Could the USA Save Your Wine Exports?
The recent breakdown in the trading relationship between China and Australia has left many Australian wine producers frustrated and desperately searching for alternative markets to China for their incredible wines.
Switching to alternative markets isn’t easy, it requires market knowledge, maybe a trip to find potential distributors (that’s not going to happen anytime soon) and time to develop new relationships. You could have vintages backing up waiting to get access to a market, growers screaming to get paid and wine wallowing in an unlabelled bottle. You know that you need to find new markets now!
So, Why All This Talk of the USA?!
Our Director, Ian, recently spoke to Steve Meckiff, a long-standing friend who is now based in New York. Steve has had a variety of roles within the wine industry, including being the Viticulturist at Cape Mentelle, where Ian was the Director and Manager. Steve moved to New York with Pernod Ricard in early 2015. Still based in New York, Steve recently started a new role working with PACE Wine & Spirits as Director, Business Development (https://www.pace.wine).
Given Steve’s position and knowledge of the US market, Ian asked Steve what challenges Australian wine producers will face if they are looking to move their exports from China to the USA.
Steve commented that, “The US is not only the number one global market, with a total alcohol value of US$165B, but also the most complicated of markets to navigate, as there are 50 markets in one country. The three-tier system is a challenge and once navigated, a brand, big or small, still needs to get supported by the chosen distributor and their sales force. It becomes expensive quickly.”
If you haven’t come across the US three-tier system before, it works as follows:
Tier 1 – Manufacturers (like wineries in Australia) sell to licensed importers. distributors and control boards. US Federal Excise taxes are collected when wine leaves the premises of the winery or the bonded facilities of a distributor;
Tier 2 – Licensed importers and distributors and responsible for ensuring that wine is correctly taxed and paid. The importers, distributors and control boards are ONLY allowed to sell to licensed retailers;
Tier 3 – Licensed retailers, such as bottle shops, restaurants and bars are responsible for ensuring that wine is sold to individuals who are of legal age.
It is, in some respects, a similar set up to Australia, but there is an important difference, no individual or entity is allowed to own and operate more than one tier of the system.
How Can Refresh Accounting Help?
Steve went on to say that “PACE has created a paradigm shift to the status quo, which is refreshing! PACE is a full-service National Sales Platform facilitating the transactions between Buyers (Retail) and Sellers (Importers, Wineries, Distilleries, Suppliers and Subscriber) to build brands and products in all 50 states of the USA. The schedule of service is a fixed monthly fee which also has significant accounting benefits. Turnkey solutions provided to suppliers with profitability and simplicity at the core.”
If you have been exporting to China, you know that it is highly unlikely that Australia’s trading relationship with China will improve in the near future. Wine producers, amongst other businesses affected, will need to identify alternative markets and develop mutually beneficial and trusted relationships in those markets. We think it’s worth looking at how to export wine to USA suppliers.
We know that finding people that you can work with and trust is hard. It takes time but, with a personal contact, maybe Refresh Accounting can help you make that all important connection with ‘an Australian in New York’ (to paraphrase Sting!)
Imagine, your wine, in a glass on a table in a New York apartment!