The Holidays Are Distributor Merger Time

For the last several years many things have been on repeat during the valued Holiday Sales Selling Season for adult beverage.

• I am late to my son’s birthday dinner because he had the nerve to be born during OND and I am working for clients.
• Clients’ sales begin a “hockey stick” like sales spike.
• Large distributors plan, announce, and execute a merger.

This year is no different, and my sources tell me that we are in for a doozy this year. Forever it seems SGWS is and will be the biggest dog in the fight while Breakthru, RNDC, YMCO and others continue to battle for maid of honor privileges.

We hear that there will be a merger of Breakthru and another to form the 2^nd biggest player in America. With SGWS having over $18B in sales and over 80% of market accessible coverage the logical next merger will be of two mega companies totaling $9B in sales and 76% coverage of the accessible market.

I know what you are saying, and it can be one of two things.

• Who cares and who is selling my inventory
• Why should this matter to me, I am with a distributor that is not mentioned in these talks.

When distributors consolidate there is duplication in brands and costs get cut. Cost cuttings mean that if two companies carry 40 cabernets each and the go forward plan is to carry 40 cabernets in total, than that will mean 40 cabernets get cut. It is just that simple, a numbers game. Cutting happens with either a “flat” drop meaning that your brand is fired, and you have 90 days to pick it up, or it will get closed out in the market and ruin a forward favorable price point and SRP. Cutting can also mean they just stop selling your brand. Just stop selling it in a defensive move to protect a competing brand.

All distributors are affected, especially the ones that are not merging (see above). When a merged distributor identifies brands that are in both inventories they need to cut brands (see above) the brands that are cut need to go somewhere. That said, they try and hope to get places with the next distributor standing. Usually a smaller or market specific / regional distributor. When that happens the apple cart is rocked. Your small and family owned distributor has access to better brands that were cast offs from the merger. Your brand can become the step sister in the book. What was once a favorite of the sales team and leadership of aforementioned smaller distributor is now having access to better brands with a higher SKU velocity, thus more commission and more profit. Your brand might get pushed down the pecking order to a lower position in a smaller distributor.

The point is that all mergers affect all brands whether the brand is directly or indirectly impacted from the merger activities. Brand owners, no matter what the category need to be very mindful of where they fall in the pecking order for their distributor.

In earlier columns, we have written about the brand that receives their Q4 depletion report of ZERO sales. When the distributor was contacted about the goose egg the response was, we fired your brand in October and sent you a letter. Please come get your goods. The brand owner gets the miserable experience of not only missing high season, but the expense of a bill back / buy back on their own goods. That is a true story and happens more times than we see at BevStrat and more times than I am sure I know.

Make no mistake, the hyperbole of mergers is good for all, as told by the distributor, and this will help us be a better distributor partners to our brands is bull, and the brand needs to chart their own path and always be looking thru the windshield.

It is indeed merger season and look for a press release coming soon. As brand owners we need to watch our back and our front. We need to know that consolidation affects not only the brand houses that are merging, but also the houses that are not. It all trickles down hill.

Keep your options open and selling your brand by all means needed as sales will raise all tides and rising tides raise all ships. Just don’t let yourself be a ship of fools.

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