It is not “just” a question of having the most delicious, refreshing, amazing product. Success in the beverage industry is heavily dependent on effective distribution. There is a world of choices that go into developing a strategy, and the bottom line is this: customers cannot buy your product without convenient opportunities to make a purchase.
So what is your approach to making sure your beverage products reach consumers in the best possible way? How do you ensure that your distribution strategy maximizes efficiency, optimizes product exposure, and increases sales?
Choosing and developing distribution channels involves figuring out everything related to transporting a product, as well as packaging and delivering it. With the right channels, you can enhance your product’s exposure and boost sales. Let’s have a look at what this entails.
>>> Read more on smart packaging and other beverage trends to grow your beverage brand in 2023
1. Positioning Your Product - The First Step in a Healthy Distribution Strategy
Generally stated, a distribution channel relates to how products or services are moved from a business to the end-user. As pointed out by TenFold, most products use indirect channel marketing, i.e. products are sold through a number of intermediaries. In the beverage industry, for example, the supply chain typically starts with a syrup or concentrate producer and the ready-to-drink product passes through a bottler, distributor, and merchant before reaching the consumer.
Developing distribution channels involves a fundamental decision about which type of distribution channel will help you meet your business goals and contribute to the company’s growth and development. Your approach to distribution might be defined as:
- Intensive: Distributing to the greatest number of outlets; penetrating the greatest number of markets
- Selective: Distributing to a limited number of channels and outlets; targeting a specific kind of consumer at a carefully determined price point
- Exclusive: Distributing to particular outlets and to very specific locations; maintaining brand image and product exclusivity
2. Choosing the Right Distribution Channels
When developing your distribution strategy, consider how different distribution channels relate to the positioning of your product and potential growth of sales. There are clear advantages and disadvantages to each of the industry’s primary channels:
- Supermarket and General Merchandise - This is the largest channel. In the U.S., supermarket and general merchandise represents about 50% of the market. This means that about half of all beverage products (both soft drinks and bottled water) are purchased at the supermarket or at general merchandisers like Walmart or Target.
- Food Service and Drinking Outlets - Fast-food outlets, takeout outlets, full-service restaurants, and bars make up about 20% of the U.S. market. This channel is losing now due to the economic downturn, as fewer people are dining out. For emerging brands, however, there is an opportunity here. As pointed out by Victoria Vessella of Repsly, “farm-to-table” and locally-sourced products are in demand within local communities, and you can promote a product using locally grown and seasonal offerings to gain traction in the marketplace.
- Convenience Stores and Gas Stations - Standalone convenience stores and gas station stores make up about 10% of the U.S. market. These stores are open long hours (typically 24/7) which is a real advantage, meaning that consumers will buy products after other retail stores have closed. It’s also an environment in which consumers are likely to purchase a single beverage product. This is a great platform for sales, and is a growing distribution channel, with more and more consumers “on-the-go.”
- Vending Machines - Vending machines operate 24 hours a day and are located in places like bus stations, hotels, etc. that don’t have stores, providing additional opportunities for sales. Representing about 10% of the U.S. market, vending machines in transportation outlets and other areas of convenience are no longer just for candy and soft drinks; rather, they have started offering healthier options. This opens up a new business opportunity for clean-label beverage products.
- Exports - About 1% of the market of American-made beverage products are exported to Canada, Japan, and Mexico.
- Wholesalers - Wholesalers are intermediaries who take your product and sell it to distributors and retailers. The advantages of working with them include the fact that they market your product to retailers, improve the producer’s cash flow by purchasing in bulk, bear the cost of storing the product, and ensure the distribution channel is cost effective.
3. Developing Channels - 4 Best Practices to Getting the Most Out of Your Distribution Strategy
Improving your distribution channels is a process that requires care, patience, and hard work. Here are four tips to strengthening your distribution channels and improving your ROI:
- Start with What You Have - It’s not always a question of opening new channels. Sometimes it’s smarter and more effective to improve current distribution channels in order to increase sales. This article by Marketing MO focuses on the importance of building relationships at each step of your channel and communicating with partners, investing the time and energy to make existing programs better.
- Consider the Competition - Understand what distribution channels are monopolized by your competition, then figure out alternatives. Perhaps the competition is focused on online distribution, for example, and you can put your efforts into retail brands to gain a competitive edge. HP did exactly that when Dell took over the top spot in PC sales. Dell was leveraging online sales very successfully, so HP chose to focus on retail buyers and was able to regain its former position as the world leader in personal computer sales.
- Prioritize - Rank your distribution channels based on your order of preference. But at the end of each year, go back and re-rank them based on the amount of revenue each channel generated. You might be surprised by the results, and you can use this information to help you determine which new channels to add or which ones to strengthen.
- Put Consumers First - Who is your target audience? What are their shopping habits? Where do they spend their time? Tap first into channels where you know consumers are mostly likely to make a purchase.
Go-to-Market with Better Distribution and Increase Your Sales
Having the right distribution channel for your beverage product enhances your exposure in the targeted product market. Additionally, a distribution network with the flexibility to respond to consumer preferences and needs is most likely to effectively support sales growth.
Developing and implementing a successful strategy for distribution requires a lot of hard work. There aren’t any short cuts, but careful investment and follow-up certainly pays off. The path to increased sales through better distribution requires positioning your product, choosing the right distribution channels, then developing and maintaining your channels. It is also important to continuously assess and reassess the effectiveness of each channel, responding appropriately as consumer preferences continue to change.
RC Cola International provides assistance and is a resource for developing successful strategies. RC Cola International’s craft cola, Royal Crown, started off in a single channel, supermarkets and convenience stores, and has now moved into the HORECA market; a good example of success in expanding into new markets to increase profits. To learn more about how you can work with RC Cola International, be in touch with us today.