Doug Epstein: The Future of Wholesale is Local Activation

FILED MAY 4, 2017

Norton-based Horizon Beverage is a regional wholesaler in the Northeast, operating in MA, RI, NH, ME and VT. With 84 years of operations under its belt, the company is now run by its fourth generation of family members, including: coo Mike Epstein, and managing directors Doug Epstein, Ben Rubenstein and Sam Rubenstein.

WSD recently sat down with Doug, who is coming off his tenure as WSWA Chairman in 2016, to discuss how Horizon does its part to ensure the three-tier system will be relevant in 20 years, and simultaneously stay competitive in an increasingly consolidated market.

Wine & Spirits Daily: Horizon has never been interviewed for WSD before. Can you give us some background on your operation?

Doug Epstein: We're unique in that we cover all three alcohol beverage commodities beer, wine and spirits. We deliver on the same trucks, out of the same warehouse, to the same customers, which is also fairly unique. Our blend is about one-third of all our states combined between all the commodities, give or take.

I think that's a real competitive advantage in the marketplace because what we're finding is that our gatekeepers and our customers are blending those commodities. There are not separate areas of access for wine and beer versus spirits - often they're blended together. So for us, we can meet all the beverage needs of our customers. It also protects us from any risk, depending on the popularity of one commodity versus another.

The third thing is it makes us more knowledgeable...We understand trends, maybe better than other wholesalers, because we see all the different arenas and what's happening. What we're finding is, with the consumer, it's really a "share of stomach." A phrase that my dad kind of coined years ago at the National Beer Wholesalers Association convention he spoke at.

And at that time, that was pretty novel. Now we see it more than ever before, and in craft beer in particular.

I want to make one other point about the combination of brands. It's a great lesson we've learned from Constellation. I remember [ceo] Rob Sands saying to some of our key retailers, "I'm probably your largest supplier across all the categories.” And it gives you great relevance in the marketplace. We feel the same way when we go to our customers. We have a broad base of business that we can talk about, not just segments or categories. It's been very successful with Constellation. Why not for Horizon?

WSD: How are Horizon's wine and spirits portfolios and divisions broken up?

Doug: Well, we're a great believer in building capacity because as your current suppliers innovate and grow, their demands change over time. More and more our largest suppliers are really wanting qualitative activity from their wholesale partners. And that's a key value that we have to bring to the chain.

You need a capacity for that, and to do that you have to create human resources to handle it. So with that, we recently created two new selling divisions. It wasn't as a result of a new brand coming our way or a new supplier, saying "Look, I need a dedicated sales force" or something of that nature. It was because we saw that our existing suppliers were growing dramatically in their needs, and how best a wholesaler can satisfy them, and build their brands and provide value in the chain of the three tier system.

So we built these new divisions, both Signature Brands and Trellis, to create capacity...so we can attract new suppliers and give them the time and attention that they need, particularly small suppliers as they develop over the years.

Another thing is we have craft specialists. That's the [strategy] du jour, for sure...We have a dedicated sales force just for craft. And that's been tremendously successful.

We have channel specialists in the national account department... our marketplace is transitioning from traditional retailers to a much bigger mix of national accounts.

As my father once put it (he borrowed this term) "If you build it, they will come." We are great believers in that, and we've been able to do it over the last few years. It takes a lot of fortitude though, because you have to recognize that you're creating something out of nothing. So we indemnified our salespeople in excess of $1 million this year in compensation to keep them afloat, keep them motivated, keep them focused, while we built up the existing brands that needed more attention, and while we brought in new brands to fill those gaps.

WSD: It sounds like you put a high priority on progress and self-improvement.

Doug: You know, Avis had a saying… "We're number two, so we try harder." We are not a national footprint, we're a regional player. And as a regional player, you have to maybe invest a little more on a per-case basis, or create bigger resources to compete with the expectations that suppliers have, because they are used to being on the level of national players. So we're a regional wholesaler, but we think with national resources in a certain respect.

WSD: Let's get into your distribution footprint and plans for the future.

Doug: We're always trying to innovate. We're trying to figure out what the next ten years looks like. As a wholesaler, delivery is not the end all be all anymore, taking the orders is not the end all be all. You have to provide value in this three-tier system.

We recently built a brand new facility, over 700,000 square feet, and that's not the end of the story. That's just the beginning. We opened it about three years ago, and what that did was allowed us to create these great efficiencies in delivery, save a few dollars here and there. And then we took those dollars and put them into the front of the house.

That's the key. If you just put that in your back pocket, that's not for sustainable growth. We took that money and put it in the front. That pays for the front of the house sales resources, and then supports all the qualitative activity. So we have invested heavily in digital marketing. We have a whole suite of digital marketing services. We have a new website, and access directly to the consumer, which is a bit unique.

We're taking the content from our suppliers, and we're rejiggering it locally, pushing it out to the 5 million people in the wine and spirits industry in New England. That's the reach. That's the touch we have. That's the value added that Horizon brings to suppliers.

WSD: Can you give me an example of that?

Doug: Well, we have examples where a consumer, through Twitter, will reach out to us, or reach out to the supplier. The supplier reaches out to us on Twitter, and we circle back with the retailer, who then reaches out to the consumer. We have a full circle.

The key thing is to get our people to buy into it, to believe it, to expand. It's only been up for about a year now. So we're making a big bet on that. That to us, is the future of wholesale. How do we activate the brands locally? It's not an order entry system. That's not the idea. The idea is that we're communicating on behalf of the brands...We bring the consumers to our retailers. It's pretty cool.

Stay tuned for Part II with Doug Epstein in tomorrow's issue of WSD.

BOMBAY SAPPHIRE RECALLED IN CANADA FOR HIGHER ABV

Earlier this week the Liquor Control Board of Ontario (LCBO) issued a recall of Bacardi's Bombay Sapphire London Dry Gin (1.14-L bottles) for containing nearly twice the alcohol content that's stated on the label, per the LCBO recall notice. Several other Canadian provinces have also pulled the product from store shelves.

The recall was issued after the LCBO quality assurance team found that some bottles of the gin were actually 154 proof rather than the 80 proof it should be. In a statement from Bacardi, the company said this happened because some bottles "inadvertently entered the bottling line during a short period of time (max 45 minutes) when they were switching from one bottling tank to another bottling tank," per CBC.

Bacardi estimates that no more than 1,000 cases were affected.

WSD BRIEFS:

EDRINGTON'S HIGHLAND PARK TO RELEASE VALKYRIE SINGLE MALT. Valkyrie Special Edition single malt Scotch whisky is the first in a series of three Viking legend inspired releases. it is bottled at 91.8 proof and set to launch in specialty retailers starting next month at about $80 a 750 ml.

WILLIAM GRANT & SONS' SAILOR JERRY PARTNERS WITH HARLEY-DAVIDSON. The two signed a multi-year partnership that will include events at bars, restaurants and Harley-Davidson dealerships across the country to promote the two brands, per a release. "Between our shared American roots, values and traditions, collaborating with Harley-Davidson is an exciting and natural fit," says Sailor Jerry senior brand manager Josh Hayes.

Until tomorrow,
Your Editors

Emily Pennington - emily@winespiritsdaily.com
Sarah Barrett - sarah@winespiritsdaily.com

"May the forces of evil become confused on the way to your house." -- George Carlin

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