Total Wine Tells All

Alcohol retailer plans to have 200 stores by 2018

by Paul Franson
wine financial retail sales total more
Total Wine & More started in Pennsylvania but is rapidly expanding west.
Napa, Calif.—Attendees got a detailed look at fast-growing wine retailer Total Wine & More from co-founder and co-owner Robert Trone during the Wine Industry Financial Symposium held in Napa on Sept. 27.

While Total Wine started in the east, it has become a big player in the U.S. wine market and is now moving aggressively into California. The corporation recently opened a store in Fremont, in the South (San Francisco) Bay, will open in Pleasant Hill in the East Bay this month and plans four more in the Bay Area (but not San Francisco) next year.

The chain has 149 stores including 28 storefronts in Florida, and California already ties Virginia with 17 each. It has 12 stores in Washington, Texas and North Carolina as well as 10 in Arizona. The retailer is not active in New York or Illinois (two of the biggest wine markets) nor in Pennsylvania, where ironically it began.

Trone said the fast-growing chain had 69 stores in 2010, and he estimates it will have 175 in 2017 and 200 by 2018.

Sales have risen from $896 million in 2010 to $2.38 billion estimated for this year, $2.75 billion in 2017 and $3.1 billion by 2018, according to Trone.

Though Total Wine also sells spirits and beer, 47% of its revenue is from wine, with 5,000 to 8,000 items. Spirits account for 32% of sales with 3,000 items, and beer 17% with 2,500 items.

The retailer arranges its wines by variety (or type), so Cabernets from all over the world are shelved together, though Bordeaux are elsewhere, even if they contain Cabernet.

It also doesn’t conduct sales but pledges everyday low prices.

Trone went on to explain that the average bottle price was $14, with the highest market share for super premiums, small producers and imported wines. It books 50 million transactions per year from between 6 million and 8 million different customers. According to the company’s market research, many of its regular buyers have household incomes of more than $120,000, are interested in wine and report higher than average wine consumption.

The company employs 3,500 workers, and they receive a three-week training, monthly seminars, educational trips and provide concierge sales.

Total Wine provides a very large selection at all price points but maintains a high-end focus. Its stock differs in different markets and different stores to meet local tastes and conditions. It offers low prices on items that are in wide distribution and is competitive with Costco and other low-margin retailers.

Looking to improve convenience for customers, Total Wine intends to open more stores of various sizes and offer in-store pick-up, shipping and delivery.

Major trends in wine retailing

After profiling his chain, Trone discussed major trends affecting the business.

One is increased enforcement of regulations that prohibit promotional business practices used in other types of retail business, including any form of shelf/display payments, advertising payments, promotional funding and exclusive in-store rebates.

The retail environment is also consolidating. Trone said the top 15 retail chains represent almost half of the market and continue to increase their share.

wine financial retail sales total more
Total Wine & More is the fifth largest off-premise wine seller in the United States, according to co-founder Robert Trone. These figures account for approximately 40% of all retail wine sales.
Retail margins are shrinking due to competition from Costco and Total Wine & More, supermarkets and drug stores and more retailers selling wine. Shipping and delivery from Amazon has not yet become a big factor in the business, but it could.

This is forcing retailers to concentrate on what Trone called focus brands.

Meanwhile, customers are receptive to new brands that meet their criteria of taste profile, emotional connection and favorable price/value ratio. This includes newer high-volume national brands like Apothic, Cupcake, Carnivor and La Marca, as well as store brands from Costco (Kirkland), Trader Joe’s, and Whole Foods (365) as well as limited-distribution brands.

Trone said that retailers are working closely with wholesalers and suppliers to find and develop brands that provide better value to consumers and better margins for the retailers. What makes an item/brand more appealing to retailers? Competitive advantage-quantity discounts, limited distribution or exclusivity, higher margins or increased consumer satisfaction.

He also sees the roles of wholesalers changing. The traditional model consisted of large wholesalers who serve all accounts with massive numbers of items. They need a large margin on small brands.

He sees a need for small wholesalers who serve limited number of accounts, carry a limited selection and can work on lower margins. They may not even need to carry inventory.

Trone told wineries that they can help build brands by training staff, providing displays in the store, sharing data and reducing cost in the supply chain.

Finally, Trone noted some trends in wine styles, not all likely welcomed by typical Napa or Sonoma wineries:

• Fruit-forward and slightly sweet

• Rosé: He questioned why more California wineries haven’t jumped on this trend, leaving the market mostly to southern France

• Sparkling and semi-sparkling

• California wines: Good news since the East Coast has been so import-oriented. “California wines are easier to explain,” he said.

He also said that wines selling for more than $200 per bottle never came back after the recession.

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