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Sept. 8, 2021

Building import and distribution pipes w/ Gabe Barkley, MHW

Building import and distribution pipes w/ Gabe Barkley, MHW

Breaking into the US market for alcohol has always been hard. Archaic rules such as the 3-tier system and differing regulations by state make it a complex web of rules and regulations to be in compliance. The increasing consolidation of the distributor

Breaking into the US market for alcohol has always been hard.  Archaic rules such as the 3-tier system and differing regulations by state make it a complex web of rules and regulations to be in compliance.  The increasing consolidation of the distributor channel has made it even harder for smaller players to enter.  MHW's goal is to make that simpler, giving producers the ability to enter the market and take control of their own destiny.  They provide outsourced importation, distribution, and back-office / compliance services so their clients can grow and execute their sales & marketing plan.  Listen in as Gabe Barkley, CEO of MHW, gives us a rundown of how they do this and how it compares to traditional importation and distribution.  

Detailed Show Notes: 

  • MHW background
    • Leader in import, distribution, and back-office services for wine, spirits, and beer (beverage alcohol)
    • Founded in 1934
    • Objective: enable rapid growth of new producers and importers for the US and EU markets
    • Plays mostly in the import and distribution tier of the 3-tier system in the US (3 tiers = producer, distributor, retailer; import being in-between producer and distributor)
    • Has wholesale licenses in 4 markets - NY, NJ, CA, & FL
  • Gabe’s background
    • Passion for wine started when he lived in Rome in college
    • Worked in wine retail after college
    • Left wine for consulting (Accenture, Deloitte)
    • Helped Kevin Sidders launch Vinconnect (listen to E51 for details)
    • Partnered w/ PE Fund post business school to partner w/ MHW (4 years ago)
  • MHW Core Services
    • Provides the “pipes” for selling into the US and EU, does not buy and sell the wines like a traditional importer/distributor
    • Main Services: 
      • Certificate of Label Approval (“COLA”) - winery or client’s name on back label “imported by” not MHW
      • Register brands for sale in each market
      • Tax reporting
      • Compliance requirements
      • Logistics - pay taxes, customs clearance, duties, warehousing
      • Fulfillment of orders to wholesalers or retailers in wholesale markets
      • Invoice retailers and collect payment
    • Not a single boxed service, tailor services for each market
  • Clients
    • Theme: they want to invest in growth in the US & EU markets
    • They cover wine, beer, and spirits
      • 4 years ago - 40% spirits, 40% wine, 20% beer
      • 2021 - 50% spirits, 45% wine, 5% beer
    • Serves both domestic and international clients
      • Domestic - outsource compliance and logistics for <50% of a full-time employee
      • Work with more family wineries
    • Early days - main clients were new entrants into the market and more spirits
    • Today - shifted more to wine and larger producers - want to make sure sales & marketing investment are spent how they want it spent
    • Examples: 
      • Armand de Brignac (“Ace of Spades”)
      • Carolina Wine Brands
      • Jean-Louis Chave
      • Hypothetical - winery targeting NY market entry - MHW helps bring the product over, the owner comes and open accounts, MHW takes orders and fulfills accounts
      • Hypothetical - the winery has an opportunity with a large national retailer to be in 30 states - MHW brings product over and delivers to wholesalers or direct to retailer in some states
  • Technology ecosystem
    • Internal ERP to deliver solutions to clients
    • Transparency is important - client reporting dashboard that updates every 2 hours
    • Order placement tool
    • Other communications and self-service tools
  • Business Model
    • Per case fee with a minimum monthly fee
    • Breakeven happens ~350 cases/month or more
    • Passes on direct costs of being in the market (e.g., warehousing/storage fees)
  • MHW Size
    • Sold through platform 150M cases since mid-1995
    • Helping 10,000s of products come to market
    • 150 employees, rapidly hiring
    • Global vision - opened EU office in 2018 - no 3-tier system, but complex tax ecosystem they help clients with
    • Market size - started in a niche, but growing due to increased distributor consolidation (making it hard for wineries to break into the market), cutting out the complexity of the 3-tier system while still controlling your own destiny, providing more cost-effective solutions
    • Competitors - some more tech-focused, a self-serve model; some more focused on 1 vertical (e.g., spirits or wine), MHW differentiates with a high touch service
  • MHW vs traditional importer / distributor
    • 3 ways to enter the market
      • Do it yourself - build out back-office to support it
      • Traditional importer/distributor - lose control of how wine is sold, but get paid upfront and importer sells the wine, lose transparency into who’s buying the wine
      • MHW - strategic partner to import and fulfill the way the winery wants it to happen
    • E-commerce increase enables clients to have another opportunity to get traction in the US market
  • Upcoming for MHW
    • Develop more value-added tech solutions
    • Acquired BevStrat in 2019 - provides on the ground sales support for clients
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