Ep. 1195 Steve Kreps | Get US Market Ready With Italian Wine People

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I'm Steve Ray, your host, and this podcast features interviews with the people actually making a difference in the Italian wine market in America. Their experiences, challenges, and personal stories. And I'll be adding a practical focus to the conversation based on my thirty years in the business. So if you're interested in not just learning how, but also how else, then this pod is for you. Hello, and welcome to this week's edition of Get US Market Ready with Italian wine people on the Italian wine podcast. I'm Steve Ray your host. Our guest this week is Steve Kreps, who's president and founder of quintessential. LLC, which is an importer in the US. And you've also been, named importer of the year by wine enthusiasts magazine in twenty twenty. Steve, welcome to the show. Hey. Glad to be here, Steve. Good to see you again. You too. So tell us a little bit about quintessential, and what you guys, how how you're defined and what you specialize in and what makes you different from everybody else. That's a big question. We are quite different from anybody else being that we're a hands on family owned company. And our directive to our staff, both in marketing and in sales, is to be very consumer oriented, not to drive distributors to work with distributors. I'll give you just a quick example, Steve, as our all of our sales force are required to do two or three in store tastings every week. We are communicating with the consumer. On a daily basis with eighty five reps on the street across the country. And for the benefit of our listeners who are not familiar with the US market, yes, that is very unusual. Oftentimes, the salespeople that work for an importer job, primary job is managing the distributor and not necessarily selling and connecting with consumers. So that definitely is a point of difference that makes a difference. How does that benefit you guys? Well, it gets us one on one with the and where we do sell a little bit on, the internet with our family wineries direct. But it also helps us with our distributor. Our people around helping pull product through the retail accounts and he benefits from those sales. Think today is becoming right to the consumer. And if you're missing the consumer, you're missing the whole point on what we're doing. We get feedback from the consumer. We understand the flavor profiles that the consumers are enjoying and looking for. It makes us more aware of the kind of product that we need to bring to the United States. And we bring product from eleven different countries. And we need to be a little bit stronger in Italy as you and I discussed a while back. So what countries do you import from now? Well, we're in eleven countries, Argentina, Australia, Chile, France, Hungary, Italy, New Zealand, Spain, South Africa and the United States. Okay. Well, that's pretty impressive. And, I I know some of the brands that you guys are working with some that I've worked with in the past as well. But one of the things that defines these, and, I think it's particularly true for the Italian ones is you're focused on family wineries. Tell us why. Well, we sub we saw it as being as a big opportunity. There's a niche there that needed to be felt. In corporate America. The consumer, as we found in all of our tastings and, surveys, they are very interested in more than just what's your score today. They wanna know about the family. They wanna know about the winemaker. They wanna know about the history. So when we market a brand, we don't market this Cabernet as ninety two points. We market this as, let's say, the Steve Ray winery. We would market Steve Ray and his family and his history. That's what's important to the consumer. They're very interested in all about the wine, but they're very interested in the family that produces the wine. And that's the big thrust on what we do. And and further to that, I mean, what I've seen as well and certainly is written in the trade magazines that the millennials and gen z are very interested in the backstory, the story of it, and to to put a person to it rather than just a brand that they have some connection to where it's grown, how it's grown, and issues like sustainably produced. Obviously, we're just talking about the legacy and the history of the the place and the place itself. When we tell the story of the winery, we tell a factual story about the winery and its history. And where it's going and where it's been. You know, what, I realize, you know, marketing is marketing, but, you know, if you would read about a lot of brands that are out there on nowadays, the stories aren't even real. They're made up stories. They're fantasy stories. Ours are all factual stars. Okay. Let's talk a little bit about, one of the other differentiating features is that you have a rep in each country that you do business with. That's pretty unusual. Tell us why you do that and then how you handle Italy and Well, it's actually, in Italy, we do have a gentleman that's worked with us for quite some time. He was many years ago, I believe tied in with Antonori. He's