One Blog |September 26, 2017 | Point-of-Sale Marketing Software
Challenging Times Ahead for Mainstream Beer Distributors - POS Marketing
A Long Look Back
Back in 1859 when Charles Dickens wrote “A Tale of Two Cities” he described that Period as follows:
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness . . . we had everything before us, we had nothing before us – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”
1859 was a long time ago, but interestingly, parts of this quote could accurately describe the current circumstances of today’s beverage alcohol distribution market – especially if you’re a beer distributor.
You see Dickens' line describes a time of contradictions. If you are beer distributor, or in the broader category of beverage alcohol distributor, it is indeed the best and worst of times.
Some Beer Contradictions
On the one hand, beer remains the most popular alcohol beverage in the US – even though beer sales can no longer be said to be recession proof.
On the other hand, Americans are now less loyal to a particular brand of beer than they’ve ever been.
Sales of a particular brand of beer continue to be less and less predictable. Consumer preferences over the past ten years have tended to be fickle, but the growth in the number of choices that have exploded in the marketplace during the past five years have only pushed the sales of little known and completely unknown brands upward sharply.
What has happened. Budweiser and Miller High Life have seen their sales plummet by nearly 30% since 2010.
Yet, Stella Artois, Corona, Dos Equis, and several other previously marginal brews have seen their sales rise by more than 200%.
With some 5,000 breweries and 20,000 beers on the market, it’s no wonder “Big Beer” looks forward to additional challenges.
However, before you conclude that beer as a category is in jeopardy, remember again, beer is the most popular beverage alcohol drink in the US. Also, the number of breweries in America now exceeds 5,300, up from just 446 in 1993.
It is the worst of times, it is the best of times.
Pressure From “Big Beer”
Beer distributors do have reasons to feel a little overwhelmed. Oddly enough, many beer distributors are getting more pressure from their primary suppliers like Anheuser-Busch or MillerCoors.
These macro breweries actually would like nothing more than for “their” distributors to drop as many brands as possible that are not supplied by the brewery. Indeed, the Department of Justice has been looking into allegations that that “Big Beer” has been attempting to quash competition by blocking access to distributors, especially from craft brewers.
One of the ways the macro breweries have been using to reduce competition is to offer cash incentives of up to 50% of a distributor’s costs of point-of-sale (POS) marketing, if they will increase their percentage of volume deliveries of the macro supplier’s portfolio.
With potential POS chargebacks in the hundreds of thousands of dollars per year, there is temptation to take the brewery up on its generous “offer” of assistance.
The bottom line is that if distributors were to agree to the terms of the POS offer, competition would be reduced and consumers’ choices would also be reduced. But we should not forget, choice is the motivating factor that has distributors expanding their brand portfolios to gain and retain competitive advantage.
A distributor might be tempted to sell more of their big beer supplier’s products to receive the POS allowances. The benefit could be higher sales volumes, but perhaps at the risk of lower profits.
For example, craft beer and other new products often contribute significantly more margin than macro supplier’s products. And these new products often require less warehouse space to generate equivalent revenue and income compared to big beer’s products.
The Cost of Brand Proliferation
But, there is a “cost” in brand and SKU proliferation. When distributors looked at their portfolios just a few years ago, they often averaged less than 300 SKU’s, where today that number is north of 1,000.
The chances are these numbers are only going to continue to grow. Beer distributors are struggling to keep up with the requirements of managing these ever-growing brands and brand extensions.
It is the age of wisdom, it is the age of foolishness.
On the one hand, brand proliferation is – especially for the distributor – a competitive advantage. On the other hand, managing the increasing number of POS marketing initiatives that are required to successfully promote all of these brands is tough to manage and control.
Distributors Investment in POS Marketing
Today, most beer distributors have extensive and expensive graphics and print-shop infrastructures. Typically, at least one print-shop per warehouse. Many have state-of-the-art equipment (printers and networked computers), plus separate warehouses for permanent POS inventory (displays, neon signs, racks, umbrellas, etc.), and in addition, six-figure budgets for consumables (ink, paper, laminates).
With the explosion of SKU’s happening today, it is likely your POS marketing initiatives have become increasingly more expensive while not being as efficient and effective as new brands and SKUs are adopted.
The Increasing Importance of POS Marketing
POS marketing is more important today than ever before for the brands you distribute.
Effective POS marketing campaigns cut through the clutter, create a visual impression, and drives sales when the shopper enters the aisle where your brands live.
As a distributor, it is your job to create, place, track, measure and manage your brand’s POS marketing promotions and convert as many shoppers to buyers as possible.
But that’s really difficult to do with the manual our semi-automatic systems that are currently being used by a majority of distributors.
The OnTrak Approach
Imagine giving your sales and marketing teams total control of their POS marketing efforts with a powerful set of easy-to-use POS Tracking Tools - For both your printed/custom, and permanent POS.
In closing let me offer another line from Dickens' “Doctor Marigold” in which Dickens portrays the activities of a salesman:
“No one is useless in this world who lightens the burdens of another.”
Why not let OnTrak help lighten your POS marketing burden.
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