On 6 July the Treviso Chamber of Commerce organized a conference to continue analysing the wine and foodstuff sector, which best expresses the quality and unique character of the Treviso area. Market prospects in the United States and obligatory fulfilments in compliance with the American bioterrorism regulations had in fact been previously dealt with during the conference of 4 February.
Distribution and legal issues connected to product marketing therefore completed the US market overview: the Conference highlighted the main distribution channels into the U.S.A., possible types of contracts and issues connected with possible litigation with final consumers.Due to the regional importance of these issues and the strategic importance of the US market for Veneto exports, synergic cooperation with the Veneto Foreign Centre was sought again.

The conference offered marketers an opportunity to contact the State of Illinois, represented by the director of the Illinois Trade Office – Department of Commerce and Economic Opportunit ( www.illinoistrade.org ), an agency which provides support and promotional services to local businesses – helping them to develop cooperation with potential international partners – and also supports foreign companies through specific programmes to attract investment and connected services.

The director of the Illinois Centre for Food Safety and Technology ( www.foodsafety.iit.edu ) spoke about the services offered to firms in matters of food safety - training, productive and technological assistance, information and consultancy on regulatory issues, with particular emphasis being given to product labelling issues. The Centre was set up in 1999 in synergy with industry, university and government agencies and its mission is to support small and medium sized businesses through measures in the food technology and safety sectors.

As highlighted in the presentation by the National Foreign Trade Institute (ICE), the distribution of food products varies depending on product category. As a matter of fact, there are specific regulations concerning alcoholic beverages: sales are regulated by a strict system of licenses and a monopoly regime is in force in 19 States. The distribution of alcoholic drinks is organised according to the so-called three tier system: importers, distributors and retailers must have a suitable licence, and retailers can only sell to final consumers.

In order to enter the U.S. market the exporter therefore has to identify a licensed importer who deals with clearing goods through customs; generally the importer sells the product to distributors who work at state level – with a suitable licence – and who supply points of sale. The producer/exporter can rely on a network of agents who deal with importers and distributors. Moreover, a broker often acts as a middleman in relations with supermarkets and restaurants.

Distribution for the food sector, which does not require a licence, is organised in a similar way. The importer is responsible for purchasing, customs clearance and product storage, dealing with distributors and developing promotion and advertisement together with producers/exporters, who generally incur the expenses.
The distributor is supplied by the importer, stores the goods at their warehouse, deals with retailers, manages orders and deliveries and is in charge of merchandising and promotional efforts at point of sale level, often in agreement with the importer.
The agent promotes sales and liaises with importers and distributors, in many cases playing an alternative role to that of the importer. Generally they do not have their own warehouses and transport vehicles.
Retail distribution channels include: supermarkets, mini markets, grocery shops/delicatessen, gourmet shops and specialty stores, restaurants and hotels, off-licenses and bars (only for alcoholic drinks), mail order catalogue or internet sales. Supermarkets are the most important channel in terms of sale volume, they are organized in chains of a mainly regional character and have storage facilities. The surface of individual outlets varies from 1000 to 3000 sq.m. Gourmet shops offer high quality and generally highly specialized products. They are usually independent shops managed directly by the owner, although in larger cities like New York there are small chains of outlets. Purchasing decisions typical of this distribution channel are mainly based on product quality and factors of novelty and exclusivity which help to distinguish the shop from its competitors. Another interesting channel especially for wines is medium and high end restaurants, which – as is the case with typical Italian ones – have been real ambassadors of our products.

Mail order catalogue and internet sales should also be mentioned, distinguishing between food products and alcoholic beverages. Mail order catalogues are generally published by well-known retailers who rely on the consumers’ trust in their brand name. If there is no connection to existing retailers suitable advertising investments have to be made to highlight the reliability and guarantees offered by the product.
In the case of alcoholic beverages, if mail order sales are connected to a shop they must be limited within the state covered by the licence. American authorities are cracking down on internet sales of alcoholic drinks, which are considered a threat to the three-tier system since they escape controls on the consumption of a socially sensitive product and also because they imply tax avoidance. The line of conduct adopted differs depending on the state: in 12 of them shipment of beverages is legal, in 28 it is prohibited, the remaining states enforce intermediate solutions.
Information on mark-up margins have provided marketers with useful orientation guidelines. In the food sector importers/distributors generally apply a 30/40% mark-up, which should be added to the broker’s 5/7% and approximately 35/40% for supermarkets, which can go up to 50% and even 100% as is the case with gourmet shops.
Mark-ups on alcoholic beverages are generally applied as follows: importer 40/50%, distributor/wholesaler 30/50%, retailer approximately 50%. A survey carried out by the New York ICE shows that the retail price of a bottle of wine, whose original cost is $6, reaches $21.50.
The technical surveys presented by the speakers were followed by presentations on individual company experiences, which contributed to enriching the topics being discussed. The documentation which was handed out during the conference is available on the Chamber of Commerce’s website http://www.tv.camcom.it/formazione.asp .

Edy Bombonato
Excerpt from " Economy of the Treviso area", August 2004