Ready-to-Drink (RTD) beverages remain an important part of the beverage alcohol market, but the category has changed dramatically.
A few years ago, simply being an RTD could get a Buyer’s attention. Today, Buyers have a lot more choices. Shelves are crowded, retailers are watching inventory closely, and new brands need to demonstrate why their product deserves space.
LibDib receives many inquiries from RTD Makers looking for distribution. We can provide an efficient route to market, but distribution is only one piece of a successful RTD strategy.
For RTDs in particular, Makers need to think about pricing, shipping, case configuration, inventory, sales support and velocity before launching into a new market.
Start With the Economics
RTDs can be challenging in distribution because they are often heavier and have a lower dollar value per case than traditional spirits.
The original LibDib model was designed around products with a case value of approximately $120 or more. When case values fall significantly below that level, warehousing, fulfillment and transportation costs can represent a much larger percentage of the sale.
Before launching, calculate your economics all the way through the three-tier system.
Ask yourself:
- What is my wholesale case price? Consider consolidating packs to hit that $120 minimum.
- How many units are in each case?
- What does it cost to get that case to the warehouse?
- What will fulfillment and delivery cost?
- What margin is available for the distributor and retailer?
- How many cases does an account realistically need to order for the economics to work?
- Can I support promotions, samples and other market-development costs?
- How much volume do I need in a market before holding inventory makes sense?
A product can have great consumer appeal and still struggle if the case economics don't work.
Strategy #1: Consolidate Your Inbound Shipments
Avoid shipping one or two cases to the warehouse every time you receive an order.
Some LibDib Makers consolidate orders weekly or bi-weekly and send a larger shipment to the warehouse on a predictable schedule. This can significantly improve inbound freight economics.
The key is setting expectations with your Buyers and sales team about delivery timing.
Predictability is usually better than expensive one-off shipments.
Strategy #2: Consider Higher Order Minimums
For lower-priced RTDs, a one-case order may simply be inefficient.
Consider establishing minimum orders of 3, 5 or even 10 cases depending on your case price and fulfillment costs.
Larger orders can spread transportation and fulfillment expenses across more product and make the economics much more sustainable.
Just make sure the minimum is realistic for the accounts you are targeting. A neighborhood account and a large chain have very different inventory needs.
Strategy #3: Don't Launch a Market Just Because You Can
This may be the biggest change in the RTD market.
Distribution does not create demand.
Before activating a new state, ideally you should already have Buyers, a sales team, sales representatives or another strategy for generating orders.
LibDib can provide the distribution infrastructure, but Makers remain responsible for creating demand for their brands.
Instead of launching five markets and hoping orders appear, it may make more sense to concentrate on one or two markets where you already have Buyer interest and sales support.
Build density. Create repeat orders. Then expand.
Strategy #4: Have a Real Sales Plan
Today's RTD market is competitive. Buyers generally aren't looking for another product simply because it has attractive packaging or an interesting flavor.
You need to be able to explain:
Why this product? Why this account? Why now?
Successful Makers often have their own sales team, independent sales representatives or an outsourced "feet on the street" sales organization supporting the brand.
Your plan should identify the specific accounts and channels that make sense for your product.
For example, your target might be:
- Independent retailers
- Regional chains
- National chains
- Hotels and resorts
- Restaurants and bars
- Entertainment venues
- Golf courses
- Convenience
- Specialty retailers
Don't try to sell everywhere at once. Figure out where your RTD has the strongest reason to exist and start there.
Strategy #5: Be Careful With Inventory
The old strategy for many emerging brands was to put inventory into a warehouse and then start selling.
That is much riskier today.
Retailers and distributors throughout the industry are paying closer attention to inventory levels and turns. Makers should do the same.
Whenever possible, build demand before building inventory.
If you are planning a larger inventory position, you should have a reasonable forecast based on actual Buyer conversations, commitments or existing velocity.
Inventory sitting in a warehouse costs money. Inventory moving through accounts builds a business.
Strategy #6: Understand That Chains Require More Planning
Landing a chain can be a major opportunity for an RTD brand, but it also changes the operational requirements.
A chain placement may require inventory to be positioned in-market, specific delivery methods, promotional planning and enough product to service multiple locations consistently.
Make sure you understand those requirements before committing to a placement.
For Makers pursuing larger retail opportunities, LibDib's Gold membership may be the appropriate option. Gold is designed for Makers who need additional chain support and inventory capabilities.
Learn more about LibDib's membership options here.
Strategy #7: Treat Distribution as an Investment
There are costs associated with launching any brand through the three-tier system.
Traditional distribution can include significant upfront investments in samples, travel, market visits, sales support, incentives and launch activity.
We wrote about some of those expenses here:
The Hidden Costs of Distribution
LibDib's model can eliminate or reduce many of the barriers associated with securing a traditional distributor, but that doesn't mean launching a brand is free.
Budget realistically for distribution, fulfillment and market development.
The goal shouldn't simply be to get distributed.
The goal is to build a market that generates enough repeat business to justify the cost of being there.
The Bottom Line
RTDs can absolutely succeed on LibDib, but today's market requires more discipline than it did a few years ago.
The strongest RTD Makers generally come to LibDib with:
Good case economics + identified Buyers + a sales strategy + realistic inventory + a plan to generate repeat orders.
LibDib can provide the infrastructure to get your brand into the market and fulfill compliant wholesale orders. Your job as the Maker is to create the demand that moves the product through that infrastructure.
When those two pieces work together, the model can be extremely effective.
Have questions about whether LibDib is a good fit for your RTD strategy? Reach out to makers@libdib.com.
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Have more questions, reach out to makers@libdib.com.