Over the last decade, our team has worked with a number of wine and spirits, along with other alcohol beverage brands, all on the move to establish their brand and portfolios in the United States market.
From Burgundies to sherries, gins and cream liqueurs, to cocktail mixers, many of these products have been hand crafted, thoughtfully produced, beautifully packaged, and had a heritage or history behind their brand story. Most, however, needed some assistance, in one form or another, because their brand was having difficulty reaching buyers.
Regardless of whether you are producing your own products, or are working with a contract distiller, have established your footprint in your home state, or are launching something entirely new, the challenges of becoming a successful alcohol beverage brand in the United States are still the same.
Below, we will identify a few of the questions every wine, spirits, and alcohol beverage entrepreneur should consider when planning to bring a product to market in the US.
Understanding The Three Tier System
The United State alcohol market can be uniquely challenging to navigate, especially when it comes to sales and marketing. The first thing to understand is how the Three Tier System works for brands that want to participate in the sales chain.
The Three Tier System was established as a regulatory system after Prohibition ended, shifting control from brands to each individual State. The theory behind this tiered approach was to create free enterprise, and to prevent big brand conglomerates from controlling the entire market. Large brands still dominate the US wine and spirits market, but that doesn’t mean that small wine, beer, and distilled spirits can’t succeed, especially once you understand the landscape.
The First Tier: The Producers
Part one of the Three Tier System is comprised of Wineries, Brewers, Distilleries, and Importers, also known as Producers. Suppliers (for example, DIAGEO) also make up a portion of this first tier, although they are not considered Producers.
The Second Tier: Distributors
To get to market, a Producer has to sell to the second part of the Three Tier System, which is a Distributor, or, as in the case of a Control State, the State ABC Board. Distributors act as intermediaries, purchasing their products, warehousing them, and then selling them to the next tier of the sales chain.
FK Tip #1: In some states, US based beers and wines may sell directly to the public through an owned/licensed winery or brewery (check local state laws). Less commonly found, spirits distilleries may also be allowed to sell direct, with limitations on per person purchase quantities. If a brand needs to ship, however, it may require a different type of license, especially depending on where the customer that wants to purchase and receive is located.
The alternative to a traditional distributor is wine and spirits self distribution. Self distribution allows brands to sell directly to retailers, using the license of a self distribution company. We will cover this topic in more detail, separately.
The Third Tier: Retail
Once you have an agreement with a distributor to sell your product, they can now sell to the third tier on our list, retail venues. This group generally consist of two categories: On and Off Premise Retailers.
On Premise Retailers consist of venues where consumers can buy and consume an alcoholic beverage while in public. Examples of such are restaurants, bars, and clubs, as well as some newer hybrids that own dual licenses.
Off Premise Retailers are venues that ONLY sell sealed, unopened products. These include liquor stores, grocery stores (depending on the state), duty free shops on cruise lines and within airports and ports of call, as well as gas stations (beer, malt beverages, low ABV, and some wine).
Before a brand is legally allowed to sell, however, registration is required for each product, vintage, and container size you plan to market. The organization in charge of Federal label registrations is the TTB.
Getting Your Wine and Spirits Brand Ready To Sell in the US
Before you can approach an importer/distributor, or open the doors to your brewery or winery to sell to the public, one of the first steps is to register your brand with the TTB. This is a requirement, regardless of whether the product is made in the US, or is being imported from another country.
The TTB requires documentation including, but not limited to, what the product is (identified by select categories), what it is made of, where it is made, the age, if applicable, percentage of alcohol, and a unique product SKU (or barcode) for the ability to quickly identify the contents of the bottle/boxes when it passes through various inventory checks.
In the United States, only certain bottle sizes and quantities will be approved by the TTB.
As of the date of this article, the US standard sizes for wine are as follows:
- 50 mL
- 100 mL
- 187 mL
- 375 mL
- 500 mL
- 750 mL
- 1 L
- 5 L
- 3 L
Distilled spirits standard sizes are as follows:
- 50 mL
- 100 mL
- 200 mL
- 375 mL
- 750 mL
- 1 L
- 75 L
Cans with standard sizes of 50 mL, 100 mL, 200 mL, and 355 mL are also acceptable for submission to the TTB.
Along with documentation and standardized net contents, all bottle labels must go through the approval process as well due to restrictions on font sizing, visibility of certain content, and placement of specific verbiage.
This is an area where import products can become complex, as bottles frequently have to be remanufactured and labeled, to meet the TTB’s requirements for market entry. If your brand is repackaging for the US, be sure to work with a team that understands the complexities of wine, beer, spirits label design, and can guide you through the process.
More Regulations: Alcohol Social Media Content = Advertising
If you own an alcohol beverage brand, Federal regulations also require compliance with guidelines and restrictions on how you market and advertise your products.
Tied House Laws not only apply to in store promotions, radio, television, and print advertisements, but also to brand generated social media content. What does that mean for a wine, beer, or spirit brand?
