There Are a Lot of Ways to Get a Wine to Market and It Doesn’t Involve Making Wine
Don’t have a winery but want to sell your wine…no problem. Need wine…no problem.
I notice numerous ads appearing in wine industry newsletters that advertise bulk wines for sale and often wondered why there is bulk wine for sale and who buys bulk wine. I see ads for a lot of California bulk wines as well as some bulk wine sales from Oregon, Washington, and from East Coast wineries and vineyards. And with some frequency it is not unusual to see ads for bulk wines sales coming from many international wine regions.
Bulk wine is another facet of the wine industry that is not understood by the casual wine consumer, but it is a major contributor to the growth of the wine industry. What is bulk wine and grapes? Bulk wine comes from surplus production at a winery that has not yet made it into the bottle and labeled. There is also a segment of the market where wineries and vineyards produce wine only for the bulk market. There are also brands that have no winery and rely on the bulk market to create their brand. Bulk grapes, like wine, come from a winery’s vineyard or an independent vineyard. These grapes are sold by the ton at time of harvest; often a year in advance.
Bulk wine is of a known quality that is tasted by a buyer prior to the purchase. Brokers that sell bulk wines never take possession of the wine, but still have licensing requirement from the Tax and Trade Bureau of the Department of the Treasury. Point being, bulk wine is a high-quality wine that has a pedigree-it has a known producer, known quality, historic characteristics and is easily sampled/tasted by the buyer.
With year over year growth in U.S. 2016 wine sales of 2.8%, it would be easy to assume that all the wine produced would have a market based upon demand. Vineyard planted acreage in California is expected to be flat in 2017 versus 2016, with 15,000 new acres being planted; mostly in San Lois Obispo Coastal area. (Planted vineyard acreage numbers are misleading as there is acreage removed when vines are removed for replanting.) Even with changes in the wine market worldwide, the market for bulk wine and grapes continue growing and the reasons for the growth are complex and numerous. So, the question that begs clarification/amplification is: What happens to surplus wine and grapes?
Bulk wine can basically be bought by anyone. There are many wine labels on the market that comes from bulk wines or even bulk grapes. For example, someone could buy the bulk wine, have it delivered to a winery, work their blending magic on that wine, do the bottling and ship to a distributor.
Now you want to know how this bulk wine impacts you as a consumer. Let’s assume you go to a restaurant or a friend’s home and you experience a wine you absolutely love, you go home and try to find the winery that produced the wine so you can buy it online or maybe you want to schedule a visit. To your surprise, you cannot find the winery. The wine you are excited about may have come from an accomplished winemaker who bought bulk wines from which he blended/bottled/labeled that new favorite wine you just discovered. The bulk wine was most likely sold by a “bulk wine” broker, of which there are many. Many around the globe, only a few in each country.
The largest global bulk wine and grape broker is The Ciatti Company in Northern California. They have been selling bulk wine and grapes around the world for 46 years. “In an average day, we initiate or receive approximately 4,000 conversation about selling or buying bulk wines,” says Steve Dorfman-Partner at Ciatti. “Mostly the bulk market is a business-to-business transaction that range from extremely large wineries with global brands, to start-up companies with a vision for a new brand.” Home winemakers are not the target market for bulk wine brokers. For example, some of their bulk wine transactions are for more than 10,000 gallons.
The bulk wine business is different than the custom crush sector of the wine business. Bulk wine comes from a winery that, generally, has produced a fermented product that may or may not be a varietal wine. Custom crush is mostly a process of acquiring grapes, crush, fermenting and bottling wine to a specific specification by a specific customer.
The bulk wine and grape business is the soft underbelly of the wine business. This business is large and doesn’t just apply to a winery with surplus juice. There are wineries and vineyards that exist only for the exclusive production of bulk wine. Simply, there are vineyards (as well as wineries) that only cater to a market that expects to buy bulk wine from which they label as their own brand. In the case of bulk grapes, some wineries and wine brands forecast their needs for grapes for their planned production for the next vintage. In the winter months, bulk grape brokers are busy selling next year’s harvest and/or beyond from vineyard production. Some bulk grape buyers can even specify grapes by clone; then bulk brokers try to match sellers and buyers.
