Distribution of Wine in Germany

Unlike its three main winemaking competitors – US, France and Italy – Germany is not as patriotic when it comes to wine consumption, but rather internationally oriented. Since its domestic production falls far short of satisfying the consumption of its population, Germany is one of the largest importers of wine in Europe – second only to the United Kingdom – with € 2.6 billion worth of imports (i.e. 20 % of the EU Member States’ total import flow). This offers grand opportunities to suppliers aiming to enter the European market.

Winemakers can best protect their trade marks through registration. For Germany, protection is available through EU trade marks (governed by the Regulation (EU) 2017/1001), and alternatively, or additionally, through German trademarks.

German trademarks are registered with the German Patent and Trade Mark Office – simply online, via DPMAdirekt or DPMAdirektWeb (in German). Costs are quite low: the basic fee is € 290 for electronic submissions and € 300 for paper submissions. Once registered, the trade mark is protected for a period of ten years without incurring any further fees during this period. This term of protection can be extended for further ten years against payment of a renewal fee. The registration process is short, especially takes less time than registering an EU trade mark. Besides, applicants can obtain rights arising from their own trade mark earlier and enforce them very effectively through interim measures.

Upon request, the German trade mark’s protection may also be extended to other countries by filing an application with the WIPO.

Wine-growing countries, including Germany, have a long tradition of labelling law, acknowledged by the EU legislator. In fact, the EU regulation on wine labelling (i.e. the Commission Delegated EU Regulation 2019/33 on protected designations of origin, geographical indications, traditional terms, labelling and presentation of certain wine sector products) leaves the Member States engaged in winegrowing quite some leeway.

While the wine classification systems of most European countries are based on the French AOC system (“Appellation d’Origine Contrôlée”), namely on the place of origin of the wine (corresponding to the EU logo “PDO”, “Protected Designation of Origin”), Germany assigns the highest rank to the ripest grapes. High levels of ripeness, measured with a refractometer, are hard to achieve in cool-climate weather conditions like Germany’s. Therefore, wines made from the ripest grapes are assigned the highest value.

This different classification system influences the labelling regulation, which was consistently amended by the EC Regulation 753/2002 (repealed by the Regulation 607/2009, in turn repealed by the EU Commission Delegated Regulation 2019/33). This latter replaced the previous “principle of prohibition” – according to which any information not expressly provided by law could not be mentioned on the wine labels – with a more liberal approach, excluding solely misleading or fraudulent information. Furthermore the new labelling law distinguished between mandatory information (such as the quality of the wine, going in ascending order of quality from the basic “Wein” to “Landwein”, then “Qualitätswein” and, finally, to the highest quality wines referred to as “Prädikatswein”) and optional details, such as the crop year. As a result, German labels, containing specifications about quality level (or grape ripeness), grape varieties and region of origin are known to be some of the world’s most confusing.

Within the European single market the procedures for the sale of wine are simplified thanks to the fundamental freedom of movement of goods (cf. art. 28 TFEU) and by a basically harmonized regulation. The customs and commercial obligations that European manufacturers must fulfil in order to be able to import wine into Germany differ according to the subjects between which the sale takes place: on the one hand, the manufacturer, facilitated if small (i.e., with a wine production of less than 1,000 hl / year) and on the other hand, typically, a wholesale importer or a final consumer (purchasing through correspondence, catalogue, e-commerce, etc.).

The import of wine in Germany from outside the EU is, however, subject to the submission of a marketability confirmation and an analytical report issued by one of the official agencies and laboratories specifically approved or appointed by third countries. The permission to import wine in Germany is issued when official examinations conducted in Germany prove that the wine product as a whole (namely the wine itself but also its purpose, the container, the labelling and the packaging) complies with the EU regulations and German law (section 32 of the WeinÜV).

Moreover, pursuant to the new German Packaging Act (Verpackungsgesetz, “VerpackG”), entered into force on January 1, 2019, manufacturers of B2C packaging material (both European and non-European) need to register, before placing said material on the German market:

a) online in the public database "LUCID";

b) with a disposal and recycling system (also referred to as dual-system companies)

The term “manufacturer” is quite broad and includes importers and distributors who for the first time place the packaging onto the German market. B2C packaging is also broadly defined as the material typically ending up as waste at

• private end-users, or
• restaurants, hotels, canteens, cinemas, theatres, etc. (for definitions, see section 3 VerpackG).
  

