The Southern Glazer’s-Constellation deal is one more slap up the head for wine drinkers
by Wine Curmudgeon Posted On
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.
Speaking as a retired wine sales rep this is awful. We in the boutique end of the trade already called Southern the evil empire. I think they just finished the death star. Andv we have no Jedi to save us.
WC –
So you buy wine at the world’s largest grocer, and your concern is consolidation at the distributor level?
I shop at supermarkets, wine shops. chain stores — you name it. That’s how I can get a sense of what’s going in the marketplace. It’s one of the things that makes me different from the rest.
SO, YOU DO NOT BELIEVE IN SHOPPING LOCAL INDEPENDENT WINE RETAILERS WHO ARE CLOSING THEIR DOORS EVERYDAY?
I guess my point is the consolidation in RETAIL has put tremendous power in a few retailers, Kroger, Costco, Total etc. they play a huge role in what you experience as a winnowing selection.
“… lose a chance to buy popular wines like Barefoot, Apothic, Kim Crawford, and Woodbridge?? Who’s to say that those wines would be as popular if they weren’t so prevalent and heavily promoted by the large suppliers through the consolidated wholesalers?
A steady erosion of choice, selection and unique. Keep seeking pleasant surprises!
The word on the street in Dallas is that Gallo may be
moving to RNDC.
Not sure whether there is any truth to it, but, within
hours of the announcement, I heard it from people
at both companies.
Does it make a difference if it is a monopoly or a
duopoly? Probably not much if RNDC can regroup.
(If they get the Gallo spirits lines, they will probably be
better off than they were with those from Constellation.
If they do not, it will be a big loss. If RNDC do not get
Gallo, it could mean that they have to pay more attention
to other suppliers–both old and new.)
Everything at SGWS could limit choice if all of the brands
cannot get attention and some are dropped, but most of
those are mundane duplicates that would not be missed.
What you don’t mention is the number of imports now con-
trolled by Gallo–and to a lesser extent– Constellation.
With the exception of smart supermarket operators like HEB,
imports have gotten little attention in supermarkets anyway
outside of a few major brands, like Jadot, Guigal, and Mouton
Cadet–all from major importers and the same two wholesalers.
Kroger has a free-wheeling import program that works with
smaller wholesalers in Houston, but not in Dallas. Almost
everything at Albertson’s and Wal-Mart are from the top two
wholesalers.
As to retailers shivering in their boots about displeasing
SGWS, I have never seen that. Many spend a lot of their
time complaining about them and some make a real effort
to subvert them.
More interesting will be speculating on what might happen
if Gallo decamps to RNDC. Will SGWS have to go after
Wine Group, Bronco, and Delicato to rebuild their low end?
Will they decide to step back and concentrate on the higher-
priced Constellation portfolio and the newly0acquired Foley
book?
Will they make more money if they do not have to service every
Dollar General and Sav-A-Lot store?
We are in the imported wine business, so are not impacted as
much as some others might be, but watching what Gallo does
is never a waste of time.
(Disclaimer. We sell to other wholesalers, but are also a fairly-
contented SGWS supplier. We understand where we are in the
pecking order and wish we were higher up, but we are realists.)
No one should expect to buy quality wines in the same store they buy their laundry detergent. This is not the death knell for boutiques that you would portray here. This should bolster the better wine shops where they can actually engage the customer. And in those grocery stores where they sell laundry detergent? They are still ordering boutique as a pass through all the time.
It’s really never been about wine to Southern Glazers or RNDC anyway. It’s all about SPIRITS — the wine brands are secondary. So, those wine brands attached to a large portfolio will receive their small share of attention. The smaller independent wineries will continue to get less and less. This bodes poorly for the little guys – both wineries and retailers.
While on the surface this is BAD, the fact is that wine retailers are an independent bunch, most of whom hate Southern. The fact that many of them, the good ones anyway, have been able to stay afloat in the same city as Total and Costco says more about them than it does about Southern. Of course, the pandemic didn’t hurt either.
More importantly, there is NO help in most stores in navigating the huge wine selections. I taught wine classes for 30 years and one of the basic tenets I emphasized was to find a retailer you can trust who knows your palate and rely on them to guide you. You may pay a little more, but in the long run it’s cheaper than buying a wine you don’t know and throwing it down the drain. Assuming you do such things.