Consolidation Making or Breaking the Industry?
Consolidation in the industry has been rampant in recent years as retailers, wholesalers and suppliers rush to gain scale in order to stay competitive. But how is this affecting your business? In our annual Truth Squad survey, readers gave us a wide range of opinions on the issue, everywhere from “no affect at all” to “too few suppliers” to “the end of small business as we know it.” Almost everyone hopes consolidation will drive down prices, but some respondents think it is unlikely to happen. People also believe consolidation will result in small brands being left behind. However, the one thing readers could agree on is that consolidation is only going to become more prevalent. Here’s what they had to say:
“More money pooled by the larger corps will result in better competition between the big players, hopefully driving prices down. However, this is to the detriment of the small/unique wineries and distillers.”
“Gaining distributor share of mind will be increasingly difficult for all but the largest suppliers. Independent retailers and restaurants are going to feel even more squeezed on margin by the chain and big-box stores' aggressive promotions of national brands.”
“This kind of supply/surplus power can drive the boutique wineries' volume and/or pricing down to stay competitive.”
“Makes it more inviting to smaller innovators willing to focus resources on the distributor network and directly at the point of purchase, especially on-premise.”
“I think as consolidation continues more states will see two dominate wholesalers and the opportunity for smaller specialty wholesalers will grow.”
“I think with pending consolidation, companies will get leaner and meaner, and really up the competition.”
“Suppliers will continue to move from distributor to distributor. With shrinking sales, distributors will have to leverage important relationships with suppliers and customers. Competitors will have opportunities to snatch brands that are not focused on. In the end, those with the best strategy, relationships and execution will win.”
Its the Wal-Martization of the wine industry. A lot of mediocre products under one roof that will appease the masses. For me it opens up the boutique/independent market a bit because those types of accounts won't touch the tainted brands of the conglomerate. Unfortunately that still leaves me with a relatively small slice of the pie.
“Consolidation and corporatization of the wine business has been, in balance, a bad thing. Good brands get bought, production is quadrupled, quality drops. Wines taste more the same. Wine identities become fictions manufactured by corporate marketers. As for my small business, the corporate mindset hinders creative winemaking and common-sense marketing, so there's less of interest to report on as a magazine, and less support from the industry.”
“By gentrifying the market place....does Blackstone/Gallo Gamily Vineyards/Twin Finn/Red Truck really taste much different? Full of sugar and manufactured beyond varietal accuracy.”
“I think we are going to see a lot more small wholesalers popping up. The bigger wholesalers can not take care of the small boutique wineries and the mid size companies.”
“It just means there will be less support available to wholesalers and retailers as these companies try to streamline their business, getting more productivity from current staff that is already struggling to manage the current portfolios.”
“Consumers will be turned off by big brands and move toward niche offerings.”
“The wine market is still extremely fragmented and consumers are not particularly brand-loyal, meaning there's very little impact on consumers.”
SOFTNESS IN WINE, STRENGTH IN SPIRITS
Wine and beer was reportedly soft in the latest four weeks, according to Morgan Stanley’s Bill Pecoriello, while spirits volumes were up. Based on IRI data, domestic beer and wine drove softness for the alcohol industry, which saw volumes fall -0.1% compared to 1.2% growth a year ago. In the latest 4 weeks, domestic beer volumes declined -0.6%, wine volumes declined -0.3%, imported beer volumes advanced 0.6% and spirits volumes were up 1.7%. The average price per case for spirits increased 1.6%.
Beer and wine lost volume share. In the latest 4 weeks, beer lost 20bps of volume share and wine lost 10bps of share while spirits share of total alcohol was up 30bps. On a dollar basis, share was flat for all segments.
Despite softness, high-end wines continue to drive growth within the segment priced $7 and above growing and wines below $7 declining. Major wineries continue to struggle to maintain their position. On a volume basis, Gallo and The Wine Group managed to drive share gains while none of the majors managed to drive share gains on a dollar basis.
Foster's price increase was captured in the latest data. Foster's volumes declined 8.1%, share declined 60bps as average price per volume increased 3.8%, ahead of the flat pricing in 2007. Constellation's volume and dollar share did marginally better than what was seen in 2007. In the latest 4 weeks, STZ lost 100bps of volume share and 50bps of dollar share.
WSD BRIEFS:
SOBIESKI VODKA has signed a multi-year marketing agreement with Madison Square Garden and Radio City Music Hall, effective March 1.
NEW HAMPSHIRE AUTHORITIES FINED FEDEX EXPRESS $5,000 after a driver left a wine delivery at a residence without getting the signature of a recipient over the age of 21.
FORTUNE CHAIRMAN NORMAN WESLEY received $3.1 million in 2007, when he also served as ceo. Norman was replaced by Bruce A. Carbonari as president and ceo on Jan.1, 2008.
Apart from his 2007 compensation, Wesley realized about $12.4 million from exercising stock options and $2.5 million from vesting stock awards, according to the AP.
Carbonari's compensation package for 2007 included a salary of $865,000 and performance related bonus of $1.1 million. He also received about $625,000 in other compensation and stock and option awards that were valued at about $2.1 million on the days they were granted.
In addition, Carbonari realized $442,000 from vesting stock awards during the year.
EDRINGTON GROUP ACQUIRED A MAJORITY STAKE in the Dominican Republic’s Brugal Co. for £200 million ($392m).
JESS JACKSON FELL 121 SPOTS ON FORBES’ annual list of the world's richest people, according to the Press Democrat. Forbes estimated Jess is worth about $2.2 billion, but he sank to number 553 on the list, down from No. 432 a year ago. His estimated worth has not changed since then.
Until Monday, Megan
“I am always doing that which I can not do, in order that I may learn how to do it.”
