Ep. 854 How To Sell Fine Wine In The US... | wine2wine Business Forum 2021

Welcome to the Italian wine podcast. This episode is brought to you by Vinitally international wine and spirits exhibition, the fifty fourth edition of Vinitally be held from the tenth to the thirteenth of April, right here in verona, to discover more about Vineetalee and get your tickets, visitvenetalee dot com. This year, the Italian wine podcast will be live and in person in Pavilion six. Stand a seven. So come on down and say hello. Italian wine podcast. A wine to wine business forum twenty twenty one media partner is proud to present a series of sessions highlighting the key themes and ideas from the two day event held on October the eighteenth and nineteenth twenty twenty one. This hybrid edition of the business forum was jam packed with the most informed speakers discussing some of the hottest topics in the wine industry today. For more information, please visit wine to wine dot net and tune in every Thursday at two pm central European time for more episodes recorded during this latest edition of wine to wine business forum. Thank you so much for coming in today. And, last seminar of the day, we promise we won't keep you too long away from the wine that will happen next door shortly. But it's very excited to be here, and this is always one of my favorite events because so many inspirational ideas from so many different countries And so I'm excited today, to introduce you guys to Dave Parker. Dave Parker is the CEO of Benchmark Wine Group in the United States. And he is also the sitting president of the National Association of Wine retailers in the United States that represents over forty thousand wine retailers across the country. I'm gonna we're gonna get into that a little bit into our presentation. A little bit about myself, your moderator. I'm Michelle Erland. I am a an Italian wine ambassador, and I'm so happy to see some of my fellow ambassadors and experts in the audience. And I'm a senior account executive with Colangelo in partners, public relations in New York. So before we get started on what we're gonna talk about today, Dave, I'd like to ask you just to let them know a little bit more about benchmark wine group. Thank you, Michelle. And I also want to thank Stevie and her team for putting this all together. This it's been a great experience so far. Benchmark is a wholesale, retail, an importer that you'll see a little bit more about in a minute, but we focus on the high end of the market when they talk about the average, bottle price of wine at ten dollars or thirty eight dollars have sold over the internet. Our average bottle price is about two fifty. So we specialize in collectible wines, and that brings with a lot of its own challenges. We have to source most of our product from private collectors, also rare wine brokers in in Europe, and wherever else we can find them. So we essentially have to buy from wherever we can. The the market for our products are very you know, limited collectors spread all over the country, so we have to be able to sell to people all over the country. So those two sets of challenges have defined who we've become over the last twenty years and have given us a significant amount of expertise in terms of how to navigate the the sometimes stormy waters of of of channel marketing. So Dave's here today. We're gonna talk about using his expertise. We're gonna talk about how to sell fine wine in the US through multi channel marketing. And I think that this seminar is a great follow-up if you were in the previous one with Steve Ray, understanding the three tier system, but there are other avenues, there are other channels that exist. And should we get right into it? Sure. Let me jump right in. Yeah. It was great to follow after Steve. He did a great job of telling you how to sell more to more people, virtually. The reality though is that we have to figure out how to do it in real space in the real world, because if you can't get a real bottle into someone's real hands, you have to don't have a real transaction. So this to start with the US market is incredibly attractive. It's by far the biggest market for wine in the world by over a factor of two, and a big chunk of that's imported. This is all wine, including bulk wine that comes in. But maybe a third of it can be called fine wine. It's got a real sense of place. It's got real brands that have been developed. Real attention is paid to to the quality of every bottle. And, while the market is growing by about six percent a year, the fine category that ten to twenty billion is probably growing fifty percent faster than that. The rare wine, the wine we just can't get enough of it, which is back vintage high quality wines, as well as things like California cult wines, and just those wines that you can hardly ever find. That's one to two billion, and that's growing at fifteen to twenty percent a year. So increasing layers of attractiveness, but increasing layers of difficulty getting them and getting them to the right people. Now the big part that seems like a really nice market to jump into. The problem is it isn't one market. It's fifty two markets. I put in DC in Puerto Rico. And every state has got its own laws, its own license requirements. A lot of these states wanna control all the alcohol themselves, like Pennsylvania, Utah, Utah on New Hampshire. Certainly, the California market and the New York, New Jersey market, which for strange reasons are kinda tied together are the biggest and the most attractive, but Florida, Texas, Illinois certainly are all very large. And all of these taken together gonna need