quite quite a, an Italian background, grew up in Rome. He's been in the wine business all of his life, and he's been more of an advisor to us than a rep on our payroll, but he's been quite a good quite a help to us. He also works a street here in the United States. He has a lot of friends. He's been in the industry. That's longer and longer than me, and I've got forty nine years in it right now. So it's been quite an advantage to have somebody along. Well, compare and contrast that most or many importers do not have a rep in in in the home country and you guys do. And what what's the reason for rationale behind that? You know, a lot of, the consumers, like you said, they're all the tastings. They like to be and the retailers and the restaurant tours. They like to see somebody whose name is Bianki from Argentina. They like to see somebody from the homeland of the of the winery that they're talking to. And we bring them in now in in the instances where the wineries are small, and they don't have a rep that's here at least you know, we have them at least three or four weeks a year. In terms of staffing, traditionally importers will have staff and they'll be defined by the geographic area that they cover, whether it's a state or a region or so forth. You guys are structured differently. By, function and customer or platform. Can you tell us more about that? Well, we're, actually, Steve, we're kind of a mixture of the two. We do do state and geographic, and then we also do by the type of account. Ethnicity, chain on, off. We're going quite to detail to make sure that our customers, every one of them are taken care of. So let's use chains as an example. This is, one of the requests one of the issues that, we deal with commonly with new suppliers who have not done business with the US. And their their first well, first inclination is I wanna be in New York. And second is I wanna be with chains. Now those two work. Not going to go together because we all know that in New York, you can only have one store per person. But how does marketing to chains differ? And how important is that given the types of brands such and price points that you're working with. Well, it's, you know, it's like you just said. It's night and day. When you go into New York, everybody's an individual account. You have to knock on a lot of doors to increase your distribution. You have tremendous competition. Everybody wants to be in New York City. When you go to the chains, you're usually going to a headquarters somewhere, whether it's in Idaho or California or Texas. You're meeting with one chain manager, and he's the one that can authorize you for five hundred six hundred. Maybe a thousand stores. He also is in charge of all his, floor activity, his displays, his promotions. So when you talk to these chain buyers, the power that they have in this country is absolutely amazing. And they're looking for the right brands that fit within the portfolios that they have in their store. Yeah. And many times, they'll even break it down. If you talk to a large chain, they might have stores that are primarily in in a an Italian neighborhood, and they'll promote Italian wines more than they would say Argentina or California. And they might have those different variances around the United States. They'll also have their stores broken up by volume, and they'll have their stores categorized by price points. So it's it's a big job that these buyers have, but you have to know how to approach them and how to make a presentation that fits what they're trying to do. The the other big point, I stress with wineries is when they first come to the US and they're thinking, well, I wanted to do volume. So therefore, I wanna be in supermarkets, because that's the way where wine is sold and and purchased by consumers in the countries, my home country and other countries in Europe that they're familiar with, where that's not the case here. It's a very different set of wines that are sold in chains. And very different parameters or needs that the chains have that a lot of smaller wineries just are not set to participate. No. Definitely not. Even if you have a small house in Italy that produces twenty five, thirty thousand cases, and he thinks he's doing a great job. He might be for his niche, but when you talk about twenty five thousand cases total production to a Jane buyer, that's not worth his time. You'd usually talk And and even more to the point, it's a negative because there's no opportunity for growth, especially if it's if it's stay produced in online. Okay. Let's just move a little bit to, distribution. Do you guys have distribution operations in addition to importing? We do in a few markets. We we saw some opportunities and took them. We opened a distribution company in California, so we sell everything directly in California with their own Salesforce. It's worked out extremely well a lot better than I thought it would. In New York and New Jersey, we're also direct direct distribution, and that's been a big success in just a few short years. But then you've got the I mean, you've got I'm just thinking about the the carrying costs of of full time employees. Only