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mixed case: opinion and advice

How Big Business Is the Wine Business?

A study says three firms account for 51.5 percent of U.S. wine sales, but the diversity of wine depends mostly on where you shop
Photo by: Mark Weinberg

Posted: Jan 8, 2013 2:00pm ET

By Mitch Frank

I took my son to get a haircut Saturday, and as the salon owner was trimming his bangs, we chatted about my job. She stopped cutting for a moment and said, "Could you give me the name of a few wines to buy? There are so many—I don't know what's sweet, what's dry and what's ... good."

When I walk into a wine store and see endless shelves of wines, I feel like a kid in a candy store. A lot of my friends find it terrifying. With so many wines, they're scared of picking the "wrong" one.

Whether you find it wonderful or intimidating, we can all agree wine's variety is plentiful. Well, maybe not. A recent study asked: Who owns all those brands on the store shelves? Is wine really a business of thousands of small family wineries, or is it just as corporate as spirits and soda?

A specialist in food and agriculture, Michigan State University associate professor Philip Howard researches how the food industry is evolving, particularly through consolidation. He and a team of researchers looked into who owns all the wine brands we see on our store shelves.

Since Howard's study was released last week, one key detail has attracted most of the attention: Three corporations—Gallo, Constellation and the Wine Group (which owns Franzia and Almaden and Cupcake, among almost two dozen other brands)—accounted for 51.5 percent of U.S. wine sales last year. So much for mom-and-pop winemaker.

Actually, this is not a new discovery. (Howard got the 51.5 percent figure from Euromonitor International, a market research firm.) Parent companies own dozens of the brands you see on store shelves. Howard found that Gallo owned, licensed or exclusively imported 48 different brands; for Constellation it was 41 and for the Wine Group it was 26.

Many of these brands don't exactly tout their lineage. One study example: "'Octavin Home Wine Bar' is in smaller print on a number of boxed wine brands, including Silver Birch (New Zealand), Pinot Evil (France) and Herding Cats (South Africa). If you go to the Octavin website you'll see it is a trademark of Underdog Wine & Spirits. If you then go to the Underdog Wine & Spirits website and make the effort to go to the "about" page, you will see in the fine print that it is a unit of the Wine Group, the second largest wine company in the U.S. (hardly an 'underdog')."

Why don't these companies put their own names on all their wines? I suspect it's partially to maintain the illusion of mom-and-pop wineries. As one distributor told me last year, "Don't ever spoil the romance of wine. It's one of the few mass-market products that has romance."

Why do these companies make so many brands? To take advantage of wine's diversity, appealing to as many customers as possible with endless grape varieties and regions—and a lot of different price points. Do you ever have to choose between a $5 box of cereal and a $250 box? Nope. But you can choose between Mouton-Cadet and Mouton-Rothschild.

So is wine just another big business, controlled by a vinous version of Coke and Pepsi? Not exactly. Howard noted that, in both the beer and soda industries, two companies control more than 75 percent of sales. "There's nothing like Bud Light or Coke in the wine industry," he told me.

For you the wine drinker, the more significant question may be: How "big business" is your wine store? Howard's team conducted an inventory of wine offerings at 20 retailers in Lansing, Detroit and Ann Arbor. "CVS and Rite Aid each offered more than one hundred unique varieties, but the majority were supplied by E. & J. Gallo or Constellation Brands, and fewer than 20 firms were represented on the shelves," the study read. However, the selection was far more diverse at specialty wine retailers. "One wine shop we visited offered products from 446 different firms, and no firm represented more than 2.6 percent of the varieties."

"It all depends on where you shop," Howard told me. "If you're really into wine and willing to pay more than bottom-shelf prices, there are tons of options." It also depends on which state, or even town, you live in. The big brands are everywhere; the little guys don't have distribution in every market.

Grocery stores can carry great wines—one New Orleans grocery near me, Dorignac's, has one of the best selections in town—but I tend to shop at places where wine comes first.

One of my favorite stores, Hopper's Carte des Vins, sits just across Magazine Street from a Whole Foods Market, and their wine selections couldn't be more different. Owner Ric Hopper specializes in interesting wines, particularly Burgundy, but many others. I asked him what he thought of the study. "Virtually all of the retail shops surveyed are mass-market sources, meaning they are not going to carry any wine that requires a knowledgeable person on duty," said Hopper. "Most folks do not want to research an appliance purchase, much less wine. Most cannot make the effort, and most retailers will not make the effort either."

As my son's stylist finished brushing the hair off him, I gave her a few good wines she could find in most stores. But I also gave her the names of three stores where I know someone will listen to what she likes and find her a great wine.

Daniel Davis
New Orleans, LA, USA —  January 8, 2013 3:16pm ET
Very nice piece, Mitch. One thing deserves a bit more discussion, I think. A consumer does not necessarily have to spend more money to get a more interesting and truly "mom-and-pop" wine.

In the example you used, it is well worth the walk across the street to a true wine retailer—if you truly care about wine. Get to know the merchant, and do not be afraid (or ashamed) to tell him or her what you've enjoyed in the past and what you wish to spend. You will almost always get a better $20 bottle in a wine shop than in a grocery or other retailer. And you have the opportunity to build a relationship with someone whose only job is to find and sell great wines.

If you do not have the opportunity to go to a good wine shop, go to the best grocery in town and ask to meet the buyer. Ask him or her to turn you on to their favorites. With such a huge variety of grapes and regions available to us (hurrah!) in today's marketplace, building a relationship with a person who buys and sells wine for a living can save you from many an insipid, disappointing bottle. And they are usually pretty happy that you sought them out.

Best, DD
Gerald Tye
Scottsdale, Arizona —  January 9, 2013 6:59pm ET
We would absolutely LOVE more consumers to look to more specialized wine merchants. The sad fact, though, is that not only are the wineries consolidating, but so are the big box retailers. So many wine purchase decisions are so price driven that we are seeing the "commodification " of wine as well as our food.

At the end of it all, as you have said, value is more a matter of personal perception. If you enjoy the Giant Winery Wine, that you bought at "All-Encompassing Wine and Stuff," then it has value to you; especially if you think it tastes just as good as "Chateau Si Chere" from the little boutique with the old guy running it.

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