Margin, Margin, Margin

April 14, 2017

Distribution, done differently. That is our motto. And it resonates true in everything that we do. The LibDib model is different than the traditional wholesaler model in a number of ways. Most importantly, our margin is between 15%-20% vs. 30% (or more) that other distributors make on their resales.

Here is a little more detail about this as the percentage varies by product and “ship to” locations.

Regulations vary by state, which is what makes building a platform like LibDib complicated (but incredibly fun work for our brilliant engineering team). At the time of this blog we have two markets available: California and New York. Our goal is to be in every state over the next few years.  Ten states are being researched and we are applying for new licenses as we speak.

A breakdown of margins by state and by product: 

#1 – California:

Beer from in the state and out of the state = 15% margin.

Wine from in the state and out of the state = 15% margin.

An interesting thing to note is that LibDib (or any distributor of record) is required to pay the state excises taxes in certain situations. Traditional wholesalers add up the FOB cost of the product, plus shipping, plus taxes, then charge margin on top of that number. This is called “laid-in.” So, a $200 case of wine at $.20-.$.30 per gallon (2.378 gallons per case) goes to the tax man, plus $6 shipping has a “laid in” for a total of approximately $206.60. With the distributor margin of 30% the wholesale price of the wine to the buyer is $268.60.

The LibDib model: Same case of wine at $200, plus shipping (let us say $25, but it can be less in some situations, just email us to discuss) totals $225. At a 15% margin you are looking at $258.75 to the buyer.

Liquor from inside the state = 18% margin. Why? As the distributor of record, LibDib pays the state excise taxes for liquor in the state of California. That tax is $3.30-$6.60 per gallon. Hence the increase in margin.

Liquor from out of state has a higher margin. Why? Because in California, liquor from out of the state must make a stop at our licensed warehouse in San Jose. This is called the “at-rest” law. Once the liquor comes to rest on our premises, LibDib delivers it “the last mile.” LibDib covers the cost of that last mile. Hence a higher margin, on top of the tax margin.

#2 – New York:

Wine from in state and out of state in NY = 15% margin.

Spirits from in and out of state in NY = 18% margin.

At this time, LibDib is only selling Wine and Spirits in New York. We need to get a separate office in New York to do beer. Sigh…another story for another time. We are in the process of posting prices with the state for a go-live date of June 1, 2017.

Again, here are those pesky taxes. For wine, it’s $.30 per gallon (no biggie). However, for spirits it’s pretty high at $1.70 per liter (3.78541 per gallon, so could be $15+ per case of 12). Here is where LibDib needs to cover our costs. However, good news is that there are no stops at a warehouse required in New York. Cool!

What does LibDib earn for that margin since the Makers handle most of the delivery and sales? (more on sales and “Feet on the Street” coming soon). We built and will maintain the web (and soon to be mobile) platform that facilitates those sales. We handle all the invoices and collections. We take the A/R risk. In states where credit cards are accepted, we pay the percentage fees back to the card “sharks.” We have the appropriate licenses in each state. We do all the required reporting, pay taxes and work with government entities to get products posted, certified and assigned to territories.  Oh and we have a ton of cool features coming soon that will help sell, sell, sell.

But most importantly, we give ANY Maker of ANY size access to the market if they want it. That is truly something different in the United States where distributor consolidation has kept many small to mid-sized Makers on the sidelines when it comes to Trade Sales. NOT ANYMORE! Consumers want small, craft products. Let’s get them in the market and change distribution now!

Welcome to a new way of doing things. Join us at LibDib.com