Ep. 399 Steve Raye U.S. Market-Ready | Import Options Part 1

Thanks for tuning in. I'm Steve Ray, author of How To Get US Market Ready. And in this podcast, I'm going to share with you some of the lessons I've learned from thirty years in the wine and spirits business, helping brands enter and grow in the US market. I've heard it said that experience is what you get when you don't get what you want. My goal with the book and this podcast is to share my experience and the lessons learned from it with you so you can apply those lessons and be successful in America. So let's get into it. Hello, and welcome back. We're about to cover the ten options to import your wine or spirit brand into America. In order to dedicate enough time to the pros and cons of each of the ten options, we're again going to break this topic down into a two part series, and this being part one. Many US market newbie export suppliers start off with a common misperception that there's only one model for importation into the US, the agency model. This is where the supplier sells the brand to the importer who in turn takes full margin and responsibility for everything that follows. Logistics, registration, distribution, pricing, marketing, promotion, sales, etcetera. It is important to understand that in fact there are ten different options that warrant consideration before making a decision on which is the right one. Outlined below are a range of import solutions. That need to be at least considered as part of the planning process. Even if you ultimately decide that the agency model is right for you, you will be much better prepared for success in the US market because of the enhanced understanding of the pros and cons of the alternatives. I can't stress enough the importance and recognition that you don't need to start with your, quote, forever, end quote, importer structure. There are options such as service importers that will allow you to get started with better chance of success down the road, combined with flexibility to consider options once you have some experience on which to base a decision. That way, you become a more attractive brand. And position yourself to negotiate a better deal, then you could strike as an untested new market entry. So bottom line, take a look at all the ten options, but seriously consider it as a two step process. One is to get started in the US using service importers, then move on to a longer term, import and distribution solution. I'm now going to go through the list of the ten options for importing your brand into the US, and we'll be reading a list of the pros first, and then the cons, second, for each one. There are ten. This is number one. The traditional national agency brand importer. Examples include Palm Bay, wine bow, co brand, and Turlado. And from the pros, they have existing national distribution network. They have clout with distributors in that network, and your brand benefits from their portfolio strength. They generally have a large Salesforce calling on distributors. They have an on staff marketing department, with existing ad and PR agency relationships that they can pull in on your behalf. You can participate in their sponsored events, such as portfolio tastings that attract more and more important trade press than you could reach on your own. They have existing business with chain accounts both on and off premise. The bottom line being a national agency brand importer takes on a lot of the responsibility because they offer so much in return. On the flip side, small brands are gonna get lost in a portfolio where the bigger brands represent most of the revenue and margin. That's reality. An agency brand gets lower priority than owned brands and we're seeing a lot of these traditional agency brand importers move towards taking equity positions in the brands that they import. William Deutsch being the one who really set that in motion with Yellowtail. The third one, Con. Importer controls the pricing and the margins. You may have some different points of view on how you want your products sold and to whom the reality is you've given up that level of control. And in some cases, even the knowledge, Because unless you negotiate your contract correctly, you may not even find out the details of some of these things. And fourth, internal competition for agency company resources. I mean, they have a PR department, but that doesn't mean that they can spend all their time worrying about your brand. They're gonna be focused on the big brands that warrant their attention, generate revenue, and profit. The fifth con for the traditional agency brand structure, the imported determines marketing strategy, creative, promotion, point of sale, basically, they fit your product into their portfolio. And lastly, they're set up to work with bigger suppliers and focus on big volume brands. That's the basis of their existence. So while small brands represent the future, and meet the needs of emerging market segments, the reality is every big company is gonna have to focus on the eighty twenty rule, which are the brands that generate the revenue and margin that drive the business. The second option in our list of ten options to import brands into the United States is what I call a specialty national importer or specialist National importer. Examples include Cape classics, which specializes in South African wine, Athhenae, which specializes in Greek wine, Gaurachi partners, which specializes in South American wine. And here's the pros. One is they have an existing national distribution network, which is critically important, and saves you a lot of trouble. So you get some big benefit there. They also have a greater depth