A Transformation in Three-Tier Wine Sales

Source: winebusiness.com
June 17, 2017

Daily transactional data for three-tier wine sales will soon be widely available to wineries, a breakthrough that stands to transform the way wineries track and manage an estimated $1.8 billion in annual depletion allowances.

The sweeping change is underway at Vermont Information Processing (VIP), an industry software and information provider that has long supplied daily depletion data to the beer industry.

VIP purchased Beverage Data Network (BDN), a supplier of wholesaler depletion data to the wines and spirits industry, in July 2015. Then in January 2017, VIP quietly purchased TradePulse, a depletions data provider focused largely on California wineries.

BDN and TradePulse customers receive month-end retail and depletions summary reports but VIP has the ability to provide invoice-based data via wholesalers that’s downloaded daily, taking it to the next step. The company plans to shift all TradePulse and BDN customers to its daily Supplier Reporting Services (SRS) system within the next twenty-four months.

“Wine is on the journey to a new source of truth,” Ray Rouleau from VIP said.

Rouleau was speaking at the Wine Industry Technology Symposium in Sonoma and his presentation was followed by two sessions where winery executives delved into the details of managing data for three-tier sales.

Rouleau said daily transactional data is already available through 2200 distributors and that a significant number already provide data to TradePulse and BDN. During 2018, VIP will continue using BDN file formats while the TradePulse file formats wholesalers generate will be retired.

Depletions reporting is used by wineries to set sales targets, distribution targets, and to measure performance for depletion allowances. The data is sourced from accounts receivable and warehouse management system data.

Depletion data tells wineries how distributors, retailers, and restaurants are selling their products. Once wholesalers have wine in hand, the sale of the wine to retail accounts and to consumers – depletions – are outside the view of the winery. This was a source of frustration for years, but most wholesalers now share this data with wineries and third-parties that can help wineries manage depletion data.

Third-party services typically provide what the distributors received, i.e., winery shipments, depletions, i.e., what they sold to the trade, and remaining inventory. Then taking it down another level, depending on what one pays for, they can provide retail account data – depletions by account. Account-level data can be critical for determining where sales personnel need to focus. Account level data can then be analyzed further, giving a winery a leg up in promoting their wines or with pricing them. This data comes in in different formats and there are a number of companies that sit in the middle to digest that information and deliver it in a usable, monthly report.

Having access to account level data on a daily basis, however, is a game changer. Wineries will be able to react almost immediately to sales, pricing, and inventory trends while theoretically they’ll be on the same page as their distributors when they’re setting goals.

While a distributor typically handles sales costs, wineries need to account for depletion allowances – promotional expenses offered to the distributors. They provide an incentive for the distributor to deplete inventory and those costs can be huge (the estimated at $1.8 billion a year).

Currently, there’s no direct data connection between chargebacks and depletions; supplier pricing deals are entered into distributor systmes manually, if at all; chargebacks are generated by the distributor manually; chargebacks are reconciled to depletions manually by the supplier, and only the “tip of the iceberg” are ever actually reconciled.

“Once you have invoice-level data, its fact based. It’s exactly what’s happening and it’s going to affect your price planning,” Rouleau said.

Rouleau noted that once wineries get used to invoice level data on a daily basis and to the visibility it provides, they’ll need to align the data with planning; and will want to look at bill-backs to see if they’re close to what was forecasted. A next step, though it’s a ways away, would be to arrange for automatic reimbursement for billbacks, a practice that’s already common in the beer industry.

“The wholesalers are very excited to deal with one company, one process, and to have one source of truth to talk to their suppliers about,” Rouleau said.

Submit a Comment

Your email address will not be published. Required fields are marked *

Pin It on Pinterest

Share This