What In The Hell Is Going On Out There?
Before I get started with some of my market observations for the end of 2023, I want to make sure everyone is clear on what it is that I do. Depending on the client, I’m a social media creator, digital assets writer, blogger, email marketing manager, retail marketing consultant, and in some cases even the head of sales for California. That means not only am I making appointments with restaurants and retailers to present products, I’m also taking appointments with other brands and distributors to hear their pitches.
I’m also dealing directly with consumers via email, social media messaging, and private events. Oftentimes people assume they’re speaking directly to a brand owner when in reality they’re communicating with me. Beyond that, I’m in constant contact with friends, colleagues, and confidants throughout the industry and throughout the nation, texting little tidbits of information and observations.
Based on everything I’ve seen, read, and heard throughout the first nine months of 2023, here’s my advice on how to prepare your brand for the market reality check that is imminent in 2024.
Key retailers are both maxed out and burnt out. If you want their attention, your brand had better have its shit together.
Ten years ago, a few key retailers across the country could account for 50% or more of a brand’s total sales. Today, however, the ability for a retailer to drive volume sales for any one brand has been almost entirely extinguished. There are numerous reasons as to why.
First off, a large number of retail buyers are burnt out from the onslaught of the pandemic lockdown, from which they have never really recovered, nor had a break. I know a handful of retail buyers who actually got sober after 2020 and are no longer all that interested in their work, let alone passionate about new spirits. Add in the fact that there are 1000+ new brands complicating their landscape and you can see how difficult it can be to motivate key retail players right now.
Second, few products catch fire with consumers the way they used to. Whereas a retailer could send an email and sell 100 bottles of a particular whiskey before, they now have to send five separate emails and hope to sell 25 bottles a piece. Over time, that increase in email marketing begins to dilute the importance of any single email campaign and consumers become less interested in the moment. As a result, retailers have to work harder than ever just to maintain their sales, let alone grow.
Third, there are too many products out there with too few customers to purchase them. After the country went booze crazy during the pandemic lockdown, many serious collectors filled up their cabinets with more bottles than they’ll ever be able to drink in this lifetime. Hence, they only get out of bed for something truly unique or special, which makes it difficult for retailers to move the needle. Meanwhile, younger generations aren’t nearly as interested in taking their place, opting for cannabis products, or natural wine, or low alcohol RTDs, or choosing not to drink whatsoever. Yet, these developments come at a time where there is more alcohol being produced than ever before.
While larger retailers may have lost some of their mojo, small retailers have stepped up in a major way and found niche audiences in their local communities. They may not be driving large volumes at any single location, but the aggregate of these operations is huge. The question is: does your brand have the patience and the ability to service 50 to 100 mom and pop retailers in order to create the same amount of sales historically seen at 5 to 10 key accounts? I hope everyone is ready to work!
Private tasting groups are the new gatekeepers. Start making friends.
I did an event in San Francisco last month where we invited key retailers, bartenders, restaurateurs, and other industry figures to a party at a beautiful location on one of the most glorious afternoons I’ve spent in the city in years. Wanna know how many showed up? Less than ten.
Had I not seen it coming a mile away, I would have been too embarrassed to tell you that figure just now. But how did I know that was going to happen? See my first point above. The industry is burnt out right now. The real passion for alcohol isn’t brimming from professionals at the moment; it’s coming from private tasting groups formed by consumers who want better access and information to new products in the market. Many retailers are not the cheerleaders they once were. A new and focused energy is eminating from dedicated consumers who are extremely active on social media and in private tasting groups.
Luckily for my event, we had anticipated the low industry turnout and spent most of our efforts courting private tasting groups around the Bay Area. More than 100 people showed up and it was a huge success in terms of turnout. People were taking pictures, grabbing T-shirts, following our social media accounts, and interacting with the brand owners.
During the pandemic lockdown, a large swath of people around the country made friends with their neighbors and hosted tasting events in their garages or backyards. I was one of them. They built relationships, found common interests, and turned what started as a casual gathering into a more organized group, complete with an official name, website, schwag, and the ability to use their organization to garner access to the industry. Today, you’re more likely to find brands hosting dinners with a private consumer whiskey society than with a major retailer.
All the momentum is moving towards DTC right now. If you’re not managing key consumer relationships along with your key industry relationships, you’re going to be in a tough spot come 2024.
Distribution is going to look very different moving forward. Be prepared for the fallout.
I know very few brands that are currently happy with their distribution in California. As someone who works with about ten different distributors regularly, I can tell you that they all have their pros and cons. As far as the larger companies go, it’s becoming more and more clear that the greater geographical coverage these distributors provide isn’t worth the headache for smaller brands who are struggling for just the slightest amount of attention.
To put it bluntly, what’s the point of having a distributor if that distributor doesn’t sell your product or even notice that it’s a part of their portfolio? Why should you have to go out and make all your own sales, while paying these guys a commission? More importantly, where do you go next if you’re tired of doing everything yourself?
The pressure on the three-tier system has never been greater than it is today, nor have its flaws ever been more obvious. Sazerac leaving RNDC in California and moving to Reyes was a shocker, but the amount of small producers still struggling to find a home is what’s going to break the system at some point. Simply put, there are too many products out there for the current amount of distributors to handle. Even the smaller companies I work with aren’t taking new clients, and are hesitant to invest in more inventory as the market continues to slow down.
I know brands that have been successful with self-distribution (through a family member or friend) and DTC shipping through online clients like Barcart. Being small and nimble works quite well if the output is small and the footprint is limited to a handful of key retailers scattered across the country. However, being successful with this model requires a huge time investment in building consumer relationships, putting in time with influencers—podcasts, Instagram live broadcasts, etc—on top of all the other tasks a brand has on its plate.
As for which distributors out there are still thriving, it’s hard to say. What I can tell you for certain is this: the days of relying on your distributor to sell your products for you are over. As one brand ambassador told me last week: “I make 100% of my own sales in California. They just fill the orders I place and take their cut for the logistics.”
-David Driscoll