At Bar Convent London, Vish Patel, CEO of James Gin discussed how they cracked the complex U.S. Spirits Market. James Gin is a highly successful brand co-founded by James May, presenter of Top Gear and The Grand Tour. In this session, Patel walks through the hard-earned lessons and compliance headaches of entering the U.S. spirits market. He explains why international brands must treat the U.S. as 50 separate states rather than one country.
Park Street Imports is the back-office and importing solution for alcoholic beverage brands launching and scaling in the U.S. market.
Vishal Patel’s Presentation Transcript
Vishal Patel (00:00) Hi everyone. My name is Vishal. I’m the CEO of James Gin, and I’m here to talk to you today about cracking America. For those of you who don’t know us, we were founded by this gentleman here on screen, whom some of you may know as James May—TV presenter from Top Gear and The Grand Tour, otherwise known as a YouTube influencer.
To start, we are the most followed gin brand in the world, with over 1.6 million followers. How did we crack the US? I have to say, it was probably a bit of an accident, if I’m being honest. Our naivety regarding the US market meant that we didn’t do what the industry says you should do. We simply applied some logic and common sense, and we seem to be doing okay.
Last year, we sold 5,000 cases. This year, we’re on track to reach 15,000. In the fifteen minutes I have today, I’m going to tell you how to crack America. It is no mean feat, but hopefully, I’ll be able to share some of the things we’ve done, as well as some of the painful mistakes we’ve made along the way, to help you with your journey if you are looking to launch in the US.
The biggest mistake I see brands making is thinking that the US is just one country. If California were a standalone country, it would be the fourth-largest market in the world. Texas is the same size as France. The vast size of the country and its diversity in population lead to cultural, regional, and regulatory fragmentation. The US should not be seen as one big country; it should be seen as 50 separate states.
One of the most interesting differences in the regulatory setup is the distinction between control states and open states. Control states are states in which the government runs the system. They own all the retailers and wholesalers, and they ultimately provide the product to the end consumer. In open states, private businesses are able to sell to the end consumer through a license.
Vishal Patel (02:26) There are 17 control states in the US, including Pennsylvania, Michigan, North Carolina, and Ohio. They make up approximately 20% of total spirit sales in the US, so they’re not small. Given the more equal footing you have with major brands in control states—due to the fact that the government controls both pricing and marketing—it’s a great bellwether for brand health.
We love control states at James Gin. I’m actually flying to Virginia tonight, as we’ve just won our first listing there. The reason we love them is that the gin selection in control states is quite tight. Again, they’re government-run, so outside of the big brands like Tanqueray, Hendrick’s, and Bombay, a small craft gin brand like ours really stands out on the shelf and offers consumers a fantastic, exciting new choice.
If you treat the US like 50 different markets, you are faced with a decision: you can go far and wide—”spray and pray,” as a leading brand owner once told me—or you can stay hyper-focused on one or two markets. At James Gin, we’re big advocates of focusing on just one or two markets to begin with and building from there.
Obtain initial distribution in a couple of states that you know really well. Get to know your consumers, how they buy, and where they live. Build a highly replicable, scalable marketing playbook before you move to another market. You wouldn’t look to launch in the UK, France, Germany, and Australia all at the same time, so why launch in California, Florida, Texas, and New York simultaneously? Most brands simply don’t have the money, time, or resources to manage the cultural nuances required for each distinct market.
Let’s talk about compliance. I am a lawyer by trade, so it’s something very important to me. But I’m not going to lie to you—even I struggle with the three-tier system in the US. To give everyone a very quick introduction, it was born out of the Prohibition era to provide a regulatory framework with checks and balances for how alcohol is distributed and sold.
Vishal Patel (04:43) Brand owners and manufacturers make up tier one. They can only sell to tier two licensed importers and distributors. In turn, these distributors can only sell to retailers, who make up tier three and sell directly to the public. According to the government website, the tier system prevents monopolies, ensures orderly access to the spirits market, and allows for efficient tax collection.
