WILL CONSOLIDATION HURT THE WINE INDUSTRY?

Although the wine industry is still rather fragmented, it is moving closer and closer to a heavily consolidated environment. Wine Business Monthly reported that “the big three” – Constellation Brands, E & J Gallo, and the Wine Group – sold a combination of 171 million cases of wine last year, roughly 60% of U.S. wine sales. Jon Fredrickson of Woodside told W. Blake Gray at the San Francisco Chronicle, “There’s always been a big three, as long as I’ve been in the business. The difference now is the big players are creating big brands overseas.” Consolidation is bad news for small wineries because they have to haggle with the giants for distributors and retail and restaurant space. Wine lists at national food chains “are dominated by Beringer and Gallo. The very large guys have to maintain supply and volume to maintain their distribution channels,” said Barbara Insel, managing director of MKF Research LLC. Constellation’s marketing survey, Project Genome, found that 68% of wine-drinkers do not really care where their wine comes from and are categorized as either satisfied sippers, overwhelmed, or traditionalists. These people are more likely to stick with a wine they are comfortable with which will most likely fall under “the big three.”