004 | Cracking the Drinks Value Chain: debunking the myth of bypassing the links of the chain | Part 2/3 of the Interview with Ilias Mastrogiannis from the Distillery Nation Podcast (Seattle, WA, USA)

We touched a little bit again.
What are your thoughts about

directed consumer?
You know, for smaller Brands?

You know, on premise is very
important, but I think DTC where

it's allowed, you know, not
every where it's allowed, but

yes for DTC.
What are your thoughts and how

do we make that part of our core
strategy?

To perhaps reach consumers to
build the demand so the

on-premise maybe captures it
there.

So what are your thoughts and
Direction or or tips that you

might have for DTC Brands.
I mean, did you see it's still

like a bit of an unknown Beast
for me, I mean, for many, I

guess, but also for myself, like
the way I look at D to C is of

course, as you said, I wear,
whatever is legal.

I think the u.s. is much more
advanced than to this then most

of the European countries.
But it's, it's again about

building the demand First, and
let's say what I think, I wrote

a post like some time ago about
people going to Ellis Island.

I mean, it's very applicable to
to all of us or we are real

leather from European
background.

You know, people coming by ship
to the US.

And and and I read a quote
there, there was when I was when

I went to Ellis Island it was
like a I heard it back in Italy.

I heard that the the streets
Were paved in gold and that's

why I came here.
And when I arrived, I realized

that there was no gold and
actually there were no streets.

Like the streets were, no paved
at all.

There were Dusty and I was
supposed to pay them and and I

like, I like this and I mean,
I'm getting shiver now on my

back, I mean, you see my like my
love for history here and and

digital in general.
It's very similar to that quote

for me, so it's like d to see.
See is mistakenly thought of as

an easy, quick silver bullet
path to get sales and Islam.

I'm gonna go on whatever Amazon
or whatever dead that the

channel is.
And and they, they don't

realize.
That is not that you're

bypassing an importer or you're
bypassing a wholesaler and

staying with your margin because
D to C, it takes margins.

Anyway, And and you need to
invest in marketing to have, you

know, is not anymore.
Like, you know, the first people

that went D to C then was easy
because there were not enough

Brands and everybody was getting
visibility.

But now if you want to, you
know, be up in the in the list

or in the search you need to pay
for marketing for whatever you

want to call it.
And and then of course like

taxes and margins and so on and
is are the margins calculated

before taxes?
Enough for after tax and how

much margins are you actually
going to give out to that player

and maybe you thought of going D
to C because you wanted to skip

the margins of an importer.
And I'm talking to the European

brands for now.
And so for me it's more like be

careful what you wish for.
So II part.

I've compared the DTC very much
to the off trade and Retail so

it's like you can do it.
It.

But it's a, it's a big effort
and there is very much hidden

charges in it.
That you may not see, you know,

you don't focus on just like
thinking about the big volume

that are going to come up for
it, but you need to build those

volume and you need to be cash,
strong to be able to satisfy

that request.
Because if you have started in

selling in your own backyard for
now, If you do like this, and

then they plays huge orders,
then it's going to be troubles

for you, you know, from a cash
flow perspective as well.

Yeah, yeah that's that's an
interesting take on Astley.

So what do you think between the
relationship or the distribution

between a brand having DTC and
then perhaps a traditional

distributor model at least in
the u.s. when we talk about, you

know, the u.s. you mostly have
to have a distributor to either

go.
Go cross state or for each

within the state, you know,
because you can really hit every

single account.
So what are your thoughts about

the percentage?
And perhaps maybe making the

distributor happy too because if
they see that you're perhaps

undercutting them, or if you're
trying to do something that

might not be to their best
interest because you know

they're there to pay their bills
to.

So what are your thoughts around
that aspect and ratio of trying

to do the C versus in in that
the same time also balancing

your distribution Network.
I think, I think I mean this of

course, like when you're
starting as a brand, then it's

a, you know, you need to I think
there is an acknowledgement from

the industry.
That also from Distributors that

if you're a small player,
they're not interested in you.

