Liquor Industry 101 – How to Do Business in the U.S. Alcohol Industry

Doing Business in the US Market

The “How to” Guide to navigating the perfect execution the first time.

At times my partner Chris Stevens and I are hired after a brand’s execution in the US Market has failed.

U.S. Liquor Industry 101

Brands have their hopes and dreams of making it big in the USA, can fail to make the right choices and execute correctly the first time.

The brand spends a year or two with speed bumps that turn into road blocks, then look to Speakeasy Wine & Spirits to pour a new foundation and make it a smooth road ahead. You originally may have cut corners and the old adage is “you got what you paid for”.

This is all well and good, but it takes Chris and our team 1-2 years to fix a failed launch the first time around. Bad choices with distributor channels, professionals in the industry, (frankly that are a dime a dozen), result in your brand’s bad reputation with the retail or restaurant channels, can be suicide.

  • Phase: Introduction to Growth
  • A unique, distinctive quality brand (yours)
  • Realistic go to market pricing-well thought out programs
  • Realistic expectations
  • Short run vs long run forecasting

PUSH-placement, launch and execution

PULL: Ratings or other brand development PR/Media, Consumer pull through plan, social media, web presence of brand, SEO, digital social media, demos, hand sell programs

  • Phase: Growth to Maturity to Decline
  • Goal is to level the brand, expand creative, line extensions or other; and build upon, not to allow decline.

Let’s put all of this together:

It is important for your business to know the many options to launch your brands.  This will act as an overview for a business plan guideline for execution, expectations and an overall budget necessary to succeed.

 

Choosing a Partner to Execute Your Importation, Distribution and Sales Plan

We want to make sure you can make the best decisions with whomever you go with in the US Market

USA Liquor Industry

Label Approval and Importer noted on the bottles and cases-a necessity for your brand to enter the US Market-TTB approval and an importer is mandatory. (dictionary below)

Your business can hire a broker in the US Market, pay commissions and have a broker place you with distributors either regionally or nationally.  Most are compensated with commission (average 8-12%). Commission sounds enticing I am sure.  This can be a great way to go, however the downside is you will be waiting for them to place you in each market with a distributor.  Once placed in a distributor, you wait for an actual order and then you ship your goods in direct to the distributor. Or to a US warehouse, whereby the distributor can pick up the goods to warehouse in their own warehouse.

Brand Developers can place your brand at a “Park Street “for example, which is a warehouse, delivery service in FL, CA and NY who can deliver to restaurants, retailers and distributors. For example, a Texas distributor would pick up at Park Street in CA.  We would place you in distributors however we do not rely on this time-consuming process to build a brand.  We go direct to the retail chains, make placements, then either solicit a distributor, clearing or the distributor can represent the brand, their staff selling the products too, or have Park St deliver. We also source out distribution by market like a typical broker. There are other companies that offer the same services as Park Street, however we trust Park Street to take the utmost care of your brands.

Distributors with a new brand are not going to order in containers.  They are going to order “JIT” just in time inventory and they are going to order very conservatively until proven.  Therefore, it is hard to forecast volumes/case goals at the onset of execution. Choosing a brand developer, broker or distributor to execute quickly is key to your success.

“Going through the back door”, placing brands across the country in chains which enables the volume to build in a matter of months. Then a Park Street can deliver to the actual account, or at this time, you go to a distributor to have them pick up your brand and be represented by their salesforce or “clear” and deliver at a smaller margin for your business together

It takes time to build a brand in the US Market and even though your brands are unique, it will be an investment on your part and any company you hire to work the US Market.

Ideally, you would warehouse on the East or West coast, be able to have a warehouse that can ship direct to clients or distributors, and have inventory here in the states. This was you have state-side inventory and re-orders would be easy for all involved.  When the volume is built, many businesses could go (DI)with your brand, Direct Import and probably save money for your brand, distributors and the clients.

Ratings: You will need ratings on your brands immediately. Consumers want to feel secure in a purchase knowing the brand has “pedigree”. Go with a brand developer that can make this immediately happen and can provide a solid database of ratings businesses, your brand can submit to for review. PR and Media are of utmost importance, and plan on spending 1K for an initial Press Release launch announcing your brand in the USA.  The press release will be focused and targeted to Trade and Media. Speakeasy would tell your unique story to the US Market.

Cross Marketing: Speakeasy could target a partner with an established national brand: pair the two together for deals and programs. This would build your brand even quicker if you can cross market: for example, if you have a vodka, cross market with a Ginger beer and floor stack in retail store locations.

Find a Brand Development Company with a strong Broker Network to fund the needs of the brand’s growth-this is a question you want to ask up front to ensure coverage for the growth of your brand.

 

Find a Brand Developer that has a strong relationship with a distributor network and chain retailers.

