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Pass through distribution


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Is anyone working with a distributor who only fills orders based on the distillery's contact with retailers?  The distillery doesn't place the order with the distributor, but lets the distributor know exactly what the retailer wants. The distributor contacts the retailer to confirm the order and asks for a purchase order.  The distributor does not have sales people and does not solicit sales for the distillery.  The distillery delivers the product to the distribution warehouse, and is responsible for setting up the delivery to the retailer by a third party from the warehouse. The distributor pays the delivery service. The distributor receives payment for their invoice to the retailer, pays the distillery from the money received from the retailer, having factored in the cost of delivery. The distributor payment is static per case, but varies because of delivery charges. 

This appears to meet all 3-tier requirements, but I have been told that the California ABC has issues with this.  Does anyone see any flaws in this arrangement? It seems like a legal opportunity for micro-distilleries to have a better chance to succeed, given the small volume of production.  The idea that small distilleries could possibly dictate terms to retailers, and interfere with their ability to do business with other manufacturers, is ludicrous.

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Sounds like a great idea.  Don't know how and why ABC would have a problem with it.  It would seem that the paperwork trail would work.  Frankly I don't even see where the problem is.  You can contact a retailer, you just cannot sell to them directly nor can you give them anything of value other than a very small sample.   Frankly2, isn't it the case with most distribution agreements that you the distiller are going to have to do the marketing... the distributor won't do it until and unless you are big.

Something like this is good for the startup where there are local retailers that want the local product, but the DSP does not yet have a big enough presence or following to attract a good distributor deal.  

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Slightly off subject, I wouldn't expect most distributors to do more than fill orders that you generate anyway, especially if you're a new brand, or new to their market.  Most of us are an insignificant rounding factor in their larger portfolio, so they're going to give attention and bandwidth accordingly.  About 95% of the on and off premise sales will be made by the manufacturer or their sales team.  The best you can hope for in a distributor is for them to pay on time and deliver what you sell.  If they don't have trucks or reliable delivery systems in place, they're already batting a .500 from the start.

I wouldn't put a ton of faith in a distributor that does not deliver/or uses ad-hoc means of delivery (if that's their proposition in the value chain).  Getting tied up with a thinly-resourced partner in this regard will hurt you.  Poor execution of the sales you generate by the distributor will only hurt you.    

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