Recently, I was asked to give career advice to a young person interested in carving out a career in wine. I’ve worked in numerous facets of the wine business for more than 15 years and I’m frequently asked by wine lovers how to make a living in the wine industry. If wine is your passion and you have dreams of working in the wine business, there are a few great ways to test the waters and gain experience. This is a guide to nine key roles in the wine world and the pros and cons you’ll need to consider before you take the leap.
1. Wine Broker & Sales Representative
Like many people, I started out in the wine business as a sales broker because in most states, you don’t typically need a license or any capital input to get started. Wine brokers serve as the intermediary between buyers and sellers and earn a commission. Most commonly, wine brokers work as independent sales agents in the wholesale tier.
Wine brokers take samples to potential customers, let them taste the product, and submit orders to the seller. Most brokers live in a specified territory and connect local restaurants, hotels, retailers (HORECA) to suppliers like wineries, importers, distributors, or other brokers in other territories. Tempted? I’d always encourage you to go for it, but there are a few things you should know before signing on the dotted line.
- Low barrier to entry
The first challenge is to identify the types of wines that people want to buy from you. Then, you need to determine if the supplier is reliable and has sufficient inventory to support your sales efforts. No one wants to do the work of selling a product only the find out that the order cannot be fulfilled.
- A Living Wage
It can be tricky to make a full-time living as a commissioned sales broker or agent, but it gives you a great introduction to the wine industry. A commission of 10-15% is standard, but it can take months or years to build a book of business with sufficient sales that would generate a living wage. You may want to consider brokering wine as a work part-time endeavor to start.
Want to work in a developed market like San Francisco, Los Angeles, and New York? Don’t we all. Your main challenge will be hundreds of brokers selling to too few buyers. I often hear buyers complain that they get calls from 100-200 brokers and struggle to accommodate 50 vendor relationships. In these cities, you may find it tricky to establish vendor relationships.
- Contacts & Contracts
As a wine broker, your network is your bread and butter. Some brokers have key, high volume relationships with buyers like Costco where they can connect winery suppliers and buyers on a container basis. In this case, the wine broker makes between .03-.10/bottle or up to 5-10% of the invoiced amount.
This type of recurring, volume business can be profitable as long as you obtain and maintain a strongly enforceable contract that prevents the seller from selling directly to the buyer. This is a real problem and I had a lawyer draw up a non-circumvention agreement years ago.
- Fine Wines & Gray Market Trading
You could trade in high end, investment grade, or collectible wines. However, since these wines can be rare and high in value ($500-10,000/btl), even well-heeled brokers are cautious about acquiring too much high-end inventory that’s hard to flip for a quick sale. Also, it’s not easy to find and acquire these types of wines and it takes a professional to validate the authenticity of these wines as they are the most commonly forged wines in the world. This type of “gray market” brokering typically requires an alcohol license and state tax remittance may be required.
The largest parts of this business are the First Growth wines of Bordeaux, but also includes a select number of producers from Bordeaux, Rhone, Burgundy, Tuscany, Piemonte, and Napa. See the list of producers included in the Liv-ex 100 portfolio for examples.
2. Wine Importer
Importing wine is straightforward. You find, select and source wines produced in one area or country and manage the customs, federal registration, local, state and federal tax and compliance to sell those wines in a specified territory.
Most importers source wines that aren’t available or marketed within a specified territory. Some control states allow only a single vendor of a product within a specified territory (Nevada, Georgia, Virginia, et al.), which provides a protective moat, given certain conditions, for selling those products. These types of states are referred to as ‘franchise states’.
- Set up fees
The fees associated with starting a wine import business are nominal. There are the usual entity start up fees at the local, state, and federal level, then a free online application for your federal importer’s permit. Next, you file a state level application with the Alcohol Beverage Control (ABC) office and pay some fees (typically less than $1000).
Once you find a storage warehouse (which can be a public warehouse paid on a per case by the month basis) you can import your first pallets or container of wine. Depending on the price of the wine, this could be less than $20,000.
The hard part is selling the wine. You need to decide if you want to be a direct importer and distributor, or if you’re going to sell to distributors in a variety of states or territories. Some states prohibit an importer from being a direct distributor.
The smart importer “clears” wine for a client (a distributor or even a retailer, restaurant group or hotel). In this way, with your buyers already lined up and committed to paying, you don’t get stuck with hard-to-shift inventory. For this service, you’d be paid anything from $1-3/btl to a 30-50% margin.
A distributor operates as a key middleman in the process that connects products with buyers. You play a role in maintaining a sales staff (some of whom may also be independent contractors operating as brokers) who present products to potential clients and provide education.
- Straightforward process
The process of setting up a wholesale distribution company is similar to applying for any alcohol license. The process starts with a free federal application, followed by state and local applications that require fees and approval.
Distributors must warehouse sufficient inventory to fulfill orders in a timely manner. This costs money. You’ll need your own warehouse and staff, which can be a significant ongoing cost. You can choose to use a public warehouse to handle storage and delivery to your customers, which can add more than $1/btl to the cost of the wine, but you will be relying on the warehouse to fulfil the order promptly and correctly.
The distributor faces similar uphill battles to the broker or salesperson plus the added challenge of increasing consolidation in the wholesale tier. Currently, five companies account for over 80% of all wholesale sales. If you are up for the challenge to compete with billion dollar empires, good luck. In a crowded field how does one gain access to buyers and convince them to spend their wine budgets with products from a particular vendor?
