21/11/2019 As a supplier, you should know all about kickbacks. Here’s what you need to know.
So you’ve heard of kickbacks haven’t you, but have you ever wondered how important they are? Or have you ever wondered what types of kickbacks are there in the drinks industry?
So you’ve found the right distributor for your spirits, but how are you going to help them with kickbacks?
What are kickbacks?
There are many ways to describe kickbacks in the drinks industry; but the simplest way to define kickbacks is it being the reimbursement from supplier to buyer for any sort of expenses (marketing, advertising, entertaining, and others). So for example, if your buyer, be it a distributor or retailer, is carrying out a marketing campaign for you, then in some way or another, you the supplier has to reimburse those expenses back to the buyer.
How do kickbacks help me?
Let’s look at it this way, imagine if someone gives you a little bit of an extra incentive or a gift to show appreciation for the work you’re doing. Or, if you’re carrying out a certain service for someone, and in return, you receive a reimbursement in the form of a present, or perhaps even an incentive - how would that make you feel? Good, right?
Most times, well, almost all the time - kickbacks aren’t really put down in the contract. It’s kind of like a gesture that the supplier has to be ready to give to their buyer. Not only does it show the supplier’s appreciation for the buyer, but it also makes the buyer want to work with them more.
So for a supplier, giving tangible kickbacks to their buyers is a huge advantage - as if a supplier’s kickbacks are good, then the buyer will look forward to working with them more. In this case, if it’s a distributor or retailer - then there’s a high chance that they will try to move your products faster, thanks to, of course, your generous kickbacks.
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What are the different kickbacks and programs I can offer?
1. Sales incentives
Giving incentives to sales reps is one way of offering kickbacks. For example, you can tell the sales reps that whoever builds about 10 accounts for your product will get a $1000 incentive. This is just one example of incentives. You can obviously come up with your own incentives that will fit your budget and satisfy your sales reps.
2. Gift cards
You probably already know this, but, gift cards are widely appreciated by people. So, you can make gift cards another form of kickback that you can offer to store clerks, or sales reps - or anyone involved in the selling and distributing of your wines and spirits. One way of offering gift cards could be telling offering to let’s say $2000 worth of American Express gift cards to those store clerks who end up selling a certain amount of your bottles over a certain period of time. This will motivate them to push to sell your products too.
3. Sampling allowance
At times, when distributor’s are sampling your products to others, they might deduct a certain amount before cutting a cheque to you. So, for the distributor to appreciate you, and see that you understand their work - it’s best to offer them a sampling allowance. For example, one way you can do this is by sending them extra cases of your wines or spirits which they can use for sampling. This will show the distributor that you understand that sampling means it’s an extra cost to them, and they’ll appreciate the gesture - which will push them in selling your wines and spirits.
4. Slot fee
So if you want your wines and spirits in a certain account, or with a high-end restaurant, or in a particular retail store - then you can offer a slot fee to make sure your product ends up there. This is more like a shelf placement fee as well. So if you want a certain spot on a retail shelf, you can offer a shelf placement allowance to get your bottles placed where you want them.
However, be careful, as a slot fee is something that isn’t legal in every state across the US. So make sure you find out about the laws of the slot fee in your state.
5. Sales trips
So you may want to take the distributor and sales rep to maybe Italy or France, where your winery is located. Or maybe just take them on a trip to appreciate your distribution and your accounts. So this could be done by you paying for everything and offering them a holiday of some sort. To benefit you, you could add in a couple of tasting events to the trip which include your products and also invite other buyers to enjoy the trip, and this way they’ll also end up tasting your products.
6. Additional costs
As a supplier, make sure you try and reimburse your distributor for all additional costs. So for example, if they are making some supply runs for you, reimburse them with the travel cost. If the distributor is taking out a buyer to close an account for your wines and spirits - then reimburse the cost of that dinner or lunch. One of the best ways to do this is to set a yearly allowance. So, for example, you can tell your distributor and reps that they have $5000 for the year to entertain buyers and make connections to close accounts with your products.
Kickbacks will always end up helping you, as they will show the distributor that you understand their costs and efforts, and will also show the distributor that you appreciate the work happening with your product. This appreciation and understanding will motivate your distributor and sales reps to push your spirits and wines into the market more than they already are, as they will enjoy working with you.
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