The Abysmal Selection Faced by American Wine Consumers

Posted by Tom Wark on Jan 8, 2013

For a few days now I’ve been staring at this study of “Concentration in the U.S. Wine Industry”. It has a spiffy graphic that I like. And I learned that three large wine companies with multiple brands account for 50% of all wine sales in the U.S. The point of the study comes down to the question the authors pose and attempt to answer: “What impact does this industry concentration have on consumer choices?”

The problem is the question is never answered in the paper. So let me answer it:

None.

The fact that three companies control 50% of sales in the U.S. has zero impact on consumer choice in the United States. In fact, the only factors that impact consumer choice of wine anywhere in the United States are 1) whether or not FedEx and UPS deliver to your address and 2) whether or not the state allows FedEx and UPS to deliver wine to your address.

Nothing else matters where consumer choice is concerned other than these two factors.

Here’s the thing, while I don’t know it for a fact, I’d be willing to bet that the U.S. wine marketplace is the most diverse in the world. In no other country are so many different wine products sold. And yet, the totality of that diversity is only available in the 14 states where it is legal for both out-of-state wineries and out-of-state wine retailers to ship.

In those states where no direct shipping is allowed (about 10) the choice of products is miserable compared with what it could be if direct shipping were allowed. In those states where only out-of-state wineries are allowed to ship (40), the only imported wines consumers have a choice of are the miniscule number the wholesalers in the state choose to put on the shelves. Only in those 14 states where out-of-state wineries out-of-state retailers may ship in is the total diversity of wines in this country available to consumers.

For the largest swath of wine drinkers in America, the wines that fill up the average supermarket shelves are diverse enough. There are more than enough wines at a variety of price points to satisfy this largest wine drinking contingent of low-price, uninterested wine imbibers. The thing is, the number of interested wine imbibers willing to pay a little more is growing. There may be enough for these folks based on what they find on grocery store shelves and in local liquor stores and wine shops. But increasingly, these folks want access to the full diversity of wines in America. And for the contingent of very interested, dedicated, core wine drinkers we know they want access to it all.

So, consumer choice comes down to the laws on direct shipping in a given state, not how concentrated sales are among a few companies.

A perfect example this is Maryland. Recently the Maryland Comptroller office released a study of direct shipping in that state since winery-to-consumer shipping, but not retailer to consumer shipping, was legalized. One of the ways they assessed the success of direct shipping was to look at how much access Marylanders had to wine now that wineries could ship.

To do this, the Maryland Comptroller looked at how many of the 2011 Wine Spectator 100 Top Wines were available to Marylanders. 55 of these Top 100 wines were imported wines and 11 of these 55 were carried by Maryland Wholesalers. 45 of the Top 100 wines were domestic wines, where 29 of them were carried by Maryland Wholesaler and another 13 of them were available from wineries that ship. The comptroller’s study shows that with out-of-state wineries now allowed to ship to Marylanders, still only 53 of the top 100 wines were available to Marylanders. Here’s the thing, if out-of-state retailers were allowed to ship to Marylanders, then 100% of the top 100 wines would be available to Marylanders.

The Maryland Comptroller’s office calls this a success and points to it as a real benefit to Maryland wine consumers. I call it an abysmal failure to provide Marylanders with real access to wine and real choice.