Brokers See Themselves as ‘Bridge’ Between Growers, Wineries
Wine and grape brokers insist that their role transcend that of simple intermediary between grower and winery. Some involved in the process go so far as to eschew the term “broker” in describing what they do to bring the parties together.
“I don’t like the word broker; it sounds like a used car salesman, somebody who’s taking advantage of somebody who doesn’t know anything,” said Shannon Gunier, co-owner of Lower Lake, California-based brokering firm North Coast Winegrapes. “I like the word concierge because they help you find your way.”
Gunier, who, along with husband Rick, started her business in 2010, said the couple operates as the “eyes and ears” of their customers. “Use a broker if you’re unfamiliar with the region you’re buying from, you’re new in the business, and you don’t know where to get your fruit or bulk wine,” she said.
What to Expect From a Broker
Whatever the precise term, a broker’s job is multi-faceted, Gunier said. That includes finding the right wine grapes, bulk wines or shiners (finished wines that arrive at a winery unlabeled).
Brokers can also lead their customers through a complicated decision process, Gunier said. “First, make yourself a little familiar with what you’re trying to buy and what flavor profile you want.”
Expertise is stock and trade of the sharp broker, said Jim Smith, owner of Lakeport, California-based Case By Case Wine and Grape Brokers Inc. “Someone like myself who’s been around and has the connections and a third-party endorsement from a proven professional carries a lot of weight with buyers,” Smith said. “I can make a call and tell the winery, ‘If you have time, come up and look at this; otherwise, just go with me on this, and you’ll be glad.’”
A grower “who doesn’t know anybody” might cold-call a winery and try to sell grapes, but that tack rarely works, Smith said. “[A grower will say] ‘You want to take a chance on me?’ [The winery will} say no,” said Smith.
It’s also central to the broker’s job to be on top of all market trends, growing conditions, and supply issues, said Todd Azevedo, domestic broker for Ciatti Co., a global wine and grape brokerage firm based in San Rafael, California. “In any climate or economic terms, we have the most up to date info in today’s wine and grape world,” Azevedo said. “[We know] what’s going on import/export-wise, [and with] supply and demand. We have the most accurate information when you’re trying to sell your wine or grapes.”
Going through a broker isn’t required, of course, said Michael Colavita, owner of Stockton, California-based shipper F. Colavita & Son. “Somebody can come to California and make a deal with a grower, and whatever product he comes up with, he ships it out.” Indeed, one winery operator who requested anonymity said he doesn’t need a broker. “I suppose there’s a place for it,” he said. “if you’re a bigger winery and you can afford it and don’t want to do a little work yourself, then fine. Or, if you’re going out of the country, you wouldn’t have the knowledge or resources to do it. But, If I’m knowledgeable about anything, why go through a third party?”
On the other hand, there are times when a grower isn’t equipped to or knowledgeable about how to ship their product, Colavita said. Brokers can work with shipping companies like Colavita & Son who have this know-how.
What to Consider When Choosing a Broker
Brokering grapes and wine is, above all, about relationships, Azevedo said. “Especially in the wine business, which is especially small around the world, it’s based on relationships and whom you believe will steer you in the right direction,” he said.
Having “eyes and ears” in “all major winegrowing regions” is a big advantage for the Ciatti Company’s clients. “We have 52 dedicated employees, a network of brokers. It’s up to us to discuss what’s happening in all these realms,” he said. “We’re involved in every region on a day-to-day basis.”
A broker who knows a lot about wine and everything that goes into the growing, buying and selling of grapes, has to be gifted in creating trusting relationships, Smith said. “It’s about personal relationships and trust. And trust is key.”
Integrity and a willingness to build lasting relationships between buyer and seller is a must for a successful broker, Smith insists. “I am very confident in stating we’re probably the most honest, we don’t try to hide anything,” he said. “We like everybody to show up at the vineyard and meet and greet. If you’re as trusted as we are, you can’t put a number to that value. If you’re a grower and have spent $120,000 on your operation, you need that trust.”
Gunier agrees that choosing a broker requires the right fit: “It should be somebody you have a rapport with. This is their biggest expenditure.”
