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.
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.