Direct To Trade 2.0 — Timing is Everything

When I founded WineDirect in 2002, we knew that DTC was going to be an essential sales channel for wineries and our goal was to build the tools that enabled it. But equally important we believed to our core that DTC would herald in a new channel, Direct to Trade or DTT. I remember arguing with our former VP of Marketing and John Hinman from Hinman, Carmichael (one of the industry’s most accomplished wine counsels) on naming the new strategy. John was dead set on avoiding all similarities to DTC (which was just a burgeoning channel and still raising the ire of wholesalers). He felt we didn’t need the additional attention and scrutiny as we were already pushing the industry forward to increase DTC sales. Our former VP had other aspirations. He wanted to build a brand, one that was completely separate from our core, that would exist independently, with a personality of its own. He displayed various mood boards with American revolutionists and pictures of Che Guevera and named the new brand ReThinkWine.com that he believed would inspire a revolution (#facepalm). I remember my quote to him after the fourth mood board, “If you show me any more damn muskets you are fired. Immediately. And if you are going to name this damn thing ReThinkWine.com (which became WineREvolution.com — ack) make it about a thought revolution like Apple: Think Differently.” And in the end, what resulted was a muted presentation of the phrase DTT in order not to wake the Kraken of the wholesale tier and an absurd rebranding with more phrenology that has only recently been surpassed by new nootropic web sites. Side note — accomplished marketers have dumb ideas too so trust your gut.

Launch DTT was supposed to solve the wine world’s problems as they were symptoms expressed throughout the wine world but not yet acute (that would precipitously happen in 2009). The access to market continued to constrain, and we were trying to follow where the puck was going. We felt it was an elegant answer to everyone’s problems.

For Producers —

It gave them quite a few pros:

• Access to markets (state or even regional areas) where wholesalers didn’t want their brand or even more, products within their portfolio
• Ability for large brands to test new product lines
• A place for them to recoup some margin for markets with limited sales

And a couple of the main challenges:

• Total responsibility for sales marketing efforts in the market
• Responsibility for fulfilling the product in an efficient, cost effective way

For Retailers/Restaurants —

Pros:

• Access to unique wines to differentiate their stores/menus
• Direct producer relationships
• Potential cost savings

Cons:

• Fulfillment options sucked (especially for large volume orders over 10 cases) in both cost and time
• Pricing wasn’t always better (many wineries wanted more to compensate for the increased shipping costs)
• Forced to buy in 6/12 bottle increments

For Wholesalers —

Pros:

• The ability to shed brands and especially products that didn’t turn quickly and tie up cash
• Ability to see brands that needed full service and would graduate from DTT seeking a real wholesaler and already have a sales footprint to build upon
• Reduce remote territory coverage

Cons:

• Some sales did not go through them. For each distributor, the loss or revenue MORE than made up for the huge financial burden of warehousing, inventory, and representing slow moving SKU’s

I’m not going to lie; our grand experiment was not a breakout success.

I can cite hundreds of reasons (especially the absurd branding) but DTT version 1.0 did not take the wine industry by storm and was soon abandoned by subsequent WineDirect CEO’s and relegated to the forgotten annals of history.

And then, in 2009, the industry experienced the first major setback since Prohibition. Though we had survived previous recessions, mostly unscathed, with consistent growth in US producers and volume, this time was different. For the first time, smaller producers were D-listed in droves from wholesalers. As market access constricted it forced so many wineries to refocus efforts on DTC sales not for only for additional profit but as a question of survival. Suddenly DTC was more than just a profitable channel; it became a primary focus. Moreover, as the dollar and the US economy recovered the US became a more primary target for international wineries trying to sustain their companies. We have entered into a new era of unparalleled market competition and diminished market access: the ultimate distribution bottleneck.

For me, DTT was just a memory at this point. Something I fondly remember as a possibility that might return some day in the future. Imagine my surprise when I got a text from a friend saying, “Paul, DTT is back. Check out this new company called LibDib.” I won’t lie, I was skeptical knowing all the major pitfalls and challenges associated with the channel. But I checked out the site, followed their Twitter, and realized that while their methodology was divergent from the previous incarnation, their vision was exactly right: giving producers access to the market.

Not one to just believe everything the internet tells you, I took a long drive to San Jose from Napa to meet Cheryl Murphy and Richard Brashears, the CEO/Founder and CTO/Founder. It wouldn’t surprise you that this DTT 2.0 is the brain child of a veteran of family owned winery sales and marketing. Cheryl’s parents own Clos La Chance, and she ran sales and marketing there for 20 years. She not only understands all the pain points of market access but has had to deal firsthand with them to overcome all of the increasing bottlenecks mentioned above. Forged in the fire of market constriction she decided to “liberate distribution” aka LibDib and resurrect DTT. Unlike WineDirect, she chose to get licensed as a wholesaler (currently in CA & NY) vs. the complexity of becoming a “sales agent.” With this strategy, she can remain singularly focused on creating a smart transactional hub that allows small wineries market access while still solving many of the problems inherent in the current three-tier distribution system. That being said, her team will still have monumental challenges to overcome to make DTT a frictionless channel. But if it were easy there would be no glory. The good news is that the industry needs an alternate route to market more than ever. After meeting them, I get the sense that team LibDib has done an excellent job of reading the 70+ years of lumps on our industry’s head (including mine and the other WineDirect founders) and has a pretty good diagnosis for going forward. In the meantime, my wife is going to give it a try and hopefully gain valuable insights and good learnings that I can write about. Stay tuned.