That's right for you are
probably going to start with D

to C anyway and by DTC.
See, you know you can also put

in, you know, services like Park
Street, for example know like in

a way.
You know, it's like it's a

three-tier compliant systems
that you know, enable you to

ship to on trade players as
well.

So there is an element of which,
you know, of course it by

growing, you need to acknowledge
that and no distributor will

complain about that because they
wouldn't be interested in you

anyway and you need to get to
that traction.

Then there is a moment, there is
Kind of like a glass ceiling.

Let's call it like after which
you need, if you want to scale,

you need to go with a big big
player and then you always

should look at things.
The way I see it is as an

ecosystem.
So I always like to think about

the drinks ecosystem, it's like
you cannot really, bypass people

is like it's a zero-sum game in
the end, you know, there's

importers Distributors retail,
you know, this you need to be

able to To maneuver all those
players in a way that you make,

everyone happy to sell your
brand because otherwise, you

know, like it's a small industry
in the end, you know, like if

you start like, trying to find
silver bullets and shortcuts,

you're gonna make somebody
unhappy and then that's going to

backfire on you.
So for me, it's more like, you

know, start small learn but
always think of an ecosystem.

So it's like, Not like bars or
retail and so on.

So for me I would do it as a I'm
building the demand for my brand

and I don't mind if it's a buyer
of Costco or a non trade manager

or it did you see, you know
consumer, you know for me I'm

talking about that, message
about building my brand and why

you should have my own whiskey
and my own Bourbon and sequela.

So you know for me it's more
like different.

Let's say phases of the of the
same coin kind of thing and play

and grow, don't don't kind of
like jump the yeah, I mean as

you said, yeah, don't don't try
to undercut because yeah, you

gotta the way that I see it is
and what you explained is, you

gotta build either that margin
or that cost for all the Is

equally, you know, build the
cost of cogs and your margins

for exactly the big Costco or
the big distributor or the small

distributor or the DVC kind of
have it equally across the the

board.
So that way your core message is

the same and whoever buys by is
based on that demand the yes,

wait, exactly.
Because there is a little bit of

just to close the loop like
this.

Yeah there's a bit of a
misconception about Distributors

and wholesalers like I I'm
working a lot with you know with

with brands that need them and
how to understand how to work

with them because it's not that
they are taking margins of your

brand is like they're giving you
a service of course if they work

one if they work well and and
for example like I've had

several discussion about these
like some bars they may have

like this I'm talking more from
a European perspective now like

they will ever Our will take
will buy brands from two or

three, wholesalers only.
So, if you go there by yourself

to sell, you know, you are a
nuisance to them because they're

making three big orders from
vegetables to Whiskey, with two

or three players, two or three
invoices every week.

And they don't want to have
Elias sending an invoice for

yes, you hundred bucks, you
know?

No.
So when you give your margins to

one of those wholesalers, it's
actually like making sure that

you're available in their range,
so that this guy is making three

orders in one of the three
orders.

There is also your case.
You know, so that's the price to

pay for a service so it's a
little bit like with rents.

No is Lyle I'm you know you're
wasting money if you're renting.

Yeah but I want to live in a
city centre and I can't afford

buying a house and I'll flatten
a citizen to so I'm renting and

it's not that the the the the
owner the landlord is stealing

money from me.
It's you know, if I think for

the convenience yeah I think
it's worth.

It's worth it so that I like to
think about it in this sense.

And then Learn how to work with
those people.

Because I've seen, like, in big
companies where I worked and

also clients be clients like,
there's a tendency to change,

importer change distributor.
But you know, it's just like

those people that divorced three
times, and then it's always the

wives of the husband's folds
now.

And it's like, yeah, but hang on
a minute.

Like it's is the fourth marriage
that you do within that market

with a different distributor
importer.

Can it be that the something
wrong from your end as well?

And how do you work out that
relationship?

Yeah, I really I've been
thinking about that, too.

You know, when you approach a
bar, you know, they don't have

time to do 10 different
invoices.

As you said, to your point, they
want Simplicity from their side,

they want to place an order with
12 clicks, not deal with your

QuickBooks invoice and you know
email.

So I think that's a great
Insight where you.

