The United States is one of the most sought-after markets in the world for CPG products, particularly for brands within the alcohol beverage industry. From one of the largest consumer discretionary economies to one of the fastest countries to reopen after the peak of COVID-19, the US is an ideal market for new or internationally established brands to launch, grow, and thrive.
However, when a geographic location is the most popular destination in the world, every business and brand one can think of is competing for a piece of precious real estate. With alcohol, including wine, spirits, ready-to-drink seltzers, and cocktails, as well as other categories, there are also government regulations to contend with, including the three-tier distribution system which regulates how brands are able to sell through to the consumer.
How Alcohol Brands Sell in the US
How does this to-market process work? After meeting Federal and state registration requirements, start-ups, emerging and mature brands, as well as international portfolios enter the market with the intent to capture the attention of a finite amount of importers and distributors.
Then, these distributors sell to retailers with limited shelf space, who then sell to consumers who will finally consume the product. What kinds of brands do these distributors want? Simply put: the ones that fit the rest of their portfolio, will give them the most profit, and require the least amount of effort to make it to the checkout line.
In addition to competition for market share, the global pandemic has also created new challenges. Previously, a brand could offer in-store samples, coupons, and eye-catching POP displays with hopes to deplete inventory. Now with fewer on-premise venues, and in some cases, fewer patrons visiting these establishments or shopping online, their key points of differentiation and why they’re the ‘best choice to buy’ must be communicated and consumed as information before a customer ever walks in the door.
5 Key Factors for Distributors and Retailers
In today’s market, distributors and retailers are primarily looking for five key factors when picking up new brands:
1. Proper Margins
2. Solid Branding
3. Market Support
4. Ease of Sales
5. Consumer Demand
These elements are not only necessary to appeal to distributors and retailers but to also be competitive in the marketplace.
All too often, brand owners and managers feel that their product is unique, and will immediately attract customers to buy. However, the reality is this: getting people to change brands and shopping behaviors is difficult, and in today’s market, it is even harder.
What does this mean from a buyer psychology perspective? This means that the consumer that will regularly ‘try something new’ will be challenging to retain, and the consumer that is brand loyal will typically stay in old purchasing patterns.
At off-premise locations, most consumers are also spending less time roaming the shelves and reading labels, opting into pre-ordering for pickup, or even getting things delivered to their doors. This means that even if a brand looks great on the shelf if it is not connecting with and educating consumers before they are ready to shop, the sale may already be lost.
1. Proper Margins
Although margins vary by industry and category, a distributor will characteristically seek out products that will allow them to resell a SKU for 30-50% above its wholesale purchase price. A retailer will also want to gross approximately 30% or more in profit from the sale of a product or product line. These factors should be considered when developing a product, as this is what a consumer will have to pay for the item on the shelf. If a brand is priced correctly, compared to competitor brands within the category, it will be more likely to sell. If a product is priced too high and without a sufficient basis for this increase (whether this is simply perceived value or otherwise), it becomes an inventory risk to a retailer and a distributor, thereby may have trouble attracting distribution.
What is a Margin?
A retail margin is the difference between the price that you pay for a product and the price at which you sell the product to your customer or to a distributor. It can also be calculated by subtracting the total costs of goods sold from the total sales revenues.
2. Strong and Effective Branding
Effective branding revolves around what a product is, why it exists, who it is for, and why they should choose it over another competitor.
The brand story, label, bottle design (its visual appeal, comparatively, on the shelf), price point, and brand ‘voice’ are all weighed to measure the potential appeal to the target audience. A specific target audience also must be defined based upon likes, dislikes, or other lifestyle preferences, as not everyone will become a customer of that brand.
By following branding guidelines such as label hierarchy, the ’20-10-5 Rule’, and having a clear understanding of who comprises a specific target audience (buyer personas), a brand can simplify and streamline its appeal to both distributors and retailers.
How a brand will be able to communicate with buyers also must be considered. Some grocery retailers, like Publix Supermarkets in the Southeast region of the United States, for example, will only accept presentations from existing distributor partners. That means a package must stand out and communicate visual appeal without a supplier presenting the brand, and have a concise message easily told by others. This factor is critical to attracting a good distribution partner.