- Margins & Collections
Moreover, the distributor must quickly develop a volume business to turn inventory, while working on an average markup of 35%. Some states require COD payment, but most offer 30 day terms. In California, although terms are specified by the ABC, they are not enforced and many distributors find themselves playing the role of debt collector.
After overhead, sales commissions and incentives, and the cost of extending credit to customers who may not be creditworthy, the net profit margins may be less than 10%. This is low in general, but when you remember wine is mainly a grocery store commodity, it’s actually a higher margin than many other products in the grocery store.
4. Producer/Winemaker/Winery Work
The typical path to becoming a winemaker entails going to UC Davis or UC Fresno to complete a master’s degree in winemaking. Ideally, as a newly minted graduate, you’ll work for a well-regarded winemaker for a few years and then set out on your own to produce a small amount of wine under your own label, and/or takeover as Head Winemaker at another winery.
It’s often a great idea to gain international experience by working as a harvest assistant abroad. This typically takes five years minimum and often closer to ten years to achieve.
Without a winemaking degree, many harvest interns return to a winery to work as cellar assistants, tasting room assistants and managers, etc. They work their way up the ladder and wear several hats at the winery. Many of these jobs are paid on an hourly wage.
Opening a brick and mortar retail store (with typical margins of 35%) may seem like a risky proposition given the influence of big box stores, low margin stores like Costco, and the explosive growth of online retailers. The prevalence of online retailers have increased pricing pressures due to mass availability and pricing transparency. However, a retail store can work if you build some kind of ‘moat’ around it.
For instance, a store next to a Whole Foods or other grocery store that is unable to sell alcohol (due to local licensing limitations) would be a niche opportunity. Also, opening a store in an underserved or newly developed area with a population of above average household wealth would be a good idea.
Increasingly, a number of retailers are opening online-only stores. This is also a competitive arena, but it’s an area that’s currently growing at 10-15% per year.
As the pie grows in size, so do the opportunities. The biggest hurdle is competing on marketing and reaching customers. Over the last 5-10 years, a number of online retailers entered the marketplace with subscription-based pricing (VIP deals, if you will).
Vent Privee, Rue La La, Gilt, Groupon in the fashion sector, etc., led to the growth of Woot, Lot 18, Club W (Winc), Vivino, and Wine Access, as well as a number of niche wine clubs led by an individual charismatic person. Vivino has created a unique platform with a globally recognized app. By gathering customer data, they offer wine for sale based on user’s preferences. Personal recommendations as a result of data collection and marketing segmentation appears to be the wave of the future for online wine sales.
Maybe you’d prefer to share your love of wine and want to teach classes, lead tastings, or support sales staff in larger wine organizations? The best route in this instance is to get accredited by taking a WSET Diploma or a Society of Wine Educators course.
The highest credential you can attain is a Master Sommelier (MS) or Master of Wine (MW) credential. Since it’s a requirement of MW’s to produce original research as part of completing the degree program, most MW’s write books.
- Share your passion
- Part time
With the exception of full time positions in larger importer/distributor companies, these tend to be part time gigs. Many people enter the field of wine education because they have a distaste for sales. Then, they realize that they still have to sell themselves and their own credentials before someone will hire them!
Working as a Sommelier has become a much more appealing job to a younger generation with the success of the “Somm” movie franchise. However, in essence, the pay is often low and the work extremely challenging.
Sommeliers are now competing to achieve credentials from the Court of Master Sommeliers. The top of the mountain is to become one of roughly 400 Master Sommeliers in the world. Upon completion of this feat, many MS graduates continue in the same job working for restaurants as a Wine Director.
Some become retailers, winemakers, consultants or employees at large companies who work to create educational content. But, they still have to sell themselves and their experience to someone willing to pay for it!
8. Warehousing & Delivery
This is a growing business that’s viable in states where public warehousing is required and where setting up an air-conditioned and staffed warehouse would be prohibitively expensive for small wineries, brokers or distributors. It can be very profitable if costs are contained and you have a comprehensive program in place to manage inventory and deliver product in a defined geographic area.
The ability to make drone deliveries will greatly enhance this delivery business like many others, but wine is heavy, temperature sensitive, and fragile.
The other clear opportunity is to provide warehousing and direct to consumer fulfillment of wine shipments via Fedex, UPS, and GSO. Setting up volume contracts with couriers and selling the service with an additional margin to the wineries is clearly a growth opportunity. Currently, there are only a handful of national businesses that have sufficiently scaled with operations in several states on both coasts. To be able to operate this business in a compliant manner is a patchwork, but it represents a business with a significant moat if it can be properly capitalized.
9. Wine Industry Supplier
Wineries and wine businesses need a host of supporting products like corks, bottles, barrels, labels, foils, cardboard boxes, labels, graphics design and winery equipment. There are many opportunities to service the growing number of winery producers with supplies and equipment.
There are opportunities to learn how to manage a winery office (using QuickBooks, for instance) and selling products to winery tasting rooms. There is a significant gap in the number of people who are trained to handle compliance and reporting, which is increasingly complicated due to every state operating as its own entity. There are opportunities to manage ranches, properties, farms, HR, and tasting rooms.
A Great Time to Join the Growing Wine Industry
The wine industry is a growth business and has proven to be recession-resistant. While wine consumption has accelerated in the U.S., per capita consumption is still about one quarter of Western European countries where wine is consumed more as a grocery store commodity than an affordable luxury. There are plenty of ways in which you can turn your passion into a good and rewarding living in the wine business.
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