Wine and Distilled Alcoholic Beverages

Industry Snapshot

According to a 2009 D&B Sales & Marketing Solutions' report, this industry accounted for 5,766 establishments with $32.4 billion in sales. Wine distributors made up the largest segment of the industry, accounting for 3,388 businesses and almost $12 billion in revenues. Wine distributors had an average of nine employees and $3.7 million in revenues. On the other hand, firms that distributed both wine and distilled beverages, with total sales of $9.9 billion, numbered 812 establishments, averaged 20 employees and averaged $14.5 million in revenues. Liquor-only distributors totaled 1,309 with $8 billion in sales, an average number of 17 employees, and average annual sales of $6.8 billion. Bottling wines and liquors establishments averaged $1.4 billion in sales. While brandy and brandy spirits numbered only 18 establishments, they generated about $762 million in sales, averaging an industry high of $44.8 million in average annual revenues.

Like other sectors of the wholesale industry, the wholesale wine and distilled beverages business was very fragmented with a few large companies and many small firms. The majority of operations--3,518 distributors, or over 60 percent--were small scale, with four or less employees. There were 723 businesses that employed between five and nine workers. However, the larger distributors accounted for the majority of revenues. Firms with 100 or more employees totaled just 207 establishments but brought in over 60 percent of industry revenues.

Industry associations and trade groups included the Wine and Spirits Wholesalers of America (WSWA), and the World Association of Alcohol Beverage Industries. During the middle and late years of the first decade of the 2000s, the number of wineries increased and the number of wholesale distributors for smaller wineries became fewer and fewer as they consolidated with the larger wineries. An abundance of brands brought increased competition for wineries and distributors. There was an overall trend among small wineries to ship direct as the large distributors carried more brands and devoted less attention to selling individual brands. Wineries were also taking on more sales and marketing responsibilities as those traditional roles were also diminishing among distributors. Logistically, however, distributors continued their role as the second tier in the three-tier system of U.S. wine and alcoholic beverage distribution.

The top wholesaler in this category was Southern Wine & Spirits of America, Inc., in Miami, Florida, with an estimated $8.3 billion in 2007 sales. Charmer-Sunbelt Group, a private company located in New York City, was also a leader in this category. National Distributing Company, Inc., of Atlanta, Georgia, combined most of its operations with Republic Beverage in 2007 to form RNDC Texas, LLC (Republic National Distributing Company). Once a leader in the industry, in 2009 it maintained operations as National Distributing Company, Inc. in Georgia and New Mexico only. The resulting company, RNDC, emerged as one of the country's largest wholesale distributors, with reported revenues of $4.3 billion in 2007. Glazer's Wholesale Drug Company of Dallas, Texas, was another strong player in the field with 2007 estimated sales of $3.2 billion.

Trends in the wine industry show that despite the economic recession of the late years of the first decade of the 2000s, wine continued its upward swing in popularity in the United States. According to Nation's Restaurant News, a 2009 study conducted by the International Wine and Spirits Record suggested that the United States is likely to become the world" largest consumer of wine by 2012, usurping the longtime leader, Italy. The study predicts U.S. wine consumption will reach 313.9 million cases annually in that time. Nonetheless, the wine industry was not unaffected by the economic downturn as consumers spent less on eating out--and drinking--and stores replaced wine displays with lower cost products to entice budget-conscious customers into their stores. As reported by WinesandVines.com, only 44 percent of 45 respondents surveyed at the 2009 Vineyard Economics Seminar organized by the Wine Industry Symposium anticipated sales growth in 2009. This was the lowest positive survey response ever recorded, down from 78 percent in 2008. However, 95 percent of the survey participants expected the industry to rebound by 2011.

In the late years of the 2000s, wholesale distributors of wine continued a decade-long battle across the United States against wine retailers who were lobbying to change state regulations governing distribution. Primarily at issue was the ability of wine dealers to distribute their products to consumers directly across state lines, particularly based on direct-to-consumer Internet sales. In defense of wholesalers' necessary position in the supply chain, Wine and Spirits Wholesalers of America President Craig Wolf noted in 2009, "The sale of wine and spirits from the supplier directly to the retailer would significantly alter the economies of scale and the scope of the current safe and efficient distribution system. Costs would increase for all participants currently doing business in the three-tier system and consumers would suffer as a result of fewer product choices and less convenience."

For the most part, the courts were upholding the wine wholesalers' position, giving only slight ground to those arguing for direct marketing of wine and other alcoholic beverages. For example, in February 2008, a U.S. District Court in Arizona refused to uphold a plaintiff's claim as to the unconstitutionality of Arizona's state laws that require the face-to-face sale of wine and limit direct distribution of wine to certain classes of wineries (i.e., small wineries, which may only distribute in certain quantities). Similar cases were being heard in Indiana, Kentucky, and Massachusetts.