Each of the fifty states has its own unique licensing system and within that system are entirely different requirements and costs for out-of-state importers. These can range from simple one-page forms with no fee, to extensive applications, surety bonds, non-resident seller permits, brand registrations and as much as thousands in annual fees. It is essential to comply with their requirements and to maintain the licenses in good standing or you may find yourself running afoul of the alcoholic board of that state and unable to ship. But there are other considerations which may help you negotiate the state licensing maze, and often save a considerable amount of money.

Your decision, at any stage of your business development, is whether to manage your licensing and state reporting from your office or to outsource to a compliance consultant. Initially, if you have taken on a brand or brands that have no previous history in the U.S., you will be able to start very slowly with one state and its requirements, then the next state and so on. Using the premise that you are carefully and conscientiously sourcing and appointing distributors, this may not be an onerous burden at first. But there are other considerations, even at this stage.

• Are you starting your business with little or no office assistance?
• Do you expect to be on the road most, or a significant part, of the month?
• Are you planning a strong push to assign distributors in several states at once?
• What is your budget?
• Do you have the patience for this type of paperwork, or are you likely to forget or procrastinate?

Since many states have requirements with timelines and monthly or quarterly reporting, it is essential that they are met and the money you save with doing it yourself, or with the assistance of employees, is not eaten up with penalties, late filings that delay shipments and issues that take this out of the realm of cost-effectiveness.

If you are on the road a significant amount and part-time help is unable to find the time or is unavailable to cope with meeting deadlines, I would suggest outsourcing, at least in the short term.

With the prospect of a rapid expansion of states, there are a huge number of disparate requirements to get up to speed on all at once. Budget for outsourcing should be weighed against your own ability to reasonably accomplish this on your own.

Some licenses are good for a year, others up to three. Occasionally states require a bond and this can be obtained from a surety bond company that handles bonds of all types for a nominal fee. One such agency is www.suretygroup.com. The purpose of a bond is to uphold the contract you have made with the state, to comply with their laws and to demonstrate credibility. The bond company is effectively guaranteeing your performance with the payment of a fraction of the bond issue.

Label or brand registrations are often required in addition to the actual license and may incur a fee per label. Consider which wines you plan to ship to that state, whether the available volume of wine is worth the expense and, most importantly, which wines the prospective distributor wishes to order, rather than just a wholesale registration of labels.

Some states require price posting each month or whenever a price changes, to set the price itself or the price range under which the wine will not fall. These states often prohibit variances in prices, or any discounts, and require uniform pricing for all retail outlets.

SAVING MONEY – USING OTHER’S LICENSES

License fees in certain states may appear prohibitively expensive, until you consider that, in Colorado, Arkansas, New York, New Jersey, and others, a common practice is to allow the distributor’s separate import company to “import” and register the brand for you in that state. Instead of a huge fee or unwieldy monthly price posting, the cost to you is nominal or none at all.  This is standard in several states, but it is something that escapes the notice of novice importers. They end up spending far more in license fees than necessary by not investigating or talking to the distributor beforehand.

Another vital consideration in this scenario is when assigning an “importer” in a franchise state. This effectively means the wholesaler become the owner of your brand in that state. Investigate fully the implications of using another’s license in a franchise state. It may be the logical and cost-effective way to go, but doing your homework is important. Call the relevant state ABC and discuss your obligations with them, and ask another winery in your reference checking if they have any concerns about assigning the distributor as state importer.

Proficient compliance specialists will be intimately familiar with the requirements of each state and keep up to date on changes in laws and deadlines. Make sure to discuss fees and what these cover. Some compliance firms require a large minimum monthly payment, regardless of the scope of work. This may not be in your best interests when you have only one or a handful of states in the beginning. Look for flexibility and whether they are interested in saving you money, or just taking your money.

When I first started my import business, I was somewhat overwhelmed by state requirements, particularly in Georgia, where I initially resided. The licensing process, for an in-state importer, was lengthy and onerous and on top of that they required monthly reporting and the submission of all invoices. I thought the prudent thing to do was to free myself of the state obligations and concentrate on building the sales of my fledgling business. I did not take the time to acquaint myself with the reporting requirements and for a year I paid an outside compliance company a monthly fee to handle the paperwork. I moved to Colorado with the same arrangement for another year, until one day I received a notice from the State of Georgia that I owed stiff penalties for 12 months of non-reporting. The compliance company was either incompetent or unfamiliar with the reporting requirements of an out-of-state company and had filed the wrong paperwork for the entire year I had been in Colorado. When confronted, the compliance “specialist” refused to accept full responsibility, and I ended up paying half the penalties, in addition to the full monthly fees I had already paid the compliance firm to carry out the correct handling of the compliance matters.

Never relinquish all control over your own business, but in the initial stages, when it can seem overwhelming, some assistance, in-house or outsourced, can free you up to pursue the real reason you got into the wine industry – to represent and sell wine. Whichever route you choose, doing your due diligence is paramount. Eyes wide open in this area can save you time, money and aggravation.

