Tag Archives: wine distributors

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.

Winebits 451: A three-tier system roundup

three-tierThis week’s wine news is all about the three-tier system – a well-written story about how it works, plus updates on marijuana and Utah.

• “It’s impossible to taste 645 wines:” Jeremy Baker of Food52, a self-described “amateur wine lover,” writes about his adventure in the three-tier system, and he spends a lot of time down the rabbit hole. Baker interviews a wine shop owner, who explains what it’s like to taste hundreds of wines a week to decide what to carry, and gets to visit a trade tasting where 645 wines are being shown. “The tasting list is in actuality a 166-page book,” he writes, and his amazement goes on from there. That Baker can actually begin to imagine the difficulties that the system imposes on retailers is the strength of the story. My only regret is that he doesn’t assess the system and decide if it’s time is past. Otherwise, highly recommended reading.

• Don’t trust the wholesalers: Tom Wark, whose crusade against the three-tier system makes my opinions seem like a child’s musings, has a warning for the marijuana business: “Whatever you do, don’t allow America’s alcohol wholesalers anywhere near your growing and soon-to-be-legal industry.” Wark’s post explains why he doesn’t want the legal weed business to be dominated by the distributor-based system that controls the wine supply chain. My favorite part? Where he quotes a distributor trade group, which says legal marijuana needs three-tier to prevent illegal sales. Which, of course, sounds like an argument only Dave would understand.

• Only in Utah: Regular visitors know how much the WC appreciates Utah’s Kafka-esque interpretation of three-tier, and this is yet another example. Under a new tasting law, liquor producers must have a “distinct area for consumption” so that tastings are “outside the view of minors” who may be at the winery. In other words, wineries can only do tastings in a back room out of sight of any children who may be at the winery. Which presupposes that kids are flocking to wineries and craft beer and spirits producers to watch adults sample the product. Could be worse, though: What happens when the Utah legislature finds out kids might be watching their parents drink at home?

Winebits 404: Restaurant wine, distributors, direct shipping

restaurant wine ? One person’s inexpensive: One more example of how restaurants are out of touch with their customers when it comes to restaurant wine prices. This new Dallas restaurant is boasting about its reasonably-priced list, because, said a restaurant official, “We have a low mark up on our wines, so we ?re priced fantastic.” That would be a wine list with most wines supposedly costing less than $100 (no website for the restaurant yet, so I couldn’t check). What would the official have said if there had been really expensive wines on the list? Is it any wonder, unless there’s a special reason to go, that the Wine Curmudgeon has all but abandoned Dallas’ restaurants? Besides, it’s more fun eating at home.

? Bigger and bigger: It’s not just wine companies that are getting bigger, but distributors as well. Wine Industry Insight reports that the 10 biggest distributors in the country control more than two-thirds of the wholesale business, which makes the group more or less as dominant as Big Wine. Why does that matter to consumers? Because, thanks to three-tier, every wine sold to a retailer or a restaurant in the U.S. has to pass through a distributor, which tacks on as much as 25 percent to the cost of the bottle for their effort. Fewer and bigger distributors means less competition, which means that percentage won’t get any smaller any time soon.

? Best practices: Want to know how to help your wine survive shipment, whether it comes directly from the winery or from an online or local retailer? This list, from Entrepreneur magazine, hits the highlights nicely, emphasizing how little wine likes heat, vibrations, and being left on a delivery truck all day. One overlooked point: Give the wine, particularly the pricier bottles, a chance to recover from the trip. The bottles need to rest after being bumped across the country, and letting them sit in a cool, dark room for a week or so isn’t a bad idea.