Issue link: http://winesandvines.uberflip.com/i/867389
September 2017 WINES&VINES 41 DISTRIBUTOR MARKET 2017 dreds of thousands retailers around the country, multiple times a week. Now if you're a retailer and you're trying to do that without the benefit of a wholesaler, it's impossible. If you're a sup- plier trying to get to a hundred thousand retail- ers without a wholesaler, it's impossible. What wholesalers do is create these tremen- dous efficiencies. Now, if you remove from whole- salers a large share of the business, that efficiency's lost. They're not going to be able to provide the same type of service for small and mid-sized wineries and stores that they are today. We basically spread out the cost across all sec- tors. Again, this is a larger picture issue, and as these retailers try to take their lines outside of the traditional system, the losers in the end are going to become the consumer and the small producer. Everybody then is going to be focused on what? The big product. That's where the money is. Wholesalers actually serve to protect the supplier now from the pressures of being owned by a retailer. Since we're not beholden to one supplier or one retailer, we actually benefit the consumer. It's a real quandary. We face this every day. The whole mantra of deregulation and direct shipping, whatever you want to call it, direct to retail, is, "Well, it's great for the consumer. It's removing the anachronistic three-tiered system." But, we do have the best system for alcohol distribution in the country. It's the safest, the most accountable, the best tax collection and the most consumer friendly. Q What advice do you have for smaller wineries looking for distribution? Wolf: We understand the need out there. We understand the desire. We're trying to fill that gap. By the way, almost every large wholesaler also has craft wine and craft spirits divisions. Craft divisions help them have dedicated staff people to identify those small wineries, those small craft distillers, that are going to be play- ers in the marketplace. A lot of small companies come to the WSWA convention, or they come to the wholesaler, and they want national distribution. They want the big guy. I don't encourage that. I think it's often wise to start small or regional and build support, build popularity. You start small, you start regionally. That's a strategy that some people don't get, that even if it's in a franchise state—and I know there's a fear among wineries, getting stuck in a franchise state (see page 44)—but if you can get a dedicated wholesaler to really like your product, just build your product, guess what's going to happen? You're going to get noticed. You're going to get more attention from everybody else over time. It takes time. You have to build. Remember our business is a relationship business. A certain strategic patience, if you will, is important. Q How is the growth of direct-to-consumer shipping affecting wholesalers? Wolf: You know—as well as everybody else, probably, in the industry—that we're not a big fan of direct shipping. People always say it's because we're going to be losing business. It's not about that. We get concerned about taxes, and concerned about local jobs. We're con- cerned about the gray market and the black market. You can't control processes that you can't regulate and see. Q On the regulatory front, why did the WSWA lobby for an increase in the Tax and Trade Bureau's budget? Wolf: The label-approval process for wineries has gotten better because we've actually pushed for additional funding for our regula- tors. A couple of years ago, from application to approval was taking up to half a year. Now it's closer to nine to 10 days. We're allowing more products to get to market faster. Q Are these the best of times for the wine business? Wolf: They're the best of times and the worst of times. We're Dickensian right now. The market- place is strong; the wholesalers are probably as technologically proficient as they've ever been. They're as responsive as they've ever been. Obviously the third and fourth generation are smarter, they know the local marketplace better than they ever have. In terms of helping retailers and suppliers figure out which prod- ucts should go where, they're better than they've ever been. It is also the worst time in that the challenges to the system that has brought us to this point are growing exponentially across the board. The challenges used to be a one off here and there. Direct shipping? Some wineries were that small exception. They just wanted to be able to ship a small percentage here and there. Now we're seeing all-out attacks on the system coming from the breweries, and they're coming now from the Distilled Spirits Council. We're seeing it from distilleries who want to maybe go direct themselves, and we're seeing it from the retailers who want to change the entire market dynamic. It is, across the board, litigation. A new wave of litigation is hitting the courts. People are very shortsighted, in my opinion, in not understanding that what they're doing will, in the long term, harm their own self in- terest. People think they know the answer, but we'll be there to defend a strong system. MAJOR U.S. WINE DISTRIBUTORS States Served Offices Includes Southern Glazer's 36 128 Odom Republic National Distributing (RNDC) 21 42 Breakthru Beverage 15 37 Charmer, Wirtz, Empire Merchants Young's Market Co. 11 54 Columbia, Hayden Beverage, Wilson Daniels Johnson Brothers 22 30 Winebow Group 20 20 Country Vintner, Stacole, Martin Scott, Henry All others 1,131 Total US Distributors 1,161 Source: Wines Vines Analytics. U.S. WINE DISTRIBUTOR COUNTS State Unique Distributors California 145 New York 86 Illinois 65 Florida 48 Virginia 44 Oregon 39 Washington 39 Colorado 37 Michigan 35 Texas 34 Massachusetts 34 Ohio 33 Maryland 32 All others 490 Total US Distributors 1,161 Source: Wines Vines Analytics.