Before entering into a distribution agreement, alcohol beverage producers should do their homework. Here is a list of questions to ask a potential distributor:

  • Where are you doing business as a distributor?
  • How long have you been in business?
  • How did you get started?
  • Is your state a franchise state?
  • Are you affiliated with a particular large beer, wine, or spirits producer? Are you independent?
  • What is your product mix?
  • Do you already have products like mine? What are they? How have you increased sales over time for them?
  • How much wine, beer, cider or spirits did you sell last fiscal year? How does that compare with the last 2-3 years?
  • What are your total annual gross sales?
  • How many employees do you have?
  • How often do your sales people visit accounts?
  • What length of term do you want for our agreement?
  • What is the territory covered by the agreement?
  • Do you have an exclusive right to sell my products in the territory?
  • Is the distributor entitled to new products that the producer develops after the relationship starts?
  • What, if any accounts, does the producer already work with and does the producer get to continue to handle those accounts?
  • Are you willing to meet and jointly develop an annual sales and marketing plan for my brands, including sales goals, marketing activities and pricing?
  • What performance standards will you agree to in writing?
  • What happens if we can’t agree on sales goals and pricing?
  • Is the agreement for a fixed term or does it automatically renew if the distributor meets their goals?
  • Can either of us terminate the agreement if we are not happy?
  • What happens at termination in terms of payments, return/buyback of product, etc.
  • Who arranges for delivery of my product? When does risk of loss shift to the distributor?
  • What types of insurance do you have? What are the limits of liability on the policies?
  • Who pays for delivery of product to the distributor?
  • How is my product shipped, stored and delivered to retailers to ensure no impairment in quality?
  • Who is my sales person and/or Brand Manager?
  • How long have they worked for you?
  • Are they a top producer?
  • Can I have my own sales people visit accounts by themselves and, if we want, in tandem with your sales force?
  • Will you give me the names of all your accounts and all accounts visited to show my wine, beer, and cider?
  • Who pays for samples?
  • What kind of marketing events and activities will you do, when, how will they be supported, and who pays for it?
  • Who pays for by the glass promotions or volume discounts?
  • What monthly, quarterly and annual reports will I receive regarding orders, depletions, marketing and sales events and related costs? 

For alcohol beverage contract-related questions, please contact Chris Hermann at crhermann@stoel.com or visit http://www.stoel.com/wine-law.
 

Photo of Chris Hermann Chris Hermann

Chris Hermann is the founding chair of Stoel Rives’ Brewery, Winery, and Distillery group and a former co-chair of the firm’s Beverage and Hospitality group. He has worked with Northwest breweries, wineries, vineyards, and distilleries for many years. Chris has particular experience with…

Chris Hermann is the founding chair of Stoel Rives’ Brewery, Winery, and Distillery group and a former co-chair of the firm’s Beverage and Hospitality group. He has worked with Northwest breweries, wineries, vineyards, and distilleries for many years. Chris has particular experience with transactions involving the purchase, sale, and LLC formation of breweries, wineries, vineyards, and distilleries, preparing and prosecuting trademark applications, obtaining water rights and land use permits and approvals, advising owners on employment and termination agreements, and drafting and negotiating grape purchase contracts, vineyard leases and custom crush, joint proprietorship, vineyard development and maintenance, and bottling and distribution agreements. Since 2013, Chris has been listed by Chambers USA as one of “America’s Leading Lawyers for Business” (Nationwide) in the Food & Beverages: Alcohol practice area.

Click here for Chris Hermann’s full bio.