How to Become a Wine Distributor
Wine is a pretty amazing thing, huh? There are so many varietals, regions and producers it would take several lifetimes to try them all. Even in the most populated urban markets, there are tens of thousands of wines not yet available. So maybe you; the adventurer, the entrepreneur; should start a wine distribution business? Well, sure! It’s something I’ve done and it’s definitely a fun and challenging ride. I won’t discourage you, but let’s get some fundamentals out of the way, shall we?
You (and your business partners if you have them) are the first hurdle. Ensure these few things about yourself.
You do not have a prior felony conviction. In addition to most felonies, having misdemeanors, DUI’s or various other legal issues within the last decade may cause a denial of your business applications.
You do not already own, or hold equity stake in, a business directly or auxiliary to alcoholic beverage. Due to Tied-House Laws, you cannot hold ownership in more than one tier of the system. Therefore, if you want to be granted a Wholesale Permit, you may not also have a piece of a producer or retailer. There are several states that DO allow you to be two of the tiers, but they are few and far between.
You don’t mind paperwork! Navigating both the initial license processes and monthly and yearly reporting requirements for this industry can be tedious. Between insurance, taxes, inventory and sales reporting, it can feel overwhelming. Brush up on your accounting and organizational skills now.
You have enough working capital. Inventory will be the largest pre-opening investment. Many importers and wineries will request payment upfront for your first purchase order. At best, you’ll be working on NET 90 terms. You’ll also need a temperature-controlled space to store your products. There are great third-party options in every state, but while $25/month per pallet may not seem too bad, most facilities charge a monthly minimum, in and out fees and more. So until you really get running, warehouse expenses will be a weightier piece of your budget. If you go into business hoping that you’ll just turn over inventory to fund new purchases, you’ll quickly close your doors. Start with a 3-year forecast and be prepared to take at least that long to break even.
Still in? Ok, let’s get licensed.
First and foremost, form your LLC or Corporation. I recommend keeping this business separate from any other entities you may own or operate. Since you’re dealing with a heavily regulated industry, an attorney may be worthwhile to review your structure and paperwork.
At the Federal level you’ll need a TTB Wholesale Permit. You can find information and forms here https://www.ttb.gov/ponl/permits-online-help
After your TTB license is approved, move to the state(s) in which you’ll be operating. You’ll need a Wholesalers License from the Alcoholic Beverage Commission (what this governing body is called varies by state). Links to each state are available here https://www.ttb.gov/wine/alcohol-beverage-control-boards#US
Depending on the state, some things may need to be completed before you can apply. You may have to have your warehousing established and undergo an inspection of the space. You may need letters of intent from importers or producers you’ll be working with. Review your states websites (link above) for all requirements early on. At the state level, if you even owe parking tickets, you can be denied a license. Check with the DMV and your local tax office to be sure you’re up to date on your affairs.
Will you be selling wine yourself? Are you going to hire sales staff? In most places, you and any team members you hire will need to get a Solicitors License. These are usually renewed every few years and allow you and your representatives to carry, sample and sell alcoholic beverages.
Ready for wine?
Hopefully you’ve been busy making connections and tasting potential products! With your Wholesale Permit you can now purchase wine directly from US-based wineries and importers. These are your partners, so select carefully who you do business with.
Make sure they have steady supply of the products you need. There’s nothing worse than working hard to gain customers and then losing them because your supplier can’t meet demand.
Ask about how they communicate pricing and vintage changes. Again, this is critical information for you and your customers.
Negotiate your payment terms, minimum order quantities and any sample discounts or market support you’d appreciate. Your success is their success and good partners will make efforts to encourage your growth and sales.
Once you have created your product portfolio and have wine to sell, the real work begins. I’ll do follow up blogs on curating an attractive portfolio, building a sales strategy and using your revenue to spurn growth. In the meantime, if you need guidance through this process or you’re already established and need executive advisory, email me directly at amy@commonfuelconsulting.com or schedule a time to chat on my calendar https://calendly.com/amy-t
*The information here is for Wholesale. The process to become an Importer has some additional steps I would also be happy to discuss with you.
However you choose to spread the love of wine, I wish you luck and longevity!