Pablo Picasso
--------- Sell Day Calendar ----------
Today's Sell Day: 5
Sell days this month: 21
Sell days this month last year: 22
This month ends on a: Mon.
This month last year ended on a: Fri.
YTD sell days Over/Under: +1
“More money pooled by the larger corps will result in better competition between the big players, hopefully driving prices down. However, this is to the detriment of the small/unique wineries and distillers.”
“Gaining distributor share of mind will be increasingly difficult for all but the largest suppliers. Independent retailers and restaurants are going to feel even more squeezed on margin by the chain and big-box stores' aggressive promotions of national brands.”
“This kind of supply/surplus power can drive the boutique wineries' volume and/or pricing down to stay competitive.”
“Makes it more inviting to smaller innovators willing to focus resources on the distributor network and directly at the point of purchase, especially on-premise.”
“I think as consolidation continues more states will see two dominate wholesalers and the opportunity for smaller specialty wholesalers will grow.”
“I think with pending consolidation, companies will get leaner and meaner, and really up the competition.”
“Suppliers will continue to move from distributor to distributor. With shrinking sales, distributors will have to leverage important relationships with suppliers and customers. Competitors will have opportunities to snatch brands that are not focused on. In the end, those with the best strategy, relationships and execution will win.”
Its the Wal-Martization of the wine industry. A lot of mediocre products under one roof that will appease the masses. For me it opens up the boutique/independent market a bit because those types of accounts won't touch the tainted brands of the conglomerate. Unfortunately that still leaves me with a relatively small slice of the pie.
“Consolidation and corporatization of the wine business has been, in balance, a bad thing. Good brands get bought, production is quadrupled, quality drops. Wines taste more the same. Wine identities become fictions manufactured by corporate marketers. As for my small business, the corporate mindset hinders creative winemaking and common-sense marketing, so there's less of interest to report on as a magazine, and less support from the industry.”
“By gentrifying the market place....does Blackstone/Gallo Gamily Vineyards/Twin Finn/Red Truck really taste much different? Full of sugar and manufactured beyond varietal accuracy.”
“I think we are going to see a lot more small wholesalers popping up. The bigger wholesalers can not take care of the small boutique wineries and the mid size companies.”
“It just means there will be less support available to wholesalers and retailers as these companies try to streamline their business, getting more productivity from current staff that is already struggling to manage the current portfolios.”
“Consumers will be turned off by big brands and move toward niche offerings.”
“The wine market is still extremely fragmented and consumers are not particularly brand-loyal, meaning there's very little impact on consumers.”
SOFTNESS IN WINE, STRENGTH IN SPIRITS
Wine and beer was reportedly soft in the latest four weeks, according to Morgan Stanley’s Bill Pecoriello, while spirits volumes were up. Based on IRI data, domestic beer and wine drove softness for the alcohol industry, which saw volumes fall -0.1% compared to 1.2% growth a year ago. In the latest 4 weeks, domestic beer volumes declined -0.6%, wine volumes declined -0.3%, imported beer volumes advanced 0.6% and spirits volumes were up 1.7%. The average price per case for spirits increased 1.6%.
Beer and wine lost volume share. In the latest 4 weeks, beer lost 20bps of volume share and wine lost 10bps of share while spirits share of total alcohol was up 30bps. On a dollar basis, share was flat for all segments.
Despite softness, high-end wines continue to drive growth within the segment priced $7 and above growing and wines below $7 declining. Major wineries continue to struggle to maintain their position. On a volume basis, Gallo and The Wine Group managed to drive share gains while none of the majors managed to drive share gains on a dollar basis.
Foster's price increase was captured in the latest data. Foster's volumes declined 8.1%, share declined 60bps as average price per volume increased 3.8%, ahead of the flat pricing in 2007. Constellation's volume and dollar share did marginally better than what was seen in 2007. In the latest 4 weeks, STZ lost 100bps of volume share and 50bps of dollar share.
WSD BRIEFS:
SOBIESKI VODKA has signed a multi-year marketing agreement with Madison Square Garden and Radio City Music Hall, effective March 1.
NEW HAMPSHIRE AUTHORITIES FINED FEDEX EXPRESS $5,000 after a driver left a wine delivery at a residence without getting the signature of a recipient over the age of 21.
FORTUNE CHAIRMAN NORMAN WESLEY received $3.1 million in 2007, when he also served as ceo. Norman was replaced by Bruce A. Carbonari as president and ceo on Jan.1, 2008.
Apart from his 2007 compensation, Wesley realized about $12.4 million from exercising stock options and $2.5 million from vesting stock awards, according to the AP.
Carbonari's compensation package for 2007 included a salary of $865,000 and performance related bonus of $1.1 million. He also received about $625,000 in other compensation and stock and option awards that were valued at about $2.1 million on the days they were granted.
In addition, Carbonari realized $442,000 from vesting stock awards during the year.
EDRINGTON GROUP ACQUIRED A MAJORITY STAKE in the Dominican Republic’s Brugal Co. for £200 million ($392m).
JESS JACKSON FELL 121 SPOTS ON FORBES’ annual list of the world's richest people, according to the Press Democrat. Forbes estimated Jess is worth about $2.2 billion, but he sank to number 553 on the list, down from No. 432 a year ago. His estimated worth has not changed since then.
Until Monday, Megan
“I am always doing that which I can not do, in order that I may learn how to do it.”
Pablo Picasso
--------- Sell Day Calendar ----------
Today's Sell Day: 5
Sell days this month: 21
Sell days this month last year: 22
This month ends on a: Mon.
This month last year ended on a: Fri.
YTD sell days Over/Under: +1
posted at 11:28 AM
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