Premium Spirits: US On/Off-Premise Distribution | In Practise

Premium Spirits: US On/Off-Premise Distribution

Former VP at Constellation Brands and William Grant & Sons

Why is this interview interesting?

  • Relationship between off and on-prem spirits distribution
  • How suppliers work with distributors
  • On-prem vs off-prem pricing structure
  • Distributor gross margin mechanics
  • Why Hendricks Gin scaled rapidly
  • How off-prem channel shelf space and marketing budgets work
  • Impacts of ecommerce and lessons from American Aviation deal

Executive Bio

Mark Reese

Former VP at Constellation Brands and William Grant & Sons

Mark has over 40 years of experience working in spirits sales and marketing globally. He started his career in 1980 at Seagrams where he spent 8 years running sales across California before joining William Grant & Sons where he spent 18 years responsible for the Southeast Region, managing 18 wholesalers selling brands including Glenfiddich and Balvenie. Mark was also involved in bringing Hendricks Gin to market in 1999. Mark then spent 5 years at Constellation Brands where he was responsible for scaling Svedka Vodka from 800k cases to over 3.5m before joining Erdington in 2013 to run Strategic Accounts. He is now VP of Monkey in Paradise Premium Vodka, a startup premium vodka brand in the US.Read more

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Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Can you explain your role and responsibilities at William Grant & Sons?

I was there 18 years. In the end, I was the Division Manager for the Southeast states, north of Florida and south of the Mason-Dixon line. States like Georgia, South Carolina, Alabama, Mississippi, North Carolina, Virginia, Kentucky and Tennessee.

Which brands were you managing at William Grant & Sons?

I managed close to 20 wholesalers in those States, with eight to 10 spirit brands and 30 wines in the portfolio.

If we take Glenfiddich or another scotch whiskey brand for William Grant & Sons for example, with which channel do you typically first go to market?

Any brand has three channels to look at and you will market some more heavily than others, depending on the brand. With Glenfiddich or Balvenie in the single malt category you would focus on on-premise distribution because that is where the sampling is. That is where consumers first touch your brand, try and become familiar with it. They might see it on a menu or hear it from a bartender who is the gatekeeper who makes a strong recommendation. On-premise is critical but you need off-premise, which is independent or chain accounts, to make up for the volume to make it all work. Liquor stores and chains are super important so you also have to attack them.

Looking at the on-prem channel you mentioned how the bartender is effectively the gatekeeper; how do you get access to the gatekeeper?

He is the first line of defense; you sit at the bar or order from the waitress. You ask them what scotches they have and when you look behind them they may have 15. You hope that you are mentioned in the top three. We have Glenfiddich, Glenlivet and Glenmorangie. All right, what do you have that is interesting? We might have Macallan or Lagavulin. Those are the people you have to educate, train and work with to help you get to the top of the suggested list. That is the first line you have to get past, if you are in the account.

How do you get access to those bartender gatekeepers?

In the open states which I managed, you would go through a distributor which is, by law, using the three-tier system in America; supplier, distributor and retailer for both on-premise and off-premise. You would probably meet them working with the distributor salesman who calls on them every week or you could cold call them and go in yourself, sit at the bar and have a drink. I am Mark Reese from William Grant & Son; I am your local supplier rep and it is nice to meet you and start the relationship that way. Typically, you would meet those accounts through the distributor and expand who you know in the marketplace building up a Rolodex of key accounts.

How do you ensure your brand is correctly represented by the distributor?

The most important thing you do as a supplier is managing the wholesaler because he has all the accounts and sales people, whereas you are a single person. If you get them on your side and manage them correctly, they multiply your efforts. Managing them is both an art and a science and every wholesaler is like managing a child; they are all slightly different. Some require kid gloves whereas others need a kick in the arse, as you would say in the UK. It is all about the money; if you give them big margins, they will work on your brand first. Knowing your wholesaler and what is important to them is number one.

How has on-prem distribution changed over the last 10 or 20 years?

It has changed because there are many more brands. If you went into a bar in the 60s or 70s, there was Chivas Regal, Johnny Walker Black, Johnny Walker Red and perhaps one single malt and that was about it. Today there are 30 single malts and that is the same for every category. With vodka there was Smirnoff and Absolut in the 80s, whereas today, there is a new vodka every week. There is much more competition but the biggest players have more brands and are more organized and better at what they do. If you are small you better have your stuff together because the competition is way keener than it ever used to be. Accounts have also become more sophisticated in how they market.

When I was a young salesman, we had single malt lists consisting of three items, whereas today, that list is deep. Bartenders now have to be mixologists who add their own spin. They want to put their own stamp of whatever they are known for on that menu so you are also competing with that. Consider yourself lucky when your brand goes into the cocktail. On-premise continues to evolve and, I can tell you, it has not gotten any easier.

So would Glenfiddich go to a distributor with their marketing plan, contribute dollars to market the brand and then rely on the distributor to tell the mixologist why the product is worth using in their cocktail?

They carry the story and are therefore super important. Distributors are your link to the account. Whether it is on-premise, off-premise or chains, nothing good happens without the distributor being involved at some point. From the initial contact to promoting new products or offering great prices and special discounts, they are the ones who typically relay that. I hardly ever get a phone call directly from an account saying they love my brand, please come visit us.

What is the incentive for distributors?

Begin with who is talking. If the salesman is talking to the account, they probably get a commission, so the more they sell the more they make. They are also, typically, offered incentives by suppliers to push certain brands so those are the brands they talk about. Incentives range from a trip to a California winery if they place the brand on a wine list, or a big screen TV, or maybe as simple as a Mont Blanc pen costing $300. There has to be a wow to get them interested and it should be attainable.

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Premium Spirits: US On/Off-Premise Distribution

March 3, 2021

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