Second in a Series: Conflict of Interest re Prices, Sales & More
Alvin Starkman, M.A., J.D.
You may take clients to small, Mexican distilleries for a variety of reasons. It may be to enable them to buy quality (mainly) agave spirits at affordable prices, or to learn about the diversity of processes and culture of its makers, or to enable the them to select a producer with whom to work towards an export project. Regardless, there is an inherent conflict of interest. To whom do you owe your first obligation? To the client who is paying you by the day or hour for your expertise and advice, or to the distiller with whom you have had an ongoing relationship for months if not years? It’s a slippery slope. In this segment we’ll explore the issue of pricing for those interested in buying anywhere from a couple of liters to a case or two of 12.
I’m frequently asked how I decide to which palenqueros to visit with clients. My reply is typically that out of the 70 or so with whom I’m acquainted, the ones I take mezcal aficionados and/or novices to visit, are (1) those who in my opinion have a good product, (2) at a price commensurate with the quality, and most importantly (3) the personalities of whom, including that of their family members, are pleasant … which makes the experience enjoyable for both me and my clients. No matter how inexpensive the mezcal, or good the quality, if the family members with whom we come into contact are unfriendly, are not particularly interested in interacting with new faces, or are especially bland in general, it does not make for an all ‘round rewarding experience. I might take clients to visit some of those based on particular client wishes, but they are generally not on my list of primary contacts. And if the prospective client insists, at times I will decline to work with the person, and recommend someone other than me.
You might think that I’m shooting myself in the proverbial foot, losing income. If your client has anything less than a stellar experience, the likelihood of him referring business to you, or leaving a five-star review on social media, diminishes. You’re in the game for the long haul. Concern yourself with the future. Let the other guide or teacher worry about meeting or exceeding client expectations. He might even be inclined to reciprocate by sending you fresh business in exchange for doing him the referral favor! You’ll be doing yourself the favor.
Back to pricing and conflict of interest. I generally try to do a loop on my tours, so there is no backtracking, and so the client sees new vistas throughout the entire day. This means that he does not have an opportunity to wait and see if something better comes along and then buy it on the return to home base. Tell the client the range in prices to be encountered throughout the day, and why the differences. You’ll be asked what you think, a fair question. But remember (1) everyone’s palate is different, and (2) you have an obligation to the distiller to promote sale of his products if you want that same warm welcome received by your clients to continue down the road for the benefit of others.
But not so fast. You have an obligation to the client who is paying you for advice. Each person is a little different based on factors including their knowledge of and acumen regarding the particular distillate, their initial plan for how many liters they want to purchase in the course of the day, and the amount they wish to and/or can afford to pay per unit. You can reasonably recommend a minimum of one purchase per stop; in that way the client ends up with a diversity of agave distillates. But what happens if the client is simply not interested in a producer’s line of products? He might even offer to compensate the distiller for his time and samples imbibed, by providing a gratuity. I always say it’s not necessary. In fact sometimes the client gives a paltry sum, akin to an insult to the palenquero. Perhaps better to leave nothing.
Alternatively, and in any event, you have an obligation to keep your distiller friend happy, and welcoming to the next tour. Give him a couple of hundred pesos and/or something in kind such as beer for his employees, gifts for his children, etc. You owe it to him! You’re making money by stopping there, and therefore so should he. You might think, well people don’t always buy and the next time someone will, which is true as a rule of thumb. But for me, I want the agave distillate producer to know as soon as he sees my car or van, that there will be an immediate benefit, one way or another. And so in this way you can negate the inherent conflict of interest between a first obligation to the client, and that to which you owe the distiller with whom you want to maintain positive relations for years to come. If you are concerned about the cost of giving, giving and more giving in the course of a day, then raise the amount you charge your clients for the day.
If you ask a Oaxacan palenquero why he charges X pesos per liter for a bottle of mezcal, his response might be “that’s how much I have to charge to get by and support my family.” In many cases, predominantly for those in an older generation, they are not thinking about improving lifestyle. They are content to carry on, just as their forebears. They are not creating tables listing all of their hard costs of production, and certainly not considering that a son or daughter, husband or wife, is assisting a few days a month with sales, with filling the oven with agave, etc. How should they calculate their compensation? One industry colleague has dedicated much of her working life to assisting palenqueros to understand the real cost of producing and selling mezcal. It’s an eye opener.
About two decades ago a palenquero friend sought my advice regarding an export client who owed him a significant sum of money and wanted a further two pallets for shipping abroad. I asked him about his cost of borrowing, and thus was able to illustrate that continuing to do business with the exporter without working towards retiring the debt, and without getting his costs covered up front for ongoing shipments, was not benefiting him financially and in fact that for each batch produced he was actually losing money. Better to stay home, do nothing, and have a clean balance sheet. More about distiller business acumen in a subsequent article.
Sometimes I’m asked by a distiller if his prices are too high, especially if he’s only recently started distilling on his own and if he wants to affect sales to the kinds of people with whom I typically work; (a) visitors to the state of Oaxaca, and (b) Mexican urbanites from Oaxaca and further abroad. I’ll provide my opinion. But more often than not, I am the one to provide advice to him at my initiation; not that his prices are too high, but rather that they should be raised based on what the competition charges and what I consider to be a fairer price for the product offered. A few years ago a palenquero was charging 200 pesos per liter for most products, while others were charging 300, so I recommended that he increase the price, explaining that charging $5 USD more per liter would not adversely impact sales to my American and Canadian clients. And most recently I urged a palenquero to increase the per liter price of his mezcal distilled with cannabis by 50% because the quality was that good. With this kind of approach, the conundrum of the impact of a string of non-purchaser visits is reduced because the palenquero understands that you are always looking out for him, and his bottom line. And I still ensure I leave something behind, at the conclusion of each visit.
Next month I’ll address the issue of gifts, commission and other compensation.
Alvin Starkman operates Mezcal Educational Excursions of Oaxaca (www.mezcaleducationaltours.com). His latest book, co-authored with photographer Spike Mafford, is entitled Mezcal in the Global Spirits Market: Unrivalled Complexity, Innumerable Nuances (Third Expanded Edition with Portraits).