in a given category and an expertise at being able to sell in that category. You can participate in their sponsored events, portfolio, or holiday tastings that would attract more and more important trade and press than you could reach or attract on your own. Obviously, they have category expertise, not only just the depth, but the breadth. They're a mile deep and a mile wide. They have on staff marketing personnel in the company itself, you're not dealing with a one man operation or one person operation. And they most likely commonly would have existing business with chain accounts. Again, making it a lot easier for you to penetrate the US market within a reasonable time frame. But, of course, there are cons to each, and these are the cons for specialist national importer. Generally speaking, they tend to have smaller brands, which individually would be less important to distributors that get some benefit from having a portfolio of brands with the focus, but they are tend to be smaller brands. The importer controls, generally, the pricing, margins, brand priority, creative look and feel for promotions, and they fit your product into their portfolio. So you essentially have less total control, I guess, is the easiest way to say it. Specialization may mean limited appeal. We've talked to some folks who specialize in Hungarian wines, and they're very deep and very experienced in Hungarian wines, but there's not a lot of awareness and appeal for Hungarian Wine, so they have to build the category, not just the brands. And lastly, in terms of cons for specialist national importer, in house marketing and sales resources are not nearly as extensive as a general national importer, but still significant and better than anything you can do on your own. Number three on our list of import options is a specialist regional or multi state importer. And they'll be similar to a specialist national importer, but obviously focused a little bit more geographically. Examples include Michael Skernick, the NEA Group and Opeachy. On the pro side of specialist regional or multi state importer, they're smaller, more focused and nimble. You'll get more attention and not lost in their portfolio because they're focused. And because they specialize in a particular area, whether it's a country of origin, indigenous varietals, price, a state produced by a dynamic, whatever it happens to be, they're known for that. Skernick is a perfect example. Michael Skernick and Terry Thiste's name on a bottle, carries a lot of weight with a lot of customers. And the last one, Pro, is if you only make fifty thousand bottles, you don't need national distribution. You need strength in a limited set of markets. Oftentimes, If someone's got, total production of five thousand cases, they can move that in one market. And trying to be national or expand into multiple states may not be the smartest thing, but that can be a pro or con. So continuing with the cons, because they're regional, they tend to be have limited geographic reach. And so that becomes a challenge. If they're only in the northeast and you wanna sell in California, then you're gonna need an importer that operates on the West Coast. They tend to have limited capital, credit, payment history may be a problem, not for any of the ones I just mentioned, but, some of them do operate on a shoestring. One other I would add is price imports, p r e I s s. Here, again, they're smaller, you're smaller. They have limited resources, limited capital availability. Often no marketing staff or limited number of marketing and a small sales staff, and they probably hire out PR rather than do it in house, which often can be a better thing too, but I've put it into the cons. Next is they tend to be with smaller specialty distributors, so you generally might not get the breadth of off and on premise distribution that you might have with a larger importer. There's also limited interest in investing in individual brands, and likely the majority of the marketing has to come from the brand owner. Now we work with a couple of people like that, and I read this comment and I'm thinking, yeah, that's true. But generally speaking, if you come to the marketplace and tell your importer that you want to invest in growing the brand, they will be very creative in coming up with innovative solutions so that you can all share that and share it with distributors as well, spread the costs around and still be very effective based on their expertise. If you have multiple importers, you'll need multiple back labels, and that has implications on inventory and compliance. That's the last con, and it's not a deal breaker, but it is something that a lot of people Don't think about. If you have fifteen different importers in the US, and you've got excess inventory in California, you can't necessarily move that inventory from California to New York because you have a different importer in New York. Moving on. Number four on our hit parade of import options is a common one, and that's to set up your own import company. And, obviously, the big pro of that is, you can have one hundred percent of attention on your brand. You have complete control of everything, marketing, sales, pricing, distribution, margin, focus, message, and so on. It tends to work better for spirits than wine because they're more profitable. And, obviously, you would keep the importer margin as well as the producer margin, and you can be a lot more flexible on price. We have seen some companies who have shifted from, traditional agency brand to their own import company. Examples of that includes Santa Margarita, Zonin USA, Kordornier, Schmidt Sonna, a masked Yagermeister. On the flip