Do you want to start a wine importing company? If YES, here is a quick guide on how to start a wine importing business with no money and no experience.
Importing wine can be a lucrative trade, but to start you will have to submit the proper documentation to the Alcohol and Tobacco Tax Trade Bureau, a division of the U.S. Treasury Department. Also, you will have to submit business and tax forms to the state in which you will do business and be aware of their requirements for importing alcoholic beverages. You are required to maintain and staff a business office in the United States to import wine.
How to Start a Wine Importing Business – A Detailed Guide
Table of Content
- 1 Industry Overview
- 2 Market Feasibility Research
- 3 Niche ideas in the Wine Import Business
- 4 Well Known Wine Import Businesses
- 5 Buying a Franchise vs Starting a Wine Import Business from Scratch
- 6 Possible Threats and Challenges of Starting a Wine Import Business
- 7 Best Legal Entity for a Wine Import Business
- 8 Catchy Business Name ideas for a Wine Import Business
- 9 Insurance Policies
- 10 Is Professional Certification Needed for a Wine Import Business?
- 11 List of Legal Documents Needed for a Wine Import Business
- 12 Financing a Wine Import Business
- 13 Choosing a Suitable Location for your Wine Business
- 14 Technical and Manpower Requirements
- 15 The Service Process Involved in a Wine Importing Business
- 16 Marketing ideas & Strategies for a Wine Import Business
- 17 How to Increase Customer Retention in your Wine Import Business
- 18 Strategies to Boost Your Wine Import Business Brand Awareness
According to industry reports, the revenue of the wine and brandy spirit market in the U.S. amounted to $29.2 billion in 2018, growing by an encouraging 12 percent against the previous year. Experts believe that this figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price).
Overall, the total market showed a strong growth from 2013 to 2018: its value grew at an average annual rate of +3.7 percent over the last five year period. The trend pattern, however, shows some noticeable fluctuations being recorded throughout the analysed period.
Based on 2018 figures, the wine and brandy spirit consumption increased by +61.1 percent against 2013 indices. Note that the most prominent rate of growth was recorded in 2015, when the market value went up by 13 percent y-o-y.
Wine and brandy spirit consumption peaked in 2018, and is projected to retain its growth in the near future. In 2018, approx. 1.8 million tonnes of wine, brandy, and brandy spirits were imported into the U.S.; rising by 1.7 percent against the previous year. In value terms, wine and brandy spirit imports amounted to $7.6 billion in 2018.
Italy (644K tonnes), France (455K tonnes) and Spain (149K tonnes) were the major suppliers of wine and brandy to the U.S., with a combined 70 percent share of total imports.
According to industry reports, from 2013 to 2018, the most notable rate of growth in terms of imports, amongst the main suppliers, was attained by France (+8.0 percent per year), while the other leaders experienced more modest paces of growth. In value terms, the largest wine and brandy spirit suppliers to the U.S. were France ($3.6B), Italy ($2B) and Spain ($393M), with a combined 79 percent share of total imports.
The average wine and brandy spirit import price stood at $4.2 per kg in 2018, picking up by 4.5 percent against the previous year. Meanwhile, over the period from 2013 to 2018, it heightened at an average annual rate of +4.5 percent.
Import prices varied noticeably by the country of origin; the country with the highest import price was France ($7.8 per kg), while the price for Australia ($2.1 per kg) was amongst the lowest. From 2013 to 2018, the most notable rate of growth in terms of import prices was attained by Argentina (+7.1 percent per year), while the import prices for the other major suppliers increased at more moderate paces.
Market Feasibility Research
- Demographics and Psychographics
Careful planning and a lot of research is a must if you want your business to succeed. You might know the wine already but it is very helpful if you know where to buy high quality wines at an affordable rate. In the United States, the key players in the alcoholic beverage industry make up a three-tier system and this three tier system is the law in most states.
With respect to wine, the top-tier of this system is the winery or manufacturer that is producing the wine. Foreign manufacturers often obtain an agent who represents and acts on the winery’s behalf within the United States (that is where you fall in as an importer).
