The federal government is beginning to examine anti-competitive practices in industries within the U.S., and the wine industry is included. Recently, I wrote my elected officials the following email, and posted it as a comment in the Federal Registry, as the TTB is asking for public comment for a report on “patterns of consolidation” to the Federal Trade Commission and Justice Department:
I’m an avid fan of tech but my profession is in the wine industry. Big tech has much been in the news, recently, with the House passing several bills to curb predatory and anti-trust behavior in companies such as Google, Apple, Facebook, Microsoft, and Amazon. I support the intent of the House’s efforts while holding some reservations about the actual bills themselves.
However, there is another industry in the throes of consolidation that has been and continues to be overlooked by regulators, and that is the wine industry. Consolidation in both producer and distributor segments of the industry over the last 15 years or so threatens small wineries and specialized wholesale distributors. Each state regulates the industry within their borders, and that narrow focus has caused consolidation to continue pretty much without any oversight to the impact it has nationally and in other states.
Recent examples include Delicato Family Wines (the fifth biggest U.S. wine producer) acquiring Francis Ford Coppola Winery (the 17th biggest U.S. wine producer). The top five wine producers ship over two-thirds of all wine sold in the U.S. – and Delicato just got bigger. Republic National Distributing Company (RNDC) formally announced a “partnership” with Heritage Wine Cellars LTD in Illinois. Heritage is one of the few independent family-owned wine distributors in Illinois, much less in the U.S. RNDC is the second largest distributor in the U.S., behind Southern Glazer’s Wine & Spirits. Together, those two distributors sell over $27 B in wine – over 50% of the U.S. market.
The effect on the industry is punishing the small and mid-size wineries. In 1995 there were ~1,800 wineries and ~3,000 wine distributors. In 2017 there were ~9,200 wineries and ~1,200 distributors. Access to market has become increasingly choked off by the largest producers creating partnerships with the largest distributors to dominate markets and large retail chains.
The state of wine sales in the U.S. is reaching the point where distribution by small and mid-size wineries is limited to self-distribution via retail sales to consumers or in-state wholesale sales. The result is lack of consumer choice and higher wine prices.
I’ve been in the wine industry for nearly 40 years. I am partner in Tincknell & Tincknell, Wine Sales and Marketing Consultants based in Healdsburg, CA. For 24 years we have assisted domestic and foreign wineries and industry businesses navigate the U.S. market. Consolidation has been happening throughout my career, but it is increasing in frequency and scale. The threat to small, mid-size, and family-owned wineries is real and growing, and will have a negative effect on competition if the pace of consolidation is left unchallenged and unregulated.
If you wish to add a comment for the TTB’s report, the link is: https://www.federalregister.gov/documents/2021/07/28/2021-16115/promoting-competition-in-the-beer-wine-and-spirits-markets. Do note that comments are public and most are not anonymous. Comments must be made by August 18, 2021.