How do wine wholesalers work?

Sorry for the boring business question, but am curious as to how wine wholesalers and importers do business. Lets say I import a shipment of wine from a European country. I want to sell my wine to restaurants and to large retailers. What sort of discounts will they ask for?

Do I suggest a retail price ($15 a bottle for example) then give them a discount on that? If so, what would be a typical discount?
Would a store expect 50% off the price, or something like that, so buy from me at $7.50?

Or do I just set the minimum price that I want to receive for a bottle (for example, $7 a bottle), sell to them at that price, and let the stores and restaurants decide the price they want to give to customers? Do restaurants and retailers receive the same discounts or prices from wholesalers?

Just to be clear, these questions are not related to the debate over whether restaurant wine prices are too high. I just want to understand how the international wine price system works at the most practical level. I have imported lots of stuff over the years, but don't know anything about the wine business!

[Robin Garr]

Sadly, Robert, the first thing you'll want to do is get a lawyer to guide you through the thickets of U.S. alcoholic beverage law. Thanks to our history of Prohibition and the specific constitutional nature of its repeal, alcohol import and sales is regulated like almost no other industry.

To make a long story short, you cannot import directly to restaurants and retailers (or to the public). Under our "three-tier" system, you'll have to make an arrangement with an established distributor, who in turn will make arrangements to have your wines sold to retailers or restaurants through distributors on a state-by-state basis. As a small importer, you'll also have to do some serious selling to persuade a distributor to bother; and of course there'll be a little profit taken at each step along the way.

Good luck ...

As Robin explained, it all depends on where you are, or rather, where you're doing business.

The sad leftover effects of prohibition, along with the thirst for all that beverage profit, has resulted in a strange series of fiefdoms all over the country. There's federal law, then there are the individual state laws and mandates and systems.

In several states---called 'control states' the state itself is the wholesaler/distributor/retailer and you have to sell your product to the state, according to their rules. In other states, again as Robin said, there are bewildering rules governing importers/distributors/wholesalers/brokers/restaurateurs/retailers.

And usually, especially in those states, the built-in dominance/control of the large mega-houses are what dominate the market and determine the rules (i.e., money talks and tells politicians what to do, and most money is intent on maintaining its own domination and preventing competition from whatever source).

At the basic level, of course, the beverage business is run like any other: you have a cost of goods, a cost of sales, and a selling price---and a given profit margin. Within that you have to consider your marketing, advertising and discount structure or policy (how you "go to market").

The one fairly unassailable rule though is that once you sell your product to (usually) the wholesaler, you have little to no say (usually no say) in what price is subsequently charged by that customer. You can influence, but you can't totally control, the eventual final cost.

As Robin said more succinctly, get a lawyer/consultant for the specific market(s) you are contemplating.

even these responses have been - i'm sure they will agree - simplified. this is VERY complicated. firslty, you use the word 'discount' incorrectly. a discount is something that might be offered to a customer below the normal price - perhaps for a quantity purchase or a special promotion(both are illegal some places) - not the price that is charged them below their selling price. and please do not get a lawyer who hasn't done wine related stuff for YEARS. there are wine consultants in most states who would actually be better at this than lawyers. AND you may have gotten a wrong impression from the above. You CAN get a distributors license in some state or other AND and importers license and you can BOTH import and sell to retail and on premise licensees. breaking into this business for someone like you is nearly impossible though it has been done. usually such businesses are started by someone already in the business who decides to go out on their own. they have contacts, knowledge, etc. lots of luck. remember: if you want to make a small fortune in the wine industry, you had better start with a large fortune.

In some states (e.g., Massachusetts) it's possible for one company to own all three licenses simultaneously: importer, wholesale, retailer.

New Hampshire, the state I live in, is a control state. The NH State Liquor Commission occupies the wholesale tier. Retail sale of hard liquor is through state-owned stores only. NH allows direct shipment from wineries located anywhere in the country provided that they obtain a license from the state and that they collect the state excise tax. So ironically it's easier to get direct shipping in NH, a control state, than in MA, where liquor distribution is entirely in private hands but where direct shipment is strictly forbidden.

-Paul W.

Indeed the moral of the story is not to go into this blind. Most definitely needed is either a law firm or a wine business consulting firm that has dealt with these issues for a prolonged period of time. Going in "blind" is a sure road to the bankruptcy court.

Good luck.

Best
Rogov