Wine consumers have a great advantage in Germany, compared to other alcohol consumers: the consumption is exempt from excise duties. On the other side, sparkling wine-based drinks are subject to excise duties ever since the Emperor Wilhelm II introduced them in 1902 to finance its fleet: nowadays, these amount to € 51/hl (hectoliters) if the alcohol percentage of the sparkling wine is below 6% and to € 136/hl if it is above 6% (as per section 2 of the wine tax act Schaumwein- und Zwischenerzeugnissteuergesetz, “SchaumwZwStG”). Exempted from excise duties are sparkling wines bottled with cork and muselet.

Value-added tax (“VAT”), instead, applies to the commercialization of all types of wines and amounts to the regular 19% (the reduced amount of 7% applies only to the purchase of everyday necessities (e.g. water and milk), as per section 12 of the VAT act (Umsatzsteuergesetz, “UstG”).

German viticulture has been going a very dynamic development, especially implemented by a young generation of vintners known as "Generation Riesling", established by the German Wine Institute (DWI) twelve years ago and now counting over 500 members. Supported by tradition, they use special vineyard and cellar techniques that are gentle on the wine and environment, combined with up-to-date communication and intelligent marketing, from label design to modern vinotheques and events, to focus on quality and attract also younger consumers.

Great attention is now paid by a growing number of German wine producers to ecological or biodynamic principles, now extended to over 8,000 hectares, i.e. an area that has more than tripled in the last ten years. This new trend has raised consumers’ awareness and demand for quality, regionality and authenticity. Consumers in Germany are also particularly concerned about the impact of food and drink production on the environment. Wholesalers and retailers, on the other side, also want to prevent any damage to their reputation that a cooperation with unsustainable production would entail. For this reason, they are becoming much more involved in the sustainable management of natural resources by their suppliers.

Relevant rules are, amongst others, laid down in the EU Regulations 606/2009 on grapevine products and 834/2007 on organic production.

Main tips to consider for negotiating a distribution contract:

• choose the best fitting distribution structure. Under German law, all types of distribution structures can be used, including commercial agency, distribution / retail, commission agency and franchising. The choice of the structure depends on one’s needs, especially whether you
  
• want to keep the sales intermediary at a short leash and under strict control, e.g. determine the resale price (choose employees or commercial agents),
• keep the margin high (choose employees, commercial agents or commission agents),
• want to minimize the distribution risk (outsource it to a distributor or franchisee),
• want to broaden the distribution of your products without investing your own capital, staff or time, through external forces, but under your own brand and with your specific know-how (go for distributors or franchisees).

For details, please see the overview on "Germany – Distribution agreements".

• consider the financial consequences. At termination, you may – mandatorily – have to pay an indemnity in return for the substantial benefits derived from the customers brought by the sales intermediary. Indemnity is mandatory for commercial agents, but may be avoided as regards distributors (cf. the article "German Distributor Indemnity – How to avoid it").
  
  
• applicable law and dispute resolution. The parties are free to choose both. In lack of choice, a distribution agreement with a German distribution intermediary is governed by German law (Art. 4 Rome-I-Regulation), while the single sales contracts thereunder would be governed by the exporter’s law, including the United Nations Convention on Contracts for the International Sale of Goods. Parties can agree on mediation before going to court – or on arbitration instead, especially if they want to keep their business confidential.
  
  
• formal requirements. A wine distribution agreement may be concluded orally or in writing and may even arise out of the parties’ implied conduct. There is no obligation to register a distribution agreement with a public authority to ensure its validity.
  
  
• exclusivity. The parties are free to determine the scope and eventual exclusivity of the sales intermediary’s rights. For the sake of clarity, it is recommended to contractually agree if e.g. the sales intermediary is appointed as an exclusive distributor. If so, the contract should also specify whether the exclusive appointment prevents the principal from selling the wine within the contract territory through another distributor or agent or also directly.
  
  
• non-competition. The wine-maker may also ask the sales intermediary to sell only the wine-maker’s products (not of competitors). Such non-competition clause requires, however, checking with antitrust laws, especially the five-year limit imposed by article 5 para. 1a VBER.
  
  
• sales Targets / Minimum Turnover. The distribution agreement ideally also stipulates certain sales targets and the consequences in case of non-compliance.
  
  
• remuneration. Corresponding to the sales targets, remuneration can be success-driven.
  
  
• term & termination. Stipulate the term (if applicable), the conditions, the notice period and the form of the notice of termination, the reasons for early termination and exit / transition scenarios, as well as the rights and duties of the parties at termination of the contractual relationship. Counter-check such stipulations with the applicable law, as mandatory rules may apply, e.g. minimum notice periods, especially for commercial agents, but also for distributors. For details, see "Germany – Distribution agreements".