As an importer, you are licensed and authorized to bring wine into the United States from the manufacturer’s foreign country. The “importer” therefore may be considered to stand in place of the winery when referring to the top-tier of the three tier system.
Note that your potential target market in this business will be the wholesaler or distributor, and they represent the middle-tier. The wholesaler/distributor is the person or business licensed and authorized to purchase wine from you for resale. The wholesaler/distributor transports the wine purchased from your business and resells it to the bottom-tier; the “retailer,” which is a restaurant, liquor store, or bar.
To succeed in this business, especially in the United States, you have to first distinguish what you really want to be: just an “importer or an agent of the winery, or both an importer and a “wholesaler/distributor,” so you may actually sell the wine to retailers. Many “importers” are actually both: they act as the wholesaler/distributor as well as the importer for foreign wineries.
Niche ideas in the Wine Import Business
US is a fundamental destination market for premium-priced wine, but also a complex and highly competitive market in terms of distribution channels. Notably, there are no known niches in this industry. The only way businesses in the industry differentiate themselves are in terms of product choices and import location.
When it comes to importing wine, you cannot be all things to all customers. Decide on something and sticks with it. You have two viable reasons for choosing a product to import: you know it will sell or you like it.
Hopefully, you can meet both criteria. That’s an ideal business model. Would you buy that wine it if you saw it in another part of the world? Then you are on to something! Remember that the most important thing is not just buying but having a market that appreciates the exact product.
You will improve your odds of picking a winner if you cultivate a knack for tracking trends or even spotting potential trends. Getting in on the ground floor and importing a wine before it becomes a super-seller in a country could be the business breakthrough of a lifetime.
Level of Competition in Wine import Business
Note that wine imports account for about a quarter to a third of US wine sales, a proportion that been relatively steady for the last few years but is higher now than it was 25 years ago. Recent reports indicate that imports of still wine accounted for about 26 percent of sales in the channels they measure when calculated by value and 24 percent by volume.
Imports take a larger proportion of sales in sparkling wines and in channels that the reports do not measure, such as on-trade sales. Also note that the United States accounted for about 8.5 percent of world wine production volume in 2018, so a two-thirds domestic market share is a very substantial “home court” advantage that domestic producers naturally want to defend.
Meanwhile, the slowly rising import market share has many causes. The US is the world’s most attractive wine market, so foreign producers put a great deal of effort into cracking the market.
Technology is also a factor. In recent years, the advent of efficient bulk wine shipping has facilitated increased competitiveness of foreign wine producers and allowed domestic brands to efficiently add foreign wines to their portfolios.
According to reports, the intensity of import competition rest on which market segment you are looking at. The U.S. wine market is incredibly fragmented and so it is dangerous to generalize. Note that this is true in many ways including simple geography.
Because it is costly to get distribution in all 50 states, many medium and smaller foreign wine companies have learned that it is better for them to focus on a few local markets, say, Florida, New York, Texas, and Illinois, instead of attempting national distribution. These are among the states with the broadest and most intense import competition.
Well Known Wine Import Businesses
- Deutsch Family Wine & Spirits
- Winesellers LTD
- Wirtz Beverage
- Vine Street Imports
- Young’s Market Company
- Charmer Sunbelt Group
- Frederick Wildman and Sons
- Southern Glazers
- Southern Wine and Spirits
In the United States, the law provides a tripartite distribution system on three levels: an alcoholic product gets to the consumer only after passing three different steps. The first level includes the sale of the produce to the importer, who in turn resells the product to the distributor.
At the third level, retailers (e.g. wine bars, grocery stores, restaurants, bars) buy the international or national product from wine distributors. Its preferable to think of the US market as a series of doors to cross: the first door is the import solution, the second door is a distribution solution and the third door is the retail sales solution.
Howbeit, the strong concentration of distribution chains and the length of the distribution chain have a significant impact on the price charged to the final consumer. Given the distribution mechanism and the high level of market competition, it becomes highly strategic to focus on a strong differentiating strategy, able to “tell a story” behind the brand.
