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The Merchant23 Blog

Winery-Direct: The Secret to Total Wine & More’s Success

Jun 11, 2019 5:28:54 PM / by Cyrus Azari

 

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(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. 


Total-wine-and-more-growth-winery-direct-method

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. 

 

1) Choose a way to buy Winery Direct Products.

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. 

 

First, find a distributor. Total Wine & More has their own network of distributors that they use. If you are a small retailer or winery I always recommend that you use your current distributor. If you don't have one at all as a winery, keep reading...
 
Recently I have been flooded with questions.  What do I do if my distributor is too busy to help me clear winery direct products ? What do I do if my distributor is reluctant to clear a special wholesale wine deal that I found or negotiated on www.Merchant23.com? Don't worry, you don't need to sever ties with your distributor! You can opt to use another distributor to help you clear specific products that your current distributor does not have. (unless you are in a franchise state) 
 
Sometimes it can be difficult convincing a new distributor to clear wine for a deal you have because you are a low volume customer and the clearing process takes too much time for it to be worth the distributors time. If this proves to be the case then use an online distribution platform like Merchant23.com. They help facilitate this process. 

 

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.

Download Our Sellers Success Guide Here!

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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%

winery-direct-versus-tradtional-modelA 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. 

Download Our Three-Tier Models Comparison Chart Here

 

Written by Cyrus Azari