The Agency Strategy
After the news of the Quiet Hill release spread, the atmosphere in the Redwood Winery office changed completely. It wasn't for any negative reason, but rather a pleasant sort of inconvenience caused by the fact that we hadn't finalized our distribution partner yet.
“Is it… possible to secure some right now?”
“I’m sorry, but not yet…”
“Then how much can you allocate to us?”
“That, too… it will be finalized by this Friday at the latest.”
After answering the phone politely, Dad turned to me as I stepped out of the aging room.
“It’s chaos. It’s all restaurants. Should we just do the delivery ourselves? Think about how much money I’d make if I spent just one month doing the deliveries myself!”
Recalling the days when he used to deliver Serasia himself, Dad looked like he was ready to rent a truck and hit the road at any moment.
“Hey, Dad, don’t get too greedy. We have a mountain of work to do before the Serasia launch, so where do you think you’re going?”
“Ha, I suppose you’re right.”
The upcoming Serasia release was expected to be massive, with a volume exceeding 7,000 cases. Naturally, it required strict supervision to safely bottle, label, and stack that much inventory in the warehouse.
Even knowing that, the reason Dad was greedy for distribution was the enormous profit margin involved. It was obvious that Quiet Hill, which we were supplying at $70 a bottle, would easily exceed $140 once it hit the restaurants. That’s why he was tempted.
However, I didn’t have much interest in those distribution profits. As long as I focused all my energy on making and selling wine, I didn’t have much attachment to other things. Besides, when I thought about the profits I would receive from my friends’ farms, the distribution revenue didn’t seem that enticing.
Just then, I saw two sedans pulling into the farm entrance in the distance.
“Oh? They’re here.”
I saw several people get out of the cars and walk up leisurely. They were guided by an employee and entered the office.
“You must be Representative Wooseok Choi? And this is the winemaker, Brian Choi? Nice to meet you. I’m Michael Hayes from RNDC. I’m in charge of California and Nevada.”
“So, it’s the Republic National Distributing Company? RNDC.”
“That’s right. I’m the Sales Director for the Western region.”
After shaking his hand, a woman in her late thirties standing behind him reached out, and Dad handled the introduction.
“I’m Elena Martinez from Southern Wine. I’ve been working in the on-premise sector—restaurants and bars—for a long time.”
“Southern Wine & Spirits? I think I’ve heard of you.”
“If you’re doing business in California, you can’t have missed our name.”
Displaying immense confidence, she continued.
“I heard that Mr. Warren Winiarski has joined Redwood. Every wine enthusiast is keeping an eye on Redwood. We want to sign an official distribution contract with you. But… you’ll want to compare your options, right?”
She glanced at Michael Hayes beside her and smiled thinly.
“Please, have a seat.”
The two of them presented the documents they had brought, and Dad and I sat across from them to look through the papers.
“Let’s hear your proposals first.”
As soon as Dad finished speaking, Michael opened the file he had brought as if he had been waiting for the cue.
“Our RNDC can promise you two things. One is an allocation system that manages the wine as an asset rather than just selling off the volume, and the other is price protection. First, let me explain the ‘drop’ method.”
“The drop method?”
“Yes. Once a month, only to designated accounts… for example, 6 in San Francisco, 8 in Los Angeles, 3 in San Diego. All of them are restaurants with influence on wine lists… Second, to protect the price, we set a ‘minimum retail price guide’ for each account…”
Dad and I nodded, listening intently. As soon as his explanation ended, Elena took over.
“RNDC’s proposal regarding retail protection was impressive. However, we intend to approach this by elevating the brand’s value through the on-premise sector.”
Elena slid a single sheet of paper toward me. There was bold text at the top.
[Sommelier Program / Chef’s Table Pairing Nights / Press & Critics Track]
“Quiet Hill, which I’ve already experienced, is not suited for a party wine. So, where should we build its value? The sommelier’s table.”
“Specifically?”
“For example, you know those restaurants in LA that only take 12 people for a chef’s table? If one bottle gets in there, that one bottle spreads by word of mouth. The chef tells the kitchen staff, the sommelier tells another sommelier, and the buyer calls another buyer.”
Then, looking back and forth between Dad and me, she continued in a confident tone.
“What we are proposing is a strategy that is properly designed from the moment of market entry. We’ll target sommeliers with blind tastings and…”
Their passionate presentations were certainly impressive. And the one thing they had in common was that they all demanded exclusivity.
Just then, there was a knock at the door.
“Come in.”
The door opened, and Christopher White was standing there. He was in his usual neat suit, but his slightly flushed face revealed his urgency.
“Brian, I hope I’m not too late?”
“Of course not.”
Naturally, I had no intention of listening to proposals without including Christopher’s White & Co. Wine Trading. While it was true that he had made a lot of money through Redwood, it was also true that Redwood had significantly boosted its image through his business acumen.
However, Dad had mentioned that it wasn't a good choice to keep extending contracts without any discussion with other distributors, and since these giant distribution companies were rushing in without anyone even asking, I hadn't stopped them.
