Each market has its particular quirks, and when it comes to navigating route to market the UK is no different.
The UK spirits market layered and highly competitive. Particularly for new drinks brands and distilleries launching or at the very early stages of growth.
The reason is simple – it’s saturated. There’s a lot of high-quality offerings from both multinationals and local craft brands alike. Yet there are too few high quality wholesalers and distributors that you can rely on.
This guide aims to provide an in-depth understanding of how to navigate the UK spirits market, focussing on the roles of distributors vs wholesalers, and the potential benefits and drawbacks of working with a distributor vs self-distribution.
How wholesalers service the UK spirits market
The UK spirits market is primarily supplied by a network of drinks wholesalers, who purchase products and distribute them to on-trade and off-trade retailers. The bulk of volume will be through these companies.
Wholesalers range from large national organisations, like Matthew Clark, LWC, Enotria & Coe to more specialist spirits wholesalers like Amathus and those who have strong regional presences such as Hamonds & Knutsford (north England), Gordon MacPhail (Scotland) and more.
They provide a one-stop-shop for the on-trade (restaurants, bars) and off-trade (retailers) who prefer an efficient and time-saving approach to sourcing their drinks inventory.
Wholesalers:
It’s important to differentiate between wholesalers and understand their business models. Many brands get confused by what the wholesaler’s priority is and what they do. Spoiler alert – it’s never you, but that might not be why you are getting turned down.
There are three main types of wholesalers in the UK spirits market:
- Specialist wholesalers – focused on a specific product category (e.g. wine, spirits, or beer).
- Cross-category wholesalers – selling a wide range of drinks products.
- Regional or national wholesalers (can be specialist or cross-category). These either serve a small geographical area or the whole of the UK.
The reach of each is dependent on what type they are. Meanwhile, the interest they will have in your brand will depend on where their focus lies and how you align with that.
Therefore, their ability to put your stock in the right places is highly dependent on what the end trade customer you are targeting, if that’s also their clientele and if it’s the type of product they provide them with already.
A specialist wine wholesaler might sell expensive wine to high-end restaurants, but that might not mean they are able, willing or even interested in selling super premium spirits to the same customer.
It’s a simple principle.But not understanding this is the first and most frequent hurdle brands succumb to.
Understanding what the wholesalers’ purpose is
Irrespective of the type – wholesalers in the UK are different to distributors. Yes, wholesalers physically distribute your stock, but they are rarely also the agents, nor the ones doing active representation on your behalf.
Wholesalers facilitate A to B. They make your spirits available. But their job is to service their customers and provide excellent value (pricing, credit, delivery consistency etc.). They are not there to increase your sales nor train people about your brand.
A wholesalers’ primary objective is to support the aspirations of their customer. You are not their customer. Your spirits brand is just one of the thousands of tools they have at their disposal to service their customer.
If their end customer doesn’t know about you, you cannot rely on wholesalers hustling for you and creating a sale. They might do it here and there if your product aligns with the best way to fulfil their client’s needs. Do not expect that of them as a standard however.
It’s worth repeating one more time to be unequivocal; They service their customer. They do not service your growth plans or objectives.
If you supply a wholesaler, you need to actively manage the process and get their customers to demand it from them. You create the sale, they service it.
Often, this is where it all fails and brands are brought into warehouses and made available to all customers. Yet they don’t move as nobody knew they could order from there. So they gather dust for a few months, eventually getting de-listed. There’s no pull-through.
This is why most wholesalers will insist on you proving to them that you have a dozen of their customers ready to order it as soon as it hits the warehouse to get a listing.
Spirits Distributors
Spirits distributors in the UK sit between the producer and all B2B customers. They purchase products directly from the brand and exclusively supplying the rest of the market.
They supply accounts, but critically, also create the demand through active sales and representation. Unlike Wholesalers, Distributors are often also agents and bolt-on brand teams.
While some might, Distributors typically don’t sell directly to bars and restaurants (as that is the role of the wholesalers). They often have an existing customer base and sales team to help generate sales for the brands they represent, and they work with wholesalers to ensure that supply can be found broadly.
Good Distributors work with all the stakeholders involved to ensure their brands are pulled-through the process and don’t just stop in a depot somewhere. There’s that word again – pull-though.
At a quick glance, it seems clear that the ideal choice for growth is via a Distributor. But it’s not that simple (it’s also not always possible!), and for some self-distribution might be preferable. Before we get onto that, let’s look at the strengths and weaknesses of working with a Distributor.
Working with a Distributor:
Working with a distributor can help grow your sales by introducing your brand to their existing customer base and through providing industry expertise. For brands based outside the UK, distributors can also manage importation and logistics.
Additionally, distributors can store stock in bonded warehouses, easing the burden of inventory management.
Pros:
- Access to an existing customer base. Distributors have established relationships with wholesalers, retailers, and on-trade accounts, which can help grow your sales more quickly.
- Sales and marketing support. Distributors often have dedicated sales teams and marketing resources to promote your brand and generate sales.
- Industry expertise. Distributors have in-depth knowledge of the UK spirits market. This can be valuable for brand positioning, pricing strategies, and navigating industry regulations.
- Importation and logistics. Distributors can manage the transportation, storage, and delivery of your products to customers, easing the burden of inventory management.
Cons:
- Reduced profit margin. Distributors in the UK often charge fees (retainers) and also take a margin on sales. This will result in lower profits for your brand.
- Less control. Working with a distributor may mean less control over your brand’s positioning, pricing, and sales strategy.
- Potential competition within the distributor’s portfolio. If your distributor represents other brands in the same category, there may be competition for sales and attention within their portfolio.