working on your portfolio. Is that a good thing? Or, obviously, it's a good thing. But there's there's a flip side of that too that you're not getting the accounts that you would with a major player like a Southern or r and d c or breakthrough? Well, we're getting the accounts that we want. Okay. We do not go into some neighborhoods that can't buy a parole or would not be a feasible product for, the neighborhood. We do not go into accounts that, wouldn't relate to our portfolio at all. We we mostly have lines in the twelve to a hundred and fifty dollar category. So they're not they're not yet re yes, sir. Retailers. So they're not made for every account in every place. And what about the split between on and off premise? We're a very active on premise. We also have on premise division for chain on premise. We deal with most of the chains in the United States on premise, and we deal with the chains at retail. And we have two separate sub selling divisions because it's two completely different buyers, two completely different sets of personalities of the people that we match up. And it works quite well for us. So this is a very unique structure. I'm not familiar with many. There's a few, I think, that are similar to you, but certainly not the same. Well, let's focus on Italy for a second. You've got a bunch of great brands there. As I said, one couple that I've I've worked with in the past. Where are your holes? Where are the things that you're looking for now that are maybe growing? That you're not represented in. Well, the holes as I see it, you know, the part of it comes from my history. I have a big history in Italian wines. I, was the national sales manager for a company here in the United States called Paterno imports, which they've since changed the name to Toronto. When I was there as national sales manager, I got to pioneer a lot of Italian brands. Santa Margarita for one, Margarotti, Pio cesare, Corvo, Bernato Rati, fresco Baldi when he first came to the United States. So I have a, good background in Italian wines that I would like to expand on in our company. Now when we first started the company, it was advantageous to get into business as quickly as I we could with wineries that were not I felt, represented or countries that were not as represented as they could be in the United States. So one of the first areas we went to was Argentina. And of course, as you know, most of those wineries down there owned by Italian families that went to Argentina and became a very big success. So we started in Argentina. We started in other countries, and we felt that we had opportunities in because most everyone in the United States, most every importer, is has a plethora of Italian lines. So we did not try to fight with everybody in the world on our first few years out. Now that we've established ourselves very strong in Argentina, and France and Spain. We're ready to get back to the nuts and bolts of what I love too is Italian wise. And we have a lot of opportunities. We are very strong in Pima. We are we can improve a lot in Vinato, and there's a lot of holes that we can fill in that area. There's a lot of areas in, obviously, Tuscany. We need a major player in Tuscany. We have a lot that we can deliver to a major player. And I know that from dealing with Frisco Baldi many years ago, and we took him from zero to even before I left Paterno back in the eighties, it was we got into several hundred thousand cases pretty quickly. Campagna is always an area I've liked. Sicily, I've always liked because I had Corbo many years ago and spent some time in Sicily. So those are some of the quick areas that I'm that we're going to be starting to look at right away. But we will be filling our Italian portfolio. It was very important to us. And let's face it. Davis, the number one category in the United States is Italian wine as far as imported wines. Yeah. And it's certainly not weak in in value, but, number one in volume. So what are the criteria you use in selecting wineries that you at least wanna engage in conversation with to find out more about? Are they coming to you as the stuff that just kind of comes in over the transom? Is it you actively going out and finding them. And if so, what are the criteria that you use, to be able to screen them? Well, since we've had this plague of COVID, we haven't been out and as active as we'd like to be. But we are starting to. We are looking for wineries that are characteristic of the appalachian that they come from, that they have a reputation and a history of quality, that they are family owned, and, One other that we always throw in there at the end is we need nice people. We wanna deal with we wanna have our surround ourselves with people that all care and love about the wine business. And they and their families that fit in with our family. When you're talking to wineries that are not currently present in the US, that's one of the areas where I specialize, and that's why I wrote the book. That we wouldn't have to go through the same, you know, lecture every time I talk to somebody. How educated are these? And are you only talking to wineries that you feel have a holistic