Distribution, State-specific sales, etc.

[White Dog]

Speaking as someone who's produced alcoholic beverages and has sold them in all 50 states, and who now is a senior manager for a distributor, I'll throw in my two cents.

While it's true that many states charge a fee to register your brand so as to conduct business in that state, the overwhelming majority charge fees that are not at all cost-prohibitive for a producer. And true, for many states, their charge is a per label (product) fee...but, again, it's a fairly small fee, and not at all prohibitive to business.

And while I'm not entirely a fan of the three-tier system, the choke point - at least with regards to the question posed in this post - is NOT the distributor. The issue here is availability from the supplier.

I am the State distributor for Heaven Hill, but am not able to order every item they produce...and believe me, I beg for some of them. I also sell the Sazerac portfolio, and just last week I asked our rep if I could order a few cases of AAA. "Nope, sorry, we don't sell it in Minnesota" was his response...despite the fact that I sell AA, BATC, RHF, Hancock's, Van Winkle, etc.

It really goes back to the issue of limited production, an established market for certain products, and a desire on the part of the producer to not over-commit the distribution of a product unless (or until) a consistent, adequate supply can be guaranteed. Wholesalers are in the business of making money...which means stocking the products that the customer wants, be it 500 cases or 5. We're not going to say "no" to business...unless we can't get the goods from the producer.

Mat, I too am in the distribution business. I personally know of a large Wisconsin wholesaler who has repeatedly refused to bring in solid case purchases for individual retailers. These are not import cases that need to be brought in on containers, these are individual cases that are either in Jersey or Northern California warehouses, where bringing in a case is easy. The wholesaler's response is that they won't do the paperwork for such products. This same wholesaler sells Diageo, FWIW.

The point is, many arrogant wholesalers will say no to certain business.

[cowdery]

Speaking as someone who's produced alcoholic beverages and has sold them in all 50 states, and who now is a senior manager for a distributor, I'll throw in my two cents.

While it's true that many states charge a fee to register your brand so as to conduct business in that state, the overwhelming majority charge fees that are not at all cost-prohibitive for a producer. And true, for many states, their charge is a per label (product) fee...but, again, it's a fairly small fee, and not at all prohibitive to business.

And while I'm not entirely a fan of the three-tier system, the choke point - at least with regards to the question posed in this post - is NOT the distributor. The issue here is availability from the supplier.

I am the State distributor for Heaven Hill, but am not able to order every item they produce...and believe me, I beg for some of them. I also sell the Sazerac portfolio, and just last week I asked our rep if I could order a few cases of AAA. "Nope, sorry, we don't sell it in Minnesota" was his response...despite the fact that I sell AA, BATC, RHF, Hancock's, Van Winkle, etc.

It really goes back to the issue of limited production, an established market for certain products, and a desire on the part of the producer to not over-commit the distribution of a product unless (or until) a consistent, adequate supply can be guaranteed. Wholesalers are in the business of making money...which means stocking the products that the customer wants, be it 500 cases or 5. We're not going to say "no" to business...unless we can't get the goods from the producer.

Since you know the business so well, Mat, why do you suppose the producers -- who presumably want to satisfy the customer as much as you do -- won't sell to you?

[mosugoji64]

Speaking as someone who's produced alcoholic beverages and has sold them in all 50 states, and who now is a senior manager for a distributor, I'll throw in my two cents.

While it's true that many states charge a fee to register your brand so as to conduct business in that state, the overwhelming majority charge fees that are not at all cost-prohibitive for a producer. And true, for many states, their charge is a per label (product) fee...but, again, it's a fairly small fee, and not at all prohibitive to business.

And while I'm not entirely a fan of the three-tier system, the choke point - at least with regards to the question posed in this post - is NOT the distributor. The issue here is availability from the supplier.

I am the State distributor for Heaven Hill, but am not able to order every item they produce...and believe me, I beg for some of them. I also sell the Sazerac portfolio, and just last week I asked our rep if I could order a few cases of AAA. "Nope, sorry, we don't sell it in Minnesota" was his response...despite the fact that I sell AA, BATC, RHF, Hancock's, Van Winkle, etc.

It really goes back to the issue of limited production, an established market for certain products, and a desire on the part of the producer to not over-commit the distribution of a product unless (or until) a consistent, adequate supply can be guaranteed. Wholesalers are in the business of making money...which means stocking the products that the customer wants, be it 500 cases or 5. We're not going to say "no" to business...unless we can't get the goods from the producer.

This is what I LOVE about SB: whether we agree or not, we get a great education about what goes on behind the scenes of our little hobby

[White Dog]

That was 2.5 years ago. The situation has largely been corrected.

As for your proposed solution to a previous owner's over-production. Presumably your sales department is selling as much as it can. So the solution to excess inventory is not "sell more." The solution to excess inventory is "make less." You can try to sell more but you risk undercutting your profit structure by flooding the market and depressing prices. No, I don't care what business you're talking about, you reduce inventory by making less, on the theory that when you find yourself in a hole, the first thing to do is stop digging.

Chuck, one thing I gather from your writings is that you seem to think the Kentucky producers understand where the market is going.

[mrviognier]

Mat, I too am in the distribution business. I personally know of a large Wisconsin wholesaler who has repeatedly refused to bring in solid case purchases for individual retailers. These are not import cases that need to be brought in on containers, these are individual cases that are either in Jersey or Northern California warehouses, where bringing in a case is easy. The wholesaler's response is that they won't do the paperwork for such products. This same wholesaler sells Diageo, FWIW.

The point is, many arrogant wholesalers will say no to certain business.

In any industry there are arrogant, stupid and just plain lazy businessmen...and, sadly, there are plenty of examples in the three-tier system. I was speaking specifically to the issue at hand; namely, 'why are some Bourbons unavailable in certain markets?' And I'll stand by my assertion that the PRIMARY reason for this is supplier driven, not distribution.

[mrviognier]

Since you know the business so well, Mat, why do you suppose the producers -- who presumably want to satisfy the customer as much as you do -- won't sell to you?

It's not that they won't, it's that they feel that they can't...at least not at the moment. As I stated in my post...

"It really goes back to the issue of limited production, an established market for certain products, and a desire on the part of the producer to not over-commit the distribution of a product unless (or until) a consistent, adequate supply can be guaranteed."

[cowdery]

Chuck, one thing I gather from your writings is that you seem to think the Kentucky producers understand where the market is going.

They do their best to anticipate it and I don't know of anyone who does it better.

Jeff Conder, of Beam, said something very insightful to me once. We were talking about production planning and while he agreed that they have to project a decade or more into the future, the main thing they try to do is get the next five years right. If they can get the next five years right -- don't overproduce but don't under-produce either -- the rest will take care of itself. They evaluate and adjust several times a year. Mainly they are looking at distributor orders which, in themselves, represent probably the next business quarter.

Rye is a good example. It has grown and all of the rye producers have increased production, but it has grown from a very small base and is still very small in terms of overall volume. The distiller who was making rye for two days each season is now making it for four. That's a doubling of production, which is a lot, but it still represents four days out of maybe 150, so still a drop in the proverbial old oak bucket.