NOW MORE THAN 10 YEARS SINCE ITS FORMATION, EMPIRE MERCHANTS ACHIEVES GROWTH THROUGH EVOLUTION

The unification of Charmer Industries and Peerless Importers in 2007

remains the largest single state wholesaler merger in the U.S. to

date. Overnight, the newly christened Empire Merchants became

one of the largest distributors of wine and spirits in the country.

EMPIRE 2.0

Consolidation made Empire large, but maintaining and growing market share in the nation’s most competitive marketplace is another feat entirely. Plus, a 2016 break from some of the company’s shared servic-es with Breakthru Beverage Group added other challenges that independent Empire has met head-on. “We are a family compa-ny with four generations of deep New York roots,” says John Devin, President/CEO. “We show up every day with a strong desire to win; we follow up constantly with our customers and we’ve built solid relation-ships with our suppliers. We take pride in trying to outwork the competition. These are the ingredients that have led to our success and define our culture.”

A MONUMENTAL MERGER

Beverage Media published a behind-the-scenes look at Empire Merchants a de-cade ago, when the company was just a year old and still adjusting to its new scale and organizational structure. Internal shock waves were unavoidable: After all, the Magliocco and the Drucker/Merinoff families had been competitors in a cut-throat market for many decades.

“These were two companies that competed very aggressively against each other and battled for business every day,” says John Marciano, VP, Sales, and one of the few employees who worked at both Charmer and Peerless companies prior to the merger. “When you’re in sales, you know your competition—you see them in accounts every day. Honestly, it felt good to finally meet the guy that had been beating me up for the last couple years and vice versa. We found a lot of simi-larities between our two companies. Our combined culture continues to evolve; it’s something you never stop working on.”

The business of distributing wine and spirits in New York is not for the faint of heart. “New York is an incredibly sophis-ticated market,” says Fedele Miranda, VP Sales, United Division. “We have the financial market, the highest number of luxury accounts, and over 60 million tourists a year. There are more wholesal-ers here than anywhere else, and no chain stores—which means more brands, more competition and more work.”

Not to mention Metro New York is an incredibly high-cost market to operate in, he adds. “A carbon copy of a wholesale operation that works somewhere else will not work here,” says Miranda. “You have to create an organization that mirrors the New York marketplace and that is what we have done. Having local expertise is hugely important.”

All of which makes Empire’s growth—mid-single digit growth every year off a $900 million base—especially impressive. Today, Empire Merchants and Empire Merchants North (the 2007 combination of Colony Liquor & Wine and Service-

Universal Distributors in the Upstate New York market) process over 700,000 orders annually and ship 13.5 million cases to approximately 20,000 accounts.

COVERING THE TURF

“Operations will always be our number one priority at Empire Merchants,” says Tony Magliocco, Empire’s COO with 19 years of New York State operational experience. “If we cannot deliver our products accurately, timely, and efficiently, we are of no use to our supplier and trade partners.”

Empire’s Brooklyn distribution center boasts more than 650,000 sq ft of ware-house, 5 miles of conveyor, and tens of millions of dollars of carton sortation and material handling equipment, all aligned to fulfill its customers’ orders, and only 3 miles from midtown Manhattan. With the additional warehouse in Queens, the com-pany is within a 30-mile radius of over 70% of its volume in Metro New York. “It’s a huge competitive advantage for us to be so close to the core of our business, and makes next-day delivery easier to guarantee,” says Devin. Offering “just in time” inventory is mandatory for most space-constrained New York restaurants and retailers.

But logistical excellence is just the baseline of what it takes to service this market. “Gone are the days when you could show up at an account, talk about the ball game, take an order and move on,” says David Drucker, VP Sales, Board Member and Executive Committee Mem-ber. “Today our customers are so much more information-based. They want to be closer to the brands—just as consumers are seeking deeper connections with brands. It

“DIVERSITY IS THE GREAT CHALLENGE

AND GREAT OPPORTUNITY OF THE

NEW YORK MARKET,”

— JOHN DEVIN, PRESIDENT/CEO

/// TEXT BY

KRISTEN BIELER ///

/// PHOTOGRAPHS BY

ANDREW KIST ///

SALES & MARKETING EXECUTIVES: John Marciano, David Drucker, John Devin, Carlos Ferrandiz and Fedele Miranda

requires us to have a better understanding of trends and categories. This is one of the biggest evolutions of the last decade.”

Market insights can mean the differ-ence between making and losing money. “Diversity is the great challenge and great opportunity of the New York market,” says Devin. “Suppliers tend to put large groups in buckets, but the Hispanic con-sumer in California is very different from the Puerto Rican consumer in New York.”

Massive technology investments have armed Empire’s sales force to become more like consultants to their customers, helping them understand and grow their businesses. Working with leading technology companies

like Great Vines and Inventiv Software that focus on account management, analytics and order entry, Empire’s sales representatives can set goals and measure performance in each account. The ‘Coach in the Pocket’ tool gives reps—now all traveling with iPads—access to daily results.

“Our technology lets reps see where opportunities lie, which accounts are overvalued or undervalued, and measure activation in each account,” says Miranda. “Our reps are having better conversations with retailers.”