Sales quotas can be a double edged sword for wine distributors, often putting sales reps and distributor at odds over the goals. A dynamic distributor that represents brands with some traction in the market, or with the potential for broad sales volume, will usually have some quotas, ideally hitched to an incentive bandwagon. This would indicate a sufficiently robust portfolio to enable the sales reps to make a decent living, but quotas can often conflict with their customers own needs.

I am aware that there are as many disparate situations as there are distributors and wines, and for purposes of this subject I’m eliminating large wholesalers with enormous national brands. The assumption with these companies is that the entire portfolio is based on quotas and, although it can be a great proving ground for some, it is not the scenario I wished to explore here.

One of the customary reasons for incentives tied to goals is a push from a brand owner to establish and build a particular market, to make it stand out in the sales reps’ minds and ultimately achieve some success amid a very crowded field. This can mean an income boon to the sales rep. The right wines can also open previously unavailable ‘A’ accounts, or certain price points can open other doors to case stacking in stores and glass pours in restaurants.

The downside is when the wines are impossible to sell despite threats and intimidation from the sales manager and begging and pleading with accounts. Again, there are so many reasons for this – price increase, vintage issue, decline of the category, prior commitments by the retailer to other quota related wines – any of which the distributor could look upon as a temporary situation. But while he is trying to keep the supplier happy and mark time until things improve, he is making the sales rep’s life miserable.  Another challenge is a distributor, even a small to medium-sized one, which has all quotas (with or without incentives) and nothing else. This reduces sales calls to moving boxes and a disingenuous attempt to convince the retail buyer to purchase whatever is in the book, just to reach an arbitrary target. The retail account only has limited time and will start to avoid the sales call, and the rep will become discouraged by having been reduced to a box mover, where the wines themselves have become immaterial.

Placements and volume incentives with a monetary reward are typical motivators for the sales rep, because they are, after all, commission-based, but if everything in the book is a quota they lose interest and start to feel they are chasing an unrealistic sales goal every month. Quotas ideally should be established for a period that is long enough to see results, but short enough to avoid having the incentive taken for granted. One wine a month can work for rotating wines in a brand, e.g., but ideally a quarter gives salespeople a satisfactory period to allow buyers to accommodate the wines in their schedule, and for the sales rep to accumulate a healthy bonus bump. It is also a good opportunity for vendors (hopefully in financial collaboration with the distributor) to establish a competition between reps or territories for such achievements as the following:

• Most new on-premise (restaurants) placements
• Most new off-premise (stores) placements
• Number of case stacks fulfilled
• Most glass pour placements
• Establishing new accounts
• Establishing new territory
• Opening a chain account placement

These are just broad examples. Incentives can and should be tailored to meet such factors as the population and potential of the individual market, or the ease or difficulty of selling the particular wines. A program could run a whole year if it is tied to a trip to the winery abroad. Key to any program is accountability and making it enticing and specific enough that a good segment of the sales force jumps on board. Something nebulous, such as a reward at the end of the quarter for “most wine sales” or “biggest jump in sales” can backfire. Ambiguous or undefined goals could result in very few people accepting the challenge and having, e.g., to pay out a large gift that exceeds the supplier’s profit made on the overall sales.

Esoteric varieties, high priced, low priced or unknown wines all play a part in designing a program. If budgetary constraints are an issue, make it something fun and interesting. If possible for new wines, a market visit by the vendor can generate enthusiasm and give the sales team the selling tools they need for a successful launch.  Whatever you choose, it has to make sense for all concerned. And ideally the distributor should contribute to the supplier’s financial commitment, both to attract the sales rep’s attention with a higher incentive and to make the distributor a partner in the outcome. And vice versa. If the distributor is the one who wants to set goals, then solicit the supplier’s help, both in designing the program and contributing to the incentive.

There are lazy sales reps, ones who only service accounts for reorders, who cannot be relied upon to follow through on commitments and put in a minimum number of hours. Those aren’t going to be motivated by goals or quotas or much else, so there’s no point in spending time and effort on them. The best sales people, the ones you need to keep, are self-starters who aspire to build their wine knowledge base, gain experience in the industry for future advancement, introduce their accounts to new wines and see their hard work pay off with strong income growth. Therefore, for a distributor to succeed with quotas, they must be realistic and balanced with the ability for the sales rep to have some stimulating self-determination in their sales with a diverse portfolio. The good sales rep chooses to feel they are not just “pushing” the latest quota (whether they like the wine or not) but they also have some latitude and flexibility in the field to present wines that interest and excite them, and that they are learning and growing in the process. It’s a collaborative process.

Finally, if a sales rep can see that the quota period ended with solid placements on which they can build a brand, it is a further incentive to sell the wines beyond the quota timeframe – the goal of both supplier and distributor. Quotas should ultimately be about longevity for a brand’s relationship with the distributor, not one budget period.