Importer Bob Shack says it happens more often than not. He will attend a trade show, and it doesn’t matter whether it’s ProWein, Vinexpo, or even something smaller. When he stops at a booth to taste wine, the first question from the person at the booth is, “So when are you going to place your initial order?” He tells the story with a sigh. “That’s definitely what happens,” says Shack, owner of HB Wine Merchants in New York City. “And if that happens to us, can you imagine what happens to the biggest distributors?”
This is the contradiction that baffles foreign wine producers who want to sell their product in the US. They understand (even if they don’t exactly know why or how) that US laws require a wholesaler to distribute their wine in the US. But understanding the need for a distributor and knowing how to find one are two completely different things.
“If you look at all of the wine available in the world to be sold, and then you look at how little shelf space there is in the US to give all the wine there is to be sold, then you can see the problem,” says Steve Raye, president and CEO of Bevology, an importer and marketer on the East Coast. “The biggest distributors might get thousands of queries, and they’ll consider only one or two. And of those one or two, the same percentage might be true again, so that of the thousands they consider, they might only take one or two.”
That means foreign producers need to do more than make cold calls, use Google search to send emails, and chat up reps at trade shows. Finding a US distributor requires a business plan that is tightly written and focused on showing the distributor how the producer will add to the distributor’s bottom line. In short, there are nine essentials that need to be taken into account before pitching a US distributor.
Unless a producer has at least 10,000 cases to sell in the US, most distributors won’t bother. Anything less isn’t worth their trouble, says Shack – and some even see 15,000 or 20,000 cases as a minimum. That means a Sancerre or Piedmontese winery with 2,000 cases to export is out of luck. The only exceptions? If a smaller producer can point to something so unique that it makes up for the smaller volume, like an historic single vineyard or a cult following among sommeliers or wine geeks.
So does the importer
“For small, foreign wine companies looking to export wine to the US, I believe partnering with the right importer is vitally important as a first step,” says Erica Crawford, who owns New Zealand’s Loveblock Wines with husband Kim. “You need to be ruthless because distribution is pretty much everything and the importer is an important cog in that wheel.”
Exporters, thanks to distributor consolidation and the tremendous increase in the number of brands available, have become the de facto gatekeepers for wholesalers. Hence, says Crawford, savvy foreign producers should look for importers who are big enough to be relevant for distributors. That means they need to have a horizontal book, both by quality and price. Also, can they import to all 50 states? This solves the problem of managing multiple importers across the US, which is not only complicated by the different laws but by different exporters who have different approaches to price and positioning.
Know the distributors
Each US state requires producers to hire a distributor to sell their wine to restaurants and retailers. This can be complicated enough, but changes and consolidation in the wholesale tier make it even more confusing. Mark Hyman, the president and CEO of Texas’s Llano Estacado Winery, says consolidation has made it even more difficult to find a distributor that is a good match for the producer. In Texas, he says, two distributors control as much as 85% of all wines entering the state. “Now think of all the thousands of wineries worldwide trying to enter the state and how they funnel through these two distributors,” says Hyman. “Think of a giant hourglass that all the wine brands enter, filter narrowly through, then enter the broad marketplace. Somehow, a successful winery has to distinguish itself and earn its distributor’s respect to make it through that funnel.” One distributor is not the same as another. The 10 biggest control two-thirds of the US market, and they have different requirements in terms of volume, pricing and margins, and placements than the other thousands of smaller distributors.
“If you’re not going to be a major national account, then the big distributors aren’t going to be as interested in you,” says Michael Votto, CEO of Votto Vines Importing. “You need to understand the nuances of the three-tier system.”
That means understanding the nuances of the US market, whether it’s the different laws regulating alcohol sales or the varying demographics and income. In addition, foreign producers must decide if they want their wine sold on- or off-premise, and then whether to approach large national and regional accounts or smaller, local independent retailers and restaurants. Then, knowing all of this, producers need to find a distributor that matches those preferences. Selling wine to a small retailer in Iowa is not the issue – it’s finding a distributor who knows best how to do that and wants to work with a foreign producer that wants to sell in Iowa.
