Exclusive news and research on the wine, spirits and beer business

Exclusive: Top U.S. Wine And Spirits Distributors Expect Solid Gains After Slow Start To 2017

April 19, 2017

While 2017 started off more slowly than anticipated across the wine and spirits business, the U.S. market’s major wholesalers expect conditions to improve over the course of the year, with premiumization and the expansion of craft spirits driving solid increases in value. Impact’s exclusive survey of the market’s leading spirits and wine distributors reveals that seven of the top 10 largest players are projecting their revenues to grow ahead of the total industry in 2017. Aggregate revenues for the top 10 wholesalers are projected to rise 5.3% to $41 billion this year, compared with a 3.9% advance for the distributor tier as a whole.

“January and February were soft, but March recovered nicely,” says Tom Cole, president and CEO of Republic National Distributing Co., the second-largest U.S. wholesaler. “The on-premise business is healthy, particularly the bar, lounge and tavern business. We’re spending a lot of time, energy and resources against that part of the market.”

“The market is continuing to premiumize in both wine and spirits, and that’s very positive,” Wayne Chaplin, CEO of top distributor Southern Glazer’s, tells SND. “For 2017, we’ll continue to see value grow faster than volume. On the spirits side, we’ve got a lot of craft entries. Whether they’re coming from independent companies or from the largest suppliers, there’s a lot of innovation out there that has helped create value.”

While a wave of new craft spirits product launches is creating excitement and contributing to premiumization, wholesalers and retailers alike are becoming increasingly selective about what they’ll take on. “There’s a recognition from retailers that with all those new entries they have to be more disciplined in the category management space,” notes Greg Baird, president and CEO of third-ranked Breakthru Beverage Group. “They have to make those tough decisions. Just because something is new doesn’t necessarily mean it has a reason for being.”

Another development that wholesalers are monitoring is the rapid growth of direct-to-consumer (DTC) sales. Direct-to-consumer wine sales totaled $2.3 billion last year, according to ShipCompliant, and the DTC route continues to be an important revenue driver for smaller producers. But wholesalers have concerns about what they view as an end-run around the three-tier distribution model. “There’s an attack on the three-tier system. That’s something we need to be very aware of,” says Cole. “We have to figure out how to work within the three-tier system to ensure product integrity, that consumers are of legal-drinking-age, and that taxes are collected. Those three things immediately go out the window with unregulated DTC. Public safety is a huge issue.” —Daniel Marsteller 

For a full report on the Top 10 U.S. Spirits & Wine Wholesalers, see Impact’s April 1&15 issue.

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