to be considered if you really wanna get access to the whole country. Okay. Well, this is our most and least exciting picture of the of the presentation. This is the three tier system. Central to it. Is the distributor. Every state has got a three tier law. Every state essentially says you've gotta move every bottle of wine to a distributor. They then move it to either a retailer, or grocery store or a restaurant or bar, and then they move it to the consumer. And there's some good things about it, and it's central places to tax. You get some economies of scale if you you're moving very high volume product to very high volume resellers. You they will say that helps them control underage drinking. Other reasons that are given have to do with safety of product. So there's some good things about it. But there was not so good things about it too, to begin with, you start to count up all the tiers that the wines gotta move through with a markup at each of them, and also, miscommunication perhaps of the brands, message at each step, and difficulty under hearing back from the customer. Another specific issue with this as it relates to international product is that you've got an extra tier. It almost becomes a four tier system. Because it's gotta come through an importer too. You'll see that a little blue squiggle between US producer and consumer, that is direct to consumer. That's something that the international producers generally also don't have. So in a lot of ways, they've got an inherent disadvantage coming into the US market, but there's some ways to work around that. One other thing that's not on here, but we're starting to see here at wine to wine is that there's an yet another tier that's emerging. And you might call that the the the retail to consumer online level. That's, I don't know if we've, got Hina here, but that's the VIVino type of addition. Well, that's an extra layer. They want their percentage too. So we can almost start to count six tiers in this whole system. And that's not stable. This whole thing is trying to find a way to be effective in both money and message be efficient. So there's some pretty major changes that have taken place right now. And this is one of them. This is our model, actually, in a few minutes a pal or a few, areas of the country, it's permissible to have an import license, a distribution license, and a retail license. Those two areas specifically are California and the district of Columbia, effectively. There are some other ways that you can put these together, but the states try to make sure that that's does not happen. But what this lets you do is exactly what I described as our model, which is we effectively can buy from anybody improving, including private collectors, including any importer, distributor, retailer, restaurant, or European broker in the world, even auction houses if we so choose, and we can essentially sell to anybody. Restaurants, consumers. That's what we need with a with a product that's is distributed in low volume, but high value as really rare wine is when we have wines to sell, sometimes it's only a bottle or four or five. Something a distributor is absolutely not set up to do. You notice as the dotted line to retailers, we also sell a significant amount to them, and some goes into Europe and Asia, but this model or or subsets of it really become a model for bringing new product into the market in a way that don't does not disrupt relationships you might already have. It remains legal. You have to know what you're doing. You have to be careful, but their this extends out to exactly what I've seen as I've talked to European producers. Hey, we produce a high volume product or several of them. We have high volume importers to take that. But now we're working on very high quality, very low volume product. Hey, our importer isn't all that interested. If it doesn't come in pallets or container loads, they don't know how to handle it, but we need it. To build our brand up in with the worldwide image. So what do we do with that wine? Does it just stay in Europe? Doesn't do much good in the US to help us build our brand in the US market if they can't get it? So What do we do? Same issue if you're starting a a brand new brand, especially if you're at the high end. How do you find somebody especially post COVID when everyone's very cautious to take on a new brand? And then if they take it on, how do I get my message all the way to the consumer the way I want it to be, and how do I hear back from them about how they're how they accept it? These are all absolutely critical as Steve talked about. But the practicality is you have to work through this three tier system in some way. And here's here is one of them. You find one of these specialty resellers I'll call it that can do all of these. And I'm just gonna add to this slide. I don't know if anyone or you guys got to the fair, the the Italy fair, but I know walking around, I spoke to a lot of producers, and I tried a wine that I've never tried in the US. And I asked them, is this wine in the US? And they say, no. Because, you know, we make just a small amount and the point, you know, having Dave here to explain that there are other opportunities that exist. There are other multichannel marketing opportunities to bring these products into the US. K. So now you you get it into the US through one of these specialty companies like ours. Your next question's gonna be, well, hey, you've got a distributor license in one state. You've got a retail license in one state. I want my product nationwide. Or at least I want it into the, to the big markets, or at least I want it to go