Crowdsource Question: Disrupting the Three Tier Model?

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HZ Tarar
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Joined: November 29th, 2018, 2:02 pm

Crowdsource Question: Disrupting the Three Tier Model?

#1 Post by HZ Tarar » November 29th, 2018, 3:06 pm

Hello fellow wine geeks and hustlers,

After having lived in Europe for three years, I had a bit of a reverse culture shock moving back to the East Coast just over a year ago. No longer able to access the plentiful wines Europe has to offer at fair prices, I found myself investigating work arounds. Wine clubs were one option, but still too pricey. Trader Joe's has a few bargains, but those quickly grew stale. That's when I decided I'd simply import my favorite wines myself.

I created a small start-up and now have a TTB basic importers license and have lined up a logistics company and of course a producer in Italy I'll be buying my first order of Prosecco from.

Here's the question for the collective: are my only routes to follow the standard model and hunt for wholesaler/distributors to whom I can hawk my imports? To me this defeats the central purpose of doing this (I still have a day job mind you). I want to have inexpensive top notch wines without all the markup.

Here's my initial idea: partner with a local wine store and offer exclusive imports while focusing on the store's monthly wine club. This at least removes the distributor from the equation and gives my little start up a close partner to work with. Yes, I realize many small importers act as their own wholesalers as well. The difference here is an exclusive partnership with the retail outlet and the focus on working together to scout and import unique varietals and to respond quickly to changes in customer demand. We'd focus on direct to consumer sales as well.

If you, as a retailer, had such a proposition, would it be appealing? What am I missing? Is this entire idea a non starter? Volume of course will be an issue, we can't work with importing 200 bottles at a time.

I humbly request your thoughts.


----

Zed
H. Zed Tarar

justinmcinerny
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Re: Crowdsource Question: Disrupting the Three Tier Model?

#2 Post by justinmcinerny » January 10th, 2019, 7:14 pm

Unless I am missing something, your idea seems to be unworkable in today's regulatory environment. I am a Maryland retailer. The laws here strictly prohibit partnering with a business in another tier. Maryland's laws also preclude direct to consumer imported wines. It is probably a safe bet that the laws in many other states on this issue are comparable to Maryland's. See for example what happened to the Bastianich Family in New York a few years ago https://ny.eater.com/2014/3/21/6257867/ ... sla-issues. Many, if not most, states probably prohibit 'exclusives'. Unless you have a limited, tightly allocated item or a private label, then you are generally obliged to make it available to all licensees. Your proposal might be comparable to what Total Wine seems to do in their Winery Direct program https://www.totalwine.com/wine/c/c0020? ... ewall=true. However, it's unclear to me what Total means by Winery Direct because, as I said, relationships between producers and retailers are generally illegal.

For what it's worth, I am stridently opposed to the three tier system. I have been trying to disrupt it in Maryland for years. I have been lobbying, I have been in the press, I have organized licensees. I am not getting anywhere. There is very little political will to make any major changes to the system. Minor gains have been made in the areas of domestic direct to consumer or licensee wine and beer (at least craft beer). I don't know anything about spirits. My hunch is that any significant reforms to the three tier system will come from the courts, not the legislatures.

Feel free to PM me. I am thoroughly engrossed in this topic but I can really bore people who don't share my enthusiasm for it.
Justin
ITB - retail
suburban DC

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Randy Bowman
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Re: Crowdsource Question: Disrupting the Three Tier Model?

#3 Post by Randy Bowman » January 10th, 2019, 8:01 pm

My brother-in-law has a retail wine store, got fed up trying to gets the wines he wanted by buying futures and got himself an importer's license. Spent the money to tour the wineries of Europe to build a good portfolio of wines he could import. All the majors, (the ones he wanted), wouldn't give him the time of day and the next tier was pretty much the same. He wound up with several smaller, lesser or unknown wineries from France, Spain and Italy. He tried to make it work but in the end, the wines went to his entry level wine club members or he cooked with them because they didn't sell in his store, nor could we move any of them for him from our store. Guess who the biggest competitor for his wines were? Trader Joes and Cost Plus Imports. They were cheaper too.

Unknown/little known are hand sell with no quotable accolades. We carry and sell Zardetto Prosecco. It retails for $15.00. It moves fairly well and is a an easy hand sell to people seeking a sparkling for Mimosas.

I'm a retailer. Can you sell me a Prosecco, including delivery to me here in Napa, CA at a price cheap enough to compete with Zardetto and is it as good as Zardetto?
IN THE BUSINESS SHILL: An associate of a person selling goods, who pretends no association to the seller and assumes the air of an enthusiastic customer.

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Thomas Keim
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Re: Crowdsource Question: Disrupting the Three Tier Model?

#4 Post by Thomas Keim » January 15th, 2019, 8:15 am

you have two options as an importer -

1) Break your pricing structure down into three tiers, for example: PROSECCO: delivered to your door for $5.00 a bottle. Sell it to wholesaler for $7.50 per bottle - wholesaler sells it to retailer/restauranteur for $11.00 - retailer sells it for $16.00 - you ALWAYS have to work on the end result (the final price) to work in the three tier system.

When you are visiting cellars looking for potential products, you should always look at the FOB price delivered to your door, then triple the price, adding on another 20% for good measure, and that would be your suggested retail price.

2) Find a large chain/large store in each state who can purchase direct (and work with the product as an exclusive). Now you still have to go through the three tier system, but most large chains/big box stores have wholesalers they work with who will bring the product in for 10% over cost - this allows them to purchase the product for $8.50 a bottle, and sell it for $16.00 and make a much bigger markup.

Good luck -
ITB - The Yoerg Brewing Company

"What if I fall?" "Oh, but my darling, what if you fly?"

BlaineRyanHunt
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Re: Crowdsource Question: Disrupting the Three Tier Model?

#5 Post by BlaineRyanHunt » January 20th, 2019, 10:14 pm

I work ITB and have had nightmare with the 3 tier system and wish to see it abolished.

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Eric Ifune
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Re: Crowdsource Question: Disrupting the Three Tier Model?

#6 Post by Eric Ifune » January 24th, 2019, 8:37 am

I've a friend who's a small importer. Concentrate on small unknown (at least in the US) estates outside the big areas, e.g. France, Italy. They managed to get accounts with some quite well known and iconic producers (at least in their home countries). They also had to do lots and lots of legwork, getting people to try their wines.

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