NORTHWEST PASSAGE

  

Jay S. Nelson, president of Nels Hinton Company.


“This business is not for the faint of heart,” stated Jay S. Nelson, president of the Nels Hinton Company, the largest independent statewide brokerage in Oregon. “As everyone knows, this is a business based on relationships — relationships we form with suppliers and relationships we maintain with our off- and on-premise accounts. The value of your company is the reputation you have built up through the years. And you build your reputation based on the performance that you supply for your product lines.


“But we’ve been in business for quite awhile and, even with tremendous competition, we’re optimistic about the future of our company.”

Indeed, the Nels Hinton Company has been serving Oregon since the company was incorporated in 1965 by the eponymous Nels Hinton. “Nels came from the streets,” related Nelson. “He was an astute businessman and a natural born salesman. He was in the bar business, but decided that he’d rather be at the front side of the bar than behind it.”


During the early years, the company focused on sales to on-premise establishments. At that time, the need for manpower was not nearly as great as now, and Nels ran his brokerage with a small staff. Through the 1970s, Oregon still maintained state stores and had fairly stringent regulations concerning the operations and merchandising of the stores. This began to change in the mid-1980s as the state began its conversion to individual agencies.


Meanwhile, Jay Nelson had begun his own wholesale wine business in the state. “We started from scratch and did everything,” Nelson pointed out. “We were out on the street, we made all the calls, we delivered the product.” That lasted five years, and then opportunity knocked, an opportunity too good to pass up.


“I guess I was just lucky enough to be in the right place at the right time,” Nelson admitted. Hinton offered Jay Nelson a deal: If Jay went to work for him, Nels promised that on his 65th birthday he would give Jay half the business. Nelson accepted. “It was 1978 and the business in Oregon wasn’t nearly as sophisticated as it is today,” he said. “You couldn’t merchandise liquor in the stores, you couldn’t build displays.” On the other hand, it was a time when the spirits industry in the U.S. was nearing its peak.


 


 
Some of the people who make things happen at the Nels Hinton Company include, from left, William S. Hamrick, wine and specialties manager; Jay S. Nelson, president; Neil J. Fisher, sales manager, and administrative assistant Nancy L. Hostetler.


In the late ’70s and early ’80s, the company consisted of Nels Hinton, Jay Nelson and a secretary. Period. “Nels took me under his wing and taught me the business. He taught me an awful lot,” Nelson said. Soon, the company was functioning as a partnership, with Nels, of course, being the senior partner. And true to his word, on his 65th birthday, Nels Hinton officially gave Jay Nelson half the company.


Nels Hinton Company had begun representing Bacardi in 1973, and by the early 1980s, other suppliers had signed on, including Shaw-Ross International Importers, the McCormick Distilling Co., and the Jack Daniel’s division of Brown-Forman. The company began representing the rest of Brown-Forman in 1986, and by the late 1980s, Nels Hinton had added William Grant & Sons and Rémy Amerique to their list of suppliers. Hiram Walker came onboard in 1992. And these suppliers are all still represented by Nels Hinton Company in the state of Oregon, a testament to the company’s focus on maintaining relationships.


 


Through the mid-1980s, Jay Nelson began to take on a more crucial role in the company and gradually became the point man for the Nels Hinton Company with the suppliers. In 1989, Nels felt it was time to retire; that’s when Jay Nelson purchased the other half of the company and became its president.


Oregon is ranked ninth in sales of spirits products among the 18 control states and Montgomery County. And it is ranked second among its Pacific Northwest control state neighbors, trailing only Washington State, which accounts for almost twice the case volume for distilled spirits than Oregon. But Oregon, with a population of just over 3 million, still boasted sales of 1.55 million mixed cases of distilled spirits in 1997, an increase of 1.24% over 1996, outpacing the national trend for spirits sales, which were essentially flat. The state’s retail mark-up on all distilled spirits sales is 106%.


“The market has been very vibrant the past three years,” Nelson stated. “With the strong economy, business has picked up in general in the Northwest. And we’re ahead of the curve. Fortunately for us, a lot of that growth has been in premium and superpremium products, like cordials and high-end whiskies, imported vodkas and single malt Scotch.”


In fact, Nelson pointed out that the dollar volume of his company has grown by about one-third during the past eight years. The Nels Hinton Company now accounting for just under 17% of all the spirits sold in the state (approximately 260,000 mixed cases). In addition, since 1990, the company has been representing an ever-widening portfolio of wines, which now comprises nearly 10% of the company’s business.


 


According to Nelson, the company takes a pro-active position regarding investments in the company itself and the brands it represents. The modern 3,200-square-foot office and warehouse facilities are located in Portland, near the Oregon Liquor Commission, and are fully equipped to receive and ship product also function as a staging area for all supplier merchandising programs. As each month’s programs are planned, all point-of-sale materials are indexed and inventoried by brand for easy reference. The company also maintains two smaller storage areas for out-of-office territory managers, who can then maintain a convenient inventory of p-o-s materials to fulfill local needs.


