The Goat Collective

OK so nothing exists called The Goat Collective – at least not yet – as far as I am aware anyway – there could be a bunch of goat farmers somewhere who have formed a band – but for now suffice to say – it doesn’t exist.

No this post is more about how the wine business ‘usually’ goes about getting wines from producer to consumer at the high end – small producer level. This piece comes into being on the back of a Facebook thread talking about getting wines from a particular producer available in the UK. The Goat of the title is an affectionate jibe at a popular and generous wine enthusiast and during the thread I jokingly suggested that I should set up ‘Grumpy Goat Wines’ to act as an agent for all the wines he discovers on his travels with no UK representation.

Instead of dismissing the conversation I have thought further on this, and particularly wondered why business is always done how it is. For the uninitiated wines are imported for retail in two ways in general.

1. A producer agrees terms with an agent/distributor for them to act on their behalf in the UK. That agent then buys those wines, ships them and aims to sell them on to retailers whilst taking a % on top themselves to produce their profit. The % profit they make varies from agent to agent but can be up to at least 30% (if not more). For the producer this gives them access to the UK market, but a lack of control over their wines in it. It also affects their profitability in that a wine can only sell for it’s target price point – try and sell too expensively and it won’t sell. So the agents cut comes out of the producers profit rather than being an addition on top (there are exceptions to this of course because some wines will sell at whatever price, so there is room to add costs to the wine and not reduce profit). Because of the competitive nature of the UK market it can therefore be pretty difficult for a producers to generate any kind of profit  in our market and a number of producers do opt out of the UK for this reason.

For a producer this also supposes that they can find an agent willing to represent them and who is suitable too. The wrong match may not be a disaster (although it could come close to it) but it won’t be the harmonious relationship that both parties want.

2. The other method is to simply offer wines on an ex-cellar basis (or FOB) and sell them based either on reputation or work in the UK to sell the wines at tastings, from press reports and so on. This does mean that the profit is entirely at the mercy of the producer, it also means that they have control over who the wines are sold to (retailers / wholesalers not end consumers!) but it has the massive disadvantage that a retailer, restaurant or wholesaler has to buy wine in volume in order to make the shipping cost effective and worthwhile.

There are a few people who do things a little differently though. Felton Road for instance keep their UK wines under bond and offer out their whole range under allocation. Buyers can choose to take all or part of their allocation and the wines are shipped to them on arrival in the UK. This is all managed from a one person UK office (Cornish Point Wines) run by Nicola Greening (who happens to be the owners daughter).

First Drop wines from Barossa keep the family feel going with UK distribution run by Matt Gant’s dad John. Their model was to offer their wines to a ‘Dirty Dozen’ specialist retailers who would each commit to buying a pallet of wine at a time. Unfortunately buying a full pallet of premium wine from Australia is beyond most independent retailers in one hit and they have now relaxed the rules a little bit and as a result have 11 retailers selling their wines.

When Mullineux first came to the UK they rejected the idea of appointing an agent and instead brought some wine to the UK, stored it in bond and then worked hard as a business to promote and sell those wines in the UK. The issue with that is of course that this requires significant time and investment in a single market to achieve anything worthwhile.

Taking these examples I think there is another way to do this – and to give it a name – I’m calling it ‘The Goat Collective’. I’m not going hard and fast on rules on this – I’m suggesting some ways it could work – and in some instances have suggested a number of options available.

The Goat Collective

Essentially the way I can see this working is a similar way in which the buying groups operate in the UK, the difference being that instead of buying they are selling. Member producers of the collective ship wine to the UK and hold it under bond in the collective bonded warehouse account. Retailers and wholesalers can then buy wines from any or all members of the collective  through a single UK based point of contact. The stock for each supplier remains their property at all times until transfer to the customer is made and never does it become the property of The Goat Collective.

Choice estates from around the world would be able to join the collective, however after an initial setting up period new additions to the collective would have to gain the approval of the majority of existing members with the exception that an existing member can, should there be a real issue of competition, request that the application is rejected outright for competitive reasons.

There is a choice then how the UK end of the Collective works – either all members can pay a fee that provides for a UK office, and a salaried worker to run sales, marketing and administration for the collective or it can be run on a commission basis based on ALL sales in the UK.  The UK worker would also need to be available to attend trade and consumer events in consultation with individual members. So for instance if a producer wanted to attend a particular generic tasting event they would be responsible for payment for the stand and manning it. However because the cost of flying to UK is expensive it is anticipated that the UK office would be able to provide a resource for attending events on a buy in, flat rate, day rate. (IE you want cover at X tasting, you know it will cost you £x to have cover). If several producers wish to be represented at a particular event then the cost is split equally.

Distribution costs from bond to customer are born pro rate across each delivery from the collective whilst customers pay direct to The Collective as a whole. As soon as the money hits the bank account, outstanding fees for storage and distribution are taken, commission paid and remaining funds are then offered to each member who can choose to take the money or leave it in the UK for future marketing purposes.

I would anticipate that a condition of membership of the collective would be to agree to a set trade programme of tastings that all members could attend. These would tend to be things like SITT, Independents Day, Dirty Dozen or the like and non country specific events and that members would all contribute to this.

There are obviously LOTS of details you’d need to work out, such as branding and marketing budgets, administration fees and so on, % commission etc. But the basis of this is to provide a mechanism for wineries to sell their wines in the UK in a cost effective way, with the benefit of many of the advantages of a traditional agent but with flexibility, control and increased profit brought by remaining independent. It allows them to share some of the costs involved in marketing wines in the UK and means that they don’t have to do everything if they want to be  present in the UK market.

Retaining ownership of the wines reduces the UK office cost (which I would put as being one person working from home initially) and means that the producer can ensure whichever wines they would like to be present in the market are available in the market – and by putting the UK manager on a commission basis they know that they will have to work to promote and sell the wines.

Obviously I haven’t worked out the financials or the viability but I think it could work and would allow some of the most individual boutique producers the chance to sell in the UK.

I could delve deeper into the workings but I hope this bare bones gives you a taste. It is possible someone works like this already – I haven’t seen it – I have seen some work together for marketing purposes (PIWOSA, First Families of Australia, The Outsiders) but not for sales as well – and not from different countries. It’s an interesting idea I think.

 

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