Issue link: http://winesandvines.uberflip.com/i/867389
September 2017 WINES&VINES 53 DISTRIBUTOR MARKET 2017 The company takes raw data from dis- tributors' systems and creates a standardized data set. The product data is then embel- lished with content and marketing material. "For the first time, people are able to say what they want across lots of fields, enter their ZIP code and only see things distribut- able to them." Buyers select products they want, and their orders are forwarded to the relevant sales reps by the software system. "Putting orders in (via the platform) doesn't change the way people order," Sherman says. "It's not e-commerce, it's a more accurate way of communicating to sales reps online." Distributors are the primary source of rev- enue. SevenFifty works with 900 distributors across the U.S., according to Sherman, "from one-person teams to Breakthru Beverage Group and Republic National. All the big guys except Southern." Smaller distributors get exposure, while larger distributors benefit from the ease with which customers can reach them through the marketplace. SevenFifty claims 50,000 buyers on the platform and 100,000 trade professionals in their network, which Sherman calls "by far the largest" that exists online. Suppliers can also sign up to use the system, update content and do research. Rates start at $25 per month. The platform is free to use for restaurants, bars and retailers. Sherman was previously a wine buyer, while his co-founders came from experience in distribution and technology. They started SevenFifty in September 2011, launched in New York in January 2012, and are now in "about 36 states," according to Sherman. "We'll probably open the remaining ones next year." Both SevenFifty and Beverage Media stressed the importance of the distributor sales rep in conjunction with their systems. SevenFifty built customer relationship man- agement (CRM) tools using its data set to allow reps to manage relationships better, creating sales collateral and educational con- tent. Beverage Media noted the importance of having an order already formatted in the system so a rep merely needs to approve it, thereby saving meaningful time, particularly at the hectic end-of-day rush. Both allow reps to access their orders from the road via their digital devices. Both firms also provide paid access to their data sets to suppliers seeking a better regional or national view of their position or competi- tion in a market or market data in general. Wines & Vines also offers a data service, the Distributor Market Service, which con- tains more than 1,400 North American dis- tributors and 1,850 distributor contacts, with more than 3,400 unique wineries linked to a distributor portfolio (see page 54). LibDib San Jose, Calif. Founder and CEO: Cheryl Murphy Durzy Cites 100 suppliers, 600 products, 400 buyers Cheryl Murphy Durzy founded LibDib (short for Liberation Distribution Inc.) after becoming frustrated by the challenges of gaining distributors' attention and distribu- tion for her family's specialty California brand Clos la Chance. "Nobody is taking on new brands right now due to the consolidation," Durzy says. She launched LibDib, a licensed digital distributor, as the answer. "Now they have a platform: small-production products with the back end of a big distributor. It also helps independent retailers differentiate themselves by carrying craft, which is what the market wants." LibDib allows craft brands that aren't big enough to gain the attention of distributors or even marketing companies (see page 48) to post their own materials and manage their brands while having the resources of a distributor (in this case a digital distributor) to ensure their product can be delivered to the end clients. Retailers and restaurants searching for craft products to distinguish themselves benefit from new vendors and online ordering. "You have all these suppliers that are grow- ing, and lots of independent restaurants and retailers looking to distinguish themselves with craft products," Durzy says. "They get stuck in between with the three-tier system." LibDib launched in March in California and New York. It covers wine, beer and spirits in California, and wine and spirits in New York. In just three months, the company recruited more than 100 suppliers, more than 600 prod- ucts and "well over 200 buyers in each market." Durzy explains, "My goal is 50 states." The LibDib business model is to make money as a distributor while charging less than tradi- tional distributors by leveraging technology. When a wholesale buyer places an order, LibDib notifies the winery, which ships the wine. LibDib takes payment from the buyer and remits to the supplier. They charge no fees for being on the platform and make their money through the sales margin, which is currently 15% for wine. Of course, digital distribution is not a pana- cea. As with traditional businesses selling to distributors or marketing companies, produc- ers need to build their brand demand. "I'm not out there dragging the bag," says Durzy, "I'm enabling. You still need to sell your product." Durzy wants to empower small producers to compete. "I've been living this problem for 20 years….I wanted to change the world!" Technology has certainly changed the world of many industries before ours. Perhaps one or more of these three players will change the world of wine. THE THREE-TIER SYSTEM TODAY Winery Wholesale Retailer Marketing Company Connection Company The traditional three-tier system of distribution in use in the United States since the repeal of Prohibition requires wine producers to sell to distributors (or wholesalers, virtually synonymous terms) that in turn sell to the retail tier of stores, restaurants and bars. Marketing companies have played an auxiliary role in the three-tier system for several decades, assisting wineries in marketing and sales efforts that pull brands through the wholesale channel. Connection companies are a newer phenomenon seeking to simplify three- tier sales using digital platforms as critical tools to help both buyers and sellers.