There are many obstacles to entering the New York wine market for a foreign producer, but the first is convincing an importer to take you on. Like an actor looking for their Broadway break, the better prepared you are, the better your chances of getting the role.
As a group, the importers we spoke to had three suggestions for any winemaker, cooperative, or large-scale producer looking to break into the market: do your research, have a story, and understand how Americans will actually get to buy your wine.
The 5 December 1933 repeal of Prohibition – the 13-year ban on the manufacture and distribution of all alcoholic beverages in the US – left a regulatory legacy known as the three-tier system. And each state has its own set of regulations.
The first tier is the winery, the second, the wholesaler or importer, and the third is the retailer who sells the wine to the consumer. Taxes and profit margins are added at each step, which helps explain why the same bottle of wine can cost €5.00 ($6.26) in Milan and $20.00 in New York.
Then there is the competition, both domestic and foreign. There are more than 7,700 wineries in the US, according to Wine Business Monthly. There are some 5,900 wholesalers/importers, according to the trade group Wine & Spirits Wholesalers of America. And last year alone, the US Alcohol and Tobacco Tax and Trade Bureau approved nearly 99,000 wine label registrations – the majority for foreign producers. Finally, three of the largest wine companies in the world– E&J Gallo, Constellation Brands and The Wine Group – together have a market share of approximately 51%.
So how does a winemaker break into the US market?
Find a matchmaker
In the 30 years Nora Favelukes has been in the wine business, the last 20 have been as a matchmaker, helping producers find importers and vice versa. Among her clients are Wines of Argentina and Wines of Brazil as well as producers from Spain, Italy and France seeking US importers.
“It is matchmaking, but I would say even more than that, it is a partnership,” says Favelukes, head of QW Wine Experts. “The most successful ones are where the producer and the importer have the same goals. It doesn’t do anyone any good if you are a small producer trying to woo a national importer. You won’t have the supply they need and they won’t give your brand the attention it needs.
“This is New York. Wine is a business. So you are going to a business meeting where you will have to present compelling reasons why they (the importer) should take you on,” she says, adding, “They want to know the terroir, whether the hillsides face north or south, whether the vineyards are biodynamic. Americans love information. The more prepared you are, the more information you can give, the easier it is for them to digest.”
Tell me a story
“Give me a story. Tell me something. What makes your wine so special? Give me a reason to sell your wine,” Victor Owen Schwartz says, shaking his head and raising his hands to the ceiling when asked what advice he would give a winemaker seeking an importer.
Each day wineries, their representatives and government agencies call him and his company, VOS Selections, “and 99.9% of them have nothing to say. They’ll tell me, ‘I represent this winery and we make wines in Spain.’ And then silence. So I have to drag the information out of them. Where in Spain? What denomination? What do you make? I’m like pulling teeth. Tell me something! Tell me what you have to sell. That you’re from Rioja, Rioja Alavesa and that you’ve looked at the VOS website and you see that I don’t have any Rioja Alavesa and you have press and your price points…. Tell me something! Give me a reason to want to meet with you,” an exasperated Schwartz says.
Know the competition
The Winebow Group’s Richard Driscoll is like a kid in a candy store. His wine portfolio effectively doubled when the company merged in June with The Vintner Group, expanding his reach from Massachusetts to Florida – or where about half of all US drinkers live.
Right now, he says, producers have a better chance of selling their products than they did 10 years ago, but there’s a catch. “They’ve got to be better than ever before.”
He advises to do your homework. “If you’re making a product and you’re from France or Italy, somebody else is already here with it. Look at Chianti. I can’t tell you how many people come and try to sell me new Chianti. If they had checked SevenFifty (sevenfifty.com) they could see that there are probably 250 Chiantis already sold in New York City.”
A quick check of the website – aimed at importers, suppliers and retailers – found 823 Chiantis available in the New York metropolitan area. The website categorises wines, beers, spirits and other beverages by vendor, country, region or appellation, producer, varietals and other criteria. It allows retailers to see which importer is bringing in what wine at what price.
