The Most Successful Beverage Alcohol Distributors are Innovators

New Study

The National Association of Wholesalers’ Institute for Distribution Excellence published a study recently — and although the NAW is about wholesale distribution and distributors generally, broadly, there is certainly plenty of valuable information in their new study and its conclusions to warrant serious consideration by wholesale beverage alcohol distributors.

According to the NAW’s publication, Innovate! How Successful Distributors Lead Change in Disruptive Times, written by Dirk Beveridge, “We are living in unique times that call for a new spirit of innovation throughout distribution:

• 76% of distributors said they believe we are living in an environment we could call “the age of disruption”
• 85% said they feel they need to “reinvent” their business before someone else does
• 81% said that much of the distribution industry is operating from “dated” business models.

Despite this pressing need for innovation, change, and transformation, the distributors surveyed said their companies were doing little to act on it:

• 72% said they think their companies are slow to make changes to the business
• 78% said they get trapped in the day-to-day and don’t focus enough on creating the company’s future
• 42% said they feel like they are “too rooted in the past” rather than focused on innovating for the future.

As a result of all this, 57% of the distributors surveyed said that many wholesaler distributors are “already out of business – they just don’t know it yet.”

There is good news, however: 95% of the distributors surveyed said they feel personally empowered to be a "disruptive change agent" within their business.

Expose Yourself to New Ideas: Be an Agent for Change

The blogs written here are not the place to tackle the entirety of innovation even for beverage alcohol distributors. However, our blogs and perhaps blogs in general can be the beginning of discussions in your organization about how to not just keep up (with change), but how to lead by changing, by adopting, by innovating — by leading.

With literally tens of thousands of individuals now using our sign, menu and other POS format tracking and managing software within more than 100 beverage alcohol distributors ranging in size from $20 million to billions of dollars of annual sales, we’ve been able to observe the behavior of the most successful distributors, at least insofar as their approach to marketing and promotion of the brands and products they distribute. 

Innovative distributors are like sharks,by that I mean they keep moving, keep changing — perhaps because they have to — or perhaps it is because they are driven by some internal pressure or curiosity. Whatever the reason, we’ve come to be able to recognize those distributors who are looking for tools and techniques that will enable, perhaps even “cause” them to improve themselves and their companies. Even though we are bombarded by new ideas and new products — products that seem to have ever shorter lifespans before the newer and better products or practices arrive seemingly before you’ve become familiar with the previous generations’ — too few of us are truly innovators. The bottom line is innovation can be difficult, and standing still has the allure of being, generally, pretty easy.

All beverage alcohol distributors, even those who have not been particularly keen to innovate, do seem to share one thing in common: they have been and are continuing to have their margins squeezed by suppliers, customers and competitors. Every aspect of running the business must become more efficient, more effective and more accountable.

Two Overlooked Parts of your Business

Within our scope here, we can discuss two areas of the beverage alcohol distribution business that have been, until recently, neglected or at least been almost allowed to run without much measurement and perhaps even less management. The two areas are:

1. The distributor’s sign shop or graphics department and all other types of point-of-sale marketing and promotional spending (such as menus, product samples, etc.); and,
2. The distributor’s draught beverage line cleaning operations and management (even if outsourced).

These two areas of a beverage alcohol distributor’s operation have become serious expense items — often more expensive than any other item except payroll.

Most beverage alcohol distributors consider providing “free” temporary and permanent signs (and menus), displays, mirrors, tap-handles and the provision for or payment for draught beverage line-cleaning operations for their retail customers to simply be a cost of doing business. Why not consider them part of the drivers of your business?

These already expensive functions have been allowed to continue and grow in cost. Marketing costs at the point-of-sale and line cleaning expenses regularly increase usually without much oversight and with even less analysis of what is actually going on to drive the increases or to determine the benefits. Most beverage alcohol distributors are well-aware of increased of expenses in these categories, sometimes as high as several percent every year (in several cases recently these expenses have increased as much as 7% annually); yet, there haven’t been until recently any ways to evaluate what the money is being spent on or where it is being spent (for what promotions, what brands or for the benefit of which customers?)

Are You an Innovator?

Innovative beverage alcohol distributors invest in people and “tools” — increasingly digital tools — to help them develop systems and procedures to increase efficiency and to add new capabilities to the distributor’s repertoire. Innovative distributors will look to disrupt the status quo by adopting systems that don’t merely automate manual functions, but rather change the way important and valuable (or core) functions within the organization are managed. Of course this means that an innovative distributor’s employees will be in somewhat of a perpetual state of flux as new systems will be replacing old ways of doing things. 

OnTrak’s customers are, overwhelmingly, innovators. Simply adopting our digital tools, that is, replacing the way things have been done with respect to POS promotions and administering and managing extensive and expensive line cleaning teams, can subtly change the company culture. Change, virtually any change can strain the status quo — it is up to the distributor’s team to lead by embracing change. 

The type of changes we’ve seen when a distributor innovates by implementing even one of our products, e.g., SignTrak, PermaTrak, MenuTrak, SampleTrak and LineTrak include increased output (of signs, menus and lines cleaned), improved predictability, lower costs and the ability to know the ROI associated with certain activities within the distributor (it is, for example, possible to achieve at least a 2x, 3x, 4x or more reduction of costs — compared to the cost of SignTrak, for example — within a distributor’s sign shop or graphics department.)  

I highly recommend the NAW Institute for Distribution Excellence’s new book, INNOVATE! (available at NAW.ORG) — reading this book certainly has validated and reinforced our observations about our customers:

OnTrak’s customers are innovators: They are not content to keep producing and providing POS materials without tracking, measuring and managing these increasingly expensive operations and outcomes; nor are they willing to continue funding, without accountability, their organization’s line cleaning operations. 

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