One of the best practices in importing into the US market is to aim to be present in 5 or 10 American metropolitan areas that are not yet saturated. A good strategy is therefore to find out metropolitan areas with good sales potential, where, however, wine sales are still underdeveloped and the competition is relatively low: in this way it will be easier to stand out from the competition.
Note that investing in a limited number of metropolitan areas also allows more complete analysis, studying and evaluating the reception of the product more precisely. US imports of bottled wines and sparkling wines have experienced a dynamic growth since the beginning of the century.
The 2018 results were placed along this growth path; in particular, in the year just ended, the US import sector reached $6 billion, with a year-over-year increase of +5 percent for bottled wines and +8 percent for sparkling wines. The undisputed market leadership is held by European exporters, the main partners of the American market, thanks to the winning performance of France and Italy.
The USA represents a destination market of fundamental importance for wine importers, but it is necessary to keep in mind that it represents also a complex and highly competitive market; therefore only a strategic approach can guarantee positive long-term results.
Buying a Franchise vs Starting a Wine Import Business from Scratch
Generally, experts have explained why buying a franchise is always a better business option than starting from the scratch. But in the wine import industry, there are no available franchises to leverage.
An interested entrepreneur can only buy a winery or wine production franchise, where he/she buys the right to manufacture and distribute a particular wine in the United States. Most businesses in this industry started from the scratch and built up from there.
Possible Threats and Challenges of Starting a Wine Import Business
Making your wine import business successful can be a very dominating task, but it can be easier if you already have prior experience in this line of business. Also, if you are hard working and you are willing to learn, you will surely find it a bit easier. Don’t forget that the profit you stand to make from this type of business is heavily dependent on your product choice, marketing and sales strategies.
Also another challenge you will face is the issue of licenses. Note that applying for all theses permits and licences essentially means undergoing a full background check; hence, your record should be spotless. It is important that you prove that you are an outstanding citizen with a clean family history.
Notwithstanding, questions might be asked about your top investors, loans, and even personal questions. The authorities will also inquire about your security plan in case of any potential hazards like theft and fire, among others. Most entrepreneurs willing to start-up a wine import business are faced with the issue of writing a business plan.
Best Legal Entity for a Wine Import Business
Deciding the best legal entity for your wine import business will depend on the size and of your business and capital. Howbeit, the best legal entity for your wine import business will involve a number of considerations, including taxation, liability, governance, capital structure, and potential exit strategies etc. Generally, the best legal entity for a wine import business in the United States is the LLC.
A limited liability company (LLC) is an unincorporated entity in which one or more individuals called “members” have limited liability for the company’s debts and claims even if they participate in management. Meanwhile, members of an LLC have great flexibility in structuring the management of their business through the LLC’s governing document, known as an “operating agreement”.
Have it in mind that the benefits of creating an LLC outweighs any disadvantages it may have. These benefits are also unavailable to sole proprietorships and general partnerships. But its important you consult with an experienced attorney and accountant while preparing your business plan to make sure you make the right decisions and not kill your business even before it starts.
Catchy Business Name ideas for a Wine Import Business
- Flavoured Wines
- French Import
- All Wines
- Cellar Park
- Boundary Cross
- Spanish Flight
You will need insurance to protect yourself and your business from possible dangers that may not even happen. But you will need to take this into consideration to avoid eventualities and business failures. It is advisable you meet with a business insurance agent to help you understand the insurance policy requirements for the wine import industry as well as for the business in general. They may include;
- General liability insurance
- Property insurance
- Workers’ compensation insurance
- Commercial Auto insurance
- Umbrella liability insurance
Intellectual Property Protection
The competition in this industry is growing year after year, and with intense competitions comes the need to innovative and standout. You will need IP to protect your unique methods, signs and ad specifics. It is advisable that you constantly research the essentials of patenting and protecting anything that in any way determine your success in the industry or an advantage against your competitors.
