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Leading Wholesalers Project Solid Growth Amid Changing U.S. Marketplace

March 27, 2019

Amid a rapidly changing wine and spirits landscape in the U.S. market, the country’s top wholesalers are striving to transform their operations to match the new realities of the marketplace. This year, overall wholesale revenues in the U.S. wine and spirits market are expected to increase 2.8% to $59.1 billion, according to Shanken’s Impact Newsletter.

Trends of the last few years have been dominated by the mega-mergers occurring at the top of the ladder. Southern Glazer’s is now two and a half years into its journey as a national player, and RNDC and Breakthru continue to work toward the closing of their own massive combination into a 30-state colossus.

While challenges abound—including sluggish volume growth, increasing direct-to-consumer sales, the emergence of cannabis, and an ongoing deluge of new products from the craft distilling sector—most wholesalers surveyed by Impact this year see continued progress ahead on the revenue front, driven largely by premiumization in both wine and spirits.

“There’s limited volume growth, but the value side of wine and spirits continues to be pretty healthy,” says Wayne Chaplin, CEO of Southern Glazer’s, which is projecting revenues of $19 billion this year. “American whiskey, really Bourbon, is driving the brown spirits side, along with Irish whiskey. Tequila at the higher price points and Cognac are also doing well. On the wine side, wines over $15, Champagne, and higher-priced rosés are leading growth. There are still a lot of positive trends out there, and I think they’re going to continue.”

At Breakthru Beverage Group, president and CEO Greg Baird also sees ongoing premiumization in key categories. “The ultra-premium luxury spirit brands ($25+ at retail) continue to outpace the total business, accelerating to strong double-digit growth during the holidays,” he says. “Similar to spirits, wine performed well in the back half of last year, led by healthy double-digit growth in our super-luxury ($25+ at retail) category. Cabernet Sauvignon, Sauvignon Blanc, rosé, and Prosecco stood out, with the Italian, French, Australian, and New Zealand segments outpacing domestic growth trends.”

In the on-premise, Baird says Breakthru has seen a slight acceleration in recent months. “Within our wine business, we saw on-premise slightly outperform off-premise last year, with growth skewing higher in the independent channel,” he notes. “We saw accelerating growth in casual dining and lodging. In the off-premise wine category, we saw the greatest strength in the grocery channel, with double-digit growth in the second half of last year.”

“The on-premise has been pretty steady,” Chaplin concurs. “The economy has been in a good place, and the stock market has been mainly positive other than in December. Unemployment is at its lowest point in a very long time.”

Meanwhile, the long-term consolidation trend within the U.S. distributor tier remains in full swing. This year, the top 10 wholesalers in the U.S. are projected to account for nearly 75% of the market, up from a 59% share in 2010.

The blockbuster merger of Breakthru and RNDC—which will create a distribution giant with annual revenue of approximately $13.5 billion and present a formidable new challenger to Southern Glazer’s—is still working its way through the regulatory system. “The transaction involves several states in which both companies do business today, which the Federal Trade Commission is reviewing,” says Baird. “In the meantime, you’ll continue to see us invest in our business model, our capabilities, and grow our supplier relationships. The success we achieve individually will only enhance what we ultimately build together.”—Daniel Marsteller

Impact’s full report on the Top 10 U.S. Spirits And Wine Distributors appears in the April 1&15 issue.

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