Quantcast

Big Wine: 5 companies, 60 percent of sales, 200 brands

Call it serendipity. Shortly after my blog posts about Big Wine at the end of last year, a Michigan State study offered even more data about how Big Wine works and how it has changed the business.

The paper, “Concentration in the U.S. Wine Industry,” was compiled by Phil Howard, an associate professor who studies consolidation. After doing soft drinks and beer, he told me, wine was the next logical step.

“And even I was surprised by what I found,” Howard said. “Wine was much different than what I thought. If you go to the stores, it seems like you have all these choices, because the shared ownership is not very apparent. We wanted to help consumers understand what they were really buying.”

More, after the jump:

The study consists of two parts – third-party sales data and store visits from Howard and his graduate assistants. The former, displayed in some very nifty charts on the study website, paints a fascinating picture of market share as well who owns what labels. Three companies – E&J Gallo, The Wine Group, and Constellation Brands, account for more than half of wine sales in the U.S.

This is my favorite chart. For example, you can see how important Cook’s champagne is to Constellation Brands (about as much as Robert Mondavi, believe it not), and that Bronco, which makes Two-buck Chuck, has a bigger market share than much larger companies like Diageo and Altria, which owns Chateau Ste. Michelle.

The store visit results were even more fascinating.  Howard and his graduate assistants counted wine at 20 Michigan retailers, where they found more than 3,600 unique varieties (where chardonnay was one variety, merlot another, and so forth). Those wines came from more than 1,000 different “companies,” although, as the study noted, the ”top firms each contribute to an illusion of diverse ownership by offering dozens of brands (and hundreds of varieties), many of which do not clearly indicate the parent company on their label.”

The reason for that, said Howard, is not difficult to figure out: “A company known for producing cheap wine and not quality wine does not necessarily want to be identified with a premium, high-end brand.”

Other key points:

• The only unique varieties of wine found in more than half the retailers were Clos du Bois chardonnay, from Constellation, and Cavit pinot grigio. In other words, wine has no national brands, in the way every retailer in beer carries Bud Light and Coke and Pepsi are in every store that sells soft drinks.

• Half of the stores carried the same six varieties – Blackstone merlot, Ravenswood zinfandel, and Woodbridge chardonnay, all from Constellation, and Apothic red, Barefoot chardonnay, and Ecco Domani pinot grigio, all from Gallo. What this says about retailer selection, customer preference, and distributor clout is worth a second study.

• The top six wine companies in the U.S. accounted for more than one-fifth of the varieties found in the stores. That it’s not higher speaks to retailer determination to carry other brands, something else not seen in soft drinks or beer.

• Howard said that the variety and number of wines, as impressive as it is, would probably be even more impressive in states that are less regulated than Michigan, which has one of the tightest three-tier systems in the country.

Finally, though Big Wine isn’t as top-heavy as Big Beer, it may be headed that way, said Howard. He said the wine business resembles the beer business in the 1950s, when 30 companies dominated the market. Today, just two beer producers — AB InBev and Molson Coors — account for three-quarters of all sales.

5 Responses to Big Wine: 5 companies, 60 percent of sales, 200 brands

  1. acevola@swbell.net' Alfonso says:

    slow news day? or as Charlie Olken likes to call posts like this, Friday’s fish wrap?

  2. Jeff Siegel says:

    I don’t think so, Alfonso. This is something I write about a lot and have written about recently. Plus, I did original reporting. Who else does that?

  3. skip@coomber.com' Skip Coomber says:

    Great blog. I guess that it’s inevitable that the wine industry will end up with a handful of conglomerates controlling a super-majority of the product. The restrictions on wine distribution, resulting from significant governmental lobbying efforts, probably add to the more common benefits of massive size including production, marketing and traditional distribution economies of scale. Will that be good for the consumer? How about to us independent wine brands?

  4. Jeff Siegel says:

    Thanks for the compliment, Skip. What I didn’t include in this (and what Mike Veseth has written about) is how Big Wine dominates or will dominate cheap wine production.
    This is part of what I see as the continuing change in wine to two almost separate markets — the $10 or so market, and everything else, in the way that beer has split in two. Who writes about Bud Lite? Almost no one. But everyone writes about craft beer.

  5. […] There’s Gallo, and there’s Gallo: The blog has spent much time discussing how Big Wine dominates the wine business, but never with quite this much humor. Marnie Old at Philly.com points out that someone who […]

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Powered by WordPress | Designed by: suv | Thanks to toyota suv, infiniti suv and lexus suv