where I want it to go. How do I get there? Well, retailers explicitly have rights to ship into some states And this map, it's a little old, but we'll give you at least a flavor of that. The yellow states as listed on this map, and there's another one at Florida to this, which is a wonderful addition. Really there's no restriction. Okay. So anyone in any state that has a retail license can ship line in theory to these yellow states and and Florida. Green states, you can get a permit that lets you do it. Connecticut's also added to that, and that's a pretty important state. On the other hand, Nevada is changing their laws to try to eliminate themselves from this map. So it's a constantly changing, landscape that we're we're operating the specialty retailers understand this world and are staying or kept on top of it in a way I'll talk about in a minute, but this isn't all there is. More more of the world is accessible. Than this, there's some methods I'll talk about in a minute. That kind of is a quick, a quick summary of it's not gonna you're not only gonna be tied to the three tier system. There are alternatives, and there are some pretty good alternatives. And it's especially true of the high value, high quality, generally low volume products that are most affected negatively by the current three tier system here in the US. There are ways around that. And we're gonna come back to this slide at the very end to talk more about it when we go into questions. But before we continue on and looking at more maps of the United States, I wanna bring up the National Association of Wine retailers because a lot of these issues of shipping between states and, you know, three tier system restrictions, tariffs, a lot of these things get brought up. And as I mentioned, Davis is sitting president of the National Association, and I was hoping you can tell the audience a little more about what they do. Sure. So national association of wine retailers dates back to two thousand five when a particular law, Supreme Court ruling confirmed that retailers should be allowed to ship wine nationwide, but there was no advocacy group for them. And it represents virtually, essentially, all the retailers in this country, of which there's about forty thousand an awful lot of them are mom and pop bricks and mortar neighborhood stores. A lot of them don't even have internet presence or if they do, it's just a a static information page, but we're there to help them just as we are, the national retailers, the the internet savvy ones, and some of the biggest in the country. Also, auction houses have a lot of the same issues that, the specialty retailers do and the National Association of wine retailers. Helps them too. Our job is one of education. Our job is one of enabling their success. And by doing that, we're enabling access to product consumer choice by consumers. Our biggest activities are in the legal front. Talk a little bit about this with the next slide, but we are continually lobbying and working in the judicial system. We also have done some things independent of that such as help repeal the tariffs that were so destructive to everybody on the European products. Okay. So this is that same map, but this is what wineries can do in the US. So if you're a winery in the US, you essentially can ship to every state except the gray ones. Okay. And I compare that to the map I showed a few minutes ago that's the red the red are are states theoretically retailers can't ship to. Now the Supreme Court ruling is based on what's called the interstate commerce clause of constitution. Some people would say it's the most important single piece of the constitution. It's the reason it was written actually, but it, essentially says that no state can put in place a law to discriminate against out of state businesses to favor in state businesses, period end of story in any market, including alcohol, even though the twenty first amendment says they can control alcohol Supreme for its rule twice, that that does not mean they can discriminate. So this would be a map of what amounts to nondiscrimination. This the the gray states don't allow shipping within their state borders So therefore, they can disallow shipping from outside. But if you're allowing line to be shipped within a state, then you gotta let it be shipped in from out of state by the same type license C in this case retailer to retailer. By the way, that also don't tell anyone outside this room, how we're being recorded, I will say that it goes beyond that. And so we're gonna see a lot of changes going forward. Okay. So multi the multichannel philosophy to make use of the three tier system properly, you really need to understand your volume. I showed you the first picture, which is high volume product being moved through the current three tier system. That's not an inefficient way. If you're moving container loads of your wine, that's probably the best way to get it into the US market. Now I'll go right to the bottom one for low volume product, like I described with rare wine, you really want somebody that can do all three because they're moving individual bottles. Each of them may be hundreds of dollars. So they the customer expects and personal care. You need to understand the customer. Every bottle is a is a is essentially hand treatment. So you need, to go through a specialized, what I call, consolidated importer distributor retailer. There's versions in between. So there are a lot of importers distributors. A lot of distributors have gotten import licenses. A lot of importers have gotten distributor licenses. So they've become both. They still sell into a large