What is the process of acquiring bulk wines? Remember, the bulk wine is basically a finished product.
- Phone call or e-mail starts the process. The buyer has a defined style of wine needed for a specific label or for blending, or a varietal style. Some bulk wines may be acquired to test a new wine product concept being contemplated by a winery or private label.
- Then define the requirements relative to ABV, acidity, tannins, color, and aromas. Based on these specifics a bulk broker can select specific bulk wines to have sample wines shipped overnight for buyer analysis/tasting. Maybe there are requirements relative to a very specific source of the fruit/AVA.
- Customer/buyer tastings of the initial sample might result in other options being sourced and new samples provided.
- Eventually it comes down to pricing. Bulk wine and grapes are still a function of market condition. “Market conditions are a function of availability, quality, prestige of the initial producer, trends in customer preferences, and demand,” says Dorfman. “Nothing about the bulk wine business is a constant.”
- After price is negotiated by the seller and customer, a Memorandum of Understanding is signed outlining terms, condition of the wine or fruit, shipping requirements and terms.
Now, the deal is done.
For their efforts, most bulk wine companies work on an established commission schedule; generally established by country of origin. The commission is generally between 2 and 4% based on the country of origin.
As noted previously, it would be wrong to assume surpluses (grapes or wine) are a result of over-production. It is entirely plausible that wineries or vineyards plan for excesses that can be sold to fund a small/limited private production or testing new wine ideas. Wineries that own their own vineyards often plan excess production for reasons of economies of scale for certain grapes they need for established in-house labels.
And there are wineries and vineyards (not producing wine under their own label) that exist only to supply the negociant market, private label producers and wineries needing additional wines for their brands. Some of the largest wineries buy bulk wine because they did not produce enough for expanded production or had issues with current supplies. The purchase of bulk wines seems to offer new and established winemakers a low risk option. An example is Cameron Hughes Wines which started with an initial small bulk purchase, then their growth accelerated in the following few years.
Ray Isle writing for Food & Wine explains the negociant as: first started in Burgundy, purchasing grapes or finished wine from the region’s myriad small estates, then blending, bottling and selling the wine under the négociant’s name. Some of the best, and best-known, Burgundy producers are primarily négociants—including Jadot, Drouhin, and Bouchard Père & Fils.
As a rule of thumb, there is generally no such thing as a good or bad wine, only wines looking for a fit. “At Ciatti we know that there is always going to be an application for all bulk varietals or bulk blends. Every winemaker experiences issues in the production of their wines that can be solved with an available bulk wine,” said Dorfman. With 55% of their business being domestic and 45% international there seems to be a home for quality bulk wine someplace in the world.
On occasion, there can be times when bulk wine doesn’t sell someplace in the world. For those rare occasions, bulk wine can find a place as food grade vinegar or distilled into brandy.
Although bulk wine is a business-to-business, bulk wine brokers, will spend time developing potential new buyers that have a sound plan. The start of such a relationship always starts with some free advice–don’t buy the wine first then start thinking about a sound business plan. “I have seen customers buy wine first then work on the marketing plan, TTB requirements, labeling and then lastly start looking for customers,” comments Dorfman. The very first order of business is to know where and how you will sell your proposed brand. Second, contact the TTB and start the licensing process and know the laws governing your business. While at the TTB you will find labeling requirements to be a very difficult process for the uninitiated. Designing a label can be a quasi-scientific and laborious process. Dorfman commented that he was aware of a group expecting to launch their own label within a few months of buying their wine. Four years later, they finally launched their new wine. The problem was that they bought the wine first without understanding state and Federal laws, labeling approvals and having reliable commitments from customers.
Wine is not as simple as crushing grapes, turning juice to wine, putting wine in a bottle with a cork and delivering that wine to a retailer. The iterations and nuances in the wine industry are complex and convoluted and highly controlled. Fortunately for the consumer we only see the industry when we drive through the vineyards of wine country.