understanding of the US market and what's really required to be successful here. Well, it's always it's a lot it's always a lot easier to talk to somebody who knows what's going on over here because this country is so different. Yes. With the largest wine market in the world, but we're also the most difficult wine market in the world. We have fifty different states with fifty different sets of laws. So for them, they think it's just the United States, but it's actually more like fifty different countries that we have to operate in here. And all the legal registrations and the filings and the things that you go through for every state that we call compliance is sometimes nerve wracking. It takes it it's nice to be able to talk to somebody with a good understanding, but it's always not necessary. We can always teach a winery about the United States. I think they need to have a understanding of what is here and what they are capable of doing. Like you mentioned a little earlier, they just can't walk into a chain and expect if there are twenty thousand case winery, expect to get distribution in a thousand stores. It's it's just not even it's not even feasible. They have to know where their markets would be, and we explain that to them when we do interview wineries. We have to have their feet on the ground. They have to be able to understand what America is. And when they do, We always seem to get along quite well. And usually, you know, we always try to grow a brand, not immediately at retail, but fine wine shops and on premise. And that's where we get begin, especially with rolling rim. Italian wine podcast. If you think you love wine as much as we do, then give us a like and a follow anywhere you get your pods. One of the things I see as a consultant to brands that wanna come into the US market is there's been a change in the asks, if you will, from both importers, as well as distributors who are looking for the simple way to say it is a piece of the action, but what they really mean is a success fee or some sort of benefit or bonus that comes if there's a liquidity event or if the brand is moved. It started with distributors asking for three to five and now I hear seven years of twelve months trailing gross profits, which is amazing to a lot of people, but it's kind of in most contracts that we see these days. And now we find I find this, importers are asking for some similar things. Can you comment on that? Put it in perspective for us. Well, sure. I can comment on it. We do not do that. We haven't done it, but I can I understand why? Many times, a winery will come to the United States. And let's say that they come in and they sell to an importer. And the importer spends time his money, his manpower on the brand, and builds it to what might be a significant volume after, say, a ten year contract. And then the winery, because he has a friend in New York that would like to distribute it. Let's say he moves it for not because of just cause, but because he would just like to be with a relative or a friend who or somebody had met. You know, that importer loses a lot. He's invested in it. His heart and souls in it. So I think what they're doing is just putting up some kind of a protection for themselves so that they're they don't go out and spend a lot of money on a portfolio of wines and lose in the long run. Every importer likes to take a brand on like people when they get married. They think they're going to be married forever. And if they're not married forever, there's consequences. Maybe that's the thought behind it. We haven't done that. We have had winery say, well, what if we partnered or You know, we don't get into those conversations. We're really looking at the people, the quality in the product, but I understand why some importers are doing that. Okay. Fair enough. Let's get back to, regions. I'm just back from a a trip sponsored by Cecilia Doc of Western Sicily. We were in Marsala, and tripani, that region, Western, Colorado, Grillo, brands like that. Some near Adavolo, but not know, what we're hearing is everybody's talking about Aetna, but there's only about twelve hundred hectares of of wine, or of grapes in in Aetna, and there's a lot more than than that in the rest of of Italy. Tell me your thoughts on on Sicily as as a an island as a a region all told and where you think some of the strengths and weaknesses are. You know, I love Sicily. I've been there many times. I had a brand back in my paternal days called Corvo that came out of Sicily that during my time at, Paterno, we got up to about four hundred thousand cases. So they had the capacity. They had the vineyards. They had they were with all to provide us with what we needed. There has been a lot of new wineries come up since since those days back in the eighties. Sicily has gotten a lot more notoriety. The ones that we've been approached by had been very, very small. Not even, you know, a a winery needs to understand too that when you first take on a brand, just the filings getting the wine to the wine writers, the, the compliance that involves, and I've done it, did a study on it once it cost us in the first couple of weeks. Before we