How Draftline Reduces Portfolio Churn for Beverage Distributors
An Insightful Analysis by Jennifer Hauke, Founder & CEO of Draftline Technologies.
Table of Contents:
Introduction
The High Cost of Rotation Nation to Distributors
Churn Offenders and Incentive Strategies
Conclusion
Introduction
As the Founder and President of Draftline Technologies, I’m often referred to as "The Queen of Beer" in the industry. With thirty years of experience in the on-premise draft category, I have led my company in providing modern beverage distributors with data-driven, on-premise compliance, market analytics, and sales tools. As the on-premise draft leader, Draftline Technologies tracks over 1,000,000 draft lines in 88,000 accounts across 40 States.
In this article, I will discuss portfolio churn, also known as "Rotation Nation," and how beverage distributors can manage and reduce churn to save costs and improve their business.
The High Cost of Rotation Nation to Distributors
To illustrate the impact of portfolio churn, I analyzed a large, anonymous AB distributor in the Midwest, with 4,352 lines in a market of 9,016 lines. Using Draftline Data, I identified that last month, there were 373 instances where the distributor replaced one of their brands with another one of their brands. I then used Draftline's proprietary "System Builder" to evaluate the churn and its impact on the distributor's business.
My analysis revealed a monthly portfolio churn rate of 8.83%, which is on the high side of the average range (6%-8%). I believe that a churn rate below 6% is ideal for a leading distributor, while anything above 8% indicates room for improvement and cost savings.
Churn Offenders and Incentive Strategies
In most cases, one or two churn offenders drive up the distributor's churn numbers, costing the distributor money. By analyzing the salespeople's behavior, I suggest changing incentives to encourage better behavior, focusing on conversion into new categories, and reducing the impact of Rotation Nation.
Using Draftline Data, I highlighted a top salesperson, Jane, who had a low churn rate of 5%, mainly attributed to seasonal change-related churns, which I consider "good" churn. In contrast, another salesperson, Joe, had a high churn rate and accounted for 20% of the total distributor portfolio churn for the month.
By identifying the best sellers and biggest churn offenders, I recommend being more strategic with incentives. People respond to incentives, and if you change them, you can change the behavior of your sales team. Incentives should be used to grow market share, not to continue the waste of Rotation Nation. Consider putting incentives on open lines or conquesting competitive lines.
Conclusion
In conclusion, the problem of portfolio churn (e.g., Rotation Nation) is a people problem. We want to give the sales team the coaching, tools via Draftline, and aligned incentives to be successful. I hope this detailed look at churn helps you improve your business. Please get in touch with me if you would like a demonstration of what Draftline can do for you.
Jennifer Hauke, Founder & President