The decline of the small distributor

I don’t have any special insight into o the plight of the small distributor, just my own perceptions based upon our own marketing efforts during these difficult times.

The wine press has been replete with reports of improvement in the sales in our business, and I have no reason to doubt these reports. But I have to question whether the effect is spreading to most small wineries, who depend largely on small distributors.

I know for us, small distributors have been our mainstay. We’ve occasionally latched onto a large distributor, but the results have been disappointing. Our initial optimism about getting in with a distributor with a huge sales force was quickly tempered by the realization that the big distributors are interested in big sales, something a small producer can’t do. So the small producer with a large distributor tends to languish in the book-like listings of a large distributor, never noticed and certainly not the focus of attention of salesmen looking to sell large numbers of cases.

So where we’ve really found our niche is in the small distributor, where a winery of our size matters. Where sales of cases, rather than 10’s of cases, or even hundreds of cases, matter.

I don’t see these small distributors doing that well. Their sales, for one, aren’t doing that well, from everything I can tell. Most telltale is the fact that they are having increasing trouble paying their bills (or at least their bills from us). I think this is for a variety of reasons.

I think the recession has had a huge impact. I think distributors, large and small, have seen their credit lines, which they depend on to maintain reasonable inventories, constricted. One trend we’ve seen is that instead of getting large orders, we’re seeing increasingly a series of smaller orders. I interpret this as doing everything they can to trim inventories to the bare minimum, and to stretch their buying dollar to the max.

I also see the small, retail wine outlet suffering greatly from the effects of the recession. They are hit with the same credit restrictions of the small distributor. And they are seeing the big warehouse stores cut more and more into their main product lines as people trend downward in their cost per bottle purchasing decisions. Yet these small wine shops are the main customers of the small distributor. So the small distributor not only is hit with a credit crunch, but also with the disappearance of many of their customers.

I think many distributors are disappearing from natural attrition. Unlike a large corporate distributor, the small distributor has the trials of any small business. One of the major issues in a small business is succession, as an older generation retires. Often, the younger generation isn’t interesting in running the business. The smaller distributor then either simply goes out of business, or gets bought up, usually by a larger distributor. The bottom line is that the number of small distributors, while far from disappearing, is shrinking, and with it the outlets for the small winery.

While I expect things to improve as the economy improves (which seems to be happening at an extremely slow pace), I think the problem of the small distributor may be ongoing, as our economy more and more trends in favor of the largest outlets, and the smaller are squeezed more and more by the factors that make it difficult for any small business to succeed.