Innovation stems from necessity. If the need for an alternative distribution channel was not previously evident, recent moves in the wine industry should make it so.
For decades, E&J Gallo was the world’s largest wine producer pumping out an estimated 75 million cases under more than 40 labels; Constellation Brands Inc. now holds this title. The recent acquisition of many big hitters including Geyser Peak and Clos du Bois, push the industry giant to a production level of over 110 million cases a year.
Throwing out some more numbers, in 2006 California’s top 10 wine producing companies introduced 41 new brands. Because of the sales clout these companies’ poses; shelf placement was achieved more often than not. A staggering 100,000 line items are now available to the U.S. wine consumer.
Consolidation of wine companies pair well with the shrinking number of wholesalers, as big distributors prefer big suppliers. From a small winery prospective, this means less access to large markets.
Many of the IBG partners I speak with have trouble claiming a spot in the distributors “book” as small producers are an irritant. If they do get a spot, the movement is often minimal as their vinification efforts age past perfection. In all fairness the mega distributors are willing to represent smaller wineries, although there is only some much time a rep can spend with an account and many of California’s 2,400 wineries are left in the cold searching for a solution to this quagmire.
Although the wine market’s competitive, it is growing, and there are plenty of pallets to please. One solution is the Direct-to-Trade channel. Does opening up this channel mean that smaller wineries will sell out vintage after vintage? It could, but along with producing quality wine they are also going to have to market and sell themselves. The competition is fierce but an alternative channel is now open. The power rests with the wineries once again.