In short, two things. One, every Facebook post, tweet, Instagram story, or Snapchat video is considered advertising. This means the same regulations for content on a billboard would apply here, as well. Two, responses to consumer inquiries on social media platforms are viewed under the same guidelines. Violations of Tied House Laws are punishable by fines, potentially costing thousands of dollars.
Although an experienced, knowledgeable marketer can legally work within these guidelines, hiring just anyone, whether it’s a PR firm, an ad agency, or your cousin to run your vodka brand’s social media can not only be unwise, it can be expensive, if they make a mistake.
FK Tip #2: Any/all Facebook posts, Tweets, Instagram shots published on the brand page count as an advertisement, and Tied House Laws apply. Only hire experienced persons to represent your brand on social media, and be smart about what you post, no matter where that content will live.
How To Work With US Importers & Distributors
Once your bottle and label have been approved, the next step is to identify the right distribution company to get your product to retailers. How bad could this be?
For many entrepreneurs, this is where the confusion and misunderstanding begins to set in, as there are things that a distributor does-and does not-do, especially for emerging brands.
Over the years, we have heard many entrepreneurs make statements like, “I have emailed hundreds of distributors, but no one has responded. What do I have to do to get them to pick up my brand?”
Even new brands that obtain a distributor can have challenges. It is common to also hear from brand owners that their importer or distributor is ‘not marketing’ the product, or has picked it up, and is now sitting on the inventory.
In the wine and spirits industry, one of the biggest misconceptions regarding the supplier to distributor relationship is that once you get a distributor to carry your product, all of your work is done.
Unfortunately, this is not the case in the US market. A brand owner cannot simply keep making alcohol, ensuring the supply never runs out, while the distributor does the rest of the work. To help clarify both the role of a Producer, and a Distributor, you must understand what a distributor’s job truly encompasses.
What Is The Role Of An Alcohol Distributor in the United States?
Distributors of alcoholic beverages are licensed and bonded to transport alcohol from their warehouses to various on and off premise retailers, within their assigned territories. Each route has both an account representative, or commissioned sales persons, as well as drivers, designated to fulfill orders solicited by the distributor’s sales persons, and placed by the on or off premise retail buyers.
When the inventory of a specific item is running low, and they choose to place a reorder, a retail buyer will notify the distributor that they need to purchase a shipment of product. In the US, orders are fulfilled based on either six or twelve bottle cases.
Distributors collect data based on the purchasing requests of their retailers, and stock their warehouses accordingly. Products that sell the most are the products that get higher priority.
FK Tip #3: It can be helpful to provide bonus or sales incentive programs for distributors and buyers, to help increase their efforts, and encourage them to work with your brand.
Like most savvy sales persons, alcohol distributors are not in the business of selling inventory that a retail buyer does not want, or ask for. Retailers also prefer to buy products that their customers want to buy-not things that will sit on the shelf, collecting dust and occupying precious space that they need to make a profit. This applies even more so to back bars in on premise locations.
For a commissioned sales person, which do you think is an easier sell? A brand like Grey Goose (now a subsidiary of Bacardi), with a well-established consumer demand and brand awareness, or XYZ Vodka, that the American consumer and buyers have never heard of? Logic would follow that a popular brand-a name that both retailers and consumers are familiar with-is easier to sell.
Does this mean that a distributor will only carry a brand only if their retail buyers are asking for it? To most unknown brands, the hard answer is yes. Either educate the buyer, and start making noise, or pay your way into the game.
So how do you get a retailer to ask a distributor for a brand if you can’t sell directly to them? By leveraging one of the world’s oldest, most effective forms of marketing: word of mouth.
Sales vs. Marketing, Which Comes First?
When first establishing a wine, spirit, or beverage brand in a new market, driving both demand and sales can appear to be a ‘chicken vs. egg’ scenario. If people don’t know about your product, they won’t ask for it. It is because of this reason, retailers will not buy it, and distributors won’t pick it up.
You may feel that you don’t want to market something that consumers can’t yet buy. Smart brands like Grey Goose, Tito’s Vodka, Rumchata, and Fireball Whiskey, however, succeeded because of more than just a product. Each brand was built around a consumer lifestyle, with stories and content that resonated with them.
Even without product at retail, startup brands still have access to opportunities. Participation in industry events, tastings, and tradeshows are abundant. Even consumer event sponsorships can be an option, creating noise and building brand equity that will open doors at both the distribution and retail level.
Often referred to as bottom up marketing, understanding your ideal buyer, crafting a message that they can relate to, and clearly outlining why your brand is better, different, or unique from the competition will go a long way in winning the attention of buyers. Be relatable, be useful, and stand out, and consumers will take notice of your brand.
At the end of the day, distributors and retailers want to know that your brand will sell, and that in buying from you, they’ll also make a profit. The recipe for a successful wine or spirit brand is to prove to them that your brand can do more than take up shelf space, and they’ll make room for you, too.
Through smart word of mouth marketing, developing brand equity, and educating the end consumer about your brand, it is possible to successfully bring an alcoholic beverage to market in the USA.