Making a small fortune in the wine business
You’ve heard the old joke, right?
Q: How do you make a small fortune in the wine business?
A: You start with a large fortune and lose some of it.
A clear sign of our dubious sanity is our decision to become wine importers and online retailers, despite not staring with a large fortune. Today we are launching an online wine store at http://www.topochinesvino.com.
What would compel two (relatively) reasonable wine bloggers to abandon the comfortable world of drinking wine, visiting wineries, and writing about it, and jump into the competitive world of wine importing? As the Grateful Dead sang, “what a long strange trip it’s been.” In truth, though, the trip has been more strange than long.
If we had to identify the start of this strange trip, it would have to be the fall of 2016, which was marked by a series of encounters with wine makers across the globe. Just over a year ago, during a trip to Willamette Valley in Oregon, we met a fantastic grape grower and winemaker. In the course of several hours of conversation, we talked a lot about the challenges facing wineries. We guessed his biggest challenges would be weather; bugs; mold and mildew; or any number of other pestilences conjured up by Mother Nature. Uh-uh, our friend told us. His biggest challenge? Distribution. Given how many distributors and retail outlets there are, we figured it would be easy for a winery to get its product into the hands of clients through restaurant, retail or online channels. Apparently, though, finding reliable partners that are in it for the long term, and want to grow with the winery, is not as easy as it should be. We left Oregon with the distribution problem in the back of our minds but still not thinking about a life-changing shift to becoming importers or sellers of wine.
Next stop, Europe!
About three weeks after the Oregon trip, we embarked on a long trip through some of the oldest wine growing regions in the world. Our first stop was Italy – the magical city of Venice to be exact. At a rooftop restaurant overlooking the Grand Canal, we had dinner with a young couple who are grape growers and vintners from the wine region of Abruzzo. They shared several of their wines with us and we enjoyed them so much we asked where we could find them in the United States. They told us that they do not sell their wines in the U.S. because their small production, artisan wine making approach would not interest the “big guys.” Our next stop was Slovenia, where we tasted some truly unique and fabulous wines made from indigenous varietals and using traditional methods that go back generations. With a few exceptions, most Slovenian wines do not make it to this country either. By the time we made our third stop, in Zagreb, Croatia, a theme was starting to emerge: there are some very impressive and unique wines to which the American consumer does not have ready access. In Zagreb, we stopped at the coolest wine bar in the city, The Basement. Their proprietor, Dario Drmac, poured quite a few wines for us, some of them traditional Croatian varietals and others made from varietals that are more international. Again, we were shocked to hear that none of the wines we tasted was available in the United States. Three weeks later, after driving the entire length of Croatia and half of neighboring Bosnia & Herzegovina, it was time to go home.
As we boarded our plane, we turned to each other and said, “We have to become wine importers and sellers.” While it may sound corny (okay, it IS corny), we fell a little bit in love with the people we met, their personal stories, their love and passion for wine, and their dream to share their wines with consumers in America. In a way, we feel like we did not choose importing, it chose us.
While we had some idea of the complexity of setting up this type of business, we severely underestimated the many steps involved, the volume of paperwork, the layers of Federal and state licensing, tax rules and regulations, and the logistics of getting wine from Point A to Point B, especially when Point A is 7,000 miles and another continent away. If we had known the extent of the work required, we might not have even started, but in this case, ignorance has definitely been bliss. We took each chunk of work/activity one step at a time and that is probably what saved us from folding up our tent and throwing in the towel (to mix a couple of metaphors).
The ABC’s (and TTB’s) of Wine Importing
In order to import wine into the U.S., one must learn a new set of alphabetic acronyms: ABC, TTB, COLA, FDA, CBP, BOE and probably others we have yet to encounter. The very first and most basic requirement to be able to import wine into the U.S. from other countries is to obtain a Federal license – referred to as a Federal Basic Permit. If said importer wants to sell those wines to other wholesalers or retailers, an additional Basic Permit is required. We decided to pursue both an importer and a wholesaler permit and filed our application with the Alcohol and Tobacco Tax and Trade Bureau – the aforementioned TTB that is one of the ingredients in our alphabet soup of federal, state and local agencies. We had never heard of the TTB before; it turns out they are part of the Department of the Treasury, and they have become quite an important part of our lives this past year! After a couple of months, we were granted our Federal import and wholesale permits and proceeded to apply for our state permits. You see, the Federal permit gives you the right to bring wine into the U.S., but each state has its own requirements for importing the wine into the state.
