What Happens When Your Distributor Goes Out of Business?

Over the last four decades, we’ve seen a lot of changes in the wine industry. Sure, we’ve seen restaurants come and go, wine shops come and go, and even other wineries come and go. But the real change has been how small, or rather boutique, wineries operate.

Back in the 1980’s, wineries would work with distributors across the country. Even we had distributors in 12 or 13 states including New York, Illinois, Indiana, Nevada, etc. Since the tasting room business (also known as DTC or “direct to consumer”) didn’t really exist, most wineries relied on selling their wines to distributors.

The three-tier system still exists today with a winery selling to a distributor, the distributor selling to the restaurant/store, and the restaurant/store selling to the consumer. This distributor would also have complete control of our product in their market. That’s part of the deal.

In those olden days, you hoped you would get paid in a timely fashion, which some of the distributors didn’t seem to understand.

As our tasting room business grew and we had two kids, the appeal of traveling all over the country to help sell the wines just wasn’t there. In fact, Maggie and I made the conscious decision to drop all our distributors with the thought of selling our wines locally. It also meant we were around for kids’ lives growing up.

However, we did keep one distributor in Nevada. Since about 1/3 of our customers come from the Carson/Reno area, it was nice to have a small presence in the restaurants there.

Well, we’ve seen changes in our distributor in Nevada (merges, new wineries, new salespeople, etc.) and continued to work with them over the years. But alas, the wine industry is hard and our distributor decided to close up shop August 2nd. Ironically (or perhaps fortuitously), we had decided to work with a new distributor the week earlier.

So where did that put us? Well, our old distributor still owed us money and they had 45+ cases of random Madroña wines in their warehouse. It is at this point like this that a winery has a choice to make.

  1. We could demand our money (which they would eventually pay) and tell them we wouldn’t take the wine back. In other words, the wine was there concern.
  2. Or we could negotiate buying the wine back, making their lives a little easier and ours a little cleaner.

The problem with option 1 above, where the winery says it’s the distributor’s problem, is that the winery has no control of where they sell the wine to. Or even more importantly, how much they sell the wine for. So you could find your wine being sold in the bargain bin of a clearance store…and it could sit there for a long time. That’s not good for your brand!

We decided on option 2 of buying the wine back. That put the control over the wines in our hands. It also made our new distributor happy that wine wasn’t being “dumped” by the old distributor.

Here’s where you come in. As you know, we couldn’t do our Lost and Found sale this last winter simply because we didn’t have enough wine. Well guess what. I know that the old distributor stored the wines in temperature-controlled warehouses over the last 10 years with a thought to the quality of the product. And the selections of wines available are more of the higher-end and now aged Cabernet Sauvignon and Zins.

So this Saturday, August 24th, we’ll be hosting a “Distributor Going out of Business—Lost and Found Sale.” We don’t have to worry about reintegrating individual bottles into the library, and you get to pick up incredible wines at $5, $10, $15 and $20. That’s not too bad at all!

So that’s what we at Madroña do when our distributor goes out of business. The defunct distributor wins, we win, and you win!

One last note. When I did pick up the wine, it was interesting and somewhat depressing looking at the warehouse filled with wines. And they said that most wineries weren’t taking their wines back, but instead going for the money and kicking the problem down the road. Very short sighted in my opinion, but then again we’re in for the long haul.

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3 Responses to What Happens When Your Distributor Goes Out of Business?

  1. Jill baker says:

    Smart move on madrona’s part.
    I always knew your 2 heads…paul n maggie’s… were, together, smarter than most.


  2. Deb/Michael Basham says:

    Hi Paul,
    What time does the “Lost and Found Sale…Distributor Going Out of Business” start on Saturday 8/24! Thanks. Deb Basham


  3. Deb/Michael Basham says:

    Oops! I should have continued reading. It starts at 10:00 AM.


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