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February 8, 2016

3-Tier Sales Channel | Overview of the US Wine Industry | Part One

In the U.S. the state is empowered to regulate the sale of wine to the degree that it does not compromise federal laws, and each state is unique in the set of laws governing sales of wine. Only the production, importation, packaging, and marketing of wine are regulated by the federal government.

National Sales

This is the sales tier where a supplier – winery, importer, or other producer – sells to wholesale distributors either in-state or out-of-state. The pricing terminology for this tier is called “distributor FOB,” the price of the wine by the case to a wholesale distributor ex-supplier’s warehouse. This price sets the subsequent market pricing and, unless the supplier holds a wholesale and/or retail license, the only price the supplier sets directly.

This tier may engage a regional broker to facilitate sales and provides marketing support to a group of wholesale distributors. For their services, a regional broker receives a commission on all sales to the distributors that they manage. That commission is traditionally paid by the supplier – not the wholesale distributors.

A supplier must be compliant in each state they sell into according to each state’s requirements regarding the sale of wines. The level of compliance varies greatly for each state in terms of cost and requirements. Regional brokers must be licensed according to each state where they conduct business according to that state’s laws.