Tag Archives: Big Wine

Big Wine 2023

Wine Business Mnnthly magazine cover Feb 2023Big Wine has done the seemingly impossible: Make less product, but still control 90 percent of the market

The most telling statistic in the 19th annual Wine Business Monthly’s survey, which ranks the 50 biggest producers in the U.S.? That the market share controlled by the 100 biggest companies has not changed all that much – even though many of them are actually producing less wine.

Which pretty much sums up the crisis facing the U.S. wine business as sales decline, its core customers age, and the rest of the country drinks something else.

The pie is getting smaller, but the biggest companies still slice off the same size piece. That’s certainly not good for the other 11,000 wineries, and it’s not even particularly good for Big Wine. Success is about growth, not maintaining market share.

In other words, as one industry analyst noted earlier this year, “This is obviously a place where none of us want to be. If a rising tide floats all boats, then a shrinking tide is the opposite. In that case, we’re in a Darwinian model, where the only way to get business is by taking it from someone else. And that’s obviously a place where we don’t want to go.”

Frankly, I was stunned when I finished parsing the numbers. Case in point: the study says E&J Gallo, the biggest producer in the world, hasn’t increased its sales in the U.S. in several years. But Gallo still accounts for almost one out of every three bottles made in this country.

Even more revealing: The 10 biggest producers have lost a stunning amount of market share, from controlling about 4 out of 5 bottles in 2016 to three-quarters in 2022 — even though the top 100 still control 90 percent. This is a business school example of cannibalization: Those in the next 40 are stealing market share from those in the top 10, and no one is necessarily better off.

Here are some notes of interest from the study (for those of you who haven’t already started drinking in despair):

• There are 11,691 wineries in the U.S., a three percent increase from last year.

• Eight of 10 wineries in the U.S. make fewer than 1,000 cases while a third make fewer than 5,000 cases. There are 281 medium-sized wineries making 50,000 to 499,999 cases—counting both bonded and virtual wineries. There are 79 large wineries in the U.S. making 500,000 cases or more.

• Some historic and important wine names have seen production slump over the last year. They include Bronco, makers of Two-buck Chuck, which suffered an 11 percent decline, and supermarket stalwart Ste. Michelle Estates, down 15 percent.

• The three biggest producers have seen their share of the market fall by one-sixth since 2017 – even though Gallo bought a sizable chunk of then No. 2 producer Constellation Brands a couple of years ago.

More about Big Wine:
• Big Wine 2022
• Big Wine 2021
• Big Wine 2020

Feds: Big Wine means less choice and higher prices

wine prices
Has wine consolidation led to higher prices?

Treasury Department says consolidation may have increased wine prices as much as 18 percent

The U.S. government may be about to do something that many experts said it would never do – and couldn’t be done anyway.

That’s rein in Big Wine, as well as the largest companies in beer and spirits.

Reuters reported yesterday that the Treasury Department “suggested stiffer Department of Justice and Federal Trade Commission oversight, tougher enforcement of existing rules and development of new ones. …” The comments were released in a report that is part of the Biden Administration’s promise last July to look at concentration and anti-competitive behavior in the U.S. in markets that include alcohol, meat packing, and hearing aids.

The Treasury report focused on beer, which is even more concentrated than wine; the two largest companies control almost two-thirds of the market. In wine, the top five control about 65 percent of U.S. production.

Still, it noted that concentration in beer, wine, and spirits has resulted in higher prices. Beer consumers alone pay $487 million more a year than they should, said the report, and found that concentration can increase the cost of a bottle of wine by as much as 18 percent and a bottle of spirits by more than 30 percent.

Even more shocking? A Justice official sounded like the Wine Curmudgeon: “Enforcement and regulatory authorities should have the courage to learn and the fortitude necessary to enforce the law and protect competition.”

The report also noted that change will be difficult, since the states are responsible for much of the liquor regulation in the U.S. In addition, the Byzantine knot that makes up the country’s liquor laws would not be easy to untangle even if it was all under federal jurisdiction.

But that the report was released at all is good news for anyone who thinks consolidation has led to higher prices, less choice, and poorer quality wine. I wrote a trade story last year where a variety of anti-trust experts said unequivocally that nothing could be done. Which, hopefully, means they are wrong.

Photo: Maria Orlova from Pexels

Winebits 725: Franzia holiday outfits, sommelier scandal, Big Wine

franzia christmas
$50, and the sweater is yours — and it lights up!

This week’s wine news: More Franzia holiday outfits, plus six sommeliers could be be expelled and Big Wine is shopping a property

• Bring on the Franzia outfits – again: The WC can’t help himself – the idea of adults dressing up like wine boxes appeals to something in me that I can’t explain. This time, it’s a Franzia Christmas sweater that lights up (yes, the one in the picture). The sweater, in case anyone is interested, costs $50. The other thing I like about these Franzia promotions? The marketers call people who drink the wine and buy this stuff “Franz” (like friends – get it?) That’s so horribly awful that I can only shake my head in admiration. Wish I could get paid for writing puns like that. The bravest among you can check out anther Franzia costume promotions here.

