If you’re a savvy entrepreneur, you know that there’s more than one route to set up your business. One step that they do is to research the different franchises available in the market and find the best deal both in terms of cost and profitability. If they have enough money from investors, they might even bring in a consultant to help them in setting up and running the business.
Another way is to create your independent operation, whether it’s a food or a home service business, like a carpet or a roofing installation. If you’re not keen on riding the bandwagon and acquiring a license to operate an established food chain or restaurant business, you might want to consider entering the wine distribution business.
An Overview of the Wine Industry
The wine and spirits wholesaling industry in America just recorded an astonishing $111 billion in revenue as of August 2019. The industry is expected to thrive with its 3.9% growth for the past five years. Considering the size of the sector by revenue, the number of businesses across America is still below 6,600.
You won’t be as big as the top players, but you can find your place in this not so crowded market.
From the Vineyard to the Restaurant Table
Ever wonder how your favorite drink ends up on your dinner table at a restaurant? The restaurant didn’t acquire it directly from the winery or vineyard. It’s the distributor who buys the wine from winemakers and sells them to retailers or wine shop, who would then sell it to end customers like yourself.
Why is this so? Because of the Prohibition and the law that repealed it in 1933—the 21st Amendment. In layman’s terms, the law says alcohol makers can’t sell directly to end customers. Retailers, like restaurants, can’t procure directly from wine producers. So the law guarantees that production, distribution, and retailing do not rest on a single entity.
The Distributor Role
One of the first things you need to attend to when entering this business is to apply for a license with the Alcohol and Tobacco Tax and Trade Bureau or TTB. You will be applying for a license as a wholesaler. Here are a few more things for you to consider:
- Operational requirement. Experts in the business say that wine distributorship is not capital intensive. Also, it can be operated by one or two employees, which lowers your operating cost significantly. The work hours won’t be too stressful as well
- Documentation and registration. You won’t be able to register if you haven’t correctly incorporated or have formed a partnership. Make sure that you organize all the required documentation before applying for your license. Note that laws vary depending on the state you are in.
- Line them up. You need to have a long list of contacts of vintners or winemakers. Contact them and find out what they are offering. You need to come up with a strategy on what selections you’re going to distribute. This will depend on your location and the preferences of the market, e.g., what restaurants want to offer or what retail wine shop find the easiest bottle to sell. Winemakers are also careful about allowing more than one distributor per location. These are the reasons why you need to have a long list of contacts, not only of winemakers but also of importers.
Finally, unlike other retail businesses, the wine distribution business is recession-proof. Your bottles will age and get better if not bought.