They are vital tools for selling wine, too, where inventory levels and allocations are critical. “Every sales person has real time inventory at their fingertips, as well as allocation methodologies—all the relevant information for their customers’ purchasing decisions,” says Drucker.

STATEWIDE SYNERGY

While the Upstate New York and Metro territories are vastly different market-

places, Empire Merchants North and Metro are in the process of integrating their business intelligence tools, company website and other IT infrastructure. Both businesses are run seamlessly under one central command. Devin oversees both organizations, a leadership structure that suppliers find enormously efficient, and customers benefit from as well. “We’ve been able to apply many best practices from each business, and our planning and execution is smarter in both markets,” says Devin. “We’re now better at iden-tifying opportunities earlier because of our statewide footprint and perspective.” Empire is also investing heavily to take all platforms in-house in both markets, explains Magliocco: “Our local expertise, our commitment to technological excel-lence, and our strategic locations separate us from our competitors.”

EMPIRE 2.0

EXECUTIVE COMMITTEE: Patrick Arlantico, Terry Arlotta, Carlos Ferrandiz, David Drucker, John Devin, Tony Magliocco, Steve Meresman and Carol Brown

“THE WAY WE ARE ORGANIZED—GETTING THE RIGHT REPS CALLING ON THE RIGHT ACCOUNTS WITH SPECIALIZED, CURATED PORTFOLIOS—LETS US PERFORM WITH TREMENDOUS FOCUS.”

— DAVID DRUCKER, VP SALES

BACK TO SCHOOL

Empire’s definition of a well-informed salesperson has evolved radically. “We’ve always required sales reps to have fundamental wine and spirits training, but the knowledge required today demands much more in-depth education, especially in a market like New York,” says Drucker. “It’s the biggest pendulum shift in the industry.”

Empire’s sales force is required to obtain the WSET Level 2 Wine & Spirits certification within the first year of hire—a stipulation included in the company’s union contract. Empire offers the course 23 times a year, in class and online, and employs two full-time educators qualified to offer additional certifications.

Similarly, the diversity and interest in craft spirits makes higher education a necessity beyond wine; divisions that sell predominately spirits require reps to pass WSET Level 2 Spirits. “When I started in this business, American whiskey was Jack Daniel’s, Jim Beam and Maker’s Mark. It’s a different world today,” says Marciano. “The same history, romance and story that is part of selling wine is happening with spirits: Buyers want to know the details of produc-tion and heritage of the spirits they sell.”

GETTING SERIOUS ABOUT FINE WINE

Empire’s fine wine business is barely rec-ognizable from a decade ago. “We made a passionate commitment to fine wine when we formed Empire Merchants,” ex-plains Drucker. Having profitable spirits brands has allowed the company to in-vest heavily in attracting small wineries; Empire has created new divisions to bring a fine wine focus, and hired wine talent to accommodate the premium portfolio. “Our on-premise top 3,000 account wine division is made up of 95% new faces compared to 10 years ago,” Drucker notes.

Empire has successfully recruited doz-ens of highly-coveted, family-owned pre-mium estates from around the globe to their portfolio. “Some observers were frankly surprised that these producers chose us; 10 years ago I couldn’t have imagined the port-folio we would have today,” Drucker says.

Having deep pockets gives Empire an edge over smaller operations; Drucker fre-quently buys big on vintages from certain wineries to secure allocations. Offering delivery five days a week is another ad-vantage over many of the little guys. And the breadth and depth of Empire’s port-folio today speaks for itself, he explains: “We still carry many commercial brands and we can also provide accounts with es-oteric wines, so we’re extremely diverse.”

DIVIDING TO CONQUER: THE SEGMENTATION SOLUTION

“Consolidation at the supplier tier means you have to become increasingly nimble and execute against a wider portfolio of

THE UPSTATEADVANTAGE

Empire Merchants North views Upstate New York as one of America’s best kept secret. A

vast and varied landscape consisting (in Empire’s view) of five separate and spread-out regions—Buffalo, Rochester, Syracuse, Albany North and Albany South—the Upstate market is often neglected because it’s difficult to reach and not growing (the population has slightly shrunk over the last decade). Execution looks completely different too, as over 80% of the business is off-premise.

Yet it’s an extremely lucrative market when cultivated: Empire Merchants North sells over 5.1 million cases to approximately 10,000 unique accounts. “The key to Upstate is to logistically manage it the right way,” says Devin, who worked the Upstate market for many years. Empire’s two warehouses—in Coxsackie and Lyons—enable next day delivery to almost every part of the state.

“It’s easier and less expensive to have one centralized location in the middle of the state, but we service our customers much quicker with two,” explains Carlos Ferrandiz, VP Sales & Marketing, Empire Merchants North. “We have field managers supporting every sales rep,” he adds, as well as development specialists ready to talk martini lists and by-the-glass opportunities.

Empire Merchants North takes the same divisionalized approach to the market as Empire does in Metro NY. “Our trade development team has allowed us to focus on developing the multicultural business as

well as cultivate the on-premise,” says Keith Poole, General Manager, United Division (representing Diageo/MHUSA) Empire Merchants North.

