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How Importers and Distributors are Adapting to a New Reality Without Restaurants and Bars

How Importers and Distributors are Adapting to a New Reality Without Restaurants and Bars

How Importers and Distributors are Adapting to a New Reality Without Restaurants and Bars

 

It’s no secret that retail alcohol sales have boomed during the Covid-19 pandemic. Most notably, the wine and spirits sectors have seen significant growth. Between March 1 and May 5, retail wine sales increased more than 30 percent compared to the same period last year, according to an IRI data report. Spirits sales, meanwhile, experienced 44.1 percent YOY growth during the same period.

While the percentages are positive, not all wine and spirits importers and distributors are enjoying the spoils of the retail boom. In terms of wine, it’s bottles priced between $8 and $15 that have overwhelmingly driven sales growth. This demand has been much less beneficial to businesses that focus on the on-premise sector because they typically carry higher volumes of more expensive offerings. Spirits importers and distributors that work with small-scale craft brands are also feeling the pinch, because their portfolios are similarly catered toward bars and restaurants.

Just as on-premise businesses have been forced to temporarily rethink their operations, the importers and distributors that previously served them have also been forced to adapt. To find out how they’re navigating this landscape, VinePair reached out to eight U.S. importers and distributors that place significant focus on the on-premise sector.

All of the businesses contacted reported significant — and in some cases entire — on-premise sales losses. But each industry professional also said the effects of Covid-19 extend beyond sales. The pandemic has forced importers and distributors to change the way they operate, they explained, impacting everything from how they stock their inventories to how they communicate with suppliers, customers, and even consumers. While some say those changes will be temporary — lasting until a vaccine or effective therapies for the virus are developed — others believe it could alter the importing and distributing sector permanently.

ADAPTING TO CONSUMER DEMAND

Some importers have temporarily changed their purchasing habits to meet the high demand for lower-priced wines. “It’s a retail world right now,” says Amy Atwood, owner of Los Angeles-based natural wine importer Amy Atwood Selections. Prior to Covid-19, on-premise clients made up 60 percent of her sales, she explains. But in April, 85 percent of sales came from off-premise retailers.

During the pandemic, Atwood has focused on maintaining a high inventory of “entry-level” wines — the kind of bottles restaurants might typically sell by the glass. “I’ve been ordering those like crazy, because I know they’re going to sell,” she says. (Notably, Atwood also says the demand for higher-priced cult labels has remained strong.)

But the shift in focus is only a temporary fix. Now that restaurants have slowly started reopening in many states around the country, Atwood is starting to rebuild her inventory with larger volumes of more expensive wines to appeal to on-premise clients.

COMMUNICATION IS KEY

Because of the dynamic consumer landscape, other importers noted how important it has been to keep in constant contact with their suppliers and distributors. “It’s allowed us all to make sure expectations were set and met,” says Jeremy Sells, director of operations at New York-based fine wine importer and distributor Rosenthal Wine Merchant.

Sells uses the example of the rosé market. Rosenthal had received half of its annual stock of the popular summer style of wine prior to Covid-19. With the remainder set to arrive over the course of May and early June, the importer communicated with distributors to gauge expected demand. As many rosés had been destined for by-the-glass programs, distributors that reported confidence in on-premise businesses resuming were given higher allocations than normal. Those that were less certain of summer demand committed to lower allocations.

With the company gearing up to place orders of higher-value allocated wines for fall, maintaining clear lines of communication will be crucial to ensuring the needs of distributors and producers can both be met.

Tim Gagnon, general manager of California-based natural wine importer and distributor Selection Massale, agrees on the recent increased importance of communication. “I don’t think I’ve ever spent as much time on the phone as I have in the past two months,” he says. “Wine is such a visceral product. It’s not like you’re just selling units, so you need that personal connection.”

For other importers and distributors, clear communications with suppliers have been vital to maintaining the confidence of business relationships, even as some accounts remain unpaid.

On March 15, the day New York State enforced bar and restaurant closures, New York City-based artisanal spirits importer and wholesaler PM Spirits lost 60 percent of its clients overnight. Those closures meant the company had 34 days’ worth of invoices that would likely go unpaid until on-premise businesses reopened, says Nicolas Palazzi, PM Spirits’ owner.

