Issue link: http://winesandvines.uberflip.com/i/1019591
September 2018 WINES&VINES 29 HERE'S WHAT WORKS The company actively sells wine along with its suppliers and has hired key account man- agers in California, Colorado, Connecticut, Massachusetts, New Jersey and Texas, with plans to cover the entire United States. The company also has merchandisers who can assist with floor displays. "This is not a 100% digital play," he said. "Wineries won't be suc- cessful with just a software platform. There is still a human component." Cheryl Durzy is the founder and CEO of Lib- eration Distribution (LibDib), which she de- scribes as a "technology-based company that provides three-tier to any winery that wants it." In contrast to Merchant23, LibDib is the wholesaler, with wholesale licenses in all states where it does business, currently California and New York, with four additional state li- censes pending. Durzy plans to be licensed in every state in the next two years. Since starting in June 2016, LibDib has grown to have 305 active suppliers with 1,822 alcoholic beverage SKUs in California, and 184 active suppliers plus 1,150 SKUs in New York, with more being added daily. Durzy compares LibDib's platform to Etsy, where suppliers go in and enter all their data, sell sheets, videos and other materials in one place. Setting up distribution in a new state is as easy as entering some information online and uploading a license. And for the on-prem- ise or off-premise retailer, Durzy said, "It's a nice, easy self-serve shopping experience." Durzy offered the example of a small Cali- fornia winery that had a relationship with a New York restaurant but couldn't sell it wines. Using LibDib, the winery now ships four cases every few months. The restaurant pays LibDib as the second tier, which then pays the supplier within 45 days. Durzy claimed LibDib's margins are only 15%, as the company doesn't own and maintain delivery trucks or warehouses. Unlike with many wholesaler agreements, wine sup- pliers are free to leave at will, as LibDib will not enforce franchise Laws. Delivery costs are the responsibility of the supplier/maker, who then builds them into the price. LibDib also has relationships with ware- houses in both markets that can assist with storage and delivery. To be successful, Durzy also stresses the need for human interaction. She said the win- ery owner is always going to be the most pas- sionate salesperson. "They are still out there selling, just like three-tier today." To that end, LibDib will help the winery find a local rep. She sees wineries using her plat- form and substituting efficient virtual tastings with retailers via Skype or Facetime, instead of spending time and money to travel across the country. Both Durzy and Moynihan demonstrated tremendous entrepreneurial energy, optimism and dedication in helping their clients suc- ceed. I also never heard either say that they require slotting, return, marketing, spoils or other "allowances" that primarily exist to en- hance a middleman's bottom line. This may be just a little different than your own dis- tributor experiences. Getting past the gatekeeper Founded on election night 2016 by Meg Mur- ray, Oregon-based Nasty Woman Wines is a brand with "lefty feminist leanings." Murray expected the brand positioning with natural- food stores would be a no-brainer to get dis- tributors to support, but soon learned that "I couldn't even get past that gate." She now uses LibDib to bypass conventional distributors and go direct to market. Murray does her own sales, traveling to California as well as doing virtual retailer tast- ings. In fact, she was doing two virtual tastings the day of our interview, one in Santa Monica, Calif., and another in upstate New York, es- sentially disproving the idea that you can't be in two places at once. Murray noted that "it's a different way of selling." Air shipping wine samples does cost money, but much less than flying. She works from home but meets people "where they are in today's world. Buyers are so busy." She said she heard from one New York ac- count who discovered her on LibDib and reached out asking, "I love your brand. How do we do a tasting?" Using LibDib, Murray's sales went from zero to "several handfuls" of placements, including all 29 California and Washington locations of Total Wine & More, an account she had been working to break into for over a year. She now has a base on which to grow, making it easier to take on contract sales reps to grow the brand, and eventually storing wine in California to cut costs. By having someone else take care of com- pliance, paperwork and payments, Murray can focus on the relationships. "This is a sales and marketing business. You just happen to be sell- ing wine," she said. Making sales after giving up Along with his father, Matt Railla is co-owner of Wine Guerrilla, a single-vineyard Zinfandel specialist producing 1,000 cases a year in Santa Rosa, Calif. Before starting with Merchant23, Railla tried everything to get the attention of distributors, with minimal success. He gave up trying (does this sound familiar?), instead focus- ing his time on the tasting room, which opened in 2013. His three-tier sales dropped to zero. About a year ago, he started to work with Merchant23, and sales started with some small deals. Now he gets reorders or deals every month and sells in four states, including a San Diego retailer that orders about one-half pallet each month. His direct-to-trade sales are close to 200 to 300 cases annually. Railla is now feeling con- fident that he can grow to 1,600 cases and sell what he makes, and he credits Merchant23. "What they did for us was take all of that effort out of my hands," he said. "Now all I have to do is say yes or no, and get my wine ready to ship." The little guy gets into Cost Plus Reid Kinnett is winemaker for Karah Estate Vineyards, a 2,000-case winery in Sonoma County, Calif. Like so many wineries at this size, Karah Estate doesn't have a dedicated sales manager on staff. He likens the use of Merchant23 to "letting me throw more lines in the water," as Merchant23 casts a broad net that goes well beyond what his broker network can reach. Kinnett added that "once you make a few sales in an area, then it snowballs." Merchant23 was able to get a large order from Cost Plus World Market, something that would be highly unlikely in the conventional three-tier model. Cost Plus was direct-to-store shipped a high-quality wine that none of its competitors had, and Karah Estate moved some excess inventory without heavy discounting. And the best part: Kinnett was paid promptly. A small importer's story Ami Nahari is the founder and CEO of The River Wine, based in New York state. The com- pany distributes and produces premium kosher wines and spirits from Israel, California, Italy and Finland, with annual sales of 10,000 cases. Nahari was doing well in his home territory of New York and New Jersey but struggled in California, which should have been his second- largest market. He had some retail demand, but his distributor didn't allocate resources to the niche kosher market, even though to Na- hari it was a big market. He went to California and built sales himself, eventually getting it to $30,000 annually. Then he started using LibDib's platform, and California sales took off, going from "500 to 1,200 cases just in the first year. Now I am getting calls from Mollie Stone's and others." Nahari still can't cover California as well as he'd like, so LibDib helped him find a contract sales rep who should get him to 2,000 cases annually. He heaps praise on LibDib, stating, "I wouldn't dare to call LibDib a clearing house. They treat the wines as their own, and there are no hidden fees, no minimums." These examples show that online or virtual three-tier may finally be a viable solution for the small winery and will likely only get better. And it should be a lot more efficient than those weeklong East Coast sales trips. Andy Starr, founder of StarrGreen (starrgreen.com), is an entrepreneur, marketing manager and winemaker who provides strategy, management and business develop- ment consulting services. A resident of Napa Valley, Calif., he holds a bachelor's degree in fermentation science from the University of California, Davis, and an MBA from UCLA.