Liberating the Alcohol Distribution System

LibDib—The Web-Based Distribution Platform

The actual name of the company setting out to address the booze business wholesaler problems is Liberation Distribution (known as LibDib). The Founder/CEO is Cheryl Durzy and I spoke to her at length recently and, let me tell you, her business model could very well be a game changer in how beer, wine, and spirits come to market.

Cheryl has close to 20 years’ experience in the wine industry, managing wholesalers of all sizes, and learned firsthand what a nightmare it is for a small company to get to the shelves of restaurants, bars, and stores. She set out to fix the problem.

I’m very impressed with her web-based platform and think it’s a major positive development for producers (she calls them Makers) and restaurants, bars, and retail shops (RB&R). As Cheryl puts it, “Our goal is to make it easier for small businesses (Makers) to do business with other small businesses (RB&R).

But, as you’re about to learn, it’s much more than that. It’s a boon to the producers, the retailers, the consumer, and, even the current wholesalers.

The Problem

First, the background, as I’m sure nearly all of you know.

The three-tier system of alcohol distribution was set up after Prohibition and consists of producers, distributors, and retailers. Producers can only sell to wholesale distributors who, in turn, can only sell to retailers who sell to consumers.

The system favors wholesalers, especially in view of the consolidation of this tier—which has reduced the number significantly and increased their size. At the same time, it favors the large producers, who have the clout to get attention. Both work closely together for obvious mutual benefit. As I’ve written many times before, “follow the money.” The produce-wholesaler business model is based on volume; the distributor sales rep compensation is based on volume as well. If you were a sales person for a large distributor, which would you focus on—a 3 bottle placement of a craft product or a hand truck of a leading selling brand? Let’s be fair; they are in business to make money,

As a result, small and mid-sized wine, beer, and spirits producers have limited distribution and face many obstacles. Often the large distributors will turn them down or worse, take them on and not pay attention.

Oh, and don’t forget the small RB&R operator who also suffers from the focus on bigness. I follow many bartenders and managers on Facebook and Twitter and there are complaints aplenty about delayed shipments around holidays and long weekends when they can’t get their craft products their customers want. As one prominent Food and Beverage manager told me, “my customers come here for boutique brands that are not mainstream … and getting a timely delivery around the holidays is a nightmare.”

According to Cheryl:

Efforts to change distribution laws have been ineffective, however the market is ripe for disruption. Just as the hotel and transportation industries were disrupted by technology, the alcohol distribution market now has a technology platform that is shaking things up with a new option for small to mid-sized Makers.

The LibDib Solution

If you look at what the platform offers both producers and accounts, I think it’s very impressive. So much so that I have suggested to a number of startup clients of mine that they give this serious consideration.

Currently, LibDib is operating in CA and NY (with more markets on the way) and here’s how it works for producers:

  • A producer enters their information and license online.
  • Product is stored at a producer’s location including their production facility, personal warehouse or third party warehouse, depending on the producer’s choice.
  • It’s delivered by a common carrier, also based on producer’s choice.
  • The charge/fee from LibDib is 15% – 20%, less than what other distributors and wholesalers currently charge.
  • There are no bill backs, no aging inventory, and no buying back product.
  • Producers are free to leave LibDib at will; they will not enforce Franchise Laws. This makes them effective as an “incubator.”
  • They handle the billing, collection, and reporting, which makes them a virtual back office.
  • A producer can invite any account to purchase their product by sending them a link to the LibDib site. (See this video.)
  • And, LibDib is developing a team of platform sales people whose role will be to recruit bars, restaurants and retail stores. These folks can ultimately become brokers and sales people for the brands.

The accounts benefit by being able to buy what they want and when they want it. There are no minimums. There is no middleman, since the accounts can communicate directly with producers through the LibDib platform. Sales materials and POS are current and easily downloadable. Best of all, in my view, an account can provide the experience of unique, local and limited available products, with no hassle.

As a consumer, I’m perfectly happy buying Buffalo Trace or Bulleit Bourbon, but often I want a Koval or Dad’s Hat whiskey and can’t get it. It would be nice to suggest to my retailer or favorite drinking hole, that it’s pretty simple for them to stock less mainstream brands.

Other Potential Winners

When I was at Seagram, new products, no matter the potential, were an annoyance. It meant deflection of assets—people, money, and other resources—that could be applied to mainstream brand growth and, making the annual sales plan. That problem still exists, although companies like Diageo and Pernod Ricard have established venture groups to facilitate traction from a new brand or idea. But, at the same time, wholesalers still have to deflect their resources to address a fledgling brand’s needs. Oh sure, there are dedicated craft and startup resources at the distributor level but not all are equally effective at building brands.

It seems to me that LibDib, with its incubator capability, just might be the answer for the big boys. I know that if I were still at Seagram, I’d definitely give it a shot.

Finally, wholesalers themselves can benefit from LibDib. It’s a way to test market a new product before taking it on. It can augment and amplify the efforts of craft divisions and personnel. And, it can lift the negative feelings and imagery surrounding how and why large wholesalers overlook small, startup brands.

