Wine... An Industry With A Lot of Participants and Very Few Players

Did you know there are over 8,000 wineries in the United States? If on average those wineries have two brands each, that’s 16,000 brands available in the market in one form or another. On the surface, that looks like the definition of a fragmented market. Compare it against the car industry: domestically we have three car companies. Throw in Tesla and you have four. There might be 100 models to choose from. Pretty different business models.

Well, maybe. Certainly you don’t have small boutique car companies like you do wineries, but if you pull the layers back on the wine industry you might be surprised to learn the following: 

There are about 10 companies in the United States that own the brands that represent over 80% of the domestic wine sold in the here. By any definition, that is heavy concentration of ownership (I am going to guess more industries are like this. I just happen to know wine). Even more stunning, three of those companies represent over 60%! When you are looking at all the brands on a store shelf, more often than not you are buying a product that has been made by one of these companies. 

Still from "They Live". Photo courtesy of Universal Studios.

Still from "They Live". Photo courtesy of Universal Studios.

Knowing this fact has changed the way I look at the wine assortment in stores. When I look at the shelf, I don’t see individual products - I see companies. It’s like that horrible Sci-Fi movie, “They Live” starring Rowdy Roddy Piper (God rest his soul). He played a guy that could see aliens in human bodies with special sunglasses. I don’t have sunglasses, just a lot of time studying the companies.  

This is no big secret or revelation about our industry. Nor is it a bad thing. However, it does always amuse me that people outside the industry are surprised to learn that some of their favorite brands are actually owned by these “wine conglomerates.” Sometimes people ask me about a certain brand that they like and I will ask them if they know company x actually owns that brand. They are shocked most of the time and I give them a little information on the company. Take this recent encounter for example:

At one of my son’s weddings this year I had a lovely conversation with my daughter-in-law’s aunt. The conversation with people I meet for the first time usually turns to wine, as did this one. Aunt J frequently traveled to New Zealand. She told me she loved Kim Crawford sauvignon blanc from New Zealand. I told her I was familiar with the brand and that it was owned by one of the largest wine companies in the world. She seemed deflated and I felt horrible. I assured her it didn’t matter who owned the brand. If she likes the wine, she likes the wine. I gave her a peek through the sunglasses without any preparation. My mistake. I’m not sure she will look at a shelf of wine at a store the same again. Anything that makes people doubt their wine selections is a bad thing. I want people to be comfortable with their choices, not be dependent on others’ opinions. That’s how we will build a wine culture in the US.

Image source: Huffington Post

Image source: Huffington Post

There are some business and market realities that result from so much controlled by so few. It is very difficult for smaller wine companies to get the attention from distributors to build brands on a national level. It is daunting to try to compete with the big guys. It is frustrating to have a product that is priced more competitively and provides a better quality to price ratio than a big guy that can’t get traction because the big guy’s demands must be met first. Many wine companies simply give up on building a national distribution network because they can’t get a distributor interested in carrying or building their brands. Most of these are the small guys. The irony is that probably represents 99% of the 8,000 wineries I mentioned above. These small guys gravitate towards tasting room and wine club sales. That provides most of the “romance” that people associate with wine. You probably won’t find those wines you discovered in a wine region in your favorite wine store for that reason.

The fact that the “wine conglomerates” (I like to call them the Wine Industrial Complex) control so much, doesn’t mean it is hopeless. A company like mine, Wine Hooligans can and does compete everyday against these guys. There are ways to successfully compete with them (I could tell you, but then I would have more competition) in selling wine on a national scope. It’s not easy and it certainly has its frustrations, but it is possible.

Do I wish it were different?  Sure I do... However, I would like to have been able to dunk a basketball, but that wasn’t going to happen at 17 and it sure isn’t going to happen at 57. Point being, you have to assess your situation and see what you can do as opposed to all the things you can’t do.

Michael Corleone and Hyman Roth in "The Godfather II". Photo courtesy of Paramount Pictures.

Michael Corleone and Hyman Roth in "The Godfather II". Photo courtesy of Paramount Pictures.

When I get really frustrated with some of the quirks of the wine industry, I refer to a quote from my favorite movie of all time, Godfather II.  Hyman Roth is explaining to Michael Corleone about why he didn’t get mad when Michael had his protégé Mo Green murdered...“This is the business we've chosen; I didn't ask who gave the order, because it had nothing to do with business!”     

I never ask why the wine business is structured the way it is, because it has nothing to do with making our brands work! I don’t want to end up like Mo Green!

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By Dennis Carroll, CEO of Wine Hooligans



This blog post was written by Dennis Carroll in his personal capacity. The opinions expressed in this article are the author's own and do not reflect the view of Charles Communications Associates.

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