Industry Insights: Wine, Spirits & Beer
The alcohol wholesaling business has weathered the recession and is poised for a rebound. Retailers that liquidated inventories during the Great Recession are now looking to build inventory again,
presenting an opportunity for wholesalers.
Innovation is up in all categories with new brands, packaging and flavour profiles. And the trend back to premiumisation – higher priced brands – doesn't appear to be abating anytime soon.
The consolidation trend led by some of the industry's largest wholesalers has changed the competitive landscape in many markets. And industry watchers expect the trend will continue.
Wine, spirits and beer wholesalers are coping with high gas prices, industry consolidation and tight margins. Add to that an explosion in SKU volumes, and the wholesaling business gets very complicated indeed. Successful operators have made stock control and turnover a top priority. And their experience controlling costs and tightening operational processes, translates into higher margin returns and staying power.
It's true that controlling costs is paramount for wine, spirits and beer distributors. But where you find challenges, you'll also find opportunities. And industry experts are pointing the way with tactics to help smart distributors stay relevant.
Industry Overview:Beer wholesalers can expect to see continued interest in imports and craft beers through the five-year period to 2018. While margins are higher in the craft brew segment and revenue continues to grow, wholesalers will find that doing business with scores of smaller producers increases the cost of transacting business. The proliferation of SKUs means wholesalers will need to look for operational improvements that can translate positively on the balance sheet. Stock management and turnover is more important than ever. And understanding how well brands are performing will be critical in order to root out underperforming flavour profiles and brands. The biggest threat to beer wholesalers is from the wine and ready to drink (RTD) segments.
Wine & Spirits wholesalers should see continued growth in these segments. With more purchasing outlets, products and categories than ever before, consumers are reveling in new choices, flavour profiles and packaging. While pricing has been flat, revenues, particularly in the wine category, are poised for a rebound. And premiumisation is alive and well in this post recessionary climate. The biggest threat to wine and spirits wholesalers is the direct sale of alcohol to retailers and consumers. As a result, wine and spirits wholesalers will need to secure their market position by responding with value-added services to keep the wholesaling channel relevant. More than ever, wine and spirits wholesalers need to seek new ways to tighten supply chain processes in order to keep margins healthy.
Industry Insights & RecommendationsNiche Markets: Population Trends Will Effect Product Mix
Census data shows that American demographics will see a big shift through 2050. While Hispanics made up 16.3 % of the population in 2010, the population is growing and is expected to reach 30.8 % of the population by 2050. Asians made up 4.8 % of the population but will increase to 8.1 % of the population by 2050. These shifting demographics will have an impact on consumer preferences.
Understanding cultural values and preferences will help you better serve these growing markets. For example, research shows that Hispanics prefer tequila, rum and other spirits over wine. Beer is also preferred in this demographic. Other consumer insights indicate that Moscato drinkers are primarily young, female, African American and Hispanic consumers. Knowing your local market will help alcohol wholesalers stock the right product mix to serve local populations better.
Stock Control: Manage Inventory for High Turn Rates
With uneven margins and thousands of SKUs to manage throughout the alcohol wholesaling industry, controlling costs is paramount. Industry watchers indicate that integrated logistics systems with mobile connectivity and remote ordering capabilities will help wholesalers optimise inventory control, minimise errors and speed processes. Wholesalers that can master demand sensing and improve visibility into inbound inventory can run a leaner operation. Wholesalers that are able to increase inventory turns and reduce safety stock can expect increased profitability on balance sheets.
Promotions: Employ New Sales Techniques to Stay Relevant with Retailers
Direct-to-consumer and direct-to-retail sales continues to be a concern among alcohol wholesalers. Many industries are experiencing an increase in direct supply agreements between manufacturers and retailers, and the threat of wholesale bypass in the alcohol wholesaling industry is also a concern. In order to keep the wholesale channel relevant, experts suggest that distributors need to beef up the services they offer to retailers. Some of the recommendations for value-added services include: offering tasting seminars and promotional event tastings, preparing educational information on food pairings, assisting retailers with inventory management, and the development of new cocktail recipes to help promote products.
Technology: Adopt Technology to Support Future Growth
With revenues flat and margins tight it's more important than ever to understand how individual brands impact your business at a deeper level. No longer can you just rely on sales performance numbers. Wholesalers also need tools that enable them to see down to real margin results that account for the carrying costs of specific brands, varietals, flavour profiles, craft brews and others. In addition, fuel prices are expected to decline in 2013, but the need to control fuel costs is as strong as ever. Routing tools that help wholesalers build trucks, and scheduling tools that create efficient reverse-stop routes, are valuable investments.
Enterprise resource planning (ERP) software that includes integrated logistics, import tools, remote sales apps, truck building and routing solutions and business intelligence can help wholesalers tighten processes and improve margin results. Industry specific solutions go a step further to help wholesalers with sales reporting, compliance requirements such as depletions and BDN reporting, and a host of other unique requirements. Business intelligence solutions are designed to cascade all costs associated with a brand, customer or supplier down to the net profitability to give wholesalers a better understanding of which brands are helping or hurting profit margins.