This does not include the fruits in your wine, rather your tagline, logo, and other marketing designs. You should know that without proper protection, your concepts can be picked by someone else which can jeopardize your business. You should consider researching and learning more about trademarks, copyrights, and the other legalities of the wine import business by meeting with an expert in the industry.
Don’t forget registering your trademark helps to protect the marks you create to identify goods and services, not the goods and services themselves. Proper protection of your trademark and patent can lead to a successful brand development and greatly heightening of the value of your company or product.
Is Professional Certification Needed for a Wine Import Business?
Certification programs are very beneficial as they show your level of knowledge and expertise. They are also a uniquely transportable baseline of industry knowledge. Professional certification you may choose to acquire for a Wine import business may include
- Hazard Analysis and Critical Control Points – HACCP Certification
- Occupational Safety and Health Administration (OSHA)
- Total Quality Management
- Certified Supply Chain Management
- Certified in Production and Inventory Management (CPIM)
List of Legal Documents Needed for a Wine Import Business
Once you’ve developed a solid business and marketing plan, acquiring adequate funding, and identifying and targeting the appropriate suppliers and customers (a gross oversimplification), you will have to obtain the proper legal documents to ultimately import wine. Below are some of the necessary licenses, permits, and documents that must be put in place prior to placing your first purchase order:
- EIN- Employer Identification Number
Note that this is a prerequisite for getting a Federal import permit and also crucial for opening up a bank account for any entity other than a sole-proprietorship. An EIN can be obtained on-line fairly easily at the IRS website.
- Federal Importer Basic Permit
This is the first industry license needed when looking to start this business, and it is also the most important. The TTB (Alcohol and Trade Tax Bureau) mandates that you have a letter from a winery willing to export to you before you can apply. The application and instructions can be found on the TBB website and takes about 60 days for processing under normal circumstances.
- Certificate of Label Application (COLAs) On-Line
Note that immediately an importer receives their Basic Permit, you are expected to immediately apply for access to on-line submission of their Certificate of Label Application (COLA). This simple one page form is free of charge and takes approximately 30 days and is ready for the importer when they have labels to present.
- Home State Licenses
Every state in the United States can explicitly differ when it comes to their licensing requirements. Its advisable you visit TBB’s Alcohol Beverage Control Boards web page to learn more about individual state licensing requirements.
- FDA Product Registration
Have it in mind as an importer, you need the Food & Drug Administration (FDA) registration number from each supplier (which the suppliers should already have if they are already shipping to the U.S.) and for yourself as a company if you will be storing the wine at your own facility. Remember, this registration process is a free of charge service. More information may be found on the FDA’s Registration of Food Facilities web page.
- Broker Power of Attorney
For you to have a Customs broker act on the behalf of an importer, a Broker Power of Attorney must be executed by an officer of the company that will be looking to import. This simple document is a requirement and a fairly easy step to complete in the initial compliance process.
Meanwhile, brokers can act on behalf of importers by clearing their cargo with U.S. Customs and Border Protection (CBP) as well as with other relevant government agencies such as FDA and Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), for example.
- Customs Continuous Bond
CBP mandates that all formal entries be backed by a valid bond or surety. The validity of a Continuous Bond is 12 consecutive months from bond inception date. A Continuous Bond can be purchased from Shapiro, or typically from most Customs brokers.
Financing a Wine Import Business
Getting enough funding is very crucial in any import business. Initial startup costs are usually the deal-breaker for many entrepreneurs. The first thing to a do is to put together a detailed business plan. A business plan will serves as the road map of your business and is what investors will want to see.
This important document will tell how much you need and if you plan to fund your own business – determine how much money you have to invest. If you need external sources for fund, you can sit down with the bank to discuss getting a business loan. You can also seek the help of professional investors who will expect a return on their investment.
It is recommend that you start out by asking friends and family to be the initial investors in your business. No matter how you plan to fund your business, always ensure it is all done on a professional and legal basis to avoid problems when your product sales take off.
Choosing a Suitable Location for your Wine Business
Note that you are required to maintain and staff a business office in the United States to import a product like wine. While deciding on a good location for your business, consider your options extensively and the likely advantage they present. Are the utility systems (electrical and plumbing) are enough to handle operations and waste disposal?
