Issue link: http://winesandvines.uberflip.com/i/591609
November 2015 WINES&VINES 109 PRACTICAL WINERY & VINEYARD BUSINESS erate their organizations and how they train their people. At the distributor level, we partner inten- tionally with the same distributor in every state. For us, if they continue to consoli- date and bring on more markets, that is a good thing, since we are intentionally and strategically aligned with them." " Even for companies that do our volume, we are being forced by distributors to pick our priorities. You just can't have multiple brands anymore. On the retail side you are seeing stores consolidating, but the chain calls are decentralizing. The decentralization of chain-buying as an experiment is over for most people, now replaced by regional buying." " We are affected by it. I have some con- cern—not so much about consolidation at the distributor level, but about consolidation at the retail level. I am concerned about the disappearance of the independent retailer. The chains are a more difficult place to build a luxury wine brand. We do not sell much in chains, and with the independent retailers going away, what do they leave? That is my concern. Is my only point of distribution going to be DtC? Or will I have to do some limited distribution to chains? Which ones? How do I judiciously select the chains that can help me build a luxury brand?" " Gallo and Constellation are not only the most important supplier to the wholesaler, but they have become very important cat- egory captains. Their power just makes it difficult for anybody smaller than that with- out 60 salespeople in the field to penetrate." " It is a very strange thing. You would almost question whether (retailers handing over category control to the big wineries) is legal, because you are not supposed to give any- thing to a retailer. Yet, you go to Kroger or Wal-Mart, the big suppliers probably have 10 to 20 people helping set. It is a way for a retailer to enhance margins by having someone else do all the work, but it has been out of control. At some point, some- body—and a smart group of wineries—are going to get together and ask, 'Wait a min- ute, is this really fair?'" " It has not affected us negatively. In some ways there are some benefits to it when you are a large producer who has some lever- age. Most distributors look at the priority brands that pay the rent. That is not neces- sarily a challenge for us. But when you look at most distributors, the number of brands they have continues to increase, and the number of suppliers continues to increase." " There is development of a new tier of dis- tributors: the small/mid-tier distributors who will merge over time. I do see a continued consolidation at the top, but I also see a very grassroots, small, micro-retail whole- saling specialty distribution/retail sector opening up at the same time. This generation is willing to pay a pre- mium for food and spirits. At these price points, you do not have to do a lot of vol- ume to be sustainable. The same thing with these mid-retailers. They work on sometimes 50% margins and do not need the volume. I see consolidation continuing to get bigger, but I do see this niche thing growing." PARTICIPANTS IN 2015 CEO SURVEY Name Title Company Type of Business Annual Production (cases) Average Bottle Price Joe Gallo CEO E. & J. Gallo Winery Winery 73 million $6 Brian Vos CEO The Wine Group Winery 57 million $5 Jay Wright President, Wine & Spirits Division Constellation Brands Winery 54 million $8 Bob Torkelson President and COO Trinchero Family Estates Winery 21 million $7 Chris Indelicato Owner and president Delicato Family Vineyards Winery 9.5 million $10 Ted Baseler President and CEO Ste. Michelle Wine Estates Winery 7.4 million $20 Rick Tigner President Kendall-Jackson Winery 5.7 million $12 Ryan Bogle Vice president Bogle Vineyards Winery 2.1 million $11 Jeff O'Neill Owner O'Neill Vintners & Distillers Winery 1.9 million $28 Steven Spadarotto Co-CEO Francis Ford Coppola Winery Winery 1.2 million $18 Carolyn Wente CEO Wente Vineyards Winery 758,000 $17 Timothy Persson CEO and managing director The Hess Collection Winery 750,000 $30 Matt Wood Estate director Domaine Chandon Winery 450,000 $30 Alex Ryan President Duckhorn Wine Co. Winery 277,000 $24 Bruce Cakebread President and COO Cakebread Cellars Winery 150,000 $40 Emma Swain CEO St. Supéry Vineyards & Winery Winery 120,000 $47 Bill Leigon President Jamieson Ranch Vineyards Winery 80,000 $40 Larry Maguire President and CEO Far Niente Winery 52,000 $65 Mark Couchman CEO and chief investment officer Silverado Winegrowers and Premium Properties Vineyards / investment funds >10,000 acres Charles Merinoff Chairman and COO Charmer Sunbelt Distributor Bob DeRoose President and CEO Kobrand Fine Wine & Spirits Distributor Mel Dick Senior vice president Southern Wine & Spirits Distributor Bill Deutsch Chairman and founder W.J. Deutsch & Sons Ltd. Distributor John Ciatti Partner Ciatti Global Wine & Grape Brokers Brokerage Source for case production and bottle price: Wines Vines Analytics SUMMARY Concerns continue about the ongoing power shift toward the re- tailer as a result of chain consolidation. As a result, producers are finding fewer options to reach the shelves with all of their brands. This market makes it difficult for some wineries to build brands with the enhanced priorities placed on big suppliers and through their roles as category captains. DtC's effect on mid-size to large wineries is limited but presents a growing opportu- nity for small producers to expand their brands. Consolidation and DtC sales