Many of the cons are overcome by selecting the right partner and teaming up at the right phase of growth for your brand. The mistake many brand owners make, is in their selection and misreading the company synergies between them. Many also mis-understand the support they need to bring to the table vs in the overall expectations they have.
It takes time to seed a brand in the UK and pull it through the route to market chain and get it on shelves. Setting appropriate timelines is key to a successful partnership.
Additional Considerations
When launching, many brands factor in around 20% extra budget in addition to what they are paying in fees / retainers, to spend on additional distributor support in the first year. These take the shape of campaigns, sales drives, trade event presence, brand training etc.
As ongoing support, many also hire a brand ambassador. While they are part of a distillery’s headcount, they often work seamlessly with the distributor and act as another bridge between a brand and the external distribution company.
It’s also worth pointing that this support, budget and representation is entirely separate to the consumer facing activity brands chose to do.
Distributors deal with trade and while it should all be cohesive and co-ordinated – the reality is that if you want to do consumer festivals, events, advertising, tastings etc. it’s likely to need yet another budget as distributors will not be the ones who pay for that…
If you are an international brand looking at the UK, what this all amounts to is little to no margin being made for the first year as you gain a footing in the market. The UK has great offerings already and requires spend (or profit sacrifice) to get going. That’s understandably a tough reality check to accept for many brand owners.
Self-Distribution
As an alternative to working with a distributor, brands can consider self-distribution.
This option requires the brand to handle logistics, inventory management, and relationships with key players in the market, which can be challenging, particularly for those based outside the UK.
Pros:
- Greater control. Self-distribution allows you to maintain full control over your brand’s positioning, pricing, and sales strategy.
- Higher profit margin. By eliminating the distributor’s fees and margins, you can potentially achieve higher profits on sales and avoid ongoing representation costs.
- Direct relationships with customers. Building direct relationships with wholesalers, retailers, and on-trade accounts can provide valuable insights and opportunities for collaboration.
Cons:
- Time and resource-intensive. Managing logistics, inventory, and sales can be a significant undertaking, requiring dedicated staff and resources.
- Limited market access. Without an established network of customers, it may be more challenging to secure listings and grow your sales.
- Regulatory requirements. Self-distribution requires compliance with UK alcohol regulations, including obtaining the appropriate licenses and registrations (e.g., AWRS and WOWGR, if applicable).
As with anything in life, doing it yourself is challenging and time consuming. But if you’re willing to invest the time and effort to build direct relationships, self-distribution offers more control and higher per-unit profit and a greater ability to respond to shifting brand positions.
Critically, for most brands operating in the UK, it’s the only way. Especially for the first six to nine months as you establish your name and initial volume.
So, you might as well embrace it and establish a two-year plan on how you are going to thrive!
Don’t believe us? Just do the math to get an idea of the selection process. There are only a dozen good spirits Distributors who operate at scale nationwide, and another dozen good but very small distributors. They might have 3 brands per category at most. That’s 70 Gins, 70 rums etc. being represented by recognised and effective Distributors at any given point – yet those categories might have 500 brands actively seeking out a space.
It’s clear that if you’re looking for industry expertise, established market access, and support with logistics and inventory management, working with a distributor is the better option. But it’s reserved for those who can afford it and have a clearly defined niche that fits with a select few distributors and their shared vision.
The rest of the brands build their volumes one account at a time and eventually, supply wholesalers direct.
How to get ready for Wholesalers & Distributors?
Simply put; Sort out your price points. So many who self-distribute rule themselves out of ever being able to secure a distributor as they don’t leave a margin for all those who need to be accounted for in the chain.
They often supply the end trade customer at a rate that’s lower than they should to facilitate sales, and that spectacularly backfires once either wholesalers or distributors come onboard.
All brands should have a clear pricing structure to supply wholesale, direct to trade and direct to consumer. But understand this; The price you supply to wholesale is higher than what you will need to supply to an agent or distributor down the line.
The reason is simple – the distributor will then supply the wholesaler and manage that relationship. If they bump the price up, the wholesaler will too, then the retailer etc.
A 5% cost increase at the beginning of the chain can result in a need to increase shelf price by 8-10% by the time everyone has applied their margins and factor in VAT tax.
This leads to two inevitable outcomes. Either the cost on shelf goes up, and if it can’t do that without a huge hit to the rate of sale, retailers and on-trade will look at the margin and decide it’s not worth it any longer. They stop selling it, wholesalers don’t see volume flowing through, and you start losing entire routes to market very quickly.
If you are seeking a distributor, start by understanding that they will need to make a margin on every sale they make.
The best move you can do is to make room for them at the start of the chain long before you need to.
If you can, try to keep your prices slightly higher than they will, so that when you handover the first thing your Distributor can do is either lower your trade pricing and increase volumes / ease friction, or keep the additional margin already built in and re-invest in supporting growth through other means.
Become obsessed with sell-through.
We’ve covered the idea of selling in and selling through many times before. We’ve mentioned pull through quite a few times in this article. If you self-distribute, get into the habit of seeing all trade customers as collaborative intermediaries.
The end drinker is your destination, not the bar. The shopper’s basket is the end destination, not the retailer’s shelf.
Adopt that mentality and all the ways you can support on and off trade accounts.
It’ll make you better as a brand full stop as it forces you to be customer focussed. It’ll make you more effective at self-distribution as you will not become blinkered by the notion of selling into somewhere as being enough if you want to stay listed there.
Being cognisant of sell-through and having processes in place to move the stock into drinkers’ bags, baskets and drinks means your brand will keep flowing even when the chain gets ever more complicated.
Interested to learn more about getting spirits into the right hands? Have a look at our article on How To Plan Your Route To Market.
