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Is the Importing Business Reaching its Saturation Point?

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How many importers can New York State support? We are about to find out.

"After nearly 10 fantastic years working for [a major importer/distributor] I'm beyond excited to announce that I'm launching my own importing & distributing company…in January of 2014!!" said a recent Facebook update. Two weeks before that note was posted, another segment of the New York City wine community had been abuzz, wondering who was behind an altogether different import launch. Each month brings a new announcement. Or two. Whereas today many people outside the business seem to dream of being a sommelier, many within the wine business harbor a desire to be an importer. It is a popular passion, and it is easy to understand the reasons why. There is the globe trotting travel. The cellar visits with winemaking grandees. The old and rare vintages paired with long lunches. The joy of discovery, and the hero status back home. There are a lot of people in line, seemingly, to be the next Kermit Lynch, Terry Theise, or Joe Dressner.

But how many importers will really achieve a similar level of success, given that the number of players in the New York market now approaches 200?

Think about it. Many of the start up importers are three person operations: a person in front who buys and sells, an accountant, and a silent financial partner. These are the sort of small operations that are opening up. Which is actually surprising, because back when a major national distributor entered the New York market in 2005, it was just these small players that many feared would disappear. But the opposite has happened. Small importers have multiplied. And that has engendered hundreds of phone calls and email inquiries, usually sent to the same set of restaurants. Hundreds of competing tastings. Hundreds of sales reps on commission and a handful of well known sommeliers who complain privately about being hunted and publicly about being always pressed for time. Is it going to work out? Can it work out, or are we on the curve of a bubble about to burst into a frenzy of consolidation? Keep in mind that the total number of importer/distributors in some states is less than 10. In some others it is less than five. "The business was already too full of importers when I got here" said one New York City resident who has lived here for over a decade, and who also happens to be a newly minted importer. He pointed to Brooklyn as a huge potential growth market, and said that besides that, he really didn't know what would happen in the future, but that there was a lot of money on the table for someone. Which is undoubtedly true.

In many ways, it has never been easier to be an importer. Global communication has been helped along by technology. Setting up appointments? Google Translate can help. Finding a remote address? TomTom has your back. And there is more than one company to turn to when you need assistance shipping the wine back home. Anyone who travels to wine regions with any frequency knows of a few "undiscovered gems" that seem to stay stubbornly overseas, and also has winemaker friends who wish they could sell more wine. Wouldn't it be great to connect the dots? Tellingly, it hasn't always been the portfolios with the best wines that have held together over time. Which implies that it might be just as important to find a few customers as to find a few wines, before launching an import company. Many sales reps complain of being "shut out" of key accounts, and of buyers who will only buy from certain portfolios. Given the sheer number of sales reps out on the street, it wouldn't be a stretch to conclude that doing business with all of them has become an impossibility for any buyer.

The more entrepreneurial of the companies working the wholesale market have become de facto job placement services for sommeliers. A trusted salesperson working an account is often the first person to know that a buyer is leaving or has left their post. That salesman might know that there is a change afoot even before the boss back at the restaurant does. Wouldn't a salesperson with such knowledge want someone in the buyer role who they know is likely to purchase from them and not the competition? Many times they know just the person, and encourage them to apply. Most of the jobs never hit Craigslist, or anywhere else for that matter. With $50,000 or much more than that in annual sales attached to a friendly vibe and verbal agreements, there isn't much incentive to leave to chance what happens when a buyer leaves.

But the real spoilers of importer success may be the producers themselves. Under the law, wholesale purchasers of alcohol in New York State are required to pay within 30 days. If a buyer doesn't pay, they can speedily be put on C.O.D. The seller in New York basically has a guarantee of reimbursement. But no such law governs the transaction between the wine producer and their importer. If a producer accepts terms in excess of 30 days, then there is a cushion of time to sell product that hasn't been paid for. And it might be much longer than those 30 days before the producer - the maker of the actual wine — receives payment. A producer who hasn't been paid is placed in a double bind when the importer reorders. Should they send more wine when they haven't yet been reimbursed for what has already shipped? Many might, because they know that if they cut ties they definitely will lose out on the payment for that first shipment, which may well represent a good portion of a year's work. "I realized that I could float payments to producers during the month of harvest" one importer told me off the record, "because they are too busy doing harvest to pay attention to stuff like billing." Keep in mind that small farmers in Europe or other areas may have little familiarity with the New York market at all, and have little accounting assistance outside of their own family. Famous producers who have already made it don't have to play by the same rules, of course. They can easily find any host of importers who would be delighted to work with them. It is the small unknowns that are at the most risk. Which is exactly who an importer that is just starting out might contact.

Undoubtedly most importers are conscientious and honest businesspeople who know that their reputation is their calling card in other countries. And most will work as hard as anybody in any business. However, the unrivaled consumer choice that we enjoy in New York may be bred by a desire to live the importer life described in famous wine books, and financed in part by small time farmers across the world.
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[Photo: Daniel Krieger]