ever get a bottle of wine, we spend about fifty thousand dollars before we get a bottle of wine to sell. So when you're looking at the real small guys in Sicily, we like them. We would have loved to do so, but they were so small that we haven't, we need somebody that we can sink our teeth into that has the ability to get Okay. But what particular areas do you see as having that growth? I mean, I had mentioned Aetna. A lot of people when they say Sicily now are talking specifically about Aetna when there's so much wine produced in the rest of the island of of great quality and history. I was at Donna Fugata. I went to Pantaleria, which was pretty exciting for me. I mean, there's all kinds of variations, in in Italian wine that, you know, don't fit any, you know, standard. It's not like bordeaux. Right? The all kinds of different lines. But the winery needs to be somebody that can say, this is my signature. This is who I am. This is the type of wine that I produce. This is my history. This is where we're going, and this is where we wanna be. Okay. Critical question right there though is how capable are the wineries that are not currently important into the US that you're talking to capable in in articulating that. I found that to be a real challenge. They, you know, they you ask them, tell us about Chwinery and their response is I make really good wine. Then they tell you about their grandfather and how we went from a mixed agriculture and everybody has the same story. But your story has to be different from everybody else. True. Your story does have to be different. It cannot be the same as everybody else. It has to focus your attention in one particular area of who you want it to be. You cannot be, you know, it wasn't too long ago in a winer in California. I said, well, what's your Where are you going? Yeah. You're a cabernet producer or a pinot producer. But the gentleman was making twenty six different, varietals. The American consumers not ready for twenty six varietals from one brand. They don't understand who you're trying to be or what you really wanna be. What do you want? What can you do the best? And that's what a winery needs to sleep or anywhere in the last So the idea is is focus, and we we see that as well. I mean, when you're presenting your portfolio to, an importer, a distributor, a retailer, or even to a consumer, You can't be presenting the entire portfolio. Take your pick. What do you like? It's, I think you have to be something to somebody. Otherwise, you'll be nobody to anybody. That's true. You're just a delicate tessa. Which lunch meat do you want? What loaf of bread? You know, it goes on and on. It doesn't work that way. Okay. Strategically and philosophically, we've we've just been through two, two and a half years of COVID, which disrupted the entire world. Still is doing that. We've seen dramatic impact on the on premise. And we're also seeing a major change shift, if you will, of wine consumers from a focus at least old people like us. Have on baby boomers now to gen z and millennials. What is quintessential doing to address these three issues? Well, I think, you know, the biggest part of us is we're going right to the consumer. We're not relying on the distributor to get to the consumer. It's a lot of the in store tastings that we do, the presentations, the wine dinners. We're still very active in getting to the consumer and getting to those places where the millennials are. And the x and the ys and the zs and whatever the next generations are gonna be when they're twenty one. We're going out. We're finding them, and we're tasting wine with them. You know, I loved it when you get some of these young people and they say, well, I don't like wine. I said, well, have you tried any of the two hundred and fifty thousand different varietals. If you tried any of the different flavor profiles, you know, tell me what you do like, what you like to eat, and I can give you a wine that you're going. So to say that they don't like wine, I don't buy So two of the other areas, one is the impact of COVID, and it's a dramatic impact on premise and, obviously, your portfolio, is very on premise oriented. And Italian wines in general, I think, are. What changes are happening in the marketplace regarding on premise and how are you dealing with it? Well, when COVID first hit, I know my dad used to hit a bad heart and he used to talk about angina, which is the beginning of a little heart attack. And when when COVID first hit and they shut down, restaurants all across the United States, and we lost thousands of accounts that were selling our product. You can imagine the panic we had. And I'm not not just us, every importer, every winery in the United States had that angina. But we we covered, you know, we finished up the year at fifteen percent ahead of the previous year, even after losing all those accounts in the first part of was a twenty twenty twenty. Right? So it was, a heart attack, but we were still named importer of the year. And I think a lot of that, and I think the line enthusiasts picked us because we were so consumer oriented. You know, as soon as the stores were able to do something, we were