Like I said, LibDib has the potential to be a real game changer.

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You Don’t Have to be Jewish…

The Whisky Jewbilee Annual Event

For the past five years, Josh Hatton and Jason Johnstone-Yellin have been holding an event involving whisk(e)y tastings, education, and an overall fun evening. On June 15, at Studio 450, they will have their 2017 New York City show. (Other shows are in Chicago and Seattle.)

I’ve been intrigued with this event and set out to learn more about it by contacting Josh and talking to previous attendees and industry insiders.

Let’s start with their simple description from their website:

“The world famous Whisky Jewbilee is a nationwide parade of top-shelf spirits and fine kosher dining for whisky lovers of any faith.

I also learned that the Whisky Jewbilee is considered one of “the world’s top 10 whisky shows,” by The Spirits Business.”

Many of the people I spoke with told me previous shows have had huge turnouts and they consider the event to be top notch.

The Organizers

The Whisky Jewbilee is one of three businesses owned by the Jewish Whisky Company LLC, an umbrella organization that also owns two other companies—Whisky Geek Tours of Scotland and Single Cask Nation. The latter is an independent bottler that describes itself as follows:

Single Cask Nation began as a social fellowship or membership society organized around the right to purchase rare, fine single cask whiskies under the Single Cask Nation label.  More than a mere club, Single Cask Nation represents a unique virtual community in which members share a common affinity for the quality whiskies and other spirits of the world.

The idea is as old as scotch whisky itself. Johnnie Walker, Chivas Brothers and many others began as purveyors selling whisky from various distillers. Single Cask Nation has some interesting offerings. You might want to check it out.

Josh Hatton (L) and Jason Johnstone-Yellin (R)

The event—Jews and Booze

You might not realize it or never thought about the fact that members of the Jewish faith love whisk(e)y. A June 2013 NY times article, had this to say:

“Whiskey has numerous fan bases, but few are more devoted — and arguably less noticed by the press and public — than Jews, particularly observant Jews. Synagogues are increasingly organizing events around whiskey, and whiskey makers are reaching out to the Jewish market.”

In fact, many religious Jews wanted to attend Whisky Fest but could not because it’s held on Friday and Saturday nights. So, Whisky Jewbilee was launched in 2012 (on a Thursday night) with the blessing of the Whisky Fest people. It grew significantly over the years.

Today, the event will cap at 450 attendees and 80 companies/brands will be present with roughly 300 whisk(e)y SKUs (individual brands). But check this out—this is not a drinking event as much as it is a knowledge event and a one to one dialogue between producer and consumer. You won’t find beautiful people from central casting behind the tables or actors mindlessly spewing memorized lines. What you will find are whisky aficionados and well-informed representatives of the distilleries.

By the way, many marketers have told me that kosher consumers are very brand loyal. Perhaps more so than many other market segments.

About that Kosher thing…

I’m far from an expert on Judaica matters but I couldn’t help but wonder about what possibly could be in whisk(e)y that would violate the rules of kosher. So, I spoke with Josh about it and did some research.

What I learned is that there is nothing in whisk(e)y to make it non-kosher. Wine on the other hand, because of its sacramental use, has strict kosher rules. But with a few minor exceptions, nearly all whiskies are okay.

The organizers welcome all whiskies regardless of maturation style. This means that whiskies matured in sherry, port or other wine based casks are perfectly fine and will be present at Whisky Jewbilee. They believe all whisk(e)y to be kosher-by-nature unless the whisk(e)y is flavored. At their event, only the food is under kosher supervision.

The flavored whisky situation has to do with the fact that the flavorings used to augment the whiskey taste might contain non-kosher elements like glycerin. It would take certification to assure observant Jews that the glycerin is a vegetable rather than animal based oil.

But you will find some amazing whiskies there including some of my favorites from Brenne Whisky, Koval Distillery, FEW Spirits, and the best in the world, including—Bowmore, Glen Grant, Four Roses, Michter’s, High West, and many more.

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The organizers of the event have invited me to be there and part 2 of this article will be after June 15. If you attend, please look for me and say hi.

The Chicago Whisky Jewbilee will be on November 9 at Artifact Events. The Seattle show will be some time in February or March.

And, remember, you don’t have to be Jewish to attend. Just enjoy!

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That S*it Will Never Sell

A fascinating book on innovation in the alcohol industry

David Gluckman has spent 45 years in the drinks industry (the British phrase for the Booze Business) creating such outstanding products as Bailey’s Irish Cream (along with Tom Jago), Tanqueray Ten, Cîroc and scores of others. His book, whose title is the heading of this article, is a fascinating guide to what it takes to innovate and launch new products in this industry.

David was born in South Africa and came to the UK and began working in advertising. His accounts included such companies and brands as Procter & Gamble, Kerrygold butter, and several Unilever brands. In the late 1960s, he became a consultant to IDV (International Distillers and Vintners—a company that ultimately became Diageo), and entered the world of brand development.

