Source: Drinks Intel Magazine (pg 32-33), by Alexander Smith

Monsieur Henri Wines Ltd was founded in 1933 by Harry Feinberg, following the repeal of Prohibition, as a wine importer and distributor in New York State. The company was then acquired by Pepsi in 1972 to serve as its import agent after the soft drink maker had negotiated the famous Pepsi-Stolichnaya barter agreement with the Soviets. After Pepsi sold the distribution rights to Stolichnaya in 1994, Monsieur Henri Wines held a management buyout led by, among others, the current MHW president John Beaudette. Afterwards, the company was renamed MHW Ltd.

MHW set about pioneering the service importer and distributor model. It now provides long-term strategic partnerships to brands, facilitating import and export, distribution, licensing, compliance, logistics, fulfilment and accounting services. Since 1995, the company has helped thousands of international brands enter and excel in new markets around the world, particularly the US, including some of the industry’s most successful — The Macallan, Three Olives Vodka, Domaine Jean-Louis Chave, Champagne Duval-Leroy, Presidente Beer, Erdinger Weissbräu and Casamigos are just a few examples.

MHW CEO Gabe Barkley explains: “If you think about the beverage alcohol path-to-market, you have to put great liquid in a bottle, you have to design the packaging, you have to understand what you’re selling, and then at the other end of the spectrum, you have to market and sell the brand by creating consumer demand. But in the middle, there is a compliance ecosystem, there is an operations ecosystem, there’s order fulfillment, logistics, and accounting that need to be done. Our objective is to work with brands to take all those things off their plate to allow them to really focus on the two things that build brand equity, which are putting great liquid in a great bottle and then selling that liquid in the market. And we do that across beer, wine, and spirits.”

Supply chain pressures

That middle journey has become significantly more difficult lately as supply chain disruptions have created enormous pressure points for the industry. The ports are backed up and this has knock-on effects that are significant for everyone, with everything from increasing the cost of the products to get them to port and then adding on costs of the product if you can’t get them out of port fast enough to avoid things like demurrage charges. Then you’ve got challenges getting them inbounded to warehouses because they are also full. “Everywhere and everything is impacted at this point”, says Barkley, who explains that it is going to be harder and harder to keep shelves stocked with the products that are moving fastest for retailers.

He doesn’t see a quick solution: “The earliest that anyone is predicting any relief is the second half of 2022, and most people are thinking it more likely 2023.” There would need to be some drastic action around how equipment at the ports is used and what the rules and regulations are to help goods move faster in the US. “I’m not sure that we have the kind of the momentum to get that done quickly, so this supply chain issue is going to be here to stay,” adds Barkley.

MHW is by necessity passing those higher logistics costs to its clients, but it is still incurring the higher staffing costs for the extra man hours required to get product to market, reasoning that it is a temporary to mid-term occurrence. “The cost of getting that product to market is going higher, so you’re going to see producers having to make a difficult choice,” explains Barkley. “How long and how much of that increased cost can they bear? And then how much and how soon do they need to pass it on to consumers?”

The company’s ‘Concept-to-Commercialization’ programme, born during the pandemic to help alleviate new brands’ supply chain, componentry and go-to-market challenges, is an example of how, in addition to e-commerce consulting, MHW helps brands.

Growth of e-commerce

A more positive development from a distribution standpoint has been the development of the e-commerce channel. Distribution is a major barrier to entry for many startups and imported brands. “It’s significant in that it provides another opportunity for brands to find their best path-to-market,” says Barkley. Most e-commerce in the US still requires everything go through the three-tier system. The brand owner is still selling into a distributor, into a retailer that’s fulfilling on one of the e-commerce platforms.

“We work with brands to identify the best kind of e-commerce partner for them,” Barkley explains. “We introduce them to many. We’re happy to talk to them about ideas and their best strategy. That kind of e-commerce partner question is something that people struggle with early on in their lifecycle as a brand.”

“Overall, the opportunity that e-commerce provides is that it enables a brand to create traction online through digital channels for a consumer that’s used to buying online. If they can create that traction, it makes it so much easier for them to take the next step. You also have more direct access to the consumer through digital marketing than you do through the conventional distribution channels. Creating that consumer pull is a new opportunity for brands.”

US and EU tariff issue

MHW’s wine import business was hit hard by the trade war between the US and EU, but in June 2021 a new deal lifted the punitive extra taxes. Commenting on the impact of tariffs, Barkley says: “You saw wine imports drop pretty precipitously in a couple areas where there were tariffs imposed, and that impacted a lot of businesses. It impacted a lot of importers, retailers and distributors who rely on products from those regions to be successful here in the US market. Those regions are bouncing back relatively well, but they’re also having to do so in a new way. Because of the pandemic, they’re not able to go direct to the restaurant and bar trade anymore and many of those wines had a very healthy by-the-glass programmes in bars and restaurant menus. They are just not doing the same sorts of volume they used to do. We see that bouncing back over time, but it’s not there yet. Maybe focusing on e-commerce demand is a solution for some of these wineries that would have otherwise focused on restaurant wine lists and other sales efforts.”

MHW serves as a product incubator and relies on a steady stream of new-to-world or new-to-market products. “We definitely saw less new market entry from both kinds of brands that are successful outside the US entering the US for the first time, or new-to-world brands that were reaching out to us,” Barkley observes. “We saw that decline very quickly in March of 2020, and it stayed low through the early fall. But since October of last year, it’s really bounced back. People are seeing opportunities to enter the market again.

“They’re having to be creative about how they enter and that looks different than it might have in 2019. Then, restaurants and bars were a way for them to have early success, particularly spirits, by having consumers be able to trial the product. They still are important, just not as important a path-to-market as before. Being able to get on the backbar, and have an event and get liquid to lips for, is a little bit easier when you’re in a bar than when you have bottles on a shelf at a large liquor store next to 50 other Bourbons, for example. But now, in this environment, people can also use e-commerce. They can use off-premise. It’s also encouraged people to think outside the box on where they launch, how they launch, the best channel and where they put their marketing dollars, and people are making different choices than they would have two, three, five years ago.”

Rise of celebrity drinks brands

Another feature of the beverage landscape is the growth of celebrity brands. MHW works alongside a handful of these, such as 818 Tequila with Kendall Jenner, Dos Hombres Mezcal with Bryan Cranston and Aaron Paul, and Blue Chair Bay Rum with Kenny Chesney, as well as supporting the US partners of Teremana Tequila with Dwayne ‘The Rock’ Johnson.”

Teremana was one of the fastest brands to reach half a million cases. “Teremana has seen phenomenal acceleration,” says Barkley. “Johnson was able to really engage his fans while keeping Teremana authentic as a brand. If a brand is built with authenticity, including involvement, passion and engagement of celebrity owners, then the brand can grow very quickly and have staying power.

“Casamigos [which sold to Diageo for $1bn in 2017] is obviously an exit that everyone talks about, but that happened because they built the brand in an authentic and long-term way. They were able to leverage their personalities and social media to be part of the story. It can be much harder for a brand to find success if there isn’t engagement by the ownership — celebrity or not. But in the case of celebrity brands, using their success and visibility to drive the value of the brand can be very powerful on the path to success and accelerate growth.”