• Sommelier scandal: The Court of Master Sommeliers has moved to revoke the certifications of six members who were accused of sexual misconduct about a year ago, including one of the group’s co-founders. Hearings will be held within 30 days to decide whether to revoke the memberships. They include Fred Dame, one of its co-founders; Robert Bath, a professor of wine at St. Helena’s Culinary Institute of America; Matt Stamp of Compline Restaurant and Wine Shop in Napa; Fred Dexheimer; Drew Hendricks; and Joseph Linder. The sex scandal is the second major scandal facing the group; three years ago, it had to cancel the results of an exam after one of the members gave part of the test to someone taking it.

• Stag’s Leap sale? Sycamore Partners, the hedge fund that bought Ste. Michelle Wine Estates, as already looking to break up the company. Which, of course, is what hedge funds do. It may be asking as much as $1 billion for Stag’s Leap, a Napa winery that isn’t this producer. Bloomberg reports that “Stag’s Leap is expected to attract interest from high-net worth family offices and other private equity firms, the people said. No final decision has been made and Sycamore could elect to keep the business.” Welcome to the 21st century, wine business.

Winebits 708: Three-tier, direct shipping, Big Food

walmart wine
“Do you see that Walmart wine that the WC needs to buy?”

This week’s wine news: Even Walmart is scared of three-tier, plus direct shipping for spirits, and Big Food dominates even more than Big Wine

• Not in Arkansas? The email from the Walmart marketing person wanted me to review its new $10 Winemakers Selection Reserve Series wines. But when I talked to the woman, she said I would have to go to Walmart to buy the wines. Arkansas law forbids the company – one of the largest retailers in the world, the inventor of the post-modern supply chain, and the subject of more academic studies than Wine Curmudgeon has rants – from sending samples. Is it any wonder I worry about the future of the wine business? I mention this not to be upset and bothered that I have to go to Walmart to buy wine; regular readers know I buy about two-thirds of the wine I review, and have bought much Walmart wine in the past. Rather, it’s to note that it’s difficult to get products reviewed when it’s illegal to send the product to reviewers. Which, of course, happens in almost no other business in the world.

• Bring on the spirits: Several trade groups are lobbying for direct shipment of beer and spirits, which is currently illegal. If they succeed, you’ll be able to buy craft beer, whiskey, gin, and so forth directly from the producer, just like we do with wine. This means they’re heading for a showdown not only with the various states, but with the all-powerful Wine & Spirits Wholesalers of America. It opposes all direct shipping, even of wine. The groups say that even though 46 states plus the District of Columbia allow direct shipments of wine, only nine states plus D.C. permit direct shipping of spirits, despite “despite broad consumer support for the latter.”

• Big Food: Dwight Furrow, writing in Edible Arts, talks about the human, environmental, and agricultural cost of Big Food, the companies like Kraft Heinz, General Mills, Conagra, and Unilever that are even more dominant in their sphere than Big Wine is in its. “For those of us who have been watching consolidation in the wine business, this will come as no surprise. But the situation is much worse in the food industry,” he writes. It’s a clarion call to anyone who worries about consolidation in wine and how it affects something we dearly love.

Photo: Kampus Production from Pexels

Winebits 706: Chateau Ste. Michelle sale, restaurant wine, Total Wine

money
Let’s see. … What other wine company should we buy?

This week’s wine news: Chateau Ste. Michelle is gobbled up by a private equity behemoth, plus restaurants re-jigger alcohol sales, and Total Wine revenue reaches $5 billion

• A new era: Private equity behemoth Sycamore Partners, whose holdings include Staple’s, Aeropostale, and Nine West, will buy Ste. Michelle Wine Estates for $1.2 billion. It’s almost impossible to overestimate the importance of this deal; when private equity discovers wine, the wine business has changed forever. Washington state’s Ste. Michell, the eighth-biggest producer in the country, makes more than 8 million cases a year. Its brands include 14 Hands; Chateau Ste. Michelle and its well-known supermarket riesling; and a variety of more expensive labels. This deal not only means dramatic changes at Ste. Michelle — look for the new owners to try to dump its supermarket brands and to cut costs with layoffs, canceling grape contracts, and other “rationalizations.” But it also means, given the way private equity works,  that almost every large U.S. wine producer, save for the top dozen or so, is now for sale — whether it wants to be or not. Does it also mean that wine wholesalers, other than the top half-dozen, are also potential equity acquisitions?

