by Jeff Miller of Artisan Family of Wines (Seven Artisans, Sly Dog Cellars, Red Côte)
I was talking to a relative in the film business about independent movies. He said they are always a bad investment, because no matter how good the movie turns out to be, there’s no guarantee the film will succeed in obtaining distribution. How apropos of the wine business, where the same problem holds true.
This topic, which is rarely far from my thoughts, came home as our broker (not our distributor) in one of our most important states announced it was ceasing operations. Bad, but not nearly as bad as it could be—at least our distributor is still in business.
For those not in the industry, a distributor is the company that buys your wine, and turns around as sells it to retail outlets (stores and restaurants). A broker in most cases (though not all) is a marketing company that works at moving your product through the pipeline. They don’t own the wine and resell it, as a distributor does. They do play an important role in doing a lot of the work necessary to keep product moving through the distribution pipeline, assisting the sales efforts of the distributor.
I am not privy to the reasons why the broker decided to go out of business, but I could hazard what I’m sure is a pretty good guess. The broker dealt primarily with smaller wine and liquor companies. In fact, most brokers do, as larger wine and spirit manufactures usually bring the task in-house. The math is relatively simple: if you’re dealing with smaller companies, then when you multiply your commission times the sales of these smaller companies, the result isn’t enough to keep things going.
I particularly regret the demise of this broker, as they had done an excellent job for us. A small winery is very limited in its ability to project itself into the market place, particularly in far-off places where the hassle and cost of travel makes frequent trips to the marketplace difficult and cost-prohibitive. Having a local broker that can assist in these sorts of efforts is, if not absolutely essential, very helpful.
So where does that leave us, the winery? I’m hoping that we’ve established enough of a presence in that market that we’ll be okay. After all, we still have the distributor, who is out there selling out wines. But now that assist that the distributor received from the broker is history. So we’ll have to wait and see.
But the message for the wine market as a whole isn’t a good one. The economics of running a small operation are challenging. When the volume of goods to be sold is small, it’s tough for anyone to make enough money to justify the time and effort required to move them. Gallo doesn’t have that problem, but small producers always have. But this last recession took many of the small players (such as the broker) that were just above the line below the line. Hopefully, the economy is finally pulling itself out of the most significant downturn in my lifetime, which hopefully will counteract some of the long-term trends running against the plight of the small distributor and broker. But it’s hard to be sanguine about the long-term plight of these smaller companies, which are so essential to the small winery.