SGWS expects ‘continued consolidation’ across all tiers
The biggest spirits distributor in the US, Southern Glazer’s Wine & Spirits (SGWS), addresses the challenges and opportunities within the country’s distribution system.
The US spirits market has undergone a serious recalibration recently.
In the past year, Southern Glazer’s has seen its biggest competitor Republic National Distribution Company (RNDC) reduce its footprint and sell operations in 11 states to a distributor that has been primarily focused in beer, Reyes Beverage Group.
Southern Glazer’s, meanwhile, has announced it will make redundancies in a move that will affect just over 1% of employees. The company aims to streamline its operations amid ‘evolving market conditions’.
Addressing how expectations of distributors are changing, Mark Chaplin, president of commercial sales at Southern Glazer’s notes a need to focus on “more than just original scoped product selection”.
“Lines are blurring and consumers are continuing to cross over on occasions,” he told The Spirits Business. “Maintaining a strong focus on evolving consumer preferences is essential.
“We have to ensure we have the right products and are serving our customers the way they expect, whether with frequency of service and/or digitally with the right delivery dynamics.”
He also believes that consumer trends driving growing foot traffic in convenience stores and larger stores will also evolve.
Chaplin also points to the delivery of products and how that has changed.
“Distributors need to focus not only on the traditional value of delivering products to customers, but also on how we deliver value to ensure we are building on the legacies of the brand portfolios we are fortunate to support,” he says.
“This is a critical piece to ensure we are able to evolve for the future of the distributor tier.”
Zachary Poelma, senior vice-president of commercial intelligence at Southern Glazer’s, meanwhile highlights the challenge of evolving consumer preferences.
“Some are drinking as many as eight different choices in a day across alcoholic and non-alc products,” he says, explaining that distributors there “must continue to reassess their portfolio mix and also work with retailers to ensure shelf sets reflect this behaviour”.
Poelma also adds retailers are moving “towards more of a clean store policy”, which he says “requires distributors to be more innovative and agile in order to interrupt the consumers’ path within a store to drive purchases”.
Lastly as costs continue to rise in the industry, Southern Glazer’s has had to invest more in technology and automation, which Poelma notes is needed to “offset the higher cost to serve”.
Southern Glazer’s has a ‘2030 Vision’ strategy, a 10-year supply chain transformation that aims to make it the hospitality industry’s ‘most valued selling, logistics and insights provider’ by 2030.
Changing distribution dynamics
In spite of the declining spirits market in the US, Poelma still feels opportunity is there to increase market share, and this can be done with a focus on “execution tactics”.
He explains: “We have invested in proprietary technology to understand the market better than any other distributor. Growing our display, planner, proof of delivery (PODs) and menus are the key to growing our portfolio share.
“We now have the ability to see which of our brands are on a cocktail menu at each account and drive activation. We can also identify where competitive brands are on display or on a menu and feed that information directly to our sales teams to grow Southern Glazer’s business overall.
“When we overlay all of this execution data with our sales performance, we can identify opportunities for suppliers much more effectively.”
Chaplin, meanwhile, cites the connection between the three tiers of the US distribution system, which is “getting closer than we have ever been before”, as another area of opportunity.
He believes the closer relationships and therefore understanding between producer, distributor and retailer allows all tiers to have an “opportunity to add additional value to consumers”, by making sure the “right brand in the right place [is] stocked at the right levels, and marketed to the right people driving brand value”.
He highlights two areas where Southern Glazer’s has made investment towards this – in its expanded commercial intelligence team and in national accounts.
“Our commercial intelligence team has access to the largest data set in the industry and works directly with supplier, customer and internal commercial partners at the state and regional level to turn insights into action,” he says, adding that on the national account side, the business has invested in extra data packages and resources.
Chaplin doesn’t expect to see any major changes to the three-tier system’s foundation over the next few years, but he does foresee continued change in the supplier, distributor and customer dynamic.
He says: “We expect to see continued consolidation across all three tiers and an acceleration of technology adoption pushing the competitive edge of all three tiers. Those that are able to invest for the future will have a competitive advantage.
“Our Proof commerce platform now represents approximately a quarter of our sales while also creating millions of new points of distribution.
“This allows brands to make their way to a shelf, which would be much less likely in a system outside of the three-tier system like what we see in Europe. Consumer choice is urgent in the world due to the three-tier model.”
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