European wine producers interested to sell their products in the US market generally try the same old, traditional way to market entry. Find an importer.
If everything goes according to plan the importer will bring the product to the US. Then they will attempt to sell it to a wholesaler. And the wholesaler will sell it to a retailer. And the consumer will buy the wine. For well-known brands that are well established in the United States, it might work but for lesser-known brands, it may not. It probably won’t.
This raises an important question. When a consumer product sits on a shelf of a retail store or is listed on a retail website, whose responsibility is it that the product moves into the shopping basket of the consumer? Is it the responsibility of
- The retailer?
- The brand?
- The wholesaler?
- The importer?
Correct Answer: The brand. Regardless if it is a domestic or foreign brand. Why? Think about it. Importers sell and promote the products they carry to wholesalers. Wholesalers sell and promote them to retailers. That’s what they are supposed to do. Retailer make available shelf space to allow manufacturers (brands) to give consumers access to their products. That’s how supply chains work. In the United States, Europe, and most countries.
However, many wine producers in Europe do seem to be under the impression that their importer will handle the necessary promotional work in the US market and somehow magically their products will end up on a retailer shelf. In most cases, they won’t.
Even if they do, it does not resolve the issue of how the product will end up in the consumer’s shopping basket. And we are back to the original point. It is the responsibility of the producer to reach and engage the end consumer so they buy the product. Because any product that does not meet retailer sales and expectations won’t stay on the shelf for long.
Just 20 years ago, introducing a new brand to the US market would have been a very expensive proposition indeed. Fortunately, social and digital media have opened new avenues for wineries abroad to directly reach and engage with consumers in the United States to promote their brands. And at a price tag much lower than was required by traditional ad channels.
Winegrowing regions can work with producers to promote their regions and wines. The EU offers a program to reimburse some of the cost of campaigns that qualify.
Of course, this is not to say that retailers can’t support a brand as well. Products can be featured in weekly ad circulars, given preferable shelf placement, end cabs, or larger in-store displays. But retailers will generally only do this for brands that have a proven track record of sales. Retailers expect the product to sell well in their stores.
Retailers generally make only small margins on well-known brands of wines available at most stores; in some cases, they lose money. So most larger retailers also carry an ‘in-house’ selection of wines. These are based on quality and an attractive wholesale price point that allows retailers to also obtain a higher margin. Retail staff recommends wine on which the store makes the highest margins. They have to. They run a business.
One of the big obstacles for European wines compared to US-made wines is the price. A price point under $10 can sell very well if the product is good. Higher quality wines should be priced below $15. Once a wine hits a price point of above $15 it will be more difficult to sell and consumers really have to be convinced it represents a good value at the price.
However, the supply chain often puts European wines at a completive disadvantage. European wines often retail in the US market at 4 times EXW. That means they might sell for double or more at retail than in Europe.
And most European wine producers are not familiar enough with the US market to fully understand the intricacies of the supply chain system.
But despite all these obstacles, European wines can sell well in the US market if the price point is attractive based on the quality and if they can create retailer and consumer interest and demand.
If you are a European winery already present in the US market but looking for better options from a supply chain (cost) point of view or if you are a producer that has not sold wines in the US market but are considering market entry – please reach out to us for a free consultation.
We can help European wine brands with both import and distribution. We will show you ways to market your wines directly to consumers and retailers. We can reduce your supply chain cost and help you fully understand the 3 tier system and how to use it to your best advantage.
For more information please contact us at firstname.lastname@example.org.