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36 WINES&VINES September 2018 DISTRIBUTOR MARKET 2018 I t has become axiomatic in the wine business that gaining national distribution for a brand is difficult if not impossible. Most everyone knows the chart of two funnels pointing in different directions that illustrates the challenge. Today, 9,700 U.S. wineries need to push their wines through just 1,200 distribu- tor or wholesaler companies. That situation used to be reversed. In 1995, there were just 1,800 wineries fanning out into a wide funnel of 3,000 distributors. "When I started my career, there was a lot more attention from wholesalers," said Greg- ory Ahn, CEO of Folktale Wine Group, based in Carmel, Calif. "It used to be that distributors would come out to California and knock on your door to look for new wines. Nowadays they don't even have time to taste all the wines that come to their offices." It's a well-known challenge posed by dis- tributor consolidation. Faced with that chal- lenge, some brand owners like Ahn have found a solution in regional distribution. Focusing distribution and sales efforts on one region of the U.S. enabled Ahn and his team at Alcohol by Volume, the previous business name, to create a brand, prove its appeal in one region, and later sell it to a bigger wine company that could take it national. Bread & Butter is that brand. Conceived in 2012 and launched in 2013 as a partnership between Alcohol by Volume and Fior di Sole custom-crush winery, the $15 retail Chardonnay and Pinot Noir brand grew to 200,000 cases in four years and was sold to Novato, Calif.-based WX Brands in April 2017 for an undisclosed sum. The advisor who assisted in the sale, Mario Zepponi of Zepponi & Co., said that Bread & Butter's focused, regional-sales approach was a key factor in attracting the buyer. "I look at it as a pathway to success," Zep- poni told Wines & Vines, "especially for brands that are more positioned for sale at some point. But no matter what, it's a strategy that will lead to a successful brand." Zepponi used the Bread & Butter example in his presentation at the Unified Wine & Grape Symposium in January of this year. He told the audience that strategic distribution is becoming more and more important. "Independent win- eries are going to have to think like craft beer and spirits makers. I would encourage them to look at this example." Ahn confirmed Zepponi's characterization of the Bread & Butter distribution strategy, but ad- mitted that it wasn't as intentional as it may have appeared. "Unfortunately, I am not smart enough to say that I sat in my evil lair and decided this is what we're going to do for distribution." But he and his team's relationships with the trade in the Northeast, and outside the major urban centers, led them in that direction. Zep- poni said the company built two-thirds of its distribution in case depletions in the Northeast and did it with 65% independent, off-premise accounts and middle-tier wholesalers. "It was definitely distributor and wholesaler relationships that were key," Ahn said. Opici, based in New Jersey, distributed Bread & Butter in Connecticut and upstate New York. Bay State was the company's partner in Massachusetts, Rhode Island and New Hampshire. Ahn said that when starting a new brand or new winery, trying to get distributors to add it to their books is the biggest challenge. "Wholesale channels have created such a bottleneck that it's difficult to even get distribution at all without relationships. But we had to get our own people to pound the pavement to help them." He and two other salespeople did the pounding at first, building to five people total before the sale. Origin story A quirky shop in Salem, Mass., that sold both wine and kitchenware provided the aha moment in 2012 that led to the creation of Bread & Butter. Ahn, who had worked for Seagram, Diageo, Allied Domecq and Constel- lation Brands before founding Alcohol by Volume, said he had been hearing from vari- ous clients that consumers were turning away from unoaked Chardonnay and looking for a more classic style of California Chardonnay that was "more malolactic-driven, oak-driven and fruit-forward." Ahn had begun to believe that the trend toward unoaked wines had peaked with the Naked brand and that the trade and the public were ready for more offerings in the mid-price points that were openly rich and oaky. He ob- served that many people in the wholesale tier especially remained affectionate about Rom- bauer Chardonnay, which continued to be a big seller because of, and not in spite of, its very fruity and oaky flavors and quite soft and luxurious texture. The store stocked a number of what Ahn calls the pastry brands such as Layer Cake, Cup- cake, and JaM along with cheeky labels like Twisted Sister and Bitch. It also sold cookbooks, and as he flipped through a dictionary of food terms he came upon an entry for bread-and- butter pickles. A description of the sweet pickles as a simple, uncomplicated staple got him think- ing that the name would work especially well for a Chardonnay, except the pickle part. He said Alcohol by Volume had already worked with the Fior di Sole winery in Napa, Calif., as a custom production partner, and he asked the winery to start making Bread & But- ter Chardonnay. Fior di Sole's owners are Dario de Conti, Valentina Guolo-Migotto and Stefano Migotto, who are also the owners of Ca' Momi brand wines and a Napa, Calif., restaurant of the same name. By 2014, Alcohol by Volume was listed as one of Inc.com's 500 fastest-growing compa- nies, producing Bread & Butter and other brands including Alias Wines, Aviary Napa Valley, Des Amis, Le Mistral, Manifesto and State of Art. At the time of the sale in 2017, Zepponi stated in a news release that the brand had consistently ranked as one of the fastest- growing in the industry, based on retail scan data, with a sales value increase of 139% for the 52 weeks ended Feb. 25, 2017, based on the Nielsen food and liquor outlet data. "Mini- malist packaging design and a clean style have helped Bread & Butter stand out within the increasingly competitive super-premium price category," Zepponi wrote, "despite the brand's minimal distribution in retail chains and lim- ited sales outside of the East Coast." Building a Powerhouse Brand Regionally How Bread & Butter's founders used Northeast distribution as a proving ground Jim Gordon