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Distributors Change Winery Landscape

February 2016
by Paul Franson
wine distributor merger
Washington, D.C.—A merger involving two of the four largest wine and spirits distributors in the United States could make things easier for big wine companies but even tougher for small wineries and those trying to break into the market.

The Federal Trade Commission announced Jan. 4 that it had no objections to the merger of Southern Wine & Spirits and Glazer’s Inc., after the pair revealed plans to join and create a wholesale network serving 41 U.S. states, Washington, D.C., Canada and the Caribbean.

According to the Impact Newsletter from M. Shanken Communications, Southern Wine & Spirits posted $11.8 billion in sales last year while Glazer’s tallied $3.7 billion.

The combined annual sales was $15.5 billion, and the merged company also just signed a deal with Bacardi that will bring in $1 billion more.

The new company, Southern Glazer’s Wine & Spirits LLC, will have 20,000 employees (including 12,000 sales reps) and will sell more than 150 million cases of wine and spirits annually, serving more than 350,000 retailers and restaurants.

Southern chairman Harvey Chaplin will become the chairman of Southern Glazer’s Wine and Spirits, while Glazer’s chairman Bennett Glazer will be executive vice chairman of the new entity.

Wayne Chaplin, Southern’s president and chief executive officer, will be CEO of Southern Glazer’s, while Glazer’s CEO Shelly Stein will serve as the president of Southern Glazer’s.

The combined Glazer’s company will have nearly a 30% share of the $53 billion U.S. wine and spirits market in dollar terms.

Glazer’s and the three other largest distributors, Wirtz Charmer (which also recently merged), Republic and Young’s Market (the leader in California) will share more than 60% of the total market.

The impact of the move could impact many wine companies, but a number of representatives who were asked declined to comment on the merger. In general, larger and established wine companies could likely benefit from less paperwork and better coordination and logistics.

Trinchero Family Estates, owner of Sutter Home, Ménage à Trois and many other big brands, is one that sees the move as positive. “Over the years, the Trinchero family has built and sustained a healthy relationship with both Southern Wine & Spirits and Glazer’s,” said Roger Trinchero, CEO and chairman. “We believe a broader national footprint will positively impact our brands and satisfy the needs of suppliers and our customers. We congratulate them on this new merger and wish them every success.”

It’s another matter for smaller wineries and those trying to find or build distribution.

The Napa Valley Vintners, whose 500-plus members are mostly family-owned small or medium-size wineries, acknowledged possible negatives. “We regularly hear from our members that consolidation has made it increasingly difficult for small brands to get distribution and attention from wholesalers,” said Patsy McGaughy, spokesperson for the group.

As distributors focus on their bigger accounts, many wineries are attempting to increase direct sales to consumers—both by attracting more visitors (the largest source of direct sales) and by building Internet, mail-order and club sales.

While smaller wineries in areas like Napa and Sonoma, Calif., say that attracting more visitors is one of their only viable alternatives as distributors consolidate and focus on their biggest accounts, neighbors are concerned about the push to a DtC model.

Other wineries may turn to specialty distributors, brokers and marketing firms to both provide distribution and promote their products within retail channels. In today’s environment of almost instant shipping, distributors may not be as important in delivering wine to stores and restaurants, but they do provide vital sales efforts, local oversight and revenue collection.

Some wineries will try direct sales to the trade where it’s allowed. That’s legal in California, but few other states. 

“With nearly 80% of Napa Valley Vintners members making 10,000 cases or fewer annually, we expect direct to consumer and direct to trade to remain important alternative channels and see our role as an information resource,” McGaughy said, adding, “In fact, we just announced a member workshop on the topic of navigating the world of selling wine to trade.”

In California, a number of wine producers even own distribution companies, including Bronco (Classic Wines of California), Jackson Family (Majestic Fine Wines) and Foley (Epic Wines).

The Southern-Glazer’s merger could benefit retailers both on- and off-premise by reducing the number of suppliers they have to deal with. The biggest retailer of them all, Costco, could especially benefit. “Southern and Glazer’s are good partners with Costco,” said Annette Alvarez-Peters, assistant general merchandise manager for beverage alcohol at Costco Wholesale headquarters in Issaquah, Wash. “I would suspect with the merger, we will be able to gain synergies between all parties on the planning of our mutual businesses.”

It should be noted, however, that many large retailers including Costco have attempted to change state laws to allow them to buy directly from wineries.

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