Inventory is one of the most mis-understood aspects of the wine world.
A wholesaler that commits ten percent of their annual revenue to a single purchase of five thousand cases of Hungarian Viognier is going to run into an inventory problem. A restaurant owner who has a wine buyer that overbuys on Barolo and ties up their dollars has a right to have a serious talk with them. A retailer with a weekly buying budget of $2000, with has a rouge buyer that decides to spend $5000, needs to find a new buyer.
And all of those quips are legit. Of course. Dollars don’t lie, and when it comes to cost of inventory it’s a simple equation of dollars in, dollars committed, and dollars spent.
But inventory is more than dollars. In fact it’s different than dollars.
Inventory is actually marketing.
The purpose of inventory, on one hand, is to simply have the wine in stock for when the random customer wants to buy it.
But actually, the purpose of the inventory is to give the customer the option to buy it, which then raises the value of the wholesaler’s brand (or the restaurant, or the retailer). When the brand value is raised, then it’s called marketing.
So a wholesaler with the greatest bang for the buck 95 points, $7 cost Cabernet doesn’t help their cause by only having five cases of it in stock every week. The inventory would evaporate with the first order, and then they are left with mad customers.
Conversely, a wholesaler with some inventory of the wine on the cover of Wine Spectator suddenly finds their customers want to get their hands on some. The value of the wholesaler just went up, but only because they have cases in the warehouse.
Likewise, a restaurant can’t say they have 30 wines available by the glass and actually only have five. It doesn’t work that way. Part of saying you have 30 wines by the glass is to actually have 30 wines by the glass, increasing your market perception value (i.e. branding).
Retailers carry incredible financial loads, bringing in cases and cases of wine on the hope that the right people will walk through the door and buy it. If the big order comes through and they can’t fulfill it, there is a marketing problem. Their Yelp reviews will show it.
So the cost of marketing is partially based on the inventory, which drives wineries nuts. “If they have it, they should sell it” is a phrase I’ve heard. And if the goal of marketing that brand is to be out of stock on it, then yes a wholesaler should sell it out completely (then, importantly, tell their customers that it’s out for the year and you can’t get any more, then stick to it). But if you are selling the always available option for the retailer or restaurant to buy it, then it doesn’t do any good to have just a little of it. You have to have a lot of it.
So ‘stuck inventory’ could easily be flipped into ‘the cost of marketing that brand.’ That’s the true value of inventory, and why good wholesalers are rare indeed. Most wholesalers think the goal is to sell the wine. The smart ones know the goal is to market the wines, knowing they will sell better as a result. The inventory reliability factor, which is marketing.
Thus, on the wine retail side, the most powerful information a retailer can have is the name, email address, and types of wine a customer is seeking. They can then market the availability of wine to the right customers at the right time, using inventory at the wholesaler as marketing leverage.
On the restaurant side, with more limited space and a staff that might not know the difference between a Cote de Beaune and a Nuits-St-George, should maybe say “Burgundy of choice, $80 a bottle” on the list to allow for conversation at the table, or a journey to the wine cabinet to make the selection, to help move inventory without committing to specific items in print. In this case, the inventory (aggregate) becomes
This is all semantics, I know. Of course, there are true stuck inventory issues at most wholesalers. Of course, the goal is to sell the wine. But a wholesaler, retailer, or restaurant have to be careful in how they design their business from the start and how they portray it to their customers. Is part of your promise to customers that you’ll have specific wines ready for them to buy whenever they are ready? Or is your promise that you will represent great wines that allow you to sell into a style or category, but maybe not a specific wine?
Do you build anticipation or desperately hope for sales?
Are you stuck trying to find customers for your wines, or do you find wines for your customers? The former is what most do because of too much inventory. The latter is what the smart ones develop, by using inventory as marketing.