Clos LaChance Wines

So we just found out today that our Seattle-based distributor was sold to a larger, multi-market distributor . I thought I would take this moment to write a little bit about the current state of distributors and how Clos LaChance “fits” within these companies.

In order to sell to any account (wine shop or restaurant) outside of CA, we must go through a distributor (it’s the law). Distributors absolutely provide a lot of very important functions that we as a winery could not do on our own—transferring and storing the wine in a temperature controlled environment, selling it into accounts, delivery, collections, even brand development. I am thankful for my distributors, cause they do the dirty work. Dealing with warehouses, trucks and collections is not my forte.

However, the state of distributors is ever changing—hence Click being purchased by Winebow. The small-to-midsize distributors just do not exist anymore. And if they do, they are usually only months away from purchase via a larger distributor. There are a few big distributors out there—Southern Wine and Spirits, RNDC (Republic and National, two big distributors that merged), Charmers…to name a few. When the smaller distributors get gobbled up by big distributors, the brands from the little distributors book are merged into the big distributors book. That means the sales reps at the big distributor are selling XX more wine brands.

Clos LaChance produces 60-80K cases per year, depending on the vintage. We are not a small boutique winery—but we are not even close to being a large winery, or even a medium sized winery. The top producing winery in the US is Gallo—and they make close to 75 million cases annually. We aren’t even within spitting distance of being a part of the Top 30 Wine Producers in the US—number 30 on that list produces 300K cases annually.

There are hundreds of new wine brands being launched in the US every year. And because of buy outs, there are fewer and fewer distributors out there to sell that wine. So what happens? The sales reps at those distributors have to focus on something—how are they supposed to know the details of thousands of different wines? It’s impossible! So they focus on the big ones (see that top 30 list again). The big wine producers have the clout, the incentives and the money to dominate the mindshare of the distributor sales rep.

So where does that leave us? We try for the medium sized, independently owned distributorship—that’s where we have been very successful in the past. Click was a perfect example of that. Our brand will now be rolled into the larger book. There will be more sales reps covering a larger territory; but we will have to work that much harder to ensure our wines continue to be sold successfully in Seattle. Sometimes a buyout can be a good thing—more feet on the street, better internal communications and processes; however I am always skeptical about change.

On the other side of the spectrum, there are very small distributors. Ones that have just a few sales reps and less then 50 brands. Those are often tempting to us—as we have the opportunity to be a big fish in their small book. There are definitely a few good small distributors out there. The challenge with some of these companies is that they can be a slow (or no) pay. Once we don’t get paid, then we obviously are not going to sell more wine to that particular distributor—and then we have to find someone else to carry the brand in that particular market. It’s starting over from scratch—and risking money and time as well.

It’s certainly been challenging conducting business in current market conditions. We absolutely need good distributors to be successful in our business. So we have added more bodies to the Clos LaChance sales force (we have 5.5 people focusing entirely on our wholesale sales channel right now) to work with the wholesalers and get the wines to where they need to be. I think that is the best strategy for a winery of our size. We don’t have the clout or the dollars of the big producers to get, and hold, the attention of our distributor sales force as much as we would like. So we have an experienced and talented sales force that builds relationships with the distributors and the accounts to sell the wines in. And the wines in the bottle speak for themselves. Our goal is to produce quality wine from Estate fruit—at a fair price. Seems to be working so far, but not without a lot of effort on our part!

**6/5/08: Update: I jumped the gun a bot. Apparantly Winebow just purchased Click's import business. So for us, its business as usual. Good.