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How Do Local Drinks Distributors Compete Against Big Brands Buying All The Bars?

How Do Local Drinks Distributors Compete Against Big Brands Buying All The Bars?

As major drinks companies, including C&C Group and Heineken, move further into controlled distribution, we sketch a blueprint for how non-global drink distributors can stay relevant and retain market access.

 


Landmark acquisitions herald a new era of controlled drinks distribution

In controlled distribution, a single company controls both the manufacturing and distribution of a product. This arrangement was commonly used by pubs up until the mid-20th Century, with beer brewed on-site and sold directly over the bar. A modern-day UK alcohol industry analysis reveals that brewery-owned pubs are still selling on a controlled distribution basis–from brand new BrewDog bars to Sam Smith’s Old Brewery “tied houses”.

Distributors have always had competitors that use controlled distribution. However, the increasing prevalence of controlled distribution and the clout of the companies implementing it appears to be rising, evidenced by Heineken’s £403m acquisition of Punch Taverns last year, and more recently, C&C Group taking a 47% share in Admiral Taverns.

This poses an existential question for non-global drink distributors: How do we retain market access and stay relevant, when drinks makers are taking more of their distribution in-house?

 

Adding value will be key

Although some brands are moving towards controlled distribution, it is not yet the industry standard in the drinks sector. Above all, this is because a good distributor can offer unique advantages for makers and sellers alike, as they have access to huge amounts of data via their beverage distribution software. Advantages such as:

Using data to improve sales performance

For example, where a brewery’s sales data is made available through their beer distribution software, this insight will be restricted to their own products. A general distributor can create sales strategy insights for each client using data on all the different products they distribute, and all the clients and locations they serve. Insights tailored according to variables such as location, customer demographics and product type can be generated automatically using data from the distributor’s enterprise resource planning (ERP) software, and fed back to the client.

Even if a drinks maker or seller is planning to increase their use of controlled distribution, the unique insight a third-party distributor can provide remains a potent selling point.

Selling distributors on stock management

Drink makers will always need the option of alternative points-of-sale, in case they produce more stock than they can sell. Distributors can pitch themselves to manufacturers specifically as that alternative route to market, via trade promotions targeting their point-of-sale customers.

Coming from another angle, this arrangement also represents a strong sales proposition to put to clients on the point-of-sale side. The distributor can offer the seller big-name products at competitive prices, and that offer can be targeted via ERP towards the clients deemed likeliest to buy, based on their transaction history.

Creating the easier option

For drinks makers, setting up controlled distribution isn’t a simple case of “cutting out the middleman” and reaping the spoils. As any distributor knows, getting the right product in front of the right customer requires the coordination of transport, storage, sales strategy and the software required to harmoniously manage these and other processes.

Setting up distribution is a mountain for any drinks maker to climb, and distributors should take this as an opportunity to sell their service as a diametrically opposed alternative in terms of convenience. Yes, the manufacturer is giving away a cut; but in return, they can exchange all the demands of distribution for simple, often automatable interactions with a specialist distributor.

This may call for a subtle change in the way distribution sales managers present their offer to manufacturers: from distribution partner, to distribution service provider.

Targeting market niches

From Coca-Cola’s move into Japanese alcopops to worldwide growth in the number and variety of craft breweries, diversification in the drink market and within drinks makers’ ranges is rife.

Certain consumers are constantly seeking the new experiences this shift has accommodated, and those bars able to provide a flow of novel products have often prospered as a result.

For distributors, this represents an opportunity to sell high-value, low-volume products to enrich sellers’ inherently better placed to service that demand than individual manufacturers of any size. The answer, then, may be not to play the likes of Heineken at their own high-volume game, but rather, to target market niches that demand a wider choice.

Customers will demand a wide choice of beverages for years to come, and big brands who are moving towards controlled distribution is undoubtedly a daunting prospect. However, provided non-global distributors can achieve a flexible approach to sales strategy and an enriching service for manufacturers and sellers, we have every faith they can adapt and survive.

Did you miss out on last week’s blog? We looked at how drinks distributors could see their margins soar, just by being a little more strategic in relation to selling seasonal goods! Click HERE to find out more