Winemaking today is now an important and much respected national industry, particularly for exports. If you are a winemaker who would like to know how to distribute your wine, this article details some of the ways that you can do this, including drafting a wine distribution agreement.
What is In-House Wine Distribution?
As a winemaker, it is open to you to distribute your wine yourself. To do this, you will require a Liquor Licence. For example, in NSW a Wholesaler Licence allows wine makers to sell their wine to other licensees. They are also able to hold on-site wine tastings.
This method of distribution gives you, the winemaker, ultimate control. However, it has some significant drawbacks. If you are a small wine-maker, the chances are that your business focusses on wine production not wine distribution. The distribution of any product is a big undertaking. Wine is no exception. You will need to determine how best to market your wine and find retailers and suppliers who can help you realise the wine’s full economic potential of the product. You will need to draft agreements with these retailers and suppliers.
Also, a wine distributor must offer sales support. Your wine is a good under the Australian Consumer Law (ACL). That means that you need to meet all your consumer guarantees and provide any appropriate remedies.
These responsibilities are no small undertaking. Unless you are a larger winemaker with a degree of economic resources looking to expand your business in this direction, chances are it will only distract you from the business of making wine. It will also be a huge learning curve, especially at the start. You will certainly make mistakes through sheer lack of experience. That would be costly and inefficient.
What is a Wine Distribution Agreement?
A wine distribution agreement allows another entity (the distributor) to market and distribute your wine to retailers and other suppliers. It is commercial, and the distributor retains a portion of the profits.
Most distribution agreements cover issues such as:
- Areas of distribution;
- Whether the agreement is exclusive or not;
- The distributor’s obligations;
- The retail price of your wine;
- The terms of payment;
- The term of the agreement; and
- Termination of the agreement.
The benefit of such an agreement for you is that you would be able to focus on making wine. Also, a distributor would likely have considerable experience and know-how as well as industry specific contacts. That means that your wine would reach the market relatively quickly. If all goes well, you could have a good market share much faster than if you distributed the wine yourself.
However, you need to exercise care when making a distribution agreement. Know the scope of it and any attendant costs and expenses. Make sure you know what the distributor is undertaking to do under the agreement and whether or not it is exclusive. Also, be sure of the distributor’s commission and how often you expect to receive payment. Both you and a distributor will be seeking to maximise your profits and minimise your costs. At times, these interests may collide.
That means that when you negotiate your agreement, you absolutely must have independent, experienced legal professionals assisting you. They will be able to understand and digest the agreement more quickly and make any necessary counter suggestions.
All of which means that when you sign the agreement, you are informed. Certainly, no agreement is foolproof, and no business endeavour without risk. Nonetheless, getting expert advice means that you have minimised these risks as much as reasonably possibly. Contact LegalVision’s contract lawyers to assist you. Questions? Call us on 1300 544 755.