Expert: Eric Hofer - 2/1/2009

Question
I have found a product that is currently imported into the U.S. by its manufacturer.  This product is only being distributed locally in (1) market.  I have the opportunity to purchase distribution rights in other parts of the country. What i am looking to do is purchase the product from the manufacturer then distribute it to liquor stores & restaurants for resale to the public.

My questions are these:
1. Is a license required in order to distribute to stores & restaurants?
2. Do the stores & restaurants purchase the product from you immediately or is the product on consignment and you get paid as the product sells?
3. What kind of markup is put on liquor when selling to liquor stores & restaurants?

In general i just want to know as much about the distribution process as possible before jumping in.

Thanks for your time.

Answer
Christopher,

Question 1...
As far as I understand it, there are laws etc. concerning distribution and these can differ from state-to-state; and of course, trading across state borders comes under Federal jurisdiction.

http://www.atf.gov/
http://www.nbwa.org/

And for each state, you need to see what they offer.  I found one link
http://www.southernwine.com/AboutSWS/SWS3Tier/tabid/98/Default.aspx

that'll tell you about the 3 tier system.

Question 2...
Consignment vs COD vs x days...  It's up to you; your clout, their credit, your trust, etc.


Question 3...
Hard to say about the mark-up...  first it's relative (where are you measuring your final costs?  You could work from cost-of-goods, or product variable costs, including Primary Transport, 3rd party storage, etc.)...  From my experience its been anywhere from a few % (because the product is on offer in a world wide chain) to 200%+ because of exclusivity and having paid upfront fees to secure the account.

Eric