Ep. 88 Monty Waldin interviews Steve Raye (Bevology INC) | Monty Waldin's Let's Talk Wine Biz

Italian wine podcast. Chinching with Italian wine people. Hello. My name is Monte Walden. This is the Italian wine podcast. My guest today is Steve Ray of Bevology Inc, which is based in the United States. Welcome Steve. Thank you, Marty. Right. First question is, what is Bevology Inc, your company? What do you do? We're a consulting company. We specialize in helping export brands, wine, and spirit brands who wanna come into the US market, and I'm particularly active in the Italian wine world. Why do you specialize in Italy? Because Stev Kim has included me as of her collection of important pe white people in the world. And when she invites me to come and speak, I'm there. So I speak here, I speak at, Van Italy, and I'm also go actually gonna be doing a lecture at the University of Belonia Business School on Thursday. So Vivology, you're offering advice to producers and consumers or just wine producers. Producers principally, but we also I also own a, import company called Bevology imports, and we're a very small boutique importer. But what it this gives me a very, very practical view of the issues that new brands are facing and what the needs and desires of importers are. So I spend a lot of my time educating producers on the US market. And one of the things I would recommend to them also anyone who's interested in the US market, there's a great book called the wine exporters handbook to the US market written by Deborah Gray, who's a good friend of mine, and that's really a primer on everything you need to know with the US Mark. What are some of the common mistakes that people make? I mean, I'm not just about documents to get the wine into the US, but once the wine is there, why sometimes to to wines not sell as well as they should do? Well, the the challenge is because the US has what we call a three system. And that means that the wine producer has to sell to an importer. The importer in turn sells to a distributor or we call wholesaler, importer and distributor are synonymous. I'm sorry. Wholesaler and distributor are synonymous. I'm sorry. Wholesaler and distributor are synonymous. Us. So producers sells to an importer importer to a distributor, distributor to either an on or off premise retailer. On premise is what we call Horeca, what you call Horeca. They put that program in place in nineteen thirty three at the repeal of, prohibition to keep the tiers separate so that criminals like Al Capone didn't have vertical control of the market. Eighty years later, it's just become this very difficult thing labyrinth if you will to wind your way through almost as, byzantine or complex as, the old Soviet system was. So you have to know your way around it and that answered your first question, which was what do they need to know? They need a guy And whether it's me or anyone else, you can't do it on your own. And the thought of trying either to save money, time, or thinking that because you know somebody who's worked in the industry, it's gotta be somebody who knows the US industry cold and also knows about bringing in new wine brands. Those are two specialties with a lot of our our canna that you need to know the details of, or you will be stepping in holes that you didn't even know existed. So just explain a a little bit about your work with, say, are you working with Amazon? No. Whole Foods. The reason why I'm, my presentation at wine to wine this year is on the significance of Amazon and their purchase of whole foods, and what a lot of people, including in the United States, but a lot of people around the world, don't recognize that this is going to be a seismic change in the way the US system operates. Okay. So, obviously, in a nutshell, what is Amazon as you said, and what is or was Whole Foods? Okay. Amazon dot com is the largest, e commerce company in America. Basically, I guess you could say invented the category in America, but it dominates it in such a way that forty three percent of all e commerce in everything from automobiles to ZZ top albums. That's sold online. Forty three percent of it is controlled by Amazon. Amazon had tried to get into the wine business four times and failed each time. This is the fifth iteration of them trying to do it, and the irony is they figured out, here's this e commerce company. And what they figured out the best solution is to buy a physical retail store chain and use the licenses and the fact that those physical stores are in those states to fit into the three tier system. Yeah. It's kind of ironic where and mortar shops are going online and an online behemoth is is going back into the high street. Beautiful phrase, and and that's a huge thing. And simultaneously, there are two other things that are happening in the US that are really affecting it. Number one, has been tremendous consolidation in US distribution. So where, say, ten years ago, the top ten guys controlled maybe fifty percent of the business with a recent consolidation that was just announced two weeks ago, two will control fifty five percent of all the business. And so the challenge for producers in Italy is as they come to us and say, gee, can you help me find an importer? And the answer is yes, but it's not the yes that they wanna hear. What they wanna hear is that they're gonna find an importer like they might have in another country who's going to take the responsibility of building your brand for you. That won't happen in the US, but there are a glass of importers, which we call service importers who say yes to everyone, four names of those are NHW limited. Park Street, T. Ellen, and USA Wine West. And each of those will say yes to every friend who calls, and many of them also have distribution licenses. It's not the best solution for every winery, but it is a solution that every winery can start with and build on. But those four, you mentioned they are they in every state. They got distribution in every state or not. Let me clarify a difference between import and and distribution. Importing in the United States is, licensed as granted by the federal government. So if you a license. It's by default federal. It doesn't necessarily mean that any