The Thugs of the Wine Industry
Distributor consolidation in the wine industry —such as the latest between Republic-National and Breakthru — is beneficial to consumers who like their wine wet and with alcohol. This is the majority of wine made and sold. However, it comes at a price for those consumers who these two distributors care nothing about and generally despises: consumers who want a wine that is interesting, innovative, well-made, authentic or simply really good.
But consider this little economic innovation: today two wholesale wine companies control far more than 50% of the U.S. Market AND the producers who make the wine and the retailers that sell the wine are forced by law to use their services. Some call this a corrupt oligopoly. But it is more commonly called the Three Tier System.
Now consider the following two facts: 1) those folks who most vehemently defend the Three-Tier System are the wholesalers and lawmakers. 2) Wholesalers give hundreds of millions of dollars to the lawmakers that keep the three-tier system in place.
The vast majority of wineries in the United States are small, family-owned affairs. The vast majority of these wineries, knowing the commercial and legal power of the wholesalers will only serve to harm them, can choose to sell the majority of their wine direct to the consumer via tasting rooms and direct shipment. And they will. This, in turn, means that the great diversity of wines produced in the U.S. will not make it into wholesalers’ hands and, through them, into the hands of retailers and restaurants. This is exactly what the wholesalers want. They don’t particularly like producers selling directly to the consumer. But the few wines they have to handle, the better off the wholesalers are. Over the years, the wholesalers have learned that the less work they have to do, the fewer brands they have to serve, the easier their job.
So, yes. The recent merger of mega wholesalers is good for the vast majority of wine drinkers who merely require their wine be wet and alcoholic. And it’s better for producers of merely wet and alcoholic wine who prefer to work with fewer wholesalers in the states. And it’s better for wholesalers who prefer to work with fewer brands and still serve the majority of consumers.
However, make no mistake about it. The merger serves a corrupt purpose that is maintained and supported by lawmakers who have no problem supporting the thugs of the wine industry and they are happy to do it.