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Total Wine Moving Into Texas And New Mexico, Sets Five-Year Plan To Reach $2 Billion In Sales

November 11, 2011

Potomac, Maryland-based Total Wine & More, which just opened its 78th store in Sacramento, California, plans to move into the Dallas market with one store and into New Mexico with at least two stores next year. The company has also set a five-year goal of doubling revenues from this year’s $1 billion, according to Total Wine’s executive vice president Michael Salzberg, who joined the company three months ago after long tenures at E&J Gallo Winery, PepsiCo, Campbell Soup Co. and its Pepperidge Farm subsidiary. Shanken News Daily recently interviewed Salzberg about Total Wine’s latest expansion plans.

SND: The word is that Total Wine & More is moving into Texas. What’s the update?

Salzberg: We’ve signed a lease in Texas. We definitely think it’s a good market for us. We know it’s competitive, but we want to stick our toe in the water. The store will be located in the Dallas area and will open in the first half of next year. I can’t say more than that, except that we’re definitely excited about it. We think we’ll wow people with the new store. It will be a different look for Total Wine—a bit more of where we’re going versus where we are today.

SND: What other expansion plans do you have for 2012?

Salzberg: We’re entering New Mexico—probably with at least two stores around the middle or end of next year. I’ll keep it at that. We think it’s a great state, and the competitive environment there is ripe for us.

SND: Can you describe the buying selection process at Total Wine?

Salzberg: It seems that over the last couple of years, wines that are highly rated have taken America by storm. That’s how the consumer is deciding at the shelf. So clearly we’re very interested in highly rated wines. They’re not the only items we sell, but that definitely factors into our buying decisions. We do a lot of research on tastes—where people are going, whether they’re starting to drink more Moscatos or sweet reds, for example. We want to be first, and we want to have a huge selection at every price point. When you have 8,000 wines, 3,000 spirits and 2,500 beers, there aren’t many things we don’t take in, at least to try. Innovation, and first-to-market is really the foundation. We buy based on what we think our consumers want. We try to spot trends before they happen, and then we buy big.

SND: Are the buying decisions all made centrally? Do you make allowances for managers in different markets to cater to local tastes?

Salzberg: We want to think globally and leverage our scale to the best of our ability, but we want to act locally. Virginia is a good example, where some of the local wines are awesome. With an email to the head office, store managers can add any wines they think are important to their consumer base. We can authorize that in 24 hours. So in California, for example, we have a different mix than in Florida. We listen to our store managers because they’re closest to the customer. In a lot of cases, we act like a small wine store.

SND: How significant is scale for you?

Salzberg: We’ve got scale, but I still have to pitch that in every vendor meeting. It’s been really interesting for me, coming from PepsiCo and Campbell Soup Co. Your top 15 customers were national accounts You took care of Wal-Mart’s business in all 50 states with one meeting. Our big suppliers and wholesalers get this. They’ve jumped on board, and they’ll do well with us. That won’t affect pricing because that’s done state-by-state, but there are deals and programs that can be done based on our scale. Just get us the program, we’ll buy it and we’ll execute it with excellence. We’ll sell a lot for our national brand suppliers if they figure out how to play ball with us. We’re coast to coast, and we’re just going to be filling in over the next five to 10 years. We’ve evolved into an entirely different channel. So we’re asking everyone to think a bit differently in dealing with us. Our volume per outlet probably ranks in the top two or three of any chain for our suppliers and distributors. We’re definitely a game changer.

SND: Is the old axiom 20% of stock is responsible for 80% of revenues true for Total Wine? Because of the number of SKUs you offer, you’re financing an enormous amount of inventory in every store.

Salzberg: The first thing we stand for is service. We overstaff, we educate, we send our people to California and France, and we work with winemakers. Selection is critical to our ability to establish a point of difference. We think it’s a good investment to have selection—we have bottles priced from $2 to $2,000. So if we sell one bottle at $2,000, we’re pleased because we made somebody happy. We don’t want to say, “I can get that for you in two weeks.” We want them to touch and feel the bottle and buy it right there. Is this expensive? Yes. Is it 20% doing 80%? I don’t think so. I don’t have the exact ratio, but I would say it’s more like 35% to 80%. We think every wine in our stores is as important as the one next to it. We think that’s a strong point of difference. David (Trone) and Robert (Trone) are passionate about it. If somebody has something we don’t have, they get very irritated. We know every competitor in every market and what they carry. If they have something we don’t, I guarantee that within a week we will be carrying that product.

SND: What percentage of your wine business is private label?

Salzberg: It’s not something we talk about much, but it’s a big percentage and it’s ever-changing. It’s a very important part of our offering to the customer. It’s a big percentage—not more than the national brand percentage, but it’s growing. It moves around, and it’s different by state and by store.

SND: A frequent criticism of Total Wine by other retailers is that your private label business does a disservice to the national brands that you carry, because you undersell them.

Salzberg: Well, I guess if I were them, I’d be saying that too because we’re crushing them. At the end of the day, we give our consumers the wines they want. National brands are incredibly important to us. If you ask the national brand guys which retailer does the highest volume per outlet on their brands, they’ll say Total Wine. And I don’t think of it as private label—it’s a winemaker in France who’s been in business for 200 years and hasn’t been able to break into the U.S. So we help that person and his family get their wines distributed in the U.S. Private label is a can of corn that’s 40% cheaper than anything else.

SND: So what do you call it?

Salzberg: I call it winery direct, because we go right to the winery. And we have some unbelievable wines. But national brands are awesome. We’ve got 8,000 wines and 22,000 square feet to fill up.

SND: What’s your most popular wine price point?

Salzberg: It’s starting to move up. It’s now above $11. We’ve got more than 1,000 wines under $10. But we’re also trying to upsell. We want to trade consumers up as much as we possibly can.

SND: How do you try to trade them up?

Salzberg: When you walk into our stores, you’re greeted by one of our wine experts. They’ll ask what you want, what price point you’re interested in, and they’ll talk about how you plan to use the wine. Then they’ll provide some options at your price point, and one lower and one higher. They’ll tell you that maybe for an extra $2 you can get a different taste profile. But we’re not pushy about it. We’re trying to educate.


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