What are the key taxes involved? These are the things that are really important to brand owners. Brand owners are responsible for paying Federal Excise Tax (FET), or duty as we call it in the UK. However, even small imported brands can benefit from the US small producer allowance. This is a really interesting point that a lot of people gloss over: as an imported brand, you can access a lower rate of duty for the first 100,000 proof gallons. That’s approximately 40,000 nine-liter cases, and it could be worth up to a million dollars in savings for small brands.
Distributors are then responsible for paying the local state excise tax, and retailers pay the local state sales tax. When working out your recommended retail price (RRP) and value chains, it’s vital to account for the differences between these state taxes. They vary wildly from state to state, meaning you may have to adjust your shelf price or accept a lower margin in certain regions.
In order to sell your product in the US, each brand must obtain a Certificate of Label Approval (COLA) from the TTB. Crucially, each SKU needs a COLA, not just the brand overall. Depending on the product type, this can take time. At James Gin, we had a bit of a problem with our latest product, American Mustard Gin. Presumably, reviewers thought kids were going to pour mustard on their hot dogs, so it took some time to get that approved.
Once approved, your brand needs to be registered in each state with a licensed distributor or broker who can sell for you. This is completely separate from registering your trademark with the USPTO, which protects your name from competitors. All in all, US compliance is a massive, costly headache, but it is incredibly important.
Vishal Patel (07:02) As a lawyer, I will say that you honestly get what you pay for. Secure good legal advice. Given the highly litigious nature of the US, it’s an area where I encourage anyone looking to launch not to cut corners.
There are so many routes to market in the US, and getting yours right is crucial. Right now, the market is a bit of a mess due to consolidation between major distributors, a post-COVID downturn in sales, and high inventory levels. It’s an absolute nightmare. However, I believe cracks are starting to form in the traditional three-tier system with the rise of D2C (direct-to-consumer), more private label products, and consumers ultimately demanding more choice. Because of this, now is actually a very interesting time to try something different in the US market.
A national importer or distributor can give you huge potential reach if you’re lucky enough to score one. However, ask yourself: will they really give a relatively small brand the time and attention it needs? How long will it take to get set up? How are you going to win their share of mind? More importantly, how much are you going to have to pay each month just to get on quota with a large distributor?
Smaller, regional distributors are far more agile. They’re willing to take on new brands, and while they may lack massive reach, you shouldn’t underestimate their ability to grow alongside you. If you incentivize them appropriately, they can be fantastic allies.
At James Gin, we use a patchwork network of mid-sized distributors across various states so we can maintain their share of mind and incentivize them accordingly. Don’t be fooled by people who tell you that having multiple distributors is more work. Even national distributors operate on a state-by-state level; you still have to engage with every individual state team.
Vishal Patel (09:11) Because of that, managing multiple regionals isn’t actually more work. I wouldn’t advocate going for a large national distributor when you first launch in the US.
We initially launched in the summer of 2022. Despite everyone telling us not to do it, we went D2C first. While that’s very typical in the UK, it’s highly unusual in the US. We imported our brand using our lovely hosts, Park Street, and utilized their distributor licenses in California, Florida, New York, and New Jersey to get our online sales moving.
Park Street doesn’t provide a traditional sales force at your disposal, but for us, this structure enabled us to get online quickly. I am a big fan of D2C; it was a core part of our business model that allowed us to test key markets and track where our consumers live and how they spend. Ultimately, that data showed us exactly where the brand should enter physical retail.
There are pitfalls to D2C, of course. It’s not legal in all states to ship alcohol across state lines, so you must ensure compliance. While there’s no one-size-fits-all strategy, if you start with D2C, you will eventually have to transition into brick-and-mortar trade to truly scale. Even if you just want to get to two million dollars in US revenue, retail is king.
To give you an interesting fact, we actually found a 20% cannibalization of our D2C sales when we opened a retail listing within 25 miles of a consumer’s house. This proved to us that while D2C is great for testing, traditional retail trade is the true way to scale your business.
As a small brand with a modest budget, my modus operandi is always to stretch our marketing dollars as far as possible. The on-trade (bars and restaurants) is incredibly expensive. Just ask any CEO looking at the costs of brand ambassadors tapping their cards at bars all day if they think they’re getting a proportionate return on investment. At James Gin, we followed a very different strategy.