A little research always is helpful, she said. “What they want to do is due diligence. Call them and ask questions,” she said. Test a broker’s efficiency, Gunier urges. “Order a sample of something and see how long it takes to get it,” she said. “If it takes long or they don’t respond, you’ll know. You’re sending money to somebody you don’t know, after all.”
A buyer or seller might be tempted to go with the most prominent brokers, but that’s not necessarily the best route, Smith said. “Of course, I would imagine most people, their first thought is let’s go with the biggest outfit, but if you’re not one of the biggest growers and you don’t have 500 tons to sell, they’ll give you a number,” he said. “Do you have 500 tons to sell? That’s great. They know they’re going to make a good chunk of money. I’ve always been a big proponent of the small to mid-size grower. I prefer to get a little more personal with the small or mid-sized grower and tend to shy away from the 500- to 1,000-ton growers.”
Reputation, not size, is what to look for in a broker, Smith said. “If you ask around, wherever you are, and a broker is not doing the right thing, somebody will know about it sooner or later,” he said. “It’s a small world and tiny industry. We all run in the same circles.”
Colavita said, as a shipper, he offers other advantages to customers. For example, he points to storage facilities that his company owns. “The advantage, since I own my own facilities, my staff can tell me these grapes won’t hold up, so don’t ship them out,” he said. “Let’s call it a hands-on type of operation. Of course, you’re dealing with Mother Nature; you never know what she’s going to do.”
A good broker can help minimize mistakes, Colavita said. “To deal with somebody who’s had a reputation of doing it right is an advantage, so they have confidence they’re going to get a suitable product for their needs.”
Customers anywhere can access Colavita’s services. “My customers are all over the country. I have some smaller California wineries who rely on me for a certain grape,” he said. “But, I have customers from here to Maine and Florida – all over.”
Brokers deal in the bulk-wine, processing and storage markets in addition to the growing sector, and that macro-view is essential, Azevedo said. “I’m trying to lessen the lumps of the economy, so you can go to your bank, investors and family and make wise financial decisions,” he said.
Know What You Want
Choosing the right broker depends on several factors, including whether a winery might be looking to buy “local” grapes, or find a product that isn’t available nearby. “People want to buy local, but they also want to buy Chardonnay, Merlot and Zinfandel because that’s what the market is drinking,” she said. “If the winery is familiar with the market and knows what’s local, they can do those deals direct. There probably aren’t many brokers able to provide that service outside of California.”
Case By Case supplies wineries inside and outside California, Smith said. “I think we’re in 27 states across the country now. If somebody wants a longer-term agreement for out of state that doesn’t have the highs and lows, it will be a little less money per ton, but a long-sure road.”
Brokers can help growers to develop a workable price for their product, Smith said. “There’s another type of grower that tries to take every penny,” he said. “They ask us to get this outrageous price. I try to talk them off the edge. Sometimes, they come in at the 11th hour and say we’ve just got to sell the fruit. They slash their price at the last minute. I’ve told them, don’t go for the throat; go for the profitable long-term contract.”
Contracts: To Do or Not To Do
Rules regarding broker contracts vary widely, Azevedo said. “Everybody is different,” he said. “There are some erroneous contacts where nobody wants the liability. The bigger, the more onerous the contacts get.”
It’s important to examine the so-called “boilerplate” in a contract because one never knows what it might contain, Azevedo said. “As a broker, you need to read through the fine print. Looking for hidden fees or penalties is a big deal. It’s so drastic across the board. I could send you four contacts and all the same price, but you go through the boilerplate it’s all drastically different.”
What a contract stipulates might hinge on various factors, Gunier said. “It depends on what you’re talking about,” she said. “If you’re talking about wine grapes, the broker will provide a contract; you make sure you have a contract in place. Ask the broker, ‘Send me a finished bottle of a product from a winery in your area, and I can see what that tastes like.’ I think it points to the fact that you have to have good grapes to have good wine. “
Gunier said she’ll next-day air-freight grapes to a client, but that’s just part of the picture.