But with retail sales continuing, Palazzi has had to keep ordering from his suppliers to meet demand. In some instances, where Palazzi has outstanding financial commitments, he’s worked with suppliers to pay out of pocket, so that each business can continue functioning.

Operationally, Palazzi says Covid-19 disruptions have changed every aspect of his business. Products that were previously in high demand from the on-premise sector are no longer as viable. And because his business focuses on artisanal spirits, Palazzi hasn’t been able to switch to offering “value” brands. Convincing retailers to consider a broader range of his existing products has been complicated by the fact that delivering samples and conducting in-person tastings is not possible. “Every step of the process that used to be straightforward becomes very complicated,” he says.

HARNESSING DIGITAL PLATFORMS

While many importers and distributors are using this period to better communicate with suppliers and clients, others are also trying to connect with the end consumer.

Prior to Covid-19, California-based spirits importer Altamar Brands placed a heavier focus on bars than retailers, because the brands it carries are curated for craft cocktail bartenders. Without those on-premise champions, Altamar is now trying to increase retail sales by directly communicating its brands’ stories to consumers, says Brandon Cummins, Altamar’s director of education.

Like every professional contacted for this article, Cummins says that virtual tastings through platforms such as Zoom have been pivotal to the process. “The ease of executing a virtual tasting is so much greater and so much more convenient for all parties than in-person tastings,” he says.

Cummins expects Zoom will remain an important part of Altamar’s day-to-day operations after the pandemic is over. He’s also using other digital platforms to facilitate his role as a trade educator. Cummins is offering a range of virtual spirits classes that bartenders and distributors can book appointments for using the online scheduling tool Calendly. This negates the need for expensive travel, and allows him to connect with trade clients across the country from his office.

THE VALUE OF PERSONAL CONNECTIONS

While all the professionals contacted for this article noted the importance of digital platforms like Zoom during Covid-19, some say virtual tastings will never offer the same value as in-person experiences.

“Social distancing and the wine business are almost complete contradictions,” says Rocco Lombardo, president of Napa-based wine wholesaler and importer Wilson Daniels. “For me personally, when [wine tastings are] done virtually, it doesn’t have the same amount of charm or the same impact from an experience perspective.”

Lombardo also believes that in-person employee interactions are crucial for business efficiency. For over two months, Wilson Daniels’ sales, management, and administrative teams have been working remotely. But when it’s safe for employees to do so, the company will resume normal operations. “Productivity levels, collaboration, that sense of team building — they’re all improved when you have an in-office experience,” Lombardo says.

Like Wilson Daniels, New York City-based wine and spirits importer and distributor Skurnik Wines & Spirits has also closed its offices during the pandemic. Harmon Skurnik, the company’s president, describes Covid-19 as a “catalyst” for changes that were likely going to happen, but sees both benefits and drawbacks of the current reality.

Skurnik says the past few months have shown that many functions can effectively be carried out remotely, but agrees with Lombardo on the importance of having a physical office space. “Our office is the showplace where we invite customers to taste wines; we mix cocktails [there] and conduct sales calls and seminars. We expect to return to that,” Skurnik says.

THE IMPORTANCE OF ON-PREMISE BEYOND SALES

The fact that alcohol retailers have stayed open during Covid-19 has provided much-needed income for importers and distributors — even those previously geared toward the on-premise sector. But some professionals say the value of bars and restaurants extends past dollar sales.

Philana Bouvier, vice president of fine wine and supplier business development for national wholesaler Republic National Distributing Company, describes the on-premise as “vital” to the success of fine wine in the U.S. “We have to support restaurants and continue our dedication and commitment to the sommeliers of this country,” she says. “We need those ambassadors.”

Given the current consumer preference for budget-friendly wines and spirits, the ambassadorial role of sommeliers and bartenders will be more crucial than ever — not only to rebuild the on-premise industry, but also for the success of the importers and distributors dedicated to supplying them.

 

1/6/20
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How Importers and Distributors are Adapting to a New Reality Without Restaurants and Bars