• Bring on outdoor dining: Nation’s Restaurant News reports that restaurants across the country are tinkering with their wine, beer, and spirits efforts in the wake of the pandemic. The goal is to figure out how to keep what worked during the past 18 months, dump what didn’t, and decide what comes next. In some states, that means an end to cocktails and wine to go; in others, that means adding retail sales in addition to traditional on-premise sales. One thing that isn’t changing: Contactless check-in, virtual menus, and mobile ordering. Interestingly, one chain executive said she will change expansion plans from the northeast to warmer states, where patio dining is possible most of the year.

• $5 billion for Total Wine: Total, the country’s only true national wine retailer, saw revenue jump to $5 billion from $3 billion just a couple a years ago. Chalk that up to expansion and increased business during the pandemic. The chain has 216 stores in 27 states, and expects to reach 230 by the end of the year. It’s particularly keen on Texas, where it has 36 stores, the most of any state. Its CEO told Shanken News Daily that the company is actively looking to open more stores in Texas.

Photo:Brock Wegner on Unsplash 

 

Winebits 704: Champagne glasses, consolidation, wine trends

champagne glasses
“How quaint.. Champagne flutes.”

This week’s wine news: Once again, Champagne flutes are passe, plus Big Wine gets bigger and the worst wine trends

• Bring on the glass – or not: The Wine Curmudgeon has watched the long history of the correct Champagne glass with much amusement. There have been at least three “proper” glasses for sparkling wine in the past 30 years, and that doesn’t include this one. The flute, the staple of the past 20 years or so, has fallen out of favor because it wasn’t up to the “nuanced vineyard expression, à la Burgundy,” of post-modern Champagne, reports PunchDrink.com. Who knew? Or even what that means? I can’t shake the feeling, though, that the change in glass type has as much to do with getting wine drinkers to buy more expensive glasses – call it premiumization for crockery – as anything else.

• Big Wine gets bigger: Delicato, the fifth-biggest winery in the country, has bought Coppola, the No. 17 producer. After the sale, Delicato will account for almost 18 million cases of wine a year, or about 7 ½ percent of the California wine sold in the U.S. annually, according to Wine Business Monthly. No price was disclosed, reports the Wine Spectator, and Coppola’s high-end Inglenook in Napa and Domaine de Broglie in Oregon were not included. Instead, Delicato – perhaps best known for its Bota Box wines – will get Coppola’s supermarket brands, including Diamond Collection, Director’s Cut, and Sofia.

• Say the experts: The Vinepair website asked “wine pros” to pick the worst trends in wine. Not surprisingly, two involved natural wine – wine’s most controversial topic – and one defended natural wine while one criticized it. Best yet, natural wine is almost unknown to people who aren’t wine professionals and irrelevant to almost everyone else who drinks wine. And people wonder why I worry about the future of the wine business. The other worst trends included healthy and diet wine, new-style red blends, and complicated corkscrews.

Photo:“Two champagne glasses” by quinn.anya is licensed under CC BY-SA 2.0

Winebits 701: Focus groups, mergers, restaurant wine

focus groups
“OK — so you like cabernet sauvignon, but you like it better without the tannins and acidity?”

This week’s wine news: How focus groups “dumb down” a product, plus will the last Big Wine merger take place and middling news for restaurant wine

• Focus groups and “dumbing down:” Focus groups remain one of wine’s most insidious problems, having given us sweet “dry” wines as well as “smoooth” wines without any varietal character. How do focus groups work? One of the writers of the James Bond movie series offers a terrific explanation: “From my experience, here’s what happens to movies when [focus groups] start invading the creative process: Everything gets watered down to the most anodyne and easily consumable version of itself. The movie becomes an inoffensive shadow of a thing, not the thing itself.” One of his examples is the popular movie musical “Sweeney Todd” – research indicated it would be more popular without its songs. Remind anyone of too many cheap cabernet sauvignons on the supermarket Great Wall of Wine?

• More mergers? The wise guys are still buzzing about the next great booze merger, where Pernod Ricard (Campo Viejo, Kenwood) is once again rumored to be after Brown-Forman (Korbell. Sonoma-Cutrer). The deal, given the way the world works today, would have little to do with wine – Pernod wants Jack Daniels, Brown Forman’s flagship brand, so it can better compete with Diageom (Crown Royal, Johnnie Walker) in the whiskey market. Because, of course, Pernod’s sales of $10 billion annually puts it at a tremendous competitive disadvantage.

• Not such bad news: The outlook for the restaurant wine business is sort of looking up, according to a report from distributor-compiled sales reports. SipSpurce reports that about half of the restuaurants that closed at the beginning of the pandemic have reopened through April, calling it “significant progress” in the return to a more normal restaurant world. The report expects restaurant wine sales to grow, and that the business reached bottom in February. The bad news? Retail wine sales declined 0.6 percent in the first quarter of this year – something that was totally unexpected.

Photo: Campaign Creators via Unsplash