3. Market Support & Planning
Before a distributor will purchase a brand, they want to know it will be a worthwhile investment and be confident that it will sell through to retail. How that happens, however, is the responsibility of the brand, not the distributor. Similar to a traditional investor, some distribution partners will even ask for a formal marketing plan so that they may evaluate the risk factor of adding a brand to their portfolio.
In today’s market, that means showing how a brand is already reaching its customers, even if the brand is new to the shelf. A brand’s customers should already be familiar with a product and consider it for purchase as the right choice before beginning the shopping process.
Some retailers, particularly small, non-chain liquor and wine shops, will not pick up products until enough customers walk in the door and ask for them by name. Communicating how the brand plans to support its buyers (distributors and retailers) in various markets is one of the most overlooked and underestimated pieces to a properly constructed to-market strategy.
4. Ease of Sales/Consumer Adoption
Frequently, when presented with new brands, consumers will search online to learn more about them. They want to learn more about the production process, the ingredients, other factors that may make it unique (gluten-free, made from a particular fruit, etc), as well as what others are saying about the product in reviews and ratings.
There are many ways to boost brand recognition online. Earned media coverage from reputable publications, active up-to-date website, product reviews sites, and an аttrасtіvе social presence can all help increase consumer confidence in products.
In contrast, if a website is non-functional, has no details about a brand, and brand awareness and news coverage is low, shoppers will likely move on to more interesting brands.
Showing proof of sales in other markets and with other retailers is a smart way to show distributors and retailers that a brand will help make them profitable.
Important Questions To Ask:
How much did sales rise last quarter in a similar area or with another retailer?
How quickly did this product deplete off the shelf at another store?
If those numbers aren’t available, can the supplier show how it is better than another competitor brand that the retailer might already be selling?
As most business owners know, it’s easier and less costly to retain a current customer than it is to acquire a new one. That same mentality applies to the distributor and retailer relationship. Savvy brands will give them the confidence that their products will sell, that both distributors and retailers will make a profit, that they will support with marketing, and thereby be a lower risk as an inventory investment.
5. Existing Consumer Demand
It’s a common misnomer for brands to assume that distributors are their brand ambassadors, ready to ‘sell’ their products to retailers. However, neither distributors nor retailers are set up to operate and individual brand ambassadors, and they don’t have the time to market a single product. That responsibility solely lies with the brand.
So, what can brand owners do to prove their products are already popular, and ease retailer who are worried they’ll get stuck with your inventory?
Let’s be honest. Getting consumers to ask for products before they’re on the shelves is tough. However, it’s not impossible and is a proven method to support distribution and sales. A consistent content strategy, along with targeted, regular media outreach that communicates a brand’s value and utility will keep products top of mind with both buyers and consumers. Brands that make this effort to communicate value early and often will see an impact on demand, and if properly supported by sales, this can positively affect ROI at the shelf.
Earned media is statistically 650% greater value than paid advertising, giving brands more bang for their buck. (source: Nielson)
Influencer marketing is another effective method to stimulate shelf pull and awareness for CPG brands. If a brand does not yet have a large fan base or following, it can assign a percentage of its current marketing budget towards influencer marketing. Working with individuals that align with a brand’s products, product category, and consumer type that it is seeking to target can also stimulate demand from distributors and retailers.
How To Become A ‘Hot Ticket’ Product
One of the best ways to get distributors to show interest in carrying a brand or product line is to give them the confidence that it is ‘hot’ and in demand. If you’d like to learn how to do that, read more about our VIP G.O.L.D. Business Breakthrough Sessions™ here.
How Our Team Helps Brands Scale
From emerging brands to established supplier portfolios, our team has helped our clients implement these to-market strategies, reach billions of brand views each year, and support both sales and distribution while focusing their efforts on growth.
The right support in the US market has even created ROI around the globe, taking some suppliers to expand into new markets and countries. Contact our team today to learn how we can help you become highly attractive to distributors and retailers.