Getting a state license required us to leave behind the TTB and embrace the elementary sounding (but in reality very complex) ABC – California’s Alcohol and Beverage Commission. This state agency regulates almost every aspect of alcohol production and sale, including licensing. To support our business plan – importing wine, selling wine wholesale to restaurants and stores, and selling wine online directly to consumers – we needed three California licenses, all of which we now possess. Probably the most amusing part of this process is that we needed to post a giant sign on the front of our house for 30 days with big block letters stating “Public Notice of Application to Sell Alcoholic Beverages.” Everyone has seen one of these signs, most commonly on the front door of a bar or restaurant seeking a liquor license. We were wondering if one of our neighbors was going to see this sign and freak out, thinking we were opening a bar or on-premises wine store in our garage. Fortunately, we live in Napa Valley and this is probably a very common sight.
So finally we had our two federal and three California licenses, and quite a few wineries that wanted to send their wines from foreign lands to us. What next? Before wines can enter the United States, the foreign winery must register with the FDA – the Food and Drug Administration. Yes, really, wine is considered a food and a foreign winery is classified as a “food storage facility.” Hey, who are we to argue, some days wine is the only fruit we consume. Once the foreign winery is registered with the FDA, the TTB (remember them?) enters the picture again. Every single wine label for every single bottle must receive the TTB’s prior approval of the front and back labels on the bottle. There are quite a few rules for what must be on the label (and what cannot be on it), and after multiple submissions and re-submissions we could give seminars on the COLA process (Certificate of Label Approval).
Okay, all foreign wineries registered with the FDA? Check. All labels approved? Check. A temperature-controlled warehouse to store the wine when it arrives? Check. So how do you get the wine to the United States? If you are thinking airfare – think again! It costs about $1,000 to ship five cases of wine. Let us save you the math – that is $17 a bottle just for the shipping. Imagine what our wine would ultimately cost if we shipped it via air. No, our goal is to make our partners’ wines affordable, and the only way to do that is via containers on giant shipping vessels. Which means we needed to find a trans-Atlantic shipping company. We secured a shipping partner and finally felt like we were all set to bring some wine to the U.S We placed an order with our Croatian and Italian partners for one pallet each – 112 total cases of wine (or 1,344 bottles). We figured if we never sold the wine to consumers, we would slowly drink it ourselves; even if our business were a total flop, we would have enough wine to last a lifetime!
We had a few hiccups along the way. Trying to ship in August was one of them: somehow, we forgot that August is a vacation month for most of Europe but literally all of Italy (our departure port is in Livorno). Our wine sat in a warehouse (air conditioned, at least!) for almost a month before the dockworkers were back in action and ready to load the wines on the container ship. Before they could, though, the port city of Livorno suffered some of the worst flooding in over a century as over 10 inches of rain fell in just two hours. When all was said and done, six people died and there was massive destruction to property in the city. Oh, and total destruction to 56 cases of our wine. All of our Croatian shipment was spared, apparently because it came in later and was stacked higher. Most of the Italian wine sat underwater for days until the waters receded. Due to the miracle of insurance, our wine was replaced at no cost to us, other than lost time.
Our Croatian shipment made the safe voyage from Livorno to New York City in mid where we encountered another alphabet acronym: CBP (Customs and Border Protection). All shipments have to clear customs and we must pay applicable taxes and duties on the wine (calculated according to alcohol percentage). Once through customs, the wine was placed on a truck and made its way across the entire continental United States, ending its journey in our Napa Valley warehouse. The Italian wine arrived just a bit later and is sitting safely in our Napa warehouse.
Now that we have this wine, what do we do with it? While we will make some wine available to restaurants and retail stores, most of the wine is being made available direct to consumers via our wine store. We spent several months researching platforms to help us sell our wines – front end, back-end web store, payment processing, inventory management, invoicing, sales tax, shipping, etc. In the end, we have built out an online wine store we are proud of: www.topochines.com. In addition to the Croatian and Italian wines, we are offering a luscious Spanish wine from Rioja; a sparkling Cremant de Bordeaux from France; a few Napa Valley wines; and a delicious red blend from Sonoma County.
All of the wines on our site are similar in that they are small-production wines from producers we know personally, and the winemaking approach is very similar: respect for the varietal and the terroir in which the grapes are grown. We will be adding wines that meet these criteria as demand from our customers grows. We just returned from a trip to Oregon wine country to see old friends and meet new ones; we bought some fantastic wines on the trip and they are now available for sale on the wine store.
December 1, 2017