also the most misunderstood!

This guide will help set you up for success and shave months (if not years) off the learning curve. 

Keep an open mind as you read; what most people think is required to succeed in this arena is entirely disconnected from reality.

What constitutes a “chain?”

When considering an on-premise chain, it should meet all of the following criteria:

graph of share of on-premise chains by segment

  • Three or more store locations
  • One central decision-making process
  • Licensed to sell beer, wine, or spirits

Using this definition, we at Andavi Solutions estimate the total number of on-premise chains in the US to be around 2,000 chains with a total number of stores of just under 40,000. 

The indisputable attractiveness of on-premise chains

Five things make on-premise chains a highly desirable quarry for selling adult beverages:

It is a highly efficient sale. One placement at a major national chain can generate between 6,000 and 30,000 9-liter cases annually!

  1. Compliance is 100% “built-in” IF you choose the right chains to work with (more on this below). No time, energy, or effort is required to ensure store-level uptake of mandated SKUs. 
  2. Once acquired, placements tend to stay in place for a very long time (typically one year). It’s common for some placements to stay in place for five years or more!
  3. Restaurants and hotels that are part of a chain are much busier than the average venues, so your brand is exposed to 3-5 times as many eyeballs.
  4. The “assortment” of wine, beer, and spirits offerings is very compact, concentrating the total sales volume onto a few SKUs. 

Segmentation: not all on-premise chains are equal

It would be a huge mistake to lump all on-premise chains into one category. The first thing you must know about on-premise chains is how to classify them into groups. Each group will require a different strategy and approach. Here are some primary considerations when segmenting your chain prospects:

  • Scope of the chain (global, national, or regional)
  • Mandates and options (some chains mandate everything, some provide “approved lists” or “recommendations” only, and some use a combination of both)
  • Which department makes the final decisions? This is at the top of the list of things that are misunderstood about calling on on-premise chains. So, let us enlighten you. Beverage assortment decisions can be made by any one or a combination of the following departments below. Failure to understand how each department makes decisions will bring a speedy end to your efforts to break into this lucrative channel. 
    • Marketing
    • Operations
    • Purchasing
    • R&D
    • Culinary 
  • Chains that use “3rd party marketing agencies” versus those that do not. You also need to know which 3rd party agency each chain uses.
  • Type of operation:
    • Hotels
    • Casual restaurants
    • Fine-dining restaurants
    • Bars & taverns
    • Sports bars
    • Nightclub
    • Casino
    • Private clubs
    • Sports & entertainment venues
    • Transportation
    • Military
    • Institutions (i.e. government and healthcare)
    • Other
  • Decision-making processes and protocols. Most chains review their assortment only once per year. Some every 2 years. Some utilize a formal RFP process, and some do not.

5 Keys to Success

1. Get the logistics right

Most sellers of wine and spirits completely overlook the importance of providing an uninterrupted supply of their wares to every location across the chain.

Getting the logistics right is more important than anything else. Logistics are the table stakes.

When a store within a chain runs out of stock and notifies its corporate office, the corporate office calls the supplier for a remedy (not the distributor). This is not something you can relegate to your distributor partners.

The mandated placement is not the end of the job for the supplier; it is the beginning of the job.

Top beverage producers serious about pursuing these high-value chains intentionally invest in software that helps manage distributor inventories, monitor store-level compliance, and other metrics that provide a clear line of sight into every phase of the supply chain. 

Worth repeating: Logistics are table stakes!

2. Achieve pricing perfection

No hyperbole. No exaggeration. PERFECTION is the standard for dealing with on-premise chains. 

Beverage brands should treat every on-premise chain as if they are public companies. Of course, many of them are. For context and inspiration, we suggest you listen to the quarterly earnings calls of publicly traded restaurant companies such as 

CAKE, EAT, and DRI. You will quickly learn that every penny matters, and if you are not prepared to have it matter to you, you will never be successful in this channel.

Here are some of the most common mistakes that suppliers make when it comes to managing on-premise national account pricing:

  • Failing to understand “on-premise by-the-glass pricing” only exists in ⅓ the US states. In all other states, there is no on-premise-specific pricing.
  • Treating all states as if on-premise pricing is handled the same when, in fact, there are 5 different types or groups of on-premise pricing states
  • Leaving your national account pricing up to your distributor partners to manage for you
  • Failure to acknowledge that most corporate buying offices for on-premise chains do not truly understand how to request and collect on-premise pricing from suppliers.
  • Not having a system in place to quickly and accurately fulfill a chain’s requests for pricing by SKU and by state. Instead, most suppliers continually abuse their field sales team with last-minute requests to fill out Excel documents.

