Between the Lines: “It’s ‘Best of Times’ To Be in the Industry Says WSWA Chief”

Distributor Consolidation Harms Producers

A few months back, Leslie Gevirtz of Wine Enthusiast interviewed Craig Wolf, president of the Wine & Spirits Wholesalers of America.¹ Wolf strikes an upbeat tone, and Wine Enthusiast largely maintains that confident tenor. A closer reading, however, provides evidence that Wolf has reason to celebrate . . . at the expense of the consumer. “Let the good times roll” for the large and expanding mega distributors.

Wolf begins, “Our numbers have actually risen . . . People always see all these mergers at the higher level, but what they don’t see are all the small guys coming in to fill gaps….So, the number of wholesalers that are active across the country has increased.” The September 2017 edition of Wines & Vines states the following, “According to winery and distributor sources, in 1995 the United States had about 1,800 wineries and 3,000 distributors. Today, there were more than 9,200 wineries and nearly 1,200 distributors.²” A five fold increase in wineries, and a 60% reduction in distributors. At best, Wolf is intentionally focusing on a small window of time to bolster his (inaccurate) point. At worst, this is Trumpian era disinformation—smoke and mirrors.

Distributor Consolidation

Wolf goes on to say that, despite the recent consolidation trends, “(I)t hasn’t affected the consumer because the number of SKUs has only grown over that period of time.” If we can trust that the number of SKUs (individual wines on shelves) has increased, we must ask whether the quantity also brings us quality. As the article posits, the number of “private labels” has increased recently. Large to mid-sized retailers contract wineries to produce private labels so they can offer exclusive products with conveniently opaque pricing, which allows for dramatic markups and profit margins. The wines within the bottles? Too often mediocre at best, an unavoidable reality when asking large wineries or custom crush facilities to make a wine that tastes like plum juice concentrate or cherry jam with Hi-C for $2.40 per bottle.

With the number of wineries today, the demand for distribution is great. Many of these producers craft authentic and intriguing wines. As wineries boom, distributors serve as gatekeepers, deciding which wineries and wines deserve to come to your market. Somebody must certainly filter what sits on the shelves and restaurant lists. However, when consolidated mega distributors, well known for using corrupt practices to buy shelf space and restaurant lists³, serve as the gatekeepers, we have reason to be concerned.

The WSWA serves as a mouthpiece for the large distributors, while offering small benefits to mid-sized members. The association exists to solidify the dominance of the middle tier in our three tier system. I, for one, hope we can give more power to consumers. The WSWA certainly doesn’t have this interest at heart.

More on Big Box Retail and Distribution

• The Sandbox
• Repackaged, Repriced: Trickster Branding in the 21st Century
• The Tiers produce Tears: Tear it Down

¹http://www.winemag.com/2017/05/10/its-best-of-times-to-be-in-the-industry-says-wswa-chief/

² https://www.winesandvines.com/features/article/189049/The-Challenge-of-Distributor-Consolidation

³ Previous article about distributor corruption: https://wagonwine.com/2016/12/05/the-sandbox/