What about the price?
Marc Taub of Palm Bay International, which carries wines from 14 different countries and has nearly 100 brands in just about every state, thinks his suppliers have “an understanding of the three-tier system and that there are more costs involved in going through that process.” They also recognise that as a result, they are able to charge higher prices.
Currently, the big challenge for European producers has been currency fluctuation, he says. “Right now, the dollar is gaining strength, which is a positive for the European producer.” But during the financial crisis inventories of fine European wines evaporated. “Over the last 18 to 24 months we’ve seen a lot of the European wines regrow.” Now is the time for winemakers “to pay it forward and allow for that redevelopment of their business.”
Filling the wine shop wall
Tom Steffanci, president of Deutsch Family Wine & Spirits, represents the other end of the size spectrum when it comes to importers.
“We are the largest imported wine company in the United States. We’re bigger than Gallo. We’re bigger than Constellation when it comes to imported wine. We are in all 50 states and the Caribbean,” Steffanci says, adding the company imports 10 million cases of wine a year.
Just three men decide if a wine will be added to their portfolio: Bill Deutsch, the company’s founder and chairman; his son, Peter, who serves as the company’s chief executive; and Steffanci, president. They prefer to deal with other family companies and think of themselves as brand builders.
Yellow Tail is one example. Deutsch formed a partnership with Australia’s Casella family in 2000 to sell Yellow Tail in the United States. In 2001, there were 112,000 cases sold. By 2005, the number was 7.5 million.
“We only do equity deals now,” Steffanci says. Such an arrangement, while unusual in the industry, does align the interests of both the importer and winemaker. “We don’t do purely importer deals anymore…we want to bring things here that we can build over a long period of time,” he explains. “We talk about things here in terms of decades, not just years.”
Back to relationships
Martin Sinkoff, the marketing director for national US wine importer Frederick Wildman and Sons, has almost 40 years of experience selling, selecting, importing and distributing wines throughout the United States.
Sinkoff views the relationships an importer has with suppliers as “marriages.” Asked if suppliers were subject to an annual review, he laughs and says, “It’s a little like (the Broadway musical) ‘Fiddler on the Roof.’ That scene where Tevye asks his wife, ‘Do you love me?’ And she says, ‘For 25 years, I’ve been cleaning your socks and you are asking me now if I love you?’”
“No, it’s a long-term relationship and like all long-term relationships, they go through some rough patches and sometimes there are irreconcilable differences and sometimes one partner splits, but for the most part, if we’re married, we’re married.”
The one piece of advice that Sinkoff has for those looking to break into the US market “is to do your research and realise that there is no one US market. There are many, many markets. Each city is almost an individual market and certainly, each state by its own regulations, is an individual market.”
Five predictions for the US wine market in 2015
- “We will see the phenomenal growth of sparkling wines continue and the support for over-extracted, high-alcohol wines will continue to erode,” Marc Taub, Palm Bay International.
- “We see a deceleration of growth in the US wine market, says” Tom Steffanci, Deutsch Family Wine & Spirits. According to Nielsen data, the volume on imported table wine is down 1.4% vs. a year ago.
- “Not all trends are positive. When was the last time you saw a big ad from (New York retailer) Sherry-Lehmann for Bordeaux futures? It’s been years. And the single worst value these days is village-level Burgundy. And value is still very much here to stay.” Victor Owen Schwartz of VOS Selections.
- “The US doesn’t need a Chardonnay from Macedonia,” says Richard Driscoll of The Winebow Group, who is looking in unexpected places – Turkey, Lebanon, Macedonia – for wines. “Instead, they should work on their own identity, indigenous grapes are a selling point.”
- “We know that rosé wines from France, especially the Côte du Provence, will come back in February and I expect California wines to continue to innovate and dominate the market. There are lots of trends – there is just not one trend,” Martin Sinkoff, Frederick Wildman and Sons.