The golden mean of portfolio construction

How to find the desirable middle between excess and deficiency with your offerings

It’s a beautiful thing

Thoughtfully constructed wine and spirit portfolios have the capacity to possess a kind of beauty.¹ Now I’m not talking about a beauty comparable to the vineyards of Stellenbosch or the splendor of a dram of a particularly pleasing single malt Scotch. Rather, a well-proportioned portfolio bestows upon all those who encounter it a type of visceral satisfaction.

Considering the various ratios between products with different tastes, styles, and prices yields a book that is more likely to be both aesthetically agreeable and financially prudent. Simply, curating a balanced book benefits all stakeholders.

When a selection of wine and spirits is harmoniously proportioned, it’s:

• Attractively approachable to buyers who need to parse through tons of data

• Effortlessly navigable by sales reps trying to find those items that best fit their customers’ needs

• Easily managed by portfolio managers and the purchasing and logistics department(s)

• Economically efficient because there is greater certainty that one producer or SKU isn’t cannibalizing the sale of another

Striving for such a platonic ideal (pun fully intended) is no easy task. Unlike mathematics, which proposes a numerical model for a golden mean, an especially attractive ratio, achieving proportionality in a portfolio is more an art than a science. The overarching tenet is that balance is best achieved through the pursuit of diversity, but there are blind spots to avoid when trying to calibrate a portfolio.

• Cannibals kill. In a perfect world, you’d compose a portfolio that married your selections with your customers’ needs and wants. This is not a perfect world and it’s made less so by the fact that those that buy at the second tier don’t think like buyers at the third tier. An importer or distributor thinks, “it’s great that I have both an inexpensive Chilean Pinot Noir as well as a cheap French Pinot Noir.” A restauranteur cares about having only one affordable Pinot Noir by the glass. If your company has multiple people responsible for the portfolio, make sure their efforts are coordinated. When there’s too much overlap in the wrong places, you’re sacrificing one sale for another.²

• Beware the long tail. You’re not Amazon, nor do I imagine that’s your goal, so don’t try to be the everything store. Unless you’re at Southern Glazer’s, RNDC, or Breakthru, aim to carry more producers, but fewer SKUs. Anyone who has ever sold German wine or flavored vodka knows about the diminishing returns of a producer’s “lesser” SKUs.³ Sure, the flagship sells, but if the rest of the armada sinks, what good is the fleet?

• Every item needs a purpose. A person’s life needs meaning, and a SKU needs a reason for being in the portfolio. If a SKU doesn’t have a reason, how can you expect it to sell? It doesn’t stop there. If the sales team doesn’t know why something is in the portfolio, it shouldn’t be in the portfolio. And, no, carrying a winery or distillery’s product X because you carry their product Y is not a reason; it’s an excuse.

• Think like an ecologist. Every product is part of a larger ecosystem that is the portfolio. Sometimes there is unexpected synergy between seemingly unrelated items and other times certain SKUs act like invasive species causing destruction. The new gin shouldn’t just be viewed alongside your other gins, but among all of your other spirits. How does that new Rioja rosé fit within your Spanish wines, rosé wines, and wines that wholesale for $12 or less? For a portfolio to “make sense,” it has to be cohesive. This requires a holistic perspective.

• If a new category isn’t the focus, it is a distraction. Know that if you’re responsible for creating a portfolio, you will find the addition of a producer or SKU in a new category, style, or price point extremely exciting. Not everyone will share your enthusiasm. How about pre-existing producers vying for attention? Will this new endeavor monopolize the attention of the sales team? If your company only sells wine, the addition of one new spirit producer is a disruption. If your company hasn’t yet sold Greek wine, bringing in some Assyrtiko from Santorini is going to require more than one training with the sales team to integrate it into your catalog.

1. Portfolios here should be understood to mean both the combined offerings of an individual supplier or the full catalog of an importer or distributor. For instance, a distillery’s portfolio would consist of all the products that the distillery produces and sells, while a distributor’s portfolio would consist of the entirety of their selections across multiple producers, categories, etc.

2. Note that I emphasize too much overlap in the wrong place. Some overlap will be inevitable and understandable. Using higher-end Pinot Noir as a counterexample to above, it’s unlikely that a Pinot Noir from Santa Barbara is going to compete with a Premier Cru Burgundy. While their prices are likely comparable, their style is different enough to attract different customers. Similarly, you might only want to stock one inexpensive “well” Bourbon, but multiple single malts.

3. I’m not making any quality comparison between German wines and flavored vodka, but just noting that both categories tend to offer a surfeit of SKUs per producer.