Talk to importers and distributors, and this is one of the most difficult parts of the US system for foreign wineries to figure out. US retail prices can be twice as high as prices at home, and it’s not just because of the cost of shipping. It’s because the distributor and exporter take their percentage – as much as 15% each.
Further complicating matters is the tremendous competition for shelf space in the US, which forces producer margins down. Says Hyman: “Is your pricing competitive, not just against wines from that state or region, but by type against the wines already in the market areas in which you look to enter? And when I say competitive, I mean in both price and quality.” What does that mean for the bottom line? “If your pricing – ex-cellar to importer – is completely out of whack, you’re not going to be attractive to a lot of distributors,” says Votto. “It can literally be the difference between the need to charge €5.00 ($5.91) a bottle and asking for €11.50.”
Supply and demand
Know, too, says Crawford, that distributors need to know they will have a regular supply of wine to sell, so that when the producer promises 15,000 cases, it doesn’t deliver 8,000. “Supply and sales forecasting is crucial here, and it’s always tricky and especially for small wineries,” says Crawford. “The US is so big and reasonable supply must be available. Will you be able to supply if the brand takes off? How do you want the brand to grow – by price promo or organically? And you need to be clear on channel strategy.”
This is perhaps the leastunderstood nuance of the threetier system, says Shack. Payments to the producer take longer and go through more hands than in other markets. The retailer or restaurant doesn’t pay the winery; rather, the retailer or restaurant pays the distributor, who pays the exporter, who pays the winery.
This can turn a reasonable
45-to-60-day payment window into 90 or 120 days – or even longer when the producer is working with a small exporter who is working with a small distributor who sells to a small restaurant or retailer. “If you aren’t flexible here and understand that it’s going to take longer to get paid, then you’re in for a big surprise,” says Shack.
Samples, sales calls, and marketing budget Be prepared to spend money on marketing, says Crawford. No one else is going do it. “Your sales budget needs to accommodate price promotions, by-the-glass pour price accommodation for restaurants, and all the other incentives you’ll need,” she says. “Work with the importer on how this [advertising and promotion] will be carried, whether an equal contribution or worked into the pricing mode or contribution by producer only. But be prepared to contribute and understand the implications of your contribution.”
Also often overlooked, which especially frustrates distributors, is money for samples. This means samples not just for US media or an influential sommelier, but for distributor sales representatives and employees at retailers who carry the wine. How else can the distributor staff sell the wine to retailers unless they know what it tastes like? How else can the retailer sell the wine to its customers unless the employees know what it tastes like?
Finally, says Hyman, the producer needs to spend money to work the market, something else that foreign producers shy away from because of cost. That means money to travel to the US for distributor sales meetings and to call on accounts. “If you can’t afford to put people in the markets you want to enter,” he says, “then you need to find notable brokers that can represent you in a given territory, because you really need people with feet on the ground, working the markets on your behalf in conjunction with the distributor.”
Again, the distributor isn’t interested in doing this. The producer needs to provide the shelf talkers, technical sheets, media reviews, and magazine scores that will help sell the wine on the retail level. The producer needs to take care of social media, follow up with requests for media interviews, and handle the dozens of requests that will fall through the cracks at the distributor.
Don’t bore them
“The number one problem foreign producers have is to treat the distributor pitch as generic,” says Votto. “They don’t do enough homework. They don’t understand that their pitch not only needs to be better, but to be different. It’s not enough to say your wines are good. Everyone’s wines are good.” So, says Crawford, when it’s time to make the pitch, it’s time to tell the winery’s story, it should be clear, focused, and something the distributor can recognise immediately to sell the wine. “Now more than ever,” she says, “mind space in the distributor rep’s head is vital, and we are all competing for a small space of awareness. Have a succinct, clear, and engaging presentation. They listen to people all day – what will they remember you and your brand by? Make elbow room.”