side of setting up your own company is you bear the complete cost of everything. You can't amortize anything across the portfolio, and you really need volume to make it work. And that's gonna take some time to build. So your loss is gonna be deeper and longer. For your own import company. So you really need to put it into perspective as you're exploring that as an opportunity. And the second con is also could be a positive I suppose. You need people with lots of skills, marketing, sales, import logistics, warehousing, And oftentimes you end up being very reactive and too much attention is paid to putting out fires, and that can take your eye off of what you should be doing, which is promoting and selling the brand. And the last con for your own import companies, it's not your expertise, and you tend to make some simple mistakes. We've seen some people say, oh, we set up our import company in Delaware because a lawyer told us to do that, and they spent a lot of money on the lawyer, which is can be a very good thing. But by the same token, it's pretty easy to get an import license. In the United States, you basically just need to be a resident in the US. And so you can work with somebody who's in the market who can set this up for you, perhaps less cheaply than going through a formal attorney who is, specialized in the category. Don't get me wrong. I'm not saying don't use attorneys. Absolutely think you should and get very familiar with the options when you're negotiating contracts. But in terms of setting up your own import company, it can be simplified. Number five on our list of import options is service importers. And examples of those include MHW Limited, Park Street, USA, Wine West, T Ellen Penny and Siemens Beverage and American spirits exchange. And the pros of using a service importer is you can get started very quickly, and they are basically set up exactly to do the things that you need to do. So not only are they very efficient at what they do. They're also very effective at what they do. I would also add that they know the things not to do and provide very good counsel on, making sure that you don't make the same mistakes others have made before you, again, for the first time. They offer cost savings in terms of back office services. They can get better deals on logistics. They do freight consolidation, but have a finance department that works very well so that you can manage your funds in the US. And importantly, Park Street, for example, offers a factoring service. And working with them is kinda like a Chinese restaurant menu. One from column a and two from column b. You only pay for the services that you need, and their list of services can be very complicated to wade through to know what you need. Usually, it's on an ad hoc basis, which is great. In most cases, they have distribution licenses, in several states, generally, New York, New Jersey, and Florida. And most of them can also work in California because in California, you don't need a distribution license to distribute. They do a great job of handling cash flow invoicing price posting, bill backs, and other price modifications and distributor deals. And I can't stress this strongly enough. This is a critical function that gets a lot of people in trouble and having a professional manage it for you, is extremely valuable. And the bottom line, as I mentioned earlier, is you're gonna get quicker market entry because they know the things that need to be done, as well as the things that don't need to be done. And as I like to say, it's not only important to not just do the right things, but do the right things in the right orders, and service importers can do that for you. Now, of course, there are cons to using service importers. Generally speaking, they do not do marketing or sales. They may have an in house marketing person to help you guide them. And the ones that I've worked with have been very, very good and very useful. But it's not the level or depth or, significance of marketing support that most brands find that they need. A lot of brands think that, well, if I use a service importer, I don't need anybody in the country, Yeah. Technically, I suppose that's true, but you are gonna need somebody to do some of the things that the service importer can't do. And that would include marketing, sales planning, distributor management, managing inventory, pricing, discounts, all that kind of stuff. Another con is that you can use their license in, the states where they have distribution, but there is no on the ground sales organization. You will also need to find or set up a distribution network. So that's where, I mean, you need somebody in the US who knows the distributors who can actually make the phone calls at the senior management level. And also, once you get distribution to help manage the distributors on a staff end blind level. One of the cons I hear a lot is the minimum fees may seem too high given the limited volume that most brands start with. And, yeah, that may be true, but the reality is you're not gonna make a profit in year one You've gotta think of this as an investment and not only investing money in, but avoiding wasting money by trying to do savings on things that you don't know a lot about that service importers do. So my recommendation is absolutely consider service importers. Thank you for listening to part one of two. Regarding the ten options to import your wine or spirit brand into America. This has been how to get US market ready presented by the Italian wine podcast. Hi. This is Steve Ray. Here's a line I was taught. Although I haven't taken it to heart, I still think it's good advice. Never miss a good chance to shut up.