“For now, we’ve heard you out. We will listen to the other companies’ proposals, deliberate, and then get back to you.”
After sending the two companies away, I had Christopher sit on the sofa. He gulped down some cold water, calmed his nerves, and looked me straight in the eye.
“Quiet Hill… I’ll take it.”
He spoke as if it were a given, but the passion in his eyes made me feel that this wasn't just a forced proposal.
“All of it?”
“As much as you give me… The companies that were here already were probably RNDC and Southern Wine, right?”
He seemed to have guessed which companies they were just by looking at their faces.
“That’s right.”
“They must have made various proposals. Among them, there probably included the value-maintenance strategy we used for Sylphid in the East. Honestly, in terms of scale, there is a clear difference between us and them. So, if we use the same strategy, objectively speaking, I don’t think White & Co. has a major advantage.”
“…And?”
“We don’t want to be just a simple distributor of Redwood’s wine; we want to act as your brand agency. Therefore, instead of fixing the one-time distribution sales proceeds as our profit, we propose a ‘Pay Back’ system where we return a portion of the sales proceeds to the winery.”
“A pay-back system?”
The term alone piqued my curiosity. Seeing the curiosity on Dad’s and my faces, Christopher’s voice grew more confident.
“The standard wine distribution structure is for the distributor to purchase from the winery at wholesale prices and then go through the retail stage. In exchange for bearing the inventory burden and sales risk, the distributor takes 100% of the sales margin as a rule. That’s why they take such a significant profit. I heard that you’ve set the wholesale price for Quiet Hill at $70 per bottle, or $840 per case, just like Sylphid. Is that correct?”
“That’s right.”
“If you give us a portion of the Quiet Hill shipment, we intend to proceed with distribution in the same way as before. But if you give us exclusivity, we will return 20% of our profit from the existing $800+ per case revenue back to you.”
“So… you’re saying you’ll pay us at least $160 per case?”
He nodded vigorously.
“Exactly. This way, even though Redwood sold it at a wholesale price of $840 per case, you effectively earn the same profit as if you had sold it for $1,000 per case.”
“……”
“If the total shipment is 3,500 cases, the winery’s income will increase by $560,000 compared to before.”
It was certainly a more powerful proposal than anything else. Dad asked,
“If you’re a brand agency, are you saying you intend to do that for most of the wines we have?”
“That’s right.”
“If you give a pay-back even for Sylphid, wouldn’t that be a loss compared to now?”
“In the short term, it might look that way. But you don’t just have one wine to release, do you? I understand that a cult-level blending wine will be coming out soon…”
Since he had been in and out of our winery several times, this level of information wasn't even a secret.
“Yes, that’s right. Then, including that…?”
“It’s included.”
“Hmm…”
As Dad crossed his arms and pondered, Christopher leaned forward and said with an intense gaze.
“Think about it. Unlike other distributors, we have to return a portion of our profits to the winery. So, to maximize our company’s profit, we have to raise the value of the wine. We can’t just dump it on the market because inventory is piling up in the warehouse. It means we have no choice but to be more sincere about marketing than any other company.”
“I understand that much.”
“White & Co. will be in the same boat as Redwood. The better Redwood does, the more White & Co. will grow, and if Redwood’s reputation falls, our company’s fate will be sealed as well. But will other companies be like that?”
“……”
“They probably won’t.”
Christopher straightened his back as if he had said everything he needed to say and looked at the two of us.
“Could you give us some time to think?”
“Of course.”
“Good. Then we’ll decide and contact you within two days.”
“Thank you. Then…”
After he left, Dad turned to me immediately and said,
“That man is determined, isn’t he? He’s completely staked his life on Redwood. He thinks of our company like a lottery ticket.”
“I think Mr. Warren’s hiring played a decisive role.”
In truth, since Warren’s hiring only affected the quality of the blending wine that was yet to come, he hadn't helped with Quiet Hill at all. However, it was undeniable that from an outside perspective, people would have no doubt that Redwood would continue to grow.
“Mr. Warren is a treasure. He creates results like this just by joining the company.”
“That’s true… and he did provide decisive help with the blending wine.”
“Really? I’ve tasted both what you made and what Mr. Warren adjusted, and I couldn’t tell much of a difference.”
“Hmm… it’s not that there’s no difference.”
Since he started making wine, Dad had been studying it diligently, but only two years had passed. Among wine enthusiasts, being in his third year meant he wasn't exactly a beginner, but he wasn't at a level where he could be considered to have rich experience either.
“I still have a long way to go.”
“You do. Even if you drink one bottle a day, you’ll need at least three more years to really understand it.”
“But how do you know so well?”
“……” I paused. “I just… have a bit of a talent for it.”
Leaving Dad in the office, I went to the aging room and watched Warren, who was researching how to make brandy, before asking,
“Is that actually going to work?”
“Quiet! Just wait!”
Warren chuckled and glared at the beaker containing a mixture of Cabernet Sauvignon and Serasia.
“This little one has finally started to talk to me…”