As a new products/innovation toiler myself, I found the book to be captivating and a joyful ride on the sometimes-turbulent road of brand development.

A review by Paul Walsh (ex CEO of Diageo) put it nicely, “David Gluckman has a ‘one-of-a-kind’ approach to new brand development, but amazingly, it works. You will enjoy this book.”

I sat down (virtually) with David and asked him about his experiences.

You’ve spent most of your career on innovation and product development, what are the biggest obstacles you’ve encountered over the course of your career? Who are the innovation villains?

Somebody once asked me why we had such a high strike rate getting brands onto the market at IDV.  My answer “No marketing people.” No middle managers asking to see alternative ideas to go into massive research programmes.  I can’t imagine major players like Sidney Frank or Abe Rosenberg doing concept testing.  We had a very small team of like-minded individuals and the beauty was that we reported to top management.  I sold the idea of Smirnoff Black to Denis Malamatinas in under 10 minutes. And Aqua Libra to Tim Ambler in 5 minutes.  Well, that’s because I knew him better.

After leaving Diageo I did a project for a large drinks company.  The budget was huge and I worked in parallel with a global innovation giant.  I delivered my work a month ahead of schedule and I thought the solutions were really good.  I think it was a case of ‘budget allocated, budget spent, end of story’.  Nothing happened. I would be happy to go and re-pitch the ideas to the company tomorrow.  At no charge. I am confident the ideas would work.

Which companies (or individuals) that you’ve worked with were most welcoming or encouraging to new ideas?

IDV was a ‘one-and-only’ when it came to fostering new brand development.  Baileys took about 5 years to become significant and yet the company tolerated us (Tom Jago and me) even with the odd expensive failure. Adventure seemed to be built into the IDV culture.  When Jago left and Tim Ambler took over the rate of development accelerated.  I think of all the people I worked with, Tim was the most inspiring.  He really knew the business and he was on the main board and could make things happen.  IDV also formally introduced Tom Peters’ ‘brand champion’ idea so top management from all over the company were taking leadership on new ventures.

What’s the biggest regret of your career? What have you done or worked on that you wished you hadn’t?

When I parted company with Diageo in 2005 I got together with two ex-colleagues to develop Coole Swan, a super-premium cream liqueur.  The category made sense because there was nothing above Baileys and we felt there was an opportunity for a product with lower sweetness and more modern, sophisticated packaging which broke with the Baileys’ template. I was as proud of that brand as with any I developed for IDV/Diageo.  The problem for me personally was that it took me out of my comfort zone and into marketing and finance – not part of my skill set. I still firmly believe that it will be a great buy for a company out there with muscle and resources. But I should have negotiated a brand development fee and a small piece of the action and left it at that.

Thinking about all the new products or innovations you’ve worked on, which are you most proud and why?

It would be easy to say Baileys or Cîroc because they were so successful. But for me the two intellectual challenges which were most satisfying were Smirnoff Black and Distilled Guinness.  In the Smirnoff case, the brand was on its knees in the US.  The idea of a premium version to compete with Absolut and Stoli was scarcely credible. The solution came from a word more familiar in the brown spirits sector—we set out to achieve and perfected ‘the world’s smoothest vodka.’ And the product delivered. Hard-nosed New York 40-somethings really could taste the difference.  And even when I told them it was from Smirnoff they said they preferred it.

Distilled Guinness never got off the drawing board but the way the idea came together in my head was incredibly exciting. If you can have Jewish epiphanies, this was one. The discussion was about a Guinness Whiskey.  Should we take the brand into a new category?  On the surface, the only way was Irish and at the time (1998), Pernod-Ricard owned the market.  So, Guinness Irish Whiskey didn’t seem to make commercial sense.  Then out it popped.  The fruit of all those lengthy distillery visits.  Whisky starts life as a fermented product. A beer.  Then it’s distilled.  Why not simply distill Guinness? And call it that.  Distilled Guinness.  No SWA {Scotch Whisky Association}, no barrel-ageing, make it where you like and make it taste the way you choose.  We designed the pack the same evening and I was in a couple of focus groups a few days later. But it never happened.

What do you make of the craft (or small batch) product movement in the US and UK?

I never liked claims like ‘small batch’, ‘hand crafted’ which are all over the place these days. They are hollow claims, just hype. They don’t really mean anything.  I always liked brand claims that led to real benefits not stories. It was my advertising training working for Unilever and P&G.  Smirnoff Black was a palpably smoother vodka and Tanqueray Ten is made from fresh botanicals and has a fresher, cleaner gin taste. These are real product benefits. They could get drinkers to change their minds.

I’m not sure I agree with David on this last point inasmuch as the back story of a new brand must answer the trade’s question as to “why this and why now.” I think it’s the mix of what’s in the bottle together with the brand’s reason for being that often yields success.

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David Gluckman (L) and Joel Garner, a famous cricketer.

You can learn more about his book and buy a copy at this website.

It’s my second favorite book about the Booze Business. Can you guess which is the first? 😀

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