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Tag Archives: wine business

Winebits 393: Meiomi sale, wine retailers, restaurant wine

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Meiomi saleWinery consolidation continues: The wine cyber-ether was full of pontificating and prognosticating last week after Constellation Brands, third on the U.S. Big Wine list, bought pinot noir maker Meiomi Wines for $351 million. Most of the commentators were baffled by the sale price, which seemed like a lot of money for the winery, especially since it didn’t include any vineyard land. Still, it wasn’t that surprising, given that Constellation paid $160 million for Mark West, the $10 pinot noir, in 2012, in a deal that also didn’t include vineyards. Meiomi is on track to sell three-quarters of a million cases in 2015, making it the $20 version of Mark West (marked down to $17.99), and as such seems like a perfect fit for the strategy that most Big Wine companies are following. They’ll sell you an entry level product, and then they’ll sell you the next wine when you trade up, and they’ll make sure you will be able to buy both wines in a grocery store. In this, it’s no different than E&J Gallo buying J and The Wine Group buying Benziger — business as usual for Big Wine in the 21st century.

Retailers and grocers: This otherwise run-of-the-mill post about a Florida liquor chain adding a couple of stores explained the expansion thusly: “[I]n a bid to keep the ever-expanding grocery store channel at bay.” Which means the owners behind Florida’s ABC Fine Wine & Spirits understand what’s going on, even if most wine writers don’t. Interestingly the chain is up to 140 stores, which is still 60 less than it had 15 years ago, and speaks to the power supermarkets have today in selling wine. One national wine retailer told me that grocers thrive on competition, which explains much of their success, and aren’t scared of it the way so many regional and local liquor chains are.

Restaurant price gouging: One would not expect the New York Post, home to the legendary Page Six gossip extravaganza and headlines like “Four sex scandals rock one hanky-panky high school” to commiserate with anyone who buys restaurant wine. But reviewer Steve Cuozzo, in a story headlined “Restaurants overprice wine because they know you have no idea the pain” spared no punches. Restaurant prices “… can drive you to drink — anything but wine, that is.” He does an excellent job of explaining the contradictions and discrepancies in restaurant prices, and you can almost hear a bit of sympathy. Almost, of course, because the piece ends with a restaurant charging $100 for a very ordinary $25 retail Bordeaux.

Big Wine strikes again

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Big Wine

“Who do we want to buy next?”

That E&J Gallo bought J Vineyards, the highly-regarded California sparkling wine producer, last month was shocking, but it did make business sense. Gallo, for all its vastness, doesn’t make high-end bubbly and doesn’t have many successful restaurant wine brands, and J does and is. Plus, J owned 90 acres of prime Sonoma vineyards, making the deal even sweeter for Gallo.

So how to explain this week’s news that The Wine Group, second-biggest to Gallo among U.S. producers and with even less of a critical reputation, bought the fiercely independent and much beloved Benzinger Family Winery? The Wine Group has never shown any desire to make wine not sold in grocery stores, and its two biggest brands are Franzia and Almaden, the five-liter box cash cows.

Call it one more step in the Big Wine-ing of America:

The increasing consolidation in the U.S. wine business, something I wrote about at the beginning of the year. It is getting harder and harder for wineries that make less than one-half million cases to find distributors and space on store shelves. Benziger makes less than 200,000 cases a year, which wouldn’t even make it the biggest producer in Texas, and J sells only about one-third of that. Said the owner of a leading California independent: “My guess is that a winery really needs to be above 200,000 cases to really get the attention of a distributor. But maybe 500,000 is the new 200,000?” A distributor told me: “There are too many labels fighting for too few spots on the shelf or wine list. It’s crazy.”

• Family and independence, two hallmarks of the California wine business since the 1980s, aren’t enough anymore. These are just the latest sales involving long-time family wineries, which saw an opportunity to cash out to avoid succession problems, solve family disputes over winery operations, or to take advantage of Big Wine’s deep pockets. Sale prices weren’t disclosed, but one report said the J deal may have been worth as much as $90 million, which would make the Benziger price well into the hundreds of millions of dollars. Even of the sale price was half of that for each, which is probably more accurate, that’s a winning payout.

• It’s all about the land. Benziger, with sales of less than $10 million, is so small compared to the multi-billion dollar Wine Group that there is almost no way it could affect the parent’s financial performance. This makes the deal even more baffling, unless it was for the 200 or so acres of quality Sonoma vineyards that were part of the sale.

Will Big Wine run their new companies successfully? Certainly, if success is defined by profit. Otherwise, expect the new owners to do what new owners always do, despite best intentions and protests to the contrary — cut costs, eliminate unnecessary products (so say good bye to J’s lovely pinot gris), and “rationalize” operations. Gallo and The Wine Group won’t ruin J and Benziger the way Sears destroyed mail-order clothing retailer Lands’ End, but they won’t be the same wineries they were before the sale. That’s something we’ll have to learn to live with, because consolidation is going to be with us for a very long time.

More about Big Wine:
How to buy wine at the grocery store
Downton Abbey claret — wine merchandising for dummies
Big wine tightened its grip on the U.S. wine market in 2013

Private label wine: The future of the wine business?

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private label winePrivate label wine, always a small but important part of the wine business, is going to get much, much bigger. In this, wine drinkers will see more wines on store shelves they’ve never heard of and can only buy in one store — all of which is good for retailers, but not necessarily good for us.

More, after the jump:

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