network of of retailers, and that can be a perfect solution if you've got a medium sized volume because each of them can have a specialty. Some of them are Italian wine specialists. Some of them are cool and funky specialists or natural wine specialists or what have you, you can if you've got a medium sized brand, you can you can talk to one of those. There are some other, other solutions You saw that, US producers have the right to go right to consumers. There is a way for international producers to get right to US consumers, and that involves a specialty importer. There are custom importers that if you've already affected a sale. It's it's a done deal. You know, the guy in California has given you his credit card number, and you've run it up here, and you recognize he owns it, and he recognizes he owns it one of you contacts a company, Hick Adventures and Wine is one of them in Daily City, California, but there's a number of them. They will then do the transport. They'll charge a fee, of course, but they'll take it to all the legal channels. They don't really have any risk on the product. They're a service provider. They're, an expediter, if you will. So that is an option for you. Another interesting option is what I call, not direct importing, but indirect importing. It's where you may already have a contract, maybe for for your brand with an importer, and you wanna bring some new product in. They don't want it. Now what do you do? In some cases, you find a different importer. If they're gonna allow that, and so a contract you've written with them. Another option is for you to give that product to a broker you may already have to be doing business within Europe, but allocated to them if they have their own import license. Depending on how your contracts are written, you're not violating any contracts by doing that. And you're essentially serving a new market need in the United States as well as your own in terms of developing brands. It's only gonna help your your designated importer someday understanding what this new product is and maybe he will choose to take it later on, or maybe he'll develop a new relationship with this secondary importer, both of them work. And one of the things that's key to get you have to get some product into this market usually to get a US reviewer to taste it, which is absolutely key. There's one other piece of this I think we should touch on just briefly, and that's matching your message to the channel. So you got a high volume product into the US. You gotta create a national brand. I mean, no kidding. Right? You're you're just gonna be spending the money on a national ad campaign. You may have a PR firm like Colangelo here, but you need to have built that brand nationally. If it's a bit that's a high volume product. It's a medium volume product. You can go at it in a smaller way, maybe through your consortium that you're part of, or a specialty group, such as natural wines, or, or whatever. But targeted message to a specific category of reseller. The low volume product, if you can go into the rare space, I'm sorry. It's all about scores. It's all about really good scores. And really good scores from a European reviewer is good. It's certainly good, you know, to canter and so forth we all listen to. It's okay to have the voice of the people, the seller tracker, Vavino kind of things. It's okay to have these gold and silver medals, but that's not gonna do it for you. You're gonna need those high volume those very high level scores from the US, which means you gotta come up with a way to get some product into the market. Hi, Steve. Joyed your talk, by the way. And there's just there's just no way around it. Nobody is going to pay quite frankly, two hundred and fifty dollars a bottle for wine that an American reviewer hasn't given the super score to. Yeah? So before we open up for questions, I actually wanted to touch upon one thing. With everything that you've been talking about. And now that we have Steve, actually, he'll give a great presentation. I think I hope what you understood is that things are changing and there's discussions happening within the United States of around the beverage industry, how wine is sold, all these things. And Dave, as president of the National Association of wine retailers, why don't we talk recently about how the Biden administration had opened a survey to really start to analyze if this is working, barriers for competition, things like that. So why don't we talk a little bit about the recent survey that, was called in the US? Yeah. That's a good question. Thank you, Shell. So as Michelle pointed out, and you're probably all aware of this, the Biden administration reached out to all the industries, but they they had a few specific ones that included alcohol asking about practices that might be felt to be anti competitive, and they got a lot of feedback. They got, I think, more consumer feedback than any other topic. They've got a huge amount of, of, small business feedback, the mom and pop shops and and, the importers, and it all came down on one group. And as you may know, the the distributor tier has been getting consolidated big up and eating the slightly smaller, you know, like that fish thing, and getting far bigger for in fact, four distributors control way over half of all of the wine. Either by dollars or by volume in the United States, and they're using that power to try to gain even more power. And hence the the anti shipping laws that probably violate the US constitution, that the national association of wine retailers has been working very hard to to overturn in the courts and the legislatures. But