“We take pictures all the way through,” she said. “We have people come out and talk to the growers. That’s kind of our niche.” It’s a kind of match-making business, Gunier said. “We try to match the winery and grower, and all that comes in the contract – when we’re going to pick, when we’ll ship,” she said. “How much damage should there be when you get the fruit? What if half is damaged? You have to have all that lined out in a contract.”
Smith said he likes to see “a couple of simple things” in contracts.
“Number one, our contracts are two pages,” he said. “I’ve seen corporate wineries with 14-page contacts. If they have 14-page contracts, they’ve had a team of lawyers that draw that up in their favor. I don’t mess around with those type of agreements. I tell the growers, ‘You make the decision.’” An example of an unfair agreement is one that might stipulate a “brix range,” with a per-ton penalty for anything outside the limits but no clause that reimburses the grower for a loss of fruit weight due to dehydration at the winery. “I won’t be party to that kind of agreement,” Smith said. “By sticking to my guns, 27 years later, I still don’t have to clock in and work for somebody else.” Any deal carries risk, and a broker should be willing to share in it, Smith said. “When those grapes show up like I said they would, I will expect your business every year,” he said.
Colavita said he hardly ever has contracts. “It’s all done through emails and confirmation of orders, that sort of thing,” he said. “The buying end of it, some of it is on a contract basis, some is yearly – it’s all over the board. Most of this business is just word of mouth.”
Negotiations Can Vary
Deal negotiations can vary, Azevedo said. “Any given year it can be different. We deal in a real-time market. This year, it’s strictly a buyer’s market. Demand is fairly low. Supply is steady, but because demand is so low, it feels like there’s a lot of grapes and wine on the market. So, growers at this point are looking for a deal, an offer from somebody to say yes or no to, because of the timing of the situation.”
Timing is crucial, where negotiations go because markets shift capriciously. “It depends on what time of season and where you are, other buyers in the vineyard, the economy, what’s happening on the international market and the bulk-wine market, what’s happening with cannabis, beer, coffee, whatever the preference is in that world,” Azevedo said. “In agriculture, especially, you’re up against time, because grapes are a perishable product.”
Some brokers will work for a basic commission; others don’t, Gunier said. “We don’t work that way; we purchase fruit from growers and sell it,” she said. “We take some of the risk away from growers.”
Larger brokers are more likely to work on a percentage basis, Gunier said. “Those are big guys who can work on two percent selling 80 tons; our minimum order is six tons, which is a third of a truck.”
In negotiations, there are times when a grower needs to have a feel for the right deal, and the wrong one, Smith said. “In a hot market, say Cabernet Sauvignon, I’d say the power leans to the grower,” he said. “His price keeps going up. I’m on the back side of that, and I warn him not to push too hard, or he might lose a long-term buyer. When the market is in the tank, there were grapes on the vine because the tanks were full, growers were offering $350 a ton for their grapes. I was able to go around with a handful of growers we were working with and [find out what] they needed to break even and make a very marginal profit.”
Smith said his company’s customer retention is right at 99 percent, so it’s doing something right. “Working closely with our buyers, understanding what they need and trying to accomplish it – that’s our specialty,” he said.
When are Multiple Brokers Needed?
There may be times to call on more than one broker, but the odds are, a grower ultimately will come to rely on one, Azevedo said. “Personal opinion here: Because it’s a relationship-driven business and you’re building confidence in a person to be a partner in what you’re trying to achieve, it’s probably best to deal with only one,” he said. “As a winery, you’d be doing yourself a disservice if you don’t find out what the market is and what you can achieve. As a producer, I want to make sure I cover all my bases, in order to have all the information. Lo and behold, you’re probably going to go back to the same person who has given you all the information over and over again.”
Whether to work with more than one broker depends on the circumstances, Gunier said. “I think you should work with people who are willing to work with you,” she said. “You have to navigate your way through that.”
Going “local” with a broker might be the right solution in some circumstances, Gunier said. “The guy I’d be concerned about is the guy who can get you anything from anywhere,” she said, laughing.
A large-scale vineyard might bring in multiple brokers, Smith said. “If it’s a 1,000-acre vineyard, you might consider working with at least a couple brokers,” he said. “You might find you like one more than the other.”