The Charles River Wine Company Story
Click to skip to Part 1 or 2 of “Advantage: The Small Wholesaler” by Peter Sagansky
Charles River Wine Company, Inc. brought a forty foot container full of largely pre-sold French wines to Massachusetts on September 10, 2004 and delivered its first orders four days later. The company that Peter Sagansky – president and managing partner – designed that year started out strong, grew sales steadily, and survived the rocky economic downturn that began in 2008. It’s been an interesting first two decades and a very good ride!
While some suppliers and wine selections come and go over time, our company’s style and focus has remained largely the same. When the market became difficult and the price points fell, we consolidated our portfolio rather than shifting our focus to more commercial wines. We worked closely with our Winery and Importer partners and adjusted to the changing market conditions. We continued to hire talented and knowledgeable salespeople, believing that it takes those who are truly inspired by fine wine to sell fine wine.
Over the years we have developed a well-balanced portfolio of fine wines. It is global in reach with American wines well represented. We hold to our original intentions, continuing to grow a manageable company that competes successfully with the state’s larger competitors. We have focused on fine wines and used our group’s buying and selling skills to become an important resource to the best restaurant and store buyers of Massachusetts.
One of the best things about our industry is that it has always depended on strong working relationships. We have enjoyed the loyal support of our customers over these years, and we have depended on our important working relationships with our suppliers, some of whom having been with us since our first year of business.
Thank you for your interest in Charles River Wine Company!
– Peter Sagansky and the Charles River Wine Company Team
Advantage: The Small Wholesaler
By Peter Saganky, President and Managing Partner
Part 1: Quotas vs. Priorities
Every business structure has both advantages and disadvantages. In this article, I will point out the advantages of buying from small quality-focused wine wholesalers. I will write about our company specifically, but my comments also apply to some of the other small companies that operate in Massachusetts.
Large wholesalers utilize a quota system designed to satisfy their key suppliers. Charles River Wine Company uses a priority system designed to satisfy our key customers.
A wine buyer for a top local restaurant told me a story that illustrates the effects of the quota system. She had asked a salesperson from one of the large distributing companies to bring her Sauvignon Blancs to taste for a possible by-the-glass pour. She specifically warned him not bring “Big Brand Sauvignon Blanc” to taste. You can already see where this is going.
He showed up for his next sales call with a nicely chilled bottle of “Big Brand Sauvignon Blanc.” When the buyer asked him why he didn’t listen to her request he told her that he had so much pressure to place “Big Brand’s” wines in restaurants that he could not afford to show her his finer “Small Producer Sauvignon Blanc.”
Large wholesalers give their salespeople quotas that they must reach. This forces their salespeople to stay focused on their biggest commercial brands to the detriment of the other brands in their books. It is the big commercial supplier who benefits from this quota system, not the wine merchant with a moderate-sized store or the buyer for a fine dining establishment.
All Massachusetts retail and restaurant wine buyers are begged for placements of wines by salespeople desperate to make their quotas. These requests are not easy to handle for either party. Many of these salespeople have established relationships with the buyers that they call on. It can be hard for the buyers to say no to their regular salespeople, so they buy the wines under pressure and chalk it up to the cost of doing business.
These transactions serve the needs of the mega-producers and take pressure off the large wholesale distributing companies. The people who are least well served are the professional wine buyers and their customers.
At Charles River Wine Company, we do not have quotas, but we do have priorities. The details that result in a particular brand becoming a priority for us are quite different than those of the quota brands in the big companies. These include: the quality of the wines, the recognition of the wines in important publications, a strong demand for the wines in the marketplace, and ample availability of supply to satisfy the demand. While we have our priorities, we want our salespeople to sell all our wines.
Our portfolio is a collection of fine wines that all have reasons for being included in our book. Rather than focusing on a few mega-suppliers we succeed by having a lot of relatively limited selections selling to a wide range of customers. The efforts made by our salespeople should reflect how many cases of each wine we must sell. Priority items naturally get more attention, but we pay careful attention to all our wines. Having no quotas to worry about allows our salespeople to in essence “work for their customers”. They select their samples with their customers’ needs in mind. They do ask for business, but they do not have to beg for help all the time for the same group of big brands.