that was the single biggest piece of feedback that, the Biden administration was received regarding alcohol, and I think it was something like ninety nine to one. Those one were were the the distribution distributor group saying, oh, we think everything is just fine and paying, you know, every everybody they could just to to put that in. But So I think that that's gonna be something for us to address, and we're gonna see where the where where where it goes. But I think distributors are always gonna have a huge amount of positive effect on the industry. It's just that they can't and shouldn't cover every single corner. There's there's a lot of product that has a right to come to consumers that's having tremendous difficulty right now. Alright. Well, thank you Dave. We'd like to open up to any questions. A question regarding to the score you're talking about. So which are the most credible scores according to you? That's a good question because that's changed a lot in the last few years, the short answer used to be Robert Parker, Robert Parker, Robert Parker. Robert Parker. But, of course, you know, he's not really writing much anymore. He's got other writers for wine advocate, wine advocates now owned by a different operation. They're still very important. I would say, personally, Venice has moved up a lot. So Antonio Galloney, is certainly, now viewed as one of the the most important, especially for Italian wine, wine spectator still retains, influence. Wine enthusiasts is is actually moving up, I think, a little bit in influence. But then after that, I can I can name forty five more? You can go to you can go to wine searcher and see something like thirty of them. You can go to seller tracker and see a pretty disjoint set of another thirty. Maybe they have five in common. So you start to put those together, and there's fifty reviewers right there. For some some categories like Burgundy, it's Allen Meadows. It's Berghound. So I think you'll see more of that. You'll see the specialist. Then you'll see the voice of the people. You'll see reviews on seller track on Vavino, and I think that there's some when you have enough voices, you can you can start to listen to that. And then that's also valuable for old wines, what does it taste like last week, not four years ago when a when a reviewer tasted it. You're dealing like the super premium category, will you say it matters also the same level as the other producers? Because people should already know your brand. So is that still matters the scores? Oh, are you saying? Okay. So I think that's a good point too. I think you build a reputation at the super premium level through consistently super high scores. You know, if you're not getting in the high nineties over and over and over again, you aren't gonna move all the way to the top of that pyramid. It doesn't take long to fall off the top, though, if your scores, if if your scores go down, So they say that a very top producer produces great wine and good vintages and bad vintages, you're gonna be held to that. Just last question. So in terms of, like, scores helping the sales, you will say it's more helpful in the online sales or the offline sales? I think the although they are they are helpful on the offline sales, they are all important on the online sales because you have a you tend to have a profession that can talk to you about a wine. If you're in a wine shop, you're pretty much making your decision. Your purchase decision as Steve was saying before, just based on the information on that one page. And if it's a super expensive bottle, it's gotta have a good score. If it's a twenty or thirty dollar bottle, you might look at the a little bit more at the flavor descriptors and say that sounds interesting. I'll give it a try, but people aren't gonna take a chance on, you know, a three or four or five hundred dollar bottle. They wanna see. Somebody gave it an incredible score. And, actually, I would just like to make one point on this. When we're talking about the collector market, and a lot of these collectors are within the top one percent of, you know, when it comes to income level and stuff like that. A lot of them are also looking for these top top bottles as potential investments And maybe that's a topic for next year, but, you know, in the United States, Vino Vest has popped up and all these other companies that are really into the line investment worlds. And I will tell you that these top collectors, when they are looking to purchase wines that are, you know, thirty thousand dollars a bottle. They are going to want those scores in order to be able to put it into Vienylvast or put it somewhere else for resale later on. It's a good point. Usually, a score is forever. You know, there there's some controversy about if a reviewer re reviews and takes it down a bit. The the collectors tend to to cling to the highest score, whether that's correct or not. But They'll also look at when a wine peaks. But this is this is Michelle says this is a subject for next year. I could talk a whole another hour on that. We know there's wine waiting. So Yeah. That's right. We're in between you and Oportivo. Yep. Any other questions? There's Andrea Riberino that says, hey, Dave. Good to see you. Thanks for presenting benchmark wine. Could you speak about what kind of customer acquisition benchmark wine does and how do you see online wine marketplace, helping sell fine wine online. Thank you. Okay. Well, great. Let's start with the customer acquisition. So as Michelle mentioned, you know, we've got we tend to have high net worth customers. They tend to be people that have worked their way up from