Are there is enough office space and storage space? You will have to consider land use and zoning requirements for parking; legality of the commercial venture on the premises; loading and unloading; and compatibility with local waste management systems.
Also consider factors for acquiring the premises. If the space will be leased, the third party landlord must be amenable to the nature of the business operations. Also, the landlord may demand a long term lease. Will a long term lease be compatible with your vision and growth? Do you have the ability to exit the lease if your business needs change before the expiration of the lease term? Do you have the ability to extend your lease under favourable terms?
Technical and Manpower Requirements
In an import business, inventory will likely be your biggest expense and also eat up a chunk of your startup capital. A well-stocked inventory will take up millions especially since you want to provide your distributors with good and selling products. Adjust your initial inventory toward items which will sell quickly—the more you sell, the cheaper the cost to you—and then broaden your inventory later.
Meanwhile, remember that you sell to distributors who may not have a choice in selling prices since they have no monopoly on that particular brand (which is why the prices of alcohol are similar everywhere), so you are unlikely to be able to negotiate much on the price.
You can generally compete by marketing your business to a select market or implementing themed events in alliance with your supplier and core distributors. Most wine import businesses have their owners working in the store full time, especially in the beginning.
Nonetheless, hiring an employee or two might help you operate more efficiently than you would otherwise be able to. To be successful in the wine import business, you will find a background in accounting helpful because of the thin margins in the industry.
In many states, alcohol is tightly regulated, licensing is strict, and paperwork is plentiful. Some states do not even allow private ownership of winery or direct distribution channels, so wine importers are restricted to the three tiers as inscribed by the law.
So, business owners entering this industry need to be willing to deal with regulators and bureaucrats constantly. They also need good business sense and organizational skills to manage what can be, at times, a complex ordering and distribution process.
The Service Process Involved in a Wine Importing Business
Importers are like wineries from the point of view of distribution. They are usually identifying great wines outside the United States and taking the risk to import that wine. Most specialize in a particular area of the world, perhaps Italy or Australia or Chile.
The gross margins of a typical importer are around 30 percent. Since liquor laws vary by state, the distributors are state by state as well, including some counties that take the role of the distributor and take not only the taxes on the wine, but the margin of the distributor.
Note that these distributors will commit producers and importers to take your wine and sell it to restaurants and retailers in their served areas. Always ensure that your distributors are skilled sales people with deep wine knowledge and the willingness to provide samples and tasting as part of the sales process.
They should also be on the hook if a bottle is uncorked and the retailer returns the bottle. Typical distributor gross margins are around 30 percent for the distributor.
You have to understand that your wine bottle will finally arrive at the retailer, ready for end users to purchase. The retailer has the physical location for customers purchase, although over time wine laws are being rationalized and internet marketers are coming into play like most markets.
These retailers hold inventory, have trained staff, light, insure and maintain temperature for their inventory until customers purchase. Typical gross margins are a little higher here, at 40 percent, but costs are higher too.
There are a few mega-retailers that buy massive quantities at excellent prices and operate on somewhat lower margins like Total Wine and Costco. If your wine doesn’t go to a retailer, it might go to a restaurant and appear on the wine list. This is the most expensive place to purchase a bottle of wine, but it is a great place to try something new.
The normal rule of thumb for a restaurant is to triple their purchase price. If they buy it for $30, it might be $90 on the wine list, or a 66 percent gross margin, although some restaurants are little more moderate with their mark-ups. This is designed to cover the staff, storage, training, glassware and a decent profit.
Marketing ideas & Strategies for a Wine Import Business
While building your reputation in the wine import industry, consider free online resources such as social media and local business registries. If you become a member of any organizations, inquire about their online listings, which is often offered free of charge to members.
Also consider distributing mailers within the community and become a sponsor for local charity events. When creating your business plan, it is important that you identify several key components in your marketing plan which may include:
- Target Audience
When putting together your marketing plan, take time to research and consider the audience you want to attract. This can be based on the type of wine you will be importing. If you can identify your target audience, then you can research and find out the best way to reach them.