Small companies that are quality-driven have different strengths than those of their large competitors. Many small things come together to allow them to compete with much larger businesses. Each item that they sell is important to them. They have alternative business plans that are productive and successful in a highly competitive marketplace. Their ultimate goal is to satisfy their customers.
Part 2: Mass Market Brands vs. Regional Exclusives
Advertised commercial wine brands have great marketing power. Consumers seek out these items making them relatively easy to sell. These are commodity items. The customers know what the prices of these wines should be because they buy them regularly and see them advertised at low prices. The consumer’s loyalty is to the brand rather than to the merchants who sell the brand.
Pricing is the key issue for the merchants. Their prices on these commercial items affect their customers’ impressions of the entire store. Many merchants end up selling these selections at short margins to avoid giving their customers the impression that their wines are “too expensive.”
Unless the merchants are willing to sell these wines as “loss leaders” they must buy them at the lowest possible prices. The wholesale distributors are surprisingly successful at convincing most of their customers (regardless of the size of their businesses) that they are getting their best prices. All but the largest retail buyers must have doubts that they are really getting the deepest deals.
These brands saturate the marketplace. The salespeople who sell these wines are under steady pressure to place every SKU in every one of their accounts. These wines are in liquors stores of all sizes, convenience stores, wholesale clubs, and chain restaurants (the places where these wines are not found are in some independent fine wine stores and upscale restaurants.)
Commercial wine brands do not however have an exclusive on marketing power. There is also great marketing power in alternative wines that can compete successfully against the commercial brands. This can be achieved by combining these key factors…
1.) “Selectively Sold”- The wines are sold to the accounts as “regional exclusives”
2.) “Quality & Price”- The wines are highly competitive with the branded wines in quality and value
3.) “P.O.S.”- The wines have point-of-sale materials preferably including key reviews
At Charles River Wine Company, we focus on exactly these kinds of wines. At the core of our customer base are small to medium-sized independent stores and chef-owned restaurants. These customers compete successfully in the wine business with the giant stores and chain restaurants in their neighborhoods by offering their customers alternative wines in better shopping and dining environments.
We select wines for our portfolio with our own customer base in mind rather than for the mass marketplace. We price our wines so that the kind of customers described above may buy them at our best prices every day. We are striving to be a strong resource to those customers by providing excellent products that they can feature and make good money selling.
Given our focus it makes no sense for us to have artificially high front-line prices so that we can give deep deals to a few big stores. It is hard to come up with perfect prices that work well for all types of accounts. We set prices for the kind of customers that are our best supporters.
Our prices are in line with those of other major markets which in turn allows our customers to sell our wines at prices that are in line with national posted prices. Our ability to selectively control the distribution of our products is one area where we have a strong advantage over our large competitors. We offer managed distribution while they offer mass marketing. Our approach is intended to create rewarding buying experiences for the types of accounts that make up our regular client base.
Charles River Wine Company employs a relatively small number of salespeople. Each salesperson operates as our sole representative in their regions (with some overlap only in the Greater Boston area.) This arrangement allows our salespeople to maintain control over the distribution of our wines to their customers. We encourage them to be sensitive to the individual needs of competing customers in their sales territories. This is the complete opposite approach to that of the large companies that sell big brands to every customer.
Our salespeople can grant “regional exclusives” to their customers. They place different wines on the wine lists of competing restaurants. When a retail customer features our wines, their salesperson does not view that as an opportunity to make a new placement at the store across the street.
This is one area where our approach and that of the big companies strongly contrast. The big company’s salespeople tell their customers which other stores sell their wines. Our salespeople tell their customers which other stores do not sell our wines.
This sales approach allows our customers the option to price our wines at the level that they think they are worth rather than via a cost-plus-formula. Our discount programs allow our customers the option to run sales while maintaining decent profits, or to gain extra profits on wines that they already sell.
We buy wines with this exclusive marketing approach in mind. Our best selections are wines that our customers enjoy recommending to their customers. The buyers may do a little more work to sell some of our wines but by doing they create opportunities to make extra money while building loyal followings for their businesses.
Fine wines sold on an exclusive basis help to create customer loyalty towards the merchant rather than to the big brands that can be bought nearly everywhere.