maybe casual interest when they were young and and continued to get more and more serious. And although they tend to justify may justify their purchases based on investment potential, they're really doing it out of their love of product. And so they're they've really integrated into their lifestyle. So how do we find them? Word of mouth is number one. Frankly, wine searcher is number two because we have a tremendous inventory. We have between twelve and thirteen thousand different wines online at any given time, and they're virtually all in stock, so maybe still on the on the truck on the way in. And that bring in the quite often our wines that aren't available anywhere else in the country, So you've you've gone wine searcher, you're looking for your your birth year, Patrice, let's say, you know, if you get the money, and we there's a good chance we will have it when it's not anywhere else. So we find a lot of new customers that way. We also published the wine market journal, which is the definitive valuation publication for the entire rare wine industry attracts every auction trade at every live and internet auction going back to nineteen ninety seven. To a separate company first growth technologies, but under the same ownership, that brings in a lot of new customers because those are the people that are looking up wine values and are really interested in it. But we do lots of events, We've been doing lots of virtual events. We have a a online show called Raven Your seller. Colangelo has helped us a tremendous amount. We're we're here to make friends and we're constantly socializing. We like to do collector dinners and so forth. When we're not in times of COVID. Hopefully, we'll start that back up again soon. And we advertise quite a bit in all the media. What is the real benefit to to the consumer and to wineries of having a dispute? Are there any real benefits other than the fact that states want to control sale of alcohol and how much does does having, distributors inflate the price of the final wine for the consumer? Okay. Well, the US laws are such that you have to have a distributor in between whether you like it or not. Okay. Period end of story. How much do they mark it up? Thirty percent ish. And quite often, they will make decisions on what product goes to what resellers, what restaurants, what what model shops, what the shelf position will be, and what other products a retailer must take in order to get ones that he wants. So the these are the issues. I think I think that some people find a little difficult and the market's, adjusting. And I think I think the distributors are working hard. A lot of them to to understand your brand and bring them out, but you need to you need to find the ones that match here. And also just to add to this point, I mean, going back to what Dave said earlier is that volume. Right? When we're talking about specialty resellers and, different market opportunities or multichannel marketing opportunities, we're really talking about that opportunity to bring in that super rare wine that niche wine, and there's a lot of producers very famous producers that this channel is how they bring in those back vintages, right, that we love on the US market, and that's growing. You go to a top restaurant in New York and you look at the wine list. Everyone's trying to compete with who's got the vertical of this and who's got the vertical of that, you know, distributors are gonna bring in the recent vintage or the importers will bring in and the distributor will carry the recent vintage, but really these other opportunities that exist. These other channels are how producers are gonna bring in bottle of nineteen ninety that they just released into the US. So Yep. That's right. And Good example is we're working with Sherry producers, and Sherry producers have high volume product that's well distributed, and then they have their their bottlings that may be a hundred bottles. And how are they gonna get those in? So we we potentially can can be a channel like that. And it's needed in the market, and it doesn't otherwise exist. And so free market systems are figuring out how to solve the problem for everybody. One question before the wine. I I just wanted to ask a very simple question. What which are the future expectations for the premium segment in the US? Growth is very fast. Any way you segment it, the higher the average value, the faster it's growing. As I mentioned, the top one to two billion dollars, which is what, a year, which is what we categorize is the rare category, which is higher than their just the fine category. That's growing fifteen to twenty percent this year. Some of that's price inflation and some of that's actual volume expansion. It's a combination of both, but that's almost certainly the fastest growing segment of wine in the US. And the expectation is, and that's always the way it's been. It's not it hasn't always been that high, but the expectation has always been that the the rare segment, and usually the fine segment continue to grow faster than than the inherent market. But wine's gone way up during COVID. People discovered they liked wine better than beer or soda pop, and, and and whiskey too. As a matter of fact, and so it's gone up quite a bit. Well, thank you everybody. And if you have any more questions, Dave will be in the other room toasting you all with some wine. Cheers. Thank you very much. Thanks for listening to this episode of the Italian wine podcast brought to you by Vignitally international wine and spirits exhibition, the biggest drinks trade fair in the world. 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