in there and we were tasting lines with the consumers. As soon as they they after the first few weeks where they were delivering to the cars in the parking lot, You know, on premise, as soon as they were allowed in different states to start to open, we took a very active role. Even shifts, so are man powered markets where we could become effective. And it worked quite well for us. And like I said, at the end of the year, when it was all said and done, we finished the year in a very positive note. What benefits or what fallout accrued to you? From having been named Wayne enthusiasts, importer of the year? Well, it, you know, it's When you get a pat on the back for doing a good job, it's always a very positive thing. But everybody had known us, over the last twenty years, we have become a name. And over the last forty nine years, I've called on every distributor in America and most chain buyers and most retailers around the United States and and, on premise accounts of of, any consequence I knew. So I think that we weren't sure we got the award, but and it helped. And it did bring more awareness, but I think it was a combination of things. My long career, my son's long career, the award, and the awards we've gotten in the past. We've been named by impact, those fast track awards, and so on that we've gotten from from the Marvin Chanking companies. So I think it was a combination of everything that helped us. But the wine enthusiasts imported the year just helped top it off. We're coming to the end of the the interview, and I I'd like to end mine with, provocative question. We've talked about a lot of things here today and really in the time a lot had just touched on some. Acknowledging that most of the people who are listening to this are people in the Hawaiian trade internationally and particularly the majority are from the United States. Think about what is the takeaway of all that we talked about is there some one thing that you think a listener can take away from this conversation and put to use, practically. Immediately or near term? Well, I think, you know, a couple of things is the philosophy that we have towards how we sell our wines and how them were consumer based than we are into driving a distributor. We are, more into the consumer and the different levels of the consumer, the flavor profiles of the consumers are looking for. I think mostly for your Italian listeners, you know, I certainly want them to know that we are active now in fulfilling our Italian portfolio with our primary, area that we're looking for is Tuscany with a major player. Also, some of those other areas that I mentioned, like Compania, sicily would be, something that we are actively looking forward to filling. Won't be careful what you asked for. I I imagine you're gonna get a lot of calls. I really like the idea of driving the distributor as you described it. A lot of people think that the distributor is the one responsible for building the brand because they get it out there, and they certainly play, an absolutely critical role. But at the end of the day, their strategies aren't necessarily in line with yours as an importer or the producer as a producer. And so it's I think it's right and appropriate that an importer take the responsibility of driving the distributors strategically to execute against where the brand fits in the United States and how that applies into their individual market, whether it's a state or a city or a region or so forth. Well, the distributor has a lot of masters to answer to. And a lot of those masters are a lot bigger than us. We're, one point six, one point seven million cases a year. And I'm sure it was finished well over one point seven this year to a distributor that handles all the big liquor items all the major California items, the big, big players. So I'm not saying we're insignificant, but we're is we're not their number one priority. So anything that we do to help them to increase their sales, they are re they reciprocate quite well. And it's like anything else on our wine business. If you have the association, you have the camaraderie with the ownership of the winery, the top executives in the winery that you grew up with, which I did in most cases. You work with you you work with each other to be successful. It's all still about loyalties, friendships, camaraderie, Everybody think it's out the window. It's not. It's still. Okay. We're talking this week with Steve Cresps senior of quintessential importer in the United States. And, Steve, I'd like to thank you for sharing your your time with us. And, for our listeners tune in again, next Monday for another edition of get US market ready with Italian wine people. But before I go, if people wanted to, reach out to you, what is the best way for them to connect with you? My email address is steve at quintessential wines dot com. Now let me spell it because I've spelled it for every distributor in every rep and every retailer in the country over the last twenty years. It's q u I n t e s s e n t I a l w I n e s dot com. Thanks again for listening. This is Steve Ray with get US market ready with Italian wine people on the Italian wine podcast.