Virtual wholesalers, the future of beverage alcohol distribution?
With modern technology platforms and shipping practices, a new opportunity is emerging for “Virtual Wholesalers” that would present a fabulous opportunity for distribution for small producers of wine, beer and spirits. Virtual wholesalers utilize the principles of self-distribution and direct-to-consumer (DTC) while operating as part of the Three-Tier System. RNDC recognized this with their “strategic” partnership with LibDib and so you know Southern Glazers will be coming just around the corner.
We need a better way to distribute small craft brands or limited production products.
With the continued consolidation of large distributors, a trend that threatens small producers while giving major corporations growing control of markets, this is an ideal time to bring to market a new and innovative, technology-driven wholesale solution. Many states are looking at ways they can help the craft producers while maintaining licensing control over the distribution process. Virginia created this with their own “Virtual Wholesaler” over fifteen years ago to allow their instate producers to self-distribute, so why not open this concept around the country (although no state should be running monopolistic distribution themselves).
The idea is simple. A “Virtual Wholesaler” would do everything a traditional wholesaler does except for storing products (although it could) in a warehouse. There is zero need for “come to rest” or “bump the dock” provisions. These are old tax collection related rules where it was thought that products had to arrive at a warehouse to ensure the books and records were kept correctly to ensure tax payment (the origin of this old rule). Clearly, this ancient regulation is no longer needed. Today it is just a form of protectionism for wholesalers.
Warehouse distribution does provide the ability to streamline the purchase and delivery of products for large producers to large trade accounts by splitting down pallets of products to individual case delivery units. It also allows for multi-brand delivery at the same time. Other than these two warehouse functions there is little else a traditional wholesaler does in this modern economy that cannot be done via technology without a warehouse.
State excise tax can be tracked and paid electronically.
Orders tracked from pick up to delivery electronically.
Electronic payment can be facilitated upon delivery.
Marketing, sales, and merchandizers must be carried out in each market by producers to ensure that sales are achieved for wholesalers and to keep producers’ product relevant in the local markets, relegating the wholesaler to an order processor and warehouse business.
The traditional wholesaler does not contribute to the health and safety of products, they do not perform any quality checks on products they store and distribute. In fact, direct shipping currently does more than wholesalers through quantity limit rules within DTC, there are no consumer quantity limits on the three-tier system.
The traditional wholesale process has an unavoidable inefficiency of putting the wrong products in the wrong markets and thus in the beer industry creating greater waste from “stale” beer.
The beverage alcohol industry is changing swiftly to improve consumers choice in the market and provide small or limited production producers the ability to become less dependent on traditional wholesalers who for too long have had the ability to “make or break” small businesses.