Also, when looking to market your wines, it is crucial you identify how your wine differs from all of the other wines in the market. Because if you fail to determine the difference between your competitors, how will the consumers tell the difference?
- Market Entrance
This part of your marketing plan will need an outline of your initial introduction into the wine market and a timeline for growth and expansion in the industry. Do you wish to start locally, selling your product at shows and restaurants?
Do you think you will be seeking distribution deals on a national level? Do you plan to sell your products online? Your business strategy for getting entrance into the market is very necessary if you plan to develop an outstanding marketing plan.
- Your Sales Strategy
There’re a lot of wine importers in the United States, but having a substantial plan will aid you do it more efficiently. To develop a good marketing plan, you will need to understand your sales strategy from the start and have a plan for increasing sales in a specific period of time. Ensure you account for all costs for advertising your product – print ads, online ads, website, and social media pages.
- Business visions and products
To gain the attention of Americans you have to think outside the box. T-shirts, free giveaways, and other special offers are a good way to get your product to a larger audience in the industry. You also have to decide the cost of buying additional merchandise and include it in your startup costs.
Possible Ways of Winning Competitors in the Wine Import Business
Take your time to research and analyse your competitors before thinking of ways to outshine them. If there are a number of competitors in the same industry (meaning that it is not feasible to describe each one) then outline the number of businesses that compete with you, and why your business will provide your distributors with products that are of better quality or less expensive than your competition. Possible ways to win competitors may include;
- Advertise in industry journals, on the Internet, and on our website
- Attend/sponsor exhibitions and trade shows
- Continual PR: press write-ups; personal interviews; testimonials; product trials
- Seek out the decision-makers in large restaurants and retail stores
- Direct mail corporate material to the above
- Undertake a campaign of personal selling, targeting decision-makers
How to Increase Customer Retention in your Wine Import Business
If you understand your distribution chain, then you don’t have to take too much to build loyalty. Always consider your clients and suppliers when making decisions, especially marketing and promotional ones. Your clients will see that you consistently strive for new innovation and that their opinion matters to you. Ways to increase customer retention in your wine import business includes
- Create an online presence
- Go beyond and above
- Set customer expectations
- Be the expert
- Building trust through relationship
- Implement anticipatory services
Strategies to Boost Your Wine Import Business Brand Awareness
It is important you build your brand’s image early on to maintain consistency throughout the life of the product. Be creative and clever to remember that you can’t develop a logo then change it later. Basics to include in your brand’s design include:
- Trade Shows
Wine trade shows are still an effective way to generate leads. Wine Trade Shows are a vital marketing tool for your business, giving you exposure in the market and can get your brands in front of the right buyers if you are lucky.
- Competitions and Awards
Note that many competitions have a follow-up trade event where they invite buyers. Almost 30 percent of buyers check leading ratings and websites like Decanter, Wine Spectator and other leading magazines for wine trade.
- Private Label Strategy
Under very good arrangement, you can offer clients an option of private label packaging or even approach large retailers if they are interested in developing private label wine brands. Not only does it help you initiate a relationship with a buyer but you may offer your own line of brands to the buyer and see if they would also like to distribute.
- Social Media
You can also leverage Social Media to find Wine Distributors and market your business to reach a wider audience.
- Your own website
Leverage your trade website to create sales for yourself. Have a clear and separate trade section which shows your current distribution. Have a contact form where you can take potential leads and title it “we are always looking for partners globally” (example). The last thing you want to do is leave money on the table. Distributors who find out about your products will come on your website.
- Cold Calling
Remember, nothing beats the traditional method of cold calling which involves sending an email or making a phone call. If you have the resources or know that you want to target a particular type of distributor, simply pick up the phone and make the call.
- Marketing Companies and Brokers
Note that you can compound your sales efforts through sales & marketing companies and brokers. Platforms like Beverage Trade Network offer a range of solutions that can help wineries grow their distribution network.