Tag Archives: Southern Glazer’s

Feds to country’s biggest wholesaler: May be time to clean up your act

FTC investigating Southern Glazer’s for anti-trust violations

gavel on top of money
FTC inquiry will ask if Southern Glazer’s favored big customers over smaller ones.

The Federal Trade Commission, doing something that it hasn’t done in two decades, says the country’s biggest wine and spirits wholesaler may have broken anti-trust laws.

The FTC is investigating Southern Glazer’s Wine & Spirits, which could control much as much as two-fifths of the U.S. wine distribution market, of illegal practices “related to how wine and liquor are priced and sold around the country,” Politico reported on Friday.

Politco reports that Southern may have violated the 1936 Robinson-Patman Act, which prohibits suppliers from offering better prices to large retailers at the expense of their smaller competitors. The federal government has largely ignored enforcement of the Robinson-Patman Act for more than 20 years, and this action may indicate that the Biden Administration was serous about its 2021 report calling for more competition in a variety of U.S. businesses, including alcohol.

Why does this matter to those of us who buy wine? Because, if the charges are proved, it means Southern has used its dominant position to artificially inflate prices – and we’ve paid more than we should have.

Which, frankly, would not be surprising given consolidation in the second tier, where Southern and RNDC probably control some two-thirds of the business. And I can’t emphasize enough how important this action is, even if nothing comes from it. And nothing might, since it’s just an investigation. Nevertheless, this demonstrates that someone understands that one or two companies dominating a market is not good business and is not necessarily good for the economy – unless you’re the companies doing the dominating.

Says the Politco story: The FTC is seeking detailed sales data on thousands of brands of alcohol and wine sold around the U.S. by both Southern Glazer and its competing distributors. This includes questions about pricing and benefits Southern Glazer offers to retailers, including quantity-based discounts, rebates, promotions, as well as marketing, warehousing, merchandising and other services.

It is also asking about the “competitive dynamics” in the retail market for wine and alcohol and how Southern Glazer allocates wine and alcohol between different retailers, including whether and how it limits distribution to certain customers.

 

The Southern Glazer’s-Constellation deal is one more slap up the head for wine drinkers

Southern Glazer's
There’s big, and then there’s really big after the Southern Glazer’s Constellation deal.

Wholesaler Southern Glazer’s will control the No. 1 and No. 3 U.S. wine companies in key parts of the U.S. Can higher prices and less selection be far behind?

One of the most important pieces of of wine news in years went practically unreported in the Winestream Media this week. Because, of course, it had nothing to do with scores and everything do with limiting consumer choice and raising prices. Can’t let wine drinkers know about that, can we?

The news? Southern Glazer’s, the biggest wine wholesaler in the country, acquired the rights to distribute Constellation Brands, the third biggest wine producer, in about one-third more of the country. That gives Southern control of two of the three biggest wine companies in the world – E&J Gallo and Constellation – in some of the most important markets in the U.S.

And that is bad news for wine drinkers. Southern, already powerful, will be immensely powerful with the Constellation addition. Depending on whose numbers you believe, the Gallo and Constellation combination may give Southern a chance to eventually control as much as half of the U.S. wholesale market

In other words, one wholesaler could control half the wines for sale in your city, thanks to three-tier laws that require all wine to sold through a wholesaler. How can that be good for anyone but the wholesaler, the biggest retailers (Kroger, Costco, and the like), and the producers?

Because it’s not good for wine drinkers. That kind of concentration tends to lead to higher prices and less selection – one of the basic tenets of economic theory. Know that retailers, faced with a choice of making Southern happy by buying its wines or making it unhappy by saying, “No, we want something else,” will almost always opt for the former. Who wants to annoy Southern and lose a chance to buy popular wines like Barefoot, Apothic, Kim Crawford, and Woodbridge?

So we’ll see Southern products on store shelves at the expense of those from smaller wholesalers and producers. The result? Imagine a supermarket Great Wall of Wine where most of the domestic labels will be from two producers, and where those domestic labels will push out imports. How much fun will that be?

The wholesalers – and even Southern’s competitors – will claim that that would never happen, and that they would never use their immense economic power to force someone to buy something they didn’t want to buy. Which they may well believe. But I certainly don’t.

I know what I’ve seen at my Kroger – the slow but steady disappearance of French and Spanish wines, combined with the proliferation of Big Wine labels. And that was before the Southern-Constellation deal. I don’t even want to think about how much worse it’s going to get.