Selling to on-premise chains is not a game. It’s not for the amateur. It’s for serious companies with serious tools to manage their pricing

3. Budget for the right things in the right amounts

If you want a piece of the on-premise chain pie, you must be prepared to support your placements financially. It comes with the territory. But, it helps to understand how the money is spent (and in what proportions). Here are the primary “buckets” to budget for:graph of marketing spending by category

  • Wine menu printing. With rare exceptions, chains will require you to help pay for printing menus and other promotional materials used in the restaurant’s operations. Roughly 70% of a beverage company’s on-premise chain budget will be allocated to cover these expenses. It is not legal to pay these fees directly to a chain, but it is acceptable to pay their marketing agency. 
  • GM conferences. Most on-premise chains hold an annual gathering of all their store managers from around the US (or globally) to share new initiatives, recognize top performers, and provide inspiration via high-profile guest speak
    ers. ALL vendors are expected to sponsor the event. Suppliers enjoy access to key executives in a fun, casual environment (dinners, golf tournaments, etc.) in exchange for financial support.
  • Trade shows. One of the best ways to get in front of key chain buyers is to meet up with them at various annual events, which include the VIBE Conference, Aspen Food & Wine, Tales of the Cocktail, and many others.
  • Samples. A typical “pursuit” of gaining new mandates in on-premise chains requires many samples sent to different people and entities. Besides the cost of the samples, there are also shipping costs to consider.

This is a good place to speak briefly about 3rd party marketing agencies’ role in the on-premise chain channel. 

It is not legal for alcohol brands to provide funding directly to a chain, but it is permissible to provide funding to a chain’s marketing agency. Over the decades, certain marketing agencies began specializing in the on-premise chain world and now play an ever-increasing role in the relationship between brand owners and chain owners. 

Brand owners should meticulously track their spending with these agencies using a trade promotion management system

4. Pursue the right type of placements

There is a pervasive misconception that all “placements” at an on-premise chain are mandated throughout the chain. This is true for some chains but not all, and you must know which is which. 

One of the critical assessments to pursue this channel of trade is determining what store-level compliance looks like for each chain.

Here are some of the possibilities:

  1. All stores in the chain are required (mandated) to use the exact same wine and spirits assortment
  2. The corporate office mandates a portion of the store-level assortment, but store-level options are allowed 
  3. Individual stores must purchase from a list of “approved” or “recommended” selections

Here is where many wineries and distilleries make a big mistake: they pay for “options” when they should only ever pay for “mandates.”

Brand owners can save a lot of money and time by choosing to only sell to chains that mandate everything from the corporate office. 

5. Closely track your progress and ROI

As mentioned at the beginning of this guide, on-premise chains are some of the most expensive and time-consuming channels to pursue.

To keep a tight rein on expenses and ensure maximum ROI, it’s critical brand owners have systems to monitor progress and results continually.

This is when a powerful CRM system can pay for itself many times over.

Some of the things to track in your system include:

  • A list of chains to target that meet specific criteria (such as mandated placements)
  • Track all “mandates” by chain
  • Monitor store-level compliance against mandates
  • Manage key buyer information (cast of characters)
  • Log account headquarter visits
  • Follow-up tasks
  • Monitor velocity (sales per POD)
  • Monitor retention (“stickiness” of placements over time)
  • Monitor sold and unsold accounts

Never confuse activity with achievement

Chart of Program duration for Trade Promotion Management

Given the high cost of putting a national accounts team on the field, it is imperative that brand owners keep a tight rein on “activity” for the sake of activity. 

Many national accounts salespeople spend a lot of time and money flying around the country to various events. While this activity is part of the job, it is not THE job. 

The job is to generate lots of “automatic” long-term revenue by pursuing mandated placements. 

This dilemma is by no means restricted to national accounts salespeople. When tracking national accounts sales activities, companies create an environment of ownership and accountability, as well as providing everyone with detailed visibility.

To secure the most business possible and extract the most value from your programs, you need sophisticated software tools that help manage “activity” versus “achievement” and the ability to track your return on investment carefully.

Control your own destiny!

Due to the massive proliferation of new brands on the market and the ever-shrinking pool of wine & spirits distributors, smart brand owners are learning how to take matters into their own hands.

One of the best ways to do this is investing in sales professionals who can call directly on the major national on-premise chains.

But, it is not enough to have the people to pursue this lucrative and efficient business; its paramount brand owners have the tools and systems to support the effort and investment.

Andavi Solutions was built to offer beverage alcohol businesses an integrated suite of technology solutions providing insights, driving superior decision-making, and delivering ROI across the value chain. With decades of experience as suppliers, distributors, and analysts, Andavi Solutions has proven success in leveraging technology to support the deliverables of on-premise chain accounts.

Want to learn even more about how we can help you succeed in on-premise chains? Contact us here for more information.