5 - Channel Management

Summary

Introduction

Over time, the manner in which finished products were handled and delivered to the final consumers of alcoholic beverages changed substantially. While in many countries the wholesaler was traditionally the major intermediary between the producer and the retailer, in some countries other modes of distribution also developed. Interestingly, a number of direct competitors have created distribution alliances. This chapter explores the rationale behind the creation and evolution of different modes of distribution, and, in particular, of alliances that involved only producers, or producers and distributors (mainly wholesalers). I analyze the different levels of commitment by multinationals and provide an overview of the long-term patterns in the global distribution of this product.

Differing levels of commitment, 1960s

During the 1960s, alcoholic beverages firms from different parts of the world had distinct forms of distribution. In the United States, wholesalers were starting to concentrate at a regional or state level. In Europe, retailers entered into direct marketing relationships with producers, increasingly bypassing the wholesalers. As distributors grew in size and power, they reduced the number of purchasing channels and suppliers lost bargaining power. Many were at the mercy of retailers. The development of large-scale supermarkets and hypermarkets made it very difficult for beverage producers to integrate vertically into retailing (either outright or through contractual agreements) and remain competitive, as that would have entailed disposing of brands and other kinds of products from competing firms.