Solid US Web Presence and SEO (dictionary below) making it easy to navigate and find your brands. We recommend companies like https://www.webolutions.com/

You will need a budget accordingly, to warehouse your brands on the East or West Coast with a distribution and compliance company. This way when a business such as Speakeasy places your brands, we have inventory to pull from in the states. We go this route so we have many options to execute quickly.

A realistic, very conservative budget is $40K-80K to build a new brand in the US.  You will need this to warehouse and deliver, marketing dollars, distributor support, retainers to your broker or brand development company, and consumer pull through.

Budgets:

This is the reality of the US Market, and we not only want you to make sure you go into this project prepared, but you do need to have the budgets to back up your continued success.  We work with our brands long term, they become like family to us, we execute quicker than other companies so you are not sitting on inventory.  Inventory turns is vital to the health of your brand.  We also can refer you to brokers across the country should you decide to go that route as well.

Promotions: If your brand is placed for example in Texas at Specs Liquor stores (with 200 locations) https://specsonline.com/, for example Specs places your in 40 stores initially, demos are going to cost around $5K, in 40 stores a month. ($40.00 an hour per Brand Ambassador). Your brand would probably need at least 2 months’ worth of demos, wet or dry or hand sellers (dictionary below).  Retail chains expect the supplier (you) to build the brands, not the stores, and demos are vital to consumer pull through.

  • Warehousing-Delivery Needs
  • Promotions
  • Distributor Support
  • Brand Develepment Team
  • Total $40-$100K budget for your first year execution
  • Other variable expenses

 

US Liquor Production

Liquor Industry 101 – Dictionary of Liquor / Alcohol Industry Terms

Hand Sells-Demo professionals to stand in the aisles and hand sell your brands to consumers, known as a “Dry Demo”.

Wet Demos-Sampling consumers on your brands in a retail store or restaurant

DTC-Direct to consumer-websites that sell direct, another option for your brands

On Premise-Restaurants

Off Premise-Retail Stores

PO-Post Offs-immediate discount given to a distributor on a shipment of goods

SPA-Special Purchase Allowances-given to a distributor to purchase more quantity

DA-Depletion Allowances-given to a distributor, the more they sell, the more dollar support your brand gives a distributor by the case

OND-October, November and December where approx. 70% of the business is done for the calendar year in the US Market

FOB-Freight on Board-your cost per case

Landed or Laid In-your cost+ freight and taxes that a distributor calculates prior to getting to their List Price

List Price- the distributor markup prior to discounting the product to the retailer or restaurant

Margins-typical % of profit a distributor or on or off premise account will make

Mark-up- work on % markup instead of% margin, need to clarify before working your strategy.

Shipments-actual total cases shipped

Depletions-how many cases are depleted (sold) per month or year which a distributor should report monthly

JIT-Just in time inventory-the # of cases a distributor will order since they do not want to carry too much inventory

Terms-typically a distributor will ask for 30-90 days terms.  The distributor will ask for extended terms like 45-90 days with a new brand to pay their bill.  The money will be facilitated through an Importer and the Importer will pay the bill to the supplier (you).

Clear vs Distribute-a distributor not representing a brand with their sales staff, but clearing and delivering for a supplier, thus taking a smaller margin (example 13-18%) instead of their regular margin of 30%.

DI-Direct Import from your business to the distributor, typically a healthy discount given to the distributor to make more money on the brand.  This typically only works with a brand that is built or has a high rating.

Importation and Compliance-what you will need prior to entering the US Market

Label Approval-TTB- https://www.ttb.gov/offices/alfd.shtml

Padding-increasing your FOB to support the broker on commission, we don’t necessarily recommend this route, use your marketing budget to fund a brand developer

Sourced out supplier rep-a brand developer that works on a 1099.  Their business pays their own taxes so your business does not have the cumbersome payroll taxes, employee benefits, or workman’s comp fees.

Brand Ambassador-A demo, hand sell, event person that promotes your brand.  They can also take the form of managing your brand in markets

Cross Market-cross marketing with an established brand for quick brand recognition.  This typically costs money to do this but can be well worth the spend.

PODS-Points of distribution, how many placements your brand has in stores or restaurants

Organic Marketing-Social Media, clubs, and type of promotional venue, for example if you represent a Whiskey brand we will find cigar shops and Men’s Hair Salons to cross market and organically market your brand.  If you have a Champagne we will organically market with Bridal Shops.

SEO-Search engine optimization makes it easy for consumers, retailers and distributors to find your brands. This is website or brand (word)optimization so if a consumer or retailer types into Google for example Whiskey-your brand may come up on the first or second page instead of the 10th page. Research shows a consumer does not go past a 2nd or 3rd page.

 

 

 

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