Vishal Patel (11:34) We really like retail. Our strategy is to ask people to buy their first bottle online, and then their second, third, and fourth in retail. The off-trade has a much lower cost of entry. While the shelf competition is greater, that’s where your consumer pull-through tactics come into play.
We primarily target big retail chains. Without an army of salespeople, visiting endless independent retailers is incredibly time-consuming and costly. Starting from scratch, a good salesperson can probably manage about 50 independent accounts by the end of year one. If you do the math, you can see how many salespeople you would need to achieve critical mass.
The big retail-chain states are California, Texas, and Florida. New York, on the other hand, is made up of very small, independent liquor stores, so it is not a big focus for us. I really shake my head in dismay when small brands tell me they are launching in New York; it is incredibly expensive, and I don’t know why people do it.
Our adopted home state is California. It was our first D2C market, our biggest market for online sales, and our largest follower base. As mentioned, we use Park Street’s distribution license there. There’s a lot of distributor turmoil in California at the moment, with major players like RNDC pulling out, meaning many traditional distributors aren’t taking on new brands right now.
To solve this, we employ a sales agency called TSL Brands to be our feet on the street. They have ten people going around California selling our brand. This has been incredibly helpful because it allows us to own the relationships with our retailers from day one, which has proven fantastic for our growth.
Total Wine & More is the specific case study I wanted to share with you today. They gave us our big break in California. To give you a sense of scale, Total Wine’s annual revenue is six billion dollars. That’s the equivalent of Waitrose in the UK, but all they sell is booze—no food. This time last year, we were in just one of their stores with one SKU in California. Now, they have expanded us to over 200 stores across 17 states.
Vishal Patel (14:01) We have really leveraged their footprint to help expand our business across the US.
There are a few other operational quirks to consider, like the fact that “the check is in the mail.” I can’t quite believe that people in the US still pay with physical paper checks! What this means for a UK brand importing into the US is that you have to watch your cash flow. We face a 120-day cash cycle from ordering dry goods to shipping the product, selling it to a retailer, and actually collecting the money. It’s vital to consider how you’re going to finance that extended cycle.
You also need to watch “Cable”—the trading term for the GBP/USD foreign exchange rate. It is volatile as hell and cost us £25,000 last year in currency fluctuations alone. Always account for FX risk when your production costs are in pounds but your revenue is generated in dollars.
Ultimately, our biggest takeaway is that people don’t want to be sold to. As a brand that relies heavily on social media platforms like TikTok and YouTube, having 1.6 million followers has taught us that the more you jokingly say, “Don’t like, don’t comment, don’t subscribe,” the more people keep coming back. The US is a huge market that offers a fantastic window to create authentic content, giving people an entertaining excuse to enter our brand world, see what we’re about, and buy our gin. We like to think of ourselves as a communications agency that happens to sell a rather tasty gin, rather than the other way around.
Now, what do we do about the James May-shaped elephant in the room? Having a celebrity founder is fantastic and it absolutely opens doors, but we do run into people who suffer from a bit of “celebrity brand fatigue.” James is a true founder; he spent 28 days in the market last year and shot 500 hours of content for our social channels. He isn’t just a celebrity endorsing a product. However, no matter how passionate they are, individual fans won’t buy enough bottles to scale a business long-term.
Vishal Patel (16:05) To truly scale, you have to look beyond the celebrity name. A big part of our strategy at James Gin is building traditional marketing tactics that drive brand awareness and pull the product off the shelf without relying solely on one person.
That was a very whistlestop tour of how to crack the US market. What would we do differently, and what would we do again?
Launching online first to transition into retail has certainly worked well for us. Going D2C is a low-cost way to test your product against the largest spirits audience in the world, allowing you to build great sales data to impress retail buyers later. Cracking your route to market is super important, so don’t underestimate how difficult it is to find the right distributor. The hybrid Park Street model combined with a dedicated sales agency has worked wonderfully for us to get feet on the street.
Finally, just be realistic about your timeframes and costs. It’s a tough market to crack, it’s expensive, and it will take longer than you think. But the sheer size of the US means that if you do it well, you may never have to expand to any other country.
Thank you very much for listening today.