Yes, you're giving up margins
but your Getting placed into

that stream for bars to quickly,
get to you verses as you said

that he would approach them
other ways that most likely say

no because it's a hustle for
them to.

Exactly.
You deal with you for one case.

Exactly.
But it's up to you to make up

that share of mind.
Yeah, with the sales, guys at

the distributor to say, I want
them to sell my whiskey instead

of a competitor whiskey that
they are stocking as Yeah,

that's a great Point.
Okay, one side question as you

were talking is with
distributors in that marriage

portion, you know, you know, you
said the bigger Distributors,

might not look at you right away
because you're the demand is not

there, you're not the hottest
tequila or whiskey right now, so

you might go with smaller
Distributors.

Is that something that you
advise and maybe go with a beer

distributor, that it's local
within your area to begin with

versus you.
You know, the, the big Diageo

once or the, the solder ones or
whatever.

The company has be, is that
something that you advice for

smaller companies to begin with?
So, on that one, I've I've

changed my mind many times to be
honest.

And because there's no right
answer on that one like what

I've come up with as an answer
is that there are three levels

and on this one, I'm going to
steal like some wording from,

actually, from pole.
Let go from few Spirits because

in one of the Lab values when we
met like it was mentioning this

and I'm quoting him and I don't
know if it's the right word but

basically said something like
you have to be emotionally

relevant or strategically
relevant or financially relevant

and the way I look at this is
it's a bit of a ladder kind of

thing.
So it's like the emotional

relevance is that I love.
Elias is a great guy.

I'm gonna stalk his bottle.
Because you know, I'm not even

sure if I particularly love is
whiskey but he's a great guy

always on time.
I love his passion, I'm gonna

warn him and he's a friend of
mine now then that hits the

glass ceiling because then it's
like yeah but you you you are

like I mean I've got 15 other
whiskeys.

So when you come to me and ask
me to sell more I'm going to say

like as like, you know, you
should be thankful that you are

in the my back bar because I
can't do anything.

But if you're strategically
relevant on top of emotionally

relevant, then it becomes like,
okay.

Actually it's the only whiskey
from Washington State and I want

to stock it because of x y and
z.

And then the other issue, the
other glass ceiling comes when

it's like, yes.
But then does another whiskey

from Washington state that cost
20 bucks less?

And now I'm now I'm in trouble.
Because what, what am I going to

ask?
Want to go, and I'm gonna tell

Elias so that comes the
financially relevance because

it's like, okay, now like is
Elias giving me enough margins

to Justify the rotation and
again in margins doesn't know

there's no crazy formula is just
like it's a matrix of like price

and volume and I was like if you
want to earn per bottle, this

much you're gonna have this much
volume and if you want to get,

if you want to reduce your your
margins, you can extend that

volume because this person is
going to sell more so and that

goes for bars and that goes for
Distributors for importers and

so on. because if you're not,
Relevant for them.

They may, you know, take
advantage of of the brand for a

short while, not take advantage.
I mean, I say it wrong.

But yeah.
You know what I mean?

Yeah, yeah.
It's actually, you're not

getting those three notes.
So, yes, you might, you might

get a little bit of maybe a menu
placement because, you know,

Chris, for example, and I'll be
exact what you for two weeks in

a cocktail menu.
But then after that, I'm going

to pull you because the margin
was not good.

I'm losing money as an Tabla
Schmidt.

So, exactly as you said, you
gotta hit all those three ones

which is a very loved and yeah.
And then how do you work out the

message of because that's also
like the selling story on the

margin the recommended pricing
story is part of the messaging

because you may be able to
extend that thing.

It may be a boulevardier with
your Brand's.

It's gonna cost five bucks more
than with my brands.

But you need to be able to
justify that to Consumers.

And if you have built that
demand first, then I want to

have your whiskey because I know
that it's worth more to pay for,

but if there's no demand then
you're just another bottle there

and then it's like, why should I
pay five bucks?

More for that one like you know,
give me the cheap one.

It's good anyway.
Yeah it's good enough.

So yeah that's that's called
right there.

I think that's a very good
answer so thank you for that.