The Rise of the Small and Midsize Independent Distributors

There is a palpable change in the air: the rise of small and midsize independent distributors. Much has been written about the intense consolidation of US wine and spirits wholesalers. Until recently, it’s been a tale of the rich getting richer.

Nature Abhors a Vacuum

In today’s three-tier system, there is a striking imbalance in the ratio of suppliers to distributors, and the natural self-correction process has already begun. The law of supply and demand cannot be suppressed for long.

Because there are too many brands and far too few distributors, many small and medium-sized suppliers are getting left out in the cold regarding distributors’ share of mind.

To fill the vacuum, a new breed of distributor is emerging: the Small and Midsize Independent Distributor.

We at Andavi are watching this trend closely, and today, we offer a few nuggets of wisdom to small, independent distributors everywhere looking to exploit the opportunities that await them.

3 Ways Small Can Be the New Big

1) Agility

Agility, nimbleness, and flexibility are three adjectives unlikely to be attributed to the mega distributors. This is by no means a slight to them. They don’t pretend to be any of those things as they tout their size, scope, and muscle.

One of the most powerful ways small-sized distributors can leverage agility is through the speed of their decision-making process. Speed is one of the most overlooked and underappreciated aspects of the SMB distributor.  Faster decisions lead to shorter sales cycles, faster “conversions,” and revenue generation.

While the bigger distributors attempt to leverage online ordering systems to manage “the long tail” of the account base, smaller distributors can still manage to provide a “high touch” experience to the independent accounts. This strength in the independent accounts is one of the most powerful advantages of the SMB distributor!

Another critical aspect of agility among smaller distributors is their ability to have smaller minimum delivery requirements and more frequent deliveries (including hot-shot deliveries).

2) Personalization

Smaller distributors can provide highly personalized service. Small, independent distributor sales representatives can tailor their offerings and solutions to meet customers’ very specific needs. The power and importance cannot be overstated, as it is a huge competitive advantage over the larger distributors.

Once again, this is especially true in the independent on and off-premise accounts. The vast majority of the accounts in most markets are independent accounts. And among those independents, the 80/20 rule holds sway. By carefully analyzing the account base and employing highly personalized customer service aimed at the most important independents, the smaller distributor is positioned to grab big chunks of market share.

It’s easy to assume that “relationships” and “partnerships” are concepts from a bygone era due to the advent of technology and logistics platforms. But, this is not the case when it comes to smaller distributors. Relationships are their stock in trade!

Let’s say it right out loud: The mega distributors have little choice but to be “supplier-focused,” meaning they are under enormous pressure to please their largest supplier partners. This is much less true for smaller distributors whose entire portfolio typically comprises smaller brands. This frees them up to be “customer-focused” in ways their larger competitors simply cannot.

One suggestion for smaller distributors is to be as open as possible about their brand-to-sales rep ratio. The smaller the ratio, the easier it is to focus on restaurants and retail customers rather than the supplier overlords.

3) Transparency

One major drawback of the 3-tier system is that it is incredibly difficult for brands and suppliers to understand what is happening in any given market.

This presents a not-so-obvious opportunity for small and midsize independent distributors to be incredibly transparent with their supplier partners. To put a finer point on this, here are some very specific things to be transparent about:

• Willingness to be measured on KPIs that go well beyond depletions and provide insights into the quality of distribution, such as sales per POD (velocity), penetration percentage in target accounts, and account retention.
• Regular, outbound communication with suppliers could include market insight reports, trends, and opportunities. Modern email marketing software effortlessly facilitates this. These regular updates can even be published via the “supplier portal” of your website.
• A small, independent distributor’s website should be a powerful communication tool for supplier partners, significantly reducing supplier requests for information. While this is a severe shortcoming for many small to medium-sized distributors, it is also easily remedied.
• While this need not necessarily be a “public” endeavor, being open about matching the right accounts with the right brands should be a very transparent process. Smaller distributors can execute a very explicit protocol of matching the accounts’ values to those of the brands within their portfolio.

Shout your methods and culture from the rooftops! If you are hyper-local, talk about it. If you offer highly personalized and tailored customer service, ensure everyone knows this is among your superpowers. Like a beacon at night, high-quality supplier partners will be drawn to your door (and so will your retail customers).

The strategic advantages of not being big

There has never been a better time for small-to-medium-sized distributors to shine. However, intentionality is needed to leverage this unique position.

Being intentional about “positioning” isn’t always on the minds of smaller businesses but it needs to be.

“Differentiation” in and of itself isn’t enough. Small distributors need a deliberate strategy to articulate their value to the supplier community.

As small and midsized independent distributors contemplate what this positioning might entail, here are some key messages that should be top of mind:

• We’re local
• We know the market better than anyone
• Our brands-to-sales rep ratio is extremely low
• We have highly personalized relationships with the key accounts that drive the market
• We take suppliers “beyond the milk run” and into the more challenging accounts
• We provide our supplier partners with a clear line of sight into our activities
• Speed to market is our superpower – especially regarding key independent accounts.
• We enjoy the highest levels of account retention.

There are certainly more “key messages” than these, but this is a great starter list. Gather your team around you and create your list. Then, start using these key messages anywhere and everywhere.

Evaluate your systems!

If this article has sparked your interest, we invite you to examine your current systems closely, especially regarding data, KPIs, and automated communication systems designed to optimize your collaboration with your supplier partners. That is our superpower at Andavi Solutions!

We would be happy to help you with this evaluation process. Simply click here to start the conversation.