Distributors - Is it worth the cost?

Hello,
We are a boutique French winery. We are currently importing wine to the US. Though we believe our product is quite good, we are learning how difficult it is to sell in such a competitive market. Additionally, we have an import and distributor company based in Maryland for our wine. Since we are new to the wine business, we do not have the network of a well-established distributor. However, when we looked for a distributor who would be interested in selling our wine, we quickly learned how cost prohibitive it is to go with a well-established distributor. From our experience, it generally costs 30% plus incentives. Is this the norm? Where can I find out more information about distributors and what they normally charge and provide? Any advice or feedback is appreciated.

Thanks for your time.

Simon

And on the flip side, as a US end-consumer, I’d love to know how to buy wine directly from European wineries without the prohibitive cost of shipping when buying just a case or two.

Simon, I work on the supplier side for a US wine company based in California, and have extensive experience managing distributor networks. I’ve also worked for distributors. Feel free to send me a PM and I’ll answer your questions as best I can.

2 Likes

Simon - there are few set rules. In the US an importer is licensed by the federal government but distributors are licensed by the states and it is rare to find a distributor that is licensed by every state. Some states require that a distributor has a warehouse of a certain size, other states don’t allow you to switch distributors once you have a relationship - it’s a complete mess.

The biggest distributors generally are poor choices for smaller wineries that offer a limited supply. While they can offer access to big accounts, the sales staff wants to work with the bigger names that are easier to sell, so small wineries sometimes get left behind.

If your wines are imported into the US, the importer will obviously want to take a cut and when he sells to a distributor, the distributor will want to take a cut as well. And then the retailer will have to make something. I don’t know what you mean by 30%, but if you’re talking about 30% at each level, that’s really not out of line.

Remember that there are many wonderful wines in the world - more each day. And then there are some wines that have been around for a long time and that have built followings over the years.

To compete with those established quantities, you need to get your wine into people’s hands and let them try it. You need to market the wine. Very few people pick up an expensive wine just on a whim. They do it because they have tried it or because someone they respect has recommended it highly. And even then, if they have a choice between something new and something they know and love, as often as not they will go with the latter rather than try the new one. So it’s not easy to break into the market. It takes a lot of work and a long time.

Everyone has to work together - the retailers, the wholesalers, and the wineries. Nobody wants to shoulder the entire cost of marketing the wine but the winery has the most at stake, so you will be expected to offer samples and incentives.

And the wine has to be priced at a point where it makes sense for the various wholesalers and retailers to carry it. Nobody is getting it on a contingency basis, so they want to move it as fast as possible. I was telling someone just last night that one of the best Carignan-based wines I ever had was from a small producer in the south of France. It was simply delicious. I asked him what his cellar price was and he told me. I replied that the wine would have to sell in the US for over $100 and that was impossible. Nobody knew the wine, nobody cared about the region, and most people didn’t even know the grape. He shrugged. I have no idea whether he ever sold that wine or whether he’s drinking it all himself. But nobody imported it because it wasn’t feasible to sell it at his price.

Best of luck to you! [cheers.gif]

Hello Simon,
I own a winery in the south of Spain and am also a US importer. The US requires all wine imported for sale in the US to be imported by a US importer. The standard is 30% over your EX-Celler pricing. Right now there is a tariff of 25% vat added to EU wines 14% and under. It goes without saying that increases the prices immensely. It is a very difficult time to bring in new brands into the US and look for distribution. With Biden coming on board most of the country is anticipating that the new USTR representative to have a bigger desire to negotiate with the EU over these trade disputes rather than put the burden on importers, wine retailers and restaurants.
I am happy to assist you however I can, be it questions, COLA’s or etc.

There are also wine brokers. They tend to take a lesser cut, but it means they’re just a sales go-between and you pay for the storing of the wine and the shipping when it goes to retailer. For smaller brands it can be a better solution. But with restaurants being out of the picture for the time being, a big part of the brokers main market is now more in flux.

Yeah, but will a wine broker work for importing?

That’s an option in California where a producer or importer can sell direct to trade, but isn’t an option in most other states (if any). Outside of California, a broker is a local liaison for the supplier to the distributor, an independent contractor in lieu of the supplier having an employee covering a geographical area.

One of the biggest ‘challenges’ is that the ‘quality’ of your product has little to do with whether you can or will be successful in your endeavors in this country via distributors / brokers. As others have pointed out, there is a flood of wine out there - how do you differentiate yourselves from everyone else? ‘Quality’ may matter - but usually not as much as price point, ‘buzz’, ‘uniqueness’, etc.

Good luck and take Matt and Nola up on their offers to assist - both top notch folks. And reach out to Greg as well - he knows a thing or three.

Cheers.

1 Like

Quality matters, relationships and engagement matter too. Too many suppliers assume that because you find a distributor you now have an outlet for all the product you need to sell, that is not the case. Supplier engagement matters when it comes to educating the sales force, incentives, and pros/benefits of your product and understanding its opportunity in the market. Your engagement level = your performance in that distributor. No engagement and a set it and forget it mentality will get you disco’d by the distributor.

Matt, can an importer sell direct in CA? I thought that was against Tied House Laws and TTB.

Nola, yes, depending on how the importer is licensed in CA they can sell DTC or DTT. It’s crazy out here… especially originally being from Georgia which is a franchise state.

Here’s a link to everything you ever wanted to know about importer license options in CA - https://simasgovlaw.com/wine-importer-options/

100%. Engagement is key. My philosophy is that aligning with a distributor is like joining a club… You have to participate!

Short of that, your product needs to be its account base defined. You can be less engaged with the distributor if your demand is far enough ahead of your supply - but that’s a rare position these days.

I bought most of my stuff from Lay and Wheeler or Berry Bros and Rudd. Both top wine merchants.
TerryPimentel

[scratch.gif]

Simon, this is one of the most important points, and it goes beyond this. It isn’t just that the sales reps want to sell the bigger names. The sales reps are incentivized to focus on those bigger names, plus they usually have quotas for those specific products, so they’re basically punished for not doing so. The very large companies (producers and suppliers) impose a lot of power on their distributors. Of course there are exceptions where big distributors represent small producers very well, but that is not the norm in my experience.

Also, it’s worth reiterating that you need to be out there selling the wine to make new markets work. Each state is a new market. Don’t count on the distributor, no matter how good they seem, to do all of the work of building your brand in their state.

There’s a lot of collective experience on this board. You should follow up with some of the other people who have already posted on this thread if you have more questions. They know what they’re talking about.

Good luck!

1 Like

Wow. I really appreciate all the great feedback. Will share with our team and would definitely like to reach out to Nola and Matt. Actually, Nola we have spoken before - about 2 years ago. I look forward to catching up.

Thanks again to everyone that commented. Happy New Year to All!

1 Like

You will like your distributor more if you work hard. As in make sales with your reps, move boxes, help them earn commissions and have checks written to your distributor. As Kris pointed out, a dump and run mentality works poorly in the long run. For me the game has always been that my rep is going to feel like they will make sales when they put my wine in their bag.