Excellent article on wholesalers and the benefits they reap

[grehorst]

A friend sent me this link. http://www.reason.com/news/show/129476.html If you desire, filter out the John McCain political premise and take it for what it is- an article that does an excellent job of summarizing the wholesale end of this industry and is a must read for anyone considering opening a distillery.

[delaware_phoenix]

Another problem for people is the high cost of starting a wholesale business. State often charge good money for the annual license for a wholesaler. It's actually a lot more than that for a micro-distiller. It's another way states limit competition and why there's no move towards micro-wholesalers.

[Denver Distiller]

"For decades wholesalers have quietly added 18-25 percent to every bottle of beer, glass of wine, and shot of liquor you pour down your gullet."

Yeah, right. Any of the rest of you laugh at that gross underestimation?

[Paul G]

Ya reckon it's missing the '1' in front of those percentages?

[Denver Distiller]

Many (no, not all, thankfully....they're still some straight shooters out there) Wholesalers work very hard at obscuring markups and sampling fees. I don't know anyone who's only paying less than 25% to get their bottles on the shelves. Sadly, the author must've used mega-beer figures for wholesale markup.

Bet the distillers in VA, WA, and MI would kill for a 25% markup, eh? MI is 65% before taxes and placement fees, and what's worse is that the State media doesn't understand that that 65% doesn't go to the State....it goes to the wholesalers, literally cheating Michigan residents out of millions of dollars per year TWICE. Once by giving the markup to the distributors, and once at the cash register when they buy their spirits. It's really sad. Isn't corruption swell?

[dgpoff]

Many (no, not all, thankfully....they're still some straight shooters out there) Wholesalers work very hard at obscuring markups and sampling fees. I don't know anyone who's only paying less than 25% to get their bottles on the shelves. Sadly, the author must've used mega-beer figures for wholesale markup.

Bet the distillers in VA, WA, and MI would kill for a 25% markup, eh? MI is 65% before taxes and placement fees, and what's worse is that the State media doesn't understand that that 65% doesn't go to the State....it goes to the wholesalers, literally cheating Michigan residents out of millions of dollars per year TWICE. Once by giving the markup to the distributors, and once at the cash register when they buy their spirits. It's really sad. Isn't corruption swell?

Here in Washington we are a FOB supplier to the state. Their markup, which includes both taxes and fees to run the control system, are about 100%. So a $15 FOB bottle becomes $30 on the shelf. As a result of legislation we wrote and lobbied, we can now sell out of our distillery and capture about half of that markup for ourselves, although we are limited to both a 2 liter per person and state set pricing mandate.

Some see control states as a "problem" or difficult to break through the state mandates. We find control states much easier than distributed states. There is a level playing field with all suppliers (no distributor blocking maneuvers), and the rules are pretty much set (no negotiation of every detail and cost.)

Distributors are necessary to growing a brand. Ditto with brokers in some scenarios. You just have to plan for the costs and weigh those against the benefits/volumes obtained.

Don

[JohninWV]

What are the VA charges?

During my recent conversation with the VABCA, I was told I can direct sell to the state at their markup...which will be about 100%. My understanding is that I apply for a solicators license and can promote my product to any bar, restaurant, etc. I then go to the state and ask them to carry it on the shelves. I don't need a wholesaler.

Am I missing something here?

[Denver Distiller]

Some see control states as a "problem" or difficult to break through the state mandates. We find control states much easier than distributed states. There is a level playing field with all suppliers (no distributor blocking maneuvers), and the rules are pretty much set (no negotiation of every detail and cost.)

Distributors are necessary to growing a brand. Ditto with brokers in some scenarios. You just have to plan for the costs and weigh those against the benefits/volumes obtained.

Don

I was just trying to change the perception of what was put forth in the article: that markup is 18%-25%. That's not correct, obviously.

I like State systems just fine for the very reasons you cited....so long as is it's 100% run by the State, as it is in WA and VA, to cite two examples.

[Denver Distiller]

What are the VA charges?

During my recent conversation with the VABCA, I was told I can direct sell to the state at their markup...which will be about 100%. My understanding is that I apply for a solicators license and can promote my product to any bar, restaurant, etc. I then go to the state and ask them to carry it on the shelves. I don't need a wholesaler.

Am I missing something here?

No, you're not missing anything at all. The State is the wholesaler in Virginia. So if you do the above, you're all set. You can also register your spirits in their Special Order system should the State choose to not give you a full listing (a full listing means that 50 of the VABC stores must carry your spirits).

[JohninWV]

No, you're not missing anything at all. The State is the wholesaler in Virginia. So if you do the above, you're all set. You can also register your spirits in their Special Order system should the State choose to not give you a full listing (a full listing means that 50 of the VABC stores must carry your spirits).

Thanks...I was starting to get worried....