Investment in the high-tech manufacturing, solar power and health care industries has spelled a major revival in the Buffalo region. “For the first time in 15 or 20 years, Buffalo is thriving,” says Devin. “The on-premise is really exciting and we’ve seen quite a number of new casinos open as well, which has driven growth.”

The explosion in New York wines and micro-distilleries has also been a boon: “We are helping drive this growing emphasis on Finger Lakes wines and local spirits, and this part of our business has increased exponentially,” reports Devin.

“I see a lot of Upstate chefs and beverage directors take tremendous pride in local ingredients, wines and spirits,” says Ferrandiz. “Paying attention to details like this has helped us grow our business in the Upstate market.”

“I SEE A LOT OF UPSTATE CHEFS AND BEVERAGE

DIRECTORS TAKE TREMENDOUS

PRIDE IN LOCAL INGREDIENTS, WINES

AND SPIRITS.”

— CARLOS FERRANDIZ, VP SALES & MARKETING, EMPIRE NORTH

Empire Merchants Nor th headquar ters in Coxsackie, NY

EMPIRE MERCHANTS NORTH AT-A-GLANCE

675 associates Warehouses in Coxsackie and Lyons, NY 5.1 million cases sold annually 83% Off-Premise; 17% On-Premise 44% spirits; 56% wine 300,000 orders processed last year;

capacity to ship 50,000 cases/night 9,700 accounts

brands efficiently,” says Devin. “This is why we spend so much money to divi-sionalize—there are only so many prod-ucts you can ask a salesperson to become an expert on.”

When Empire was created, the com-pany separated wines from spirits in the top 3,000 on-premise accounts. It proved hugely successful, allowing reps to delve deeper into the portfolio with greater attention, and further segmentation fol-lowed. “I believe we are sometimes dis-criminated against because of our large size,” says Drucker. “The way we are or-ganized—getting the right reps calling on the right accounts with specialized, curated portfolios—lets us perform with tremendous focus and precision. We’re not putting a round peg in a square hole.”

Do customers ever complain they have to see too many Empire sales reps? Of course, admits Drucker: “But I tell them they benefit from better-educated, more focused reps who know their portfolios intimately; they know the allocations on every wine, they know when vintages are transitioning and prices change.”

MASTERY ON-PREMISE

“The one thing we do better than anyone else is the on-premise,” says Marciano; it’s a point of pride throughout Empire. “It’s the hardest to do. We are in the most promi-nent on-premise market in the world, so access is incredibly important to suppliers.”

Some things in this fast-paced busi-ness don’t change: Brands are built on-premise. “Brands can have a shooting star growth rate when they are dropping big volume off-premise, but eventually that will crest and go down,” says Devin. “Brands that grow consistently on-prem-ise are building real equity and visibility. There are 18,000 on-premise accounts in New York and winning there is key. We consider ourselves to be the leader.”

Empire has account development specialists focused on real world applica-tions, explains Marciano: “When we have 10 minutes with a buyer, we need to be

prepared to talk beverage and ingredient costs—whether it’s the TGI Fridays na-tional account or a crazy, make-your-own-infusions craft cocktail program where they want to work off 17% beverage cost.”

LOSS & OPPORTUNITY

Losing the Bacardi portfolio in 2016 was a big blow for Empire. A $150 million hole, to be exact. Forced to consolidate two divisions and the release of almost 60 employees, the company quickly took stock of what it would take to replace the business. “One door closed, but many more opened for us,” recalls Devin. “It’s never fun losing brands, but it gave us the chance to take a fresh breath and look at suppliers out there that might want to work with us, as well as suppliers currently with us that might be underdeveloped.”

“Bacardi was a big supplier that took up a lot of time,” says Marciano. “We were working really hard to maintain volume for their top brands, many of which were in underperforming categories. Suddenly we had the chance to refocus on growing categories like tequila and whiskey and consider new brands.”

Empire’s dedication to cultivating new business paid off. “Amazingly, we are almost back to replacing all lost revenue less than two years later,” shares Devin. But on second thought, he isn’t really that amazed: “This is what we do. New York is our backyard; we work incredibly hard to be the best and take a never-say-die attitude. We believe we’ve got the best service platform in the business.”

“We are in a performance-driven busi-ness—we deliver results for a living,” says Marciano. “It’s very satisfying to see what we have accomplished in a very competi-tive marketplace, surrounded by some ex-traordinary people.” ■

EMPIRE MERCHANTS METRO NY AT-A-GLANCE

1,200 associates 14 selling divisions 8.4 million cases sold annually 75% Off-Premise; 25% On-Premise 52% spirits; 48% wine 400,000 orders processed last year;

capacity to ship 80,000 cases/night 5 days/week delivery 10,000 accounts

BOARD OF DIRECTORS: David Drucker, Nino Magliocco (seated), Tony Magliocco, John Magliocco, Steve Drucker, Joseph Magliocco, Jim Andretta Sr. (seated) and Spencer Merinoff

EMPIRE 2.0