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Exclusive: Top Spirits And Wine Distributors On Pace For Solid Revenue Gains In 2015

April 13, 2015

Despite harsh winter weather across much of the U.S. and modest recent volume growth for both spirits and wine, the industry’s leading distributors project solid progress in 2015. In fact, nine of the U.S. market’s top 10 spirits and wine distributors are expecting overall revenue growth, with each anticipating an uptick of at least 3%, according to Impact’s exclusive report. Several key factors are driving this revenue expansion, including a widespread premiumization trend that has accelerated in the post-recession years; a reduction in discounting activity; and an increasing shift from white spirits to more lucrative brown spirits categories such as Bourbon, single malt Scotch and Cognac.

“The trends in both spirits and wine are very favorable,” says Michael Johnson, CEO of St. Paul, Minnesota-based Johnson Brothers Liquor Co., which operates in 22 states and ranks as the country’s seventh-largest spirits and wine distributor. “In wine, consumers are trading up into the $12-$15 segment, which is thriving. In spirits, brown goods are doing very well, and the craft segment is adding excitement there. These trends should continue to gain momentum with the improving economy.”

Other top distributors are similarly bullish. “When you’re operating in 23 markets, usually you’re in a position where you can see some weakness here and there,” says Tom Cole, president of Republic National Distributing Co., the U.S. market’s second-leading spirits and wine distributor. “But the business has been very healthy across the board, particularly with regard to spirits. Wine has also done well for us.” Cole adds that, with spirits and wine each accounting for around 50% of RNDC’s business, the portfolio is more balanced than many of his competitors, who are generally more dependent on spirits.

Several of the leading distributors have garnered significant revenue gains even as adverse weather conditions slowed on-premise business across much of the East Coast and Midwest in the first few months of 2015. “Business has been good over the past two quarters, despite the weather,” says a leading East Coast distributor. “The on-premise lost some momentum after promising growth before the bad weather really hit. Still, that recent on-premise decline has been offset by off-premise growth, so our overall business is still up in 2015.”

Premiumization is playing a primary role in the rising revenue trend, as distributors are generally seeing more growth on the value side than on the volume side. “There have been a few shining stars on the spirits side, but overall volume growth has been difficult to achieve. Our spirits volume was basically flat in 2014,” says Wayne Chaplin, president and CEO of Southern Wine & Spirits, the country’s biggest spirits and wine distributor by far. “However, we were able to get value growth on spirits, through premiumization and the shift toward Bourbon. On the wine side, we’ve had volume growth, and again, thanks to premiumization, value growth outpaced volume.”

The complete feature on the U.S. market’s top 10 spirits and wine distributors appears in the April 1&15 issue of Impact.

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