I’m particularly interested in the importer (though a complete picture would be great); I think I understand the retailer and distributor roles decently well. How does the importer get paid? I’ve seen posts on other forums that say importer revenues vary from a 10% to 30% markup to just $3 to $5 a case to just marking up the brand registration fees. Is that the difference between a national and state importer? Does the importer really get paid more if the wine is more expensive? And what services does the importer provide for those fees?
Let’s look at the steps.
The importer buys from the winery. Sometimes wineries offer terms like 30 days, 90 days whatever. Sometimes they want 1/2 up front and 1/2 when the boat leaves the dock. Sometimes they give it to you on consignment.
As an econ major, you realize that all of those result in different costs to the consumer.
So let’s look at some of the considerations that affect the price you pay at the store. Keep in mind that you can be an importer, a distributor, or both. These are part of the middle tier of the “3” tier system, which is really subdivided more than that in many cases.
-
Most basic = cost of goods at the winery.
-
Terms offered, if any.
-
Cost of the transport company to clear the wine at the European end.
-
Refrigerated transport? It’s not that much per bottle, but it’s an additional cost.
-
Size of container. If you load a 20 foot container with your wine exclusively, it is cheaper to ship than if you only have a few pallets and the rest is filled with wine for a different importer.
-
Ports. Some ports are just pains to ship from.
-
Brokers fees, if any
-
Customs and clearing fees and taxes on arrival
-
Self-stored or not. The importer clears customs and takes it to his warehouse. But sometimes he’s small and he pays someone to do that. If he’s paying another party, that party will charge him every time he touches a bottle.
-
Self-distributed or not. You want samples to show customers? Delivery made somewhere? If you are not storing and distributing yourself, you pay. Also, you’re not licensed to distribute in every state, so if you’re multi-state, you have another party that needs to add his piece to the final price.
-
Union. The big distributors may be union shops with high labor costs that need to be figured in. If you’re an importer/distributor, you are affected by those. If just an importer, then they’re a function of who you distribute through.
-
Volume. Wineries may offer volume discounts and distributors definitely do. That affects the price you pay in the store, but also the mark-up and margin made by the distributor or importer.
So say you’re an importer/distributor. In other words, you own your own warehouse and delivery services. Your 1 case price to retailers is $120. A wine shop that buys a single case will price accordingly. If the shop takes 25, 50, 100 cases, it’s not going to pay $120 per. It’s price will be closer to what you paid at the winery. How did we get to that $120?
Everyone has a different formula for calculating their mark ups. Roughly speaking, you figure the bottle on the shelf will be around 3-4 times the price it cost the importer at the cellar in Europe. That doesn’t mean you yourself can go over there and buy all of your wine at those prices though.
One reason you hear different things is that people do use different formulas. One guy might take his landed cost and divide that by .68, which is his price for selling to the distributor. The distributor tacks his own price on. Say he also divides by .68 to get his front line price. If the importer is his own distributor, he probably won’t mark it up as much and the wine will be cheaper in his state than in the state where he hires a distributor.
Another guy might take 40% over his landed costs, or 30% if he’s working at lower margins.
For his money, the importer will have made sure the wine has label approval, will pay import duties, VAT and excise taxes, brokerage and logistics fees and clearing agents fees, any other government or customs fees, inspections, freight and insurance, currency conversion, Customs bonds and fees, demurrage if applicable, warehousing and storage, reloading on trucks and domestic transportation, reloading truck and delivery to customer destination, and in NYC, the fines that every delivery vehicle gets each day. Those are a major source of revenue for the City, so it’s important to calculate them into your cost structure.
So a bottle that costs $5 at the cellar can go to the retailer for over $10 and then to the customer for about $15. But figure $10 avg because the retailer will be getting some kind of volume discount. We figure a bottle that is $2.75 at the winery should be on the shelf at just under $10. When I look at the store prices, I see that wine from $8.99 to $11.99.
Importers, distributors, and retailers all work on their own models, so there’s plenty of room for variance in prices and margins at every step.