The Wine Import Business: Proactive Pricing in an Ever-Changing Market
Importing wine to the North American market is a complex business. While essentially managing two separate sets of books—one for international suppliers and one for North American distributors, you’re now also dealing with all the new challenges in the shipping and logistics industry, which began with the pandemic shutdowns in 2020.
While COVID-19 upended every industry, it hit the logistics industry like a hurricane, with worker shortages on board, in port, and at warehouses. There were massive delays around the world, container shortages in major manufacturing ports, and weeks and months-long arrival delays in North American ports. These sea shipping delays inevitably rippled out into the domestic transportation network too.
Of course, you probably know these challenges all too well. The unprecedented supply chain disruptions affected wine import businesses dramatically. Delays and higher costs made the process of pricing wine for North American markets even more intricate than it already is within the three-tier system. Besides managing the usual DAs and billbacks and taxes, it became necessary to consider if or when your wine would show up on the continent, how long you’d have to store it, and if you could even find warehouse space.
With so many things to consider and keep track of when you are pricing your wine for distributors, from logistical costs to state taxes and billbacks, it’s easy to eat into your margins quickly. At Tradeparency, our data artisans focus on helping wine importers and suppliers optimize everything in their pricing cycle, from DAs, billbacks, spend tracking, promotions planning, and approvals. This article will cover ways to approach proactive pricing for wine importers so you can better control your bottom line.
A Rising Tide Raises All Wine Shipping Costs
Besides the obvious challenges the pandemic caused for everyone, there have been more strenuous impacts on global logistics that have surfaced over the past two years and are directly impacting the wine industry. Massive freight delays and economic shutdowns worldwide disturbed both the foreign and domestic markets. Shipping companies are still having a hard time finding staff—and not just seafaring staff—ports, warehouses, rail, and the trucking industry all face staffing shortages.
We often consider how the supply chain industry impacts wine importing in terms of numbers, but at the end of the day, it functions because of mass human contribution. Countries not only have a shortage of containers, but they’re also trying to manage the spread of the virus through their population and find ways to make returning to work safer for their citizens.
And who can forget the container ship that got wedged in the Suez Canal for nearly a week in the spring of 2021? Even though it was a relatively short blockage in terms of time, it still caused extensive delays in shipping that impacted logistics around the world creating a domino effect into the wine import industry. In April of 2021, Wine Spectator reported that the mix of shipping delays and over-demand for cargo space following the Ever Given canal block, combined with the temporary European wine tariffs, were causing mass friction on the ability of imported wines to get into the country.
This is all to say the costs of freight have shot up. In some cases, the cost of transporting a shipping container has risen 500% due to container shortages and fewer ships on trans-oceanic routes. Additionally, many shipping companies prefer the lucrative shipping routes between North America and manufacturing ports in Asia over the routes from Europe, where most of the wine imports come from into the US.
While some of these industry challenges are beginning to level out, some things are unlikely to go back to how they were. There will be permanent changes in logistics that affect wine import businesses, which in turn affects how suppliers will ship and price wine with you, and how you need to price imports with distributors.
But along with how the pandemic impacted wine import businesses, it also has highlighted the importance of providing reliability and continuity to the end customer. Where previously the obsession with supply chain was lowering costs, some of the focus has now shifted to getting the product where it needs to be, on time, even if it costs more.
Weforum reports that nearly every industry is seeing innovation, adaptation, and unexpected collaboration as everyone scrambles to meet the consumer demand among raising supply chain challenges. The ability to price and place your wine products properly—for your import business and for your consumer—is where some of this innovation is happening!
Changes to Wine and Liquor Distribution in America
On top of the extensive logistical challenges, the liquor and wine industry has been dealing with different taxes and tariffs on the North American side. There have been changes in federal import taxes as well as state excise taxes. If you’re selling to distributors in more than a handful of states, you or your accounting team has a significant headache in keeping track of all the different taxes and monitoring them for changes.
If you’re managing all of this in spreadsheets that must be manually adjusted, you’re likely eating a lot of missed costs. Besides just the normal costs of running a wine import business in a year and what you might already be writing off for incorrect or invalid billbacks you pay, you’re also sinking a lot of time into keeping so many spreadsheets up to date and working correctly. Your accounting team is probably fantastic, but they don’t need all the extra administration work of manually reconciling distributor deals, tax rates, or documenting trade and promotion costs.
Why You Need Proactive Three-Tier Pricing
So, the question becomes, if facing unprecedented supply chain interruptions, rising costs, scarce resources, and more regulation pressure, how do you make sure all that juice is still worth the squeeze? The good news: it’s not all bad news. As we mentioned earlier, changing market conditions push incredible industry innovation, including how wine importers can handle and automate pricing and trade promotion management to ensure healthy margins, improved profitability, and proper consumer placement!
To compete in today’s wine market, you need to be able to set your prices for distributors proactively and track your billback agreements in a way that is more trackable than a bar napkin. With decades in the wine industry, our data artisans know how much there is to manage when you’re importing wines to your North American customers. That’s why we developed Tradeparency, a wine industry solution designed to help you manage your pricing grids, keep track of your billback details, and automatically push all the information about changing costs to your system. So, you can see your exact costs at a moment’s notice, with all the relevant data you need to set your prices and promotions effectively.
Here are just a few of the benefits of pricing proactively with Tradeparency:
- Set prices fast and accurately
- Save money on incorrect billbacks
- Save time on reconciliations
- Ensure shipping costs are covered
- Peace of mind for data-based decisions
- Updated pricing grids and costs update automatically
- Automate approvals to meet distributor requests faster
- Manage all your trade spend in one place
You’ll be able to automatically reconcile your billbacks to true depletion allowances, ensuring you’re only paying the valid ones and not losing your margins on erroneous invoices that are impossible to verify. Eliminating inaccurate billbacks alone can save your wine import business tens of thousands in a year!
Tradeparency Gets Your Margins Under Control
All these costs, from logistics to DAs and billbacks, are headaches you don’t have to live with. Tradeparency links directly with your ERP to give you full control over your margins and help you manage all of your trade promotion spend. It is compatible with all devices, and you can instantly see how changes in shipping and storage costs will affect your margins.
Using Tradeparency, you will be able to make data-backed decisions so you can feel secure knowing that you aren’t hemorrhaging money based on guesses or unknown deals.
If you’re ready to lighten your management load and focus on the more fun parts of wine importing (like spending time with your suppliers, developing signature collections, or sharing your love for a region’s wine and culture with the North American market) get in touch with our team. Tradeparency can help you take back your time, reduce unnecessary payouts, and increase your bottom line.