Besides Nelson, the company now consists of Neil Fisher, the sales manager, and four separate territory managers: Richard Martin, who covers the Central Coast, central Oregon and Metro Eugene/Springfield; Dianna Stacey, who services eastern Oregon and the metropolitan Portland area; Patrick Voris, who handles the Southern Oregon territory; and Joseph Wagner, who also covers the Portland metropolitan area as well as the northern coast. Nancy Hostetler is responsible for coordinating all sales, administrative, accounting and bailment functions.


In addition, William Hamrick has been the company’s wine and specialties manager since 1990; his responsibilities include helping build the company into a viable wine brokerage.


Nelson pointed out that his company regularly calls on 150 stores throughout the state, which combined comprise 95% of the state’s spirits volume. Beyond that, he and his staff focus on the top 70 merchandisable stores, with the goal being to have them serviced by the territory managers within the first three working days of every month. [More than 100 of the state’s 234 agency outlets are so-called “counter” stores that are merchandisable only through the use of coupons and tags for temporary price reductions.]


The territory managers are responsible for making sure that:

In-store displays are properly installed and strategically located in the store;
Where applicable, coupons are distributed and installed on all appropriate displays and shelf locations;
Customized laser-printed shelf and price signs are used in displays and to highlight selected brands on the shelf.

While in the stores, the territory managers are constantly working with the agents/managers to gain new distribution, as well as improve the shelf location and increase facings and visibility of the brands the company represents.


“The best definition of a brokerage is that it is a sales company. We do for the supplier in a controlled environment what distributor salespeople do in an open environment,” said Nelson.


“In the scheme of things, we’re a small state, and we run a relatively lean organization, but we work exceedingly hard at building distribution. I like to think we have the state covered better than anyone else,” Nelson said. “Unlike some of our competitors, we run a one-state operation.”


Nels Hinton’s major competitors are all brokerages who are headquartered in the larger market of Washington State.


 


Nelson understands the attraction that might have for some suppliers. “As in the rest of the industry, this is all part of the ongoing consolidation process,” he said. “To have a single broker cover the major markets for your brands in the Northwest region could be simpler — like one-stop shopping.


“But I view the market differently than my competitors do,” Nelson asserted. “To be successful, I have to make it in this market. I don’t have the luxury of larger, multi-state operations to cover my costs. Basically, we’re more motivated to make that extra call, because we have to survive.


For example, Nelson noted the importance of reaching out to the less-populous areas of the state. In Oregon’s cities, an agency liquor store usually can stand alone, without having to be part of another outlet, such as a drug store. But in small towns, there is not enough beverage alcohol business to support a single store, so that agencies can pop up anywhere, even in the back of feed stores, according to Nelson.


“We have to sell into these stores for distribution. There’s a need for this service, and we offer it.”


Nelson, a 48-year-old native son hailing from Portland, uses his own origins to help position his company against the out-of-staters. “In Oregon, I’m the ‘local boy,’ and because of that I feel I can do a better job in the market. On the other hand, I firmly believe I can’t be everything for everybody.”


Nelson also believes that consolidation throughout the industry is the major issue on every broker’s mind. Naturally, supplier consolidations always have an effect on brokerages — sometimes positive and sometimes negative. And the results often have a tremendous potential impact on a company’s business.


In addition, “Several years ago, there were twice as many competitors in my market as there are now,” Nelson said. “Now, there are brokers being bought out by multi-state wholesalers, who are beginning to move into the control states where they have not traditionally been.” Still, Nelson commented, “This situation is not unique to the beverage alcohol industry. It’s happening in all industries.”


 


Positive Adjustments

In recent years, the Oregon Liquor Control Commission has done wonderful things, Nelson said, by being open to examining issues affecting business. “They’ve basically brought us into the ’90s with several positive adjustments,” he said.


For example, it was illegal to merchandise the stores until 1993. “We went through a process of the industry petitioning the Commission, which in turn recommended changes to the Oregon Legislature, which then changed the law.”


 


The state also now allows coupons to be used in stores, as well as allowing on-packs — 50 ml samples piggybacked onto larger-size bottles — to be displayed in stores. Another major advance made during the past two years is that credit card usage is now legal in liquor stores in Oregon.


In addition, brokers can now leave closed 50 ml bottles of products with agents, so they can sample the product to see if they would like to stock it. On the other hand, product sampling in stores by consumers is still not allowed. “That’s something we’ve been trying to get passed — DISCUS has been involved with that — but we’ve been unsuccessful so far.”


These days, Nelson pointed out, the industry seems to have moved in the direction of focusing on on-premise activity. “From staff trainings to promotional nights to special-event opportunities, on-premise is where you can go to build brands,” Nelson stated. He noted that brands like Bacardi Lim

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