(Left to Right) Robert and David Trone - Owners of Total Wine and More
Have you ever wondered how some companies grow sales year after year while your company's revenue remains stagnant? Everyone always wonders how Google, Amazon, and Facebook grow their user base year after year. It's not luck. They are using data driven strategies that have the best results to achieve their goals.
What are companies in your industry doing to set themselves apart and succeed?
Today we will take a look at how one of the biggest companies in the wine and spirits industry uses one little secret to propel its sales and win the game. This company is Total Wine & More and its secret is the Winery-Direct Model. The Winery Direct model has helped Total Wine and More grow its revenue exponentially year after year. Refer to the chart below.
From 2005-2010, the whole recession, they grew by 60% Think about that
What is Winery Direct?
Winery Direct is sourcing product directly from the suppliers. As said by Cyrill Penn, writer at Wine Buisness.com, "wholesalers clearing wine for reduced margins enables retailers to sell wines from smaller producers more profitably." Still confused? Check out this side by side comparison of the old three tier model and the new more profitable winery direct model. Now lets check out how Total Wine and More has implemented the Winery Direct Model.
How does Total Wine and More implement the Winery-Direct Model? It does it by following three simple steps.
2) Use national brands to lure in customers, and teach staff to promote winery direct products in the store.
3) Sell Winery Direct Products! Repeat.
Second, use national brands to bring customers into your store. The Minnesota Municipal Beverage Association told me that Total Wine will break even or lose money on national brands (Jack Daniels, Smirnoff, etc.) to bring customers in.
Obviously this doesn't work for wineries. In your case, you will want to showcase how your product stacks up to your competitors when making your pitch. You need to show value to the retailer. A good resource to start getting an idea of that is Southern's Price Book. Find the category that you products fit in and price compare to your competition. Click that hyperlink above and see how you stack up!
For more info on how wineries can start selling winery direct, download our sellers success guide below.
Total Wine & More Loses Money on National Brands
According to the MMBA, the winery direct products are marked up 300-400%. Bring it in for $15 landed, sell it for $45 - and its solid wine to boot. A high quality wine, at a reasonable price point! Because its winery direct, the distributor takes a smaller margin. Multiply this nationwide with 173 stores and you can see how that 300-400% markup can pay off much...so much they can afford to break even or lose money on national products. It's a constant feedback loop.
This graph displays the compounding effects of increasing your margin by merely 20%, let alone 300-400%
A simple adjustment yields lucrative results
Third, promote your winery direct product. The best way to do this is by training your staff about the products, and tell them to push it. As a winery it is important to establish direct relations with the retailer, and once a sale is secured use a distributor to land product.
"Total Wine places almost as much emphasis on educating its customers as it does on educating its employees. Total Wine stores provide Friday, Saturday, and Sunday wine tastings, and many stores also provide more extensive wine classes. Educating both employees and customers gives Total Wine an important step up in the marketplace. Retail sales associates at Total Wine walk hurriedly throughout the store constantly performing their jobs. They are always friendly, patient, and answer questions fully, but they don’t devote too much of their time to any one customer in order to allow plenty of time for all customers. In addition, Total Wine promotes its product to both new and frequent buyers through direct mail and email promotions, and uses media relations strategies to promote the opening of new stores.”
Lets be honest. People Love winery direct products, and with a little promotion the products almost sell themselves, on both retailer and winery sides.
Why does the Winery Direct Model work?
Wineries, retailers, and distributors all know that great wines are not making it to market. I'm sure as a winery you had to turn down opportunities because of lack of distribution.
In summary the Winery-Direct Model works because of exclusivity, high margins, and great products. It has been such a successful program for Total Wine that they intend to expand to "more than 2,000 Winery Direct and 900 Spirits Direct items" according to Total Wine's Website. By Utilizing their network of distributors Total Wine & More has brought in exclusive wines at great prices. This has given them a tremendous competitive advantage that has allowed them to grow to nearly 3 billion in sales. This is made possible because small wineries don't get picked up by distributors and they are an under utilized resource.
You do not have to be a big company like Total Wine & More to take advantage of the winery direct model. Lucky for you small retailers and wineries are using this model to grow their businesses as well. Don't forget to take a look at the 3 tier distribution infograph below to see how it works.