Excess inventory is a fact of life in the wine business. The world can change dramatically in the year or two between planning production and going to market with a wine. As winery ourselves, we had to figure out how to sell excess inventory without damaging our long-term prospects for success.
Recently, we have worked with several of the ten largest wine companies in the US to help them with strategies for quietly and discreetly selling excess inventory. Despite all their sales resources, they know that this effort requires specific channels and unique strategies that their in-house teams do not have experience with. If this is true for the largest wineries, it is even more applicable to smaller wineries with fewer resources.
The following principles for a winery guide us:
- Select a broker or agent whose interests are aligned with the winery. Most wineries don’t have the experience and expertise to strategically sell excess inventory, which, by definition, requires skills and channels outside of the normal course of business. There are many brokers touting their services, but is their compensation aligned with the winery’s interests? Any broker that is not transparent about their compensation is likely looking to buy low and sell high at the winery’s expense.
- Demand transparency, provide trust. A winery needs to know where and how their wine will be sold; distributors, retailers, and customers see almost everything in today’s world. Anybody selling your wine must provide transparency about where your wine be sold and at what price. The complement of this transparency is trust: the winery must also provide trust and assurances that it won’t circumvent its agents.
- Communicate your priorities. Do you need to maximize cash recovery from your inventory? Or do you want to minimize potential damage to your brand image? Each sales channel or potential customer has its advantages and disadvantages. A good agent needs to know what is most important to you in order to craft a specific plan that meets your needs.
- Understand your timeline. Are you trying to solve an immediate cash crunch in the next 60 days? Or do you have 12 months to get back on track with your ideal release schedule for the next vintage? Your timeline will dictate the proper order of operations. If you have more time, your agent can take the time to prioritize customers that are better suited to your needs, but may take more time to schedule your wines into their programs.
A good agent or broker should be asking you the following questions:
- What does success look like for the winery? See points 3 (priorities) and 4 (timeline) above.
- What initiatives have you tried with your own customers? If you have a DTC program, a thoughtful offer to your customers will provide the best returns. An agency like Chatterbox can unlock the full potential of your customer base.
- What markets/states/countries are most sensitive? Each winery has a unique customer base and distributor network. A good agent should be trying to steer clear of potential pitfalls that will unnecessarily harm your brand.
- Are you open to creative channels (eg, private labels, “opaque” overseas markets, etc.)? This is often means less revenue for all parties involved, but it shows the agent cares about helping you protect the image and strength of your brand.
Just as a winery carefully hires employees and appoints distributors, you must do your due diligence in selecting an agent that can help you strategically convert your excess inventory into cash that can drive your business forward. Third Leaf Trading has successfully served as an agent for wineries, distributors, and retailers all over the United States for more than a decade, and we are prepared to offer our insights and assistance as the wine industry faces the headwinds of declining consumer spending and mounting excess inventory.
There are strategies you can use to offload excess inventory without damaging your future levels of success. Want to learn more? Let Protea Financial help get you there!