given entity has a relationship with distributors in each of those states. So what I was commenting on that, all four of those guys have the ability or have distribution licenses in New York New Jersey, Florida, and in California, you don't need a distribution license, so effectively they have it. The point being, you can get an in an importer and a distribution solution in the four largest wine markets in the world. Without having to work too hard. Now there are some consequences of that, meaning that the burden of marketing and selling your wines still needs to be solved. But that's okay because the hardest thing to solve and the first thing that has to be solved is the import solution. And the simple answer is there is a solution for it as opposed to. A lot of people who feel it's a brick wall, and they can't get anybody to listen to them. And isn't one of the problems with buying a very basic one, you know, obviously Amazon and other but mainly I wasn't have found a way of delivering heavy, inconvenient, oddly sized stuff safely and without breaking it. But wine, apart from the federal or national or international regulations governing its movement is heavy and fragile. Yeah. I don't what you say is true. I don't think I think the larger way to to look at that is the last mile or call it the last meter. And it's the challenge of physically the logistics of getting whatever it is, whether it's a fifty pound bag of dog food or it's a, you know, a single bottle of wine to the customer in the same condition that the supplier would like the customer to get it with the label clean and everything the way it's supposed to be. That's what Amazon does better than anything else. They are the premier logistic company in the world. So whether or not they have had not addressed or even solved that problem in their prior manifestations, it comes with the turf with the new thing. But I think is a more important issue is wine is just the secondary piece this. What I think they're trying to do is to establish a gemini over the grocery business in the United States, and wine is a value added bolt on that will differentiate them in a very meaningful way into the live of consumers because in the US, eighty percent of wine that is purchased is consumed within twenty four hours. So knowing that consumers are gonna be buying the wine for what they're gonna serve tonight, Amazon's now through whole foods gonna be providing the food. All of a sudden, they're a part of your life. That's where they're goal is it's dominance. Not that that's a bad thing, but it's a thing. So one thing for Whole Foods, obviously being able to have access to and sell and therefore deliver direct to consumers, say, an Apple. Mhmm. It seems that Amazon is also allowing people to try, in some cases, the apple before they actually buy it. I think if I say ten apples, they can try them. Could that ever happen with wine that somebody delivery driver with Amazon on his or her t shirt turns up with a with a sample of this is the one you're you've ordered for this evening. I imagine that's gonna have a lot of regulatory pressure, but could we one day get there? Absolutely. And I think it's a brilliant idea, and it's gonna take some creativity to solve it, but it addresses one of the two fundamental questions Americans have and it relates to the comment I made about, consuming the wine within twenty four hours. What anyone wants in Americans certainly is they wanna know what does the wine taste like and is it going to go with what I'm having for dinner tonight. So address the second question. The first one is what it's gonna taste like? There's only one way to do that. I could describe it to you as, you know, boiled huckleberries. I don't know what that means, or I can say here, taste it. So that clearly is the best solution. Best solution for selling a consumer product is to get it in somebody's mouth. That's why in store tastings are the best tool that we have for selling. How can you adapt that solution into Amazon's model? Stay tuned. We don't know what their model is, and we don't know how they're gonna address it, but great question. Absolutely. But I mean, you know, some online clothes re often as funny as golden clothes retailers allow you to come turn up and allow you to try the garment on. Mhmm. Because obviously there are people that will buy wear it for one night and then send it back so it didn't fit. Yeah. And can I have a token and they'll buy something else so that they never actually buy for any buy an close? Where do you see all this going? It's a little tough for wine to do that. Yeah. That's true. Yeah. I mean, you can't put the genie back in the bottle. I mean, the number I've got is last year, this is from the economist, e commerce in America accounted for just two percent of spending on food and drinks, which is small, isn't it? It's tiny. And wine is is significantly a smaller part of that. Part of it is the three tier system, but part of it is also because the structure of the industry is such, it hasn't had a lot of innovation, and it's lagging behind the rest of the industry, whether it's appos and shoes. And even in the grocery side with Instacart in food, it's still lagging behind the rest of the industry. What Amazon's gonna do is is take the industry kicking and screaming into the two thousands. And I don't mean two thousand eighteen. I mean into the two closens. Okay. So even if we get to where we were in two thousand five, it's major league progress. Okay. So there's a lot to think about if you're an Italian wine producer or any kind of producer wanted to sell to the state complex systems, I'm sure many of them will know already, and huge changes ahead. Watch this space. Yeah. Thank very much for coming in Steve Ray, whose company is Bivology Inc, based in Connecticut, isn't it? City, New York and Connecticut. Okay. Little town. Yeah. Thanks for sharing your knowledge and you're describing how the the complexity is in can import and distribution system and also for some of your views on, what e commerce and that behemoth Amazon has in store for us in the future. Thanks very much, Steve. Thank you. You're quite welcome. Follow Italian wine podcast on Facebook and Instagram.