The news that Southern-Glazers (SGWS), the biggest wine distributor in the US, with a market share of over 50%, has laid off around 3,000 of its staff, including a large proportion of its fine wine and craft division, has sent shock waves through the US wine industry.
Mind you, I don’t suppose the automobile industry folk were that delighted to learn about Volkswagen planning to close a factory in Germany for the fiirst time in over 80 years. Correction: closing three factories, and laying off ‘tens of thousands of employees.’ And other businesses in both sectors are likely to follow suit
The German car maker is reacting to fewer people buying its cars. The US distributor is similarly aware of the latest report by Sipsource, which monitors 150,000 SKUs and 450.000 on- and off-trade outlets. Wine sales over the 12 months ending August 2024, fell by 8%, compared to a 4% drop for spirits. And just as VW is still paying for its diesel scandal, SGWS is also facing potentially highly costly lawsuits for anti-competitive behaviour.
Whatever the explanation for the SGWS move, the lay-offs have provoked a lot of online chatter. As one ‘Wine Marketer, Importer and Brand Influencer’ complained on Linkedin, “This is… going to mean that smaller artisanal producers will receive even LESS attention by an even slicker data- and quota-driven sales team with little time, interest or ability to involve themselves with anything other than products created and driven by mega sized beverage conglomerates.”
Disproportionate power
Some in the US will reasonably point out that the three-tier-system has helped lead to the consolidation that has given SGWS its disproportionate power, and created the situation in which just 10 big distributors handle over four bottles of wine in every 10.
The companies that are best at adapting and giving consumers what they want tend to get bigger and stronger, at the expense of the smaller, weaker and less adaptable
Which, I guess makes the US wine market look a little like the one we all deal with when choosing which car we want to buy. Unfortunately, with or without a legally-mandated distribution model, as Charles Darwin and Adam Smith could have explained, the companies that are best at adapting and giving consumers what they want tend to get bigger and stronger, at the expense of the smaller, weaker and less adaptable. And the situation is exacerbated by the tendency of big companies preferring to deal with similarly-scaled operations.
One in 7,000
If your US distributor is selling 70 or 700 brands, it may be hard to ensure that yours will get the attention you think it deserves. SGWS distributes over 7,000 – a figure it is worth pausing to digest.
It is both a gigantic number, for any winery imagining itself to be just one of those – or really a quite a tiny one when compared to 350,000 different labels that market researchers BW 166 reckon are available in the US at any time. Other markets may have less distributor concentration, but the pattern is similar. If you want to sell in the UK, there’s a limited number of importers, agents and wholesalers who rely, for volume sales, on a handful of big supermarket chains and a very few other big retailers. In Sweden, your bottle is going to be one in the 4,000 on offer in Stockholm’s biggest monopoly store. If you are lucky.
Closed doors
In the US, as many producers who want to introduce wines there are discovering, distributors of every size have not only closed their doors to new lines; as one explained to me, they’re looking to cut the number they already have. He certainly wasn’t in the business of selling wines produced by ‘mega sized beverage conglomerates’, but he isn’t looking to carry any passengers. If SGWS is shedding staff, what’s the betting that they’ll also be reducing the number of wines they sell?
So, maybe it’s time for wineries to try to slip on their distributors’ shoes. How easy are they making it for the sales teams to get an order? Have they created a demand - if only among the target customers - for that particular wine? Or are they relying on the salesman or woman to do it for them? In the limited time he or she may have with the customer.
US distributors of every size have not only closed their doors to new lines, they’re looking to cut the number they already have.
Have they given the salesperson any useful ammunition - apart from the assertion that ‘it tastes good and is fairly priced and made by nice people who care about terroir’? Have they given them any reason to spend time and effort trying to sell their wine rather than the one the customer already knows about and believes in - and whose sale may well lead to a reward from the winery?
Make yourself heard
SGWS are unlikely to be alone; other distributors are almost certainly going to follow their example. The lesson for wine producers is clear, and perhaps they should be grateful to SGWS for prompting them to learn it. Unless you are selling your wine yourself, or working with a small distributor with a limited range, your wine is just a voice in the crowd. If you don’t find a soapbox and a megaphone and something memorable to say, you’re going to struggle to be heard.
If you can’t afford marketing and good communication, you are going to have to rethink your business model to find a way that allows you to do so.
Marketing and good communication is no longer an option; it’s a necessity. And, bluntly, if you can’t afford it, you are going to have to rethink your business model to find a way that allows you to do so. Maybe now’s the time to launch a fast-moving, higher-margin rosé. Or a limited-production super-premium wine that will hopefully attract more attention to your brand than your good-value, mid-range efforts. Maybe you need to be more ambitious in the money you expect from your tasting room. Should you be selling more directly? Or invest in exploring other markets?
One thing is certain: complaining that the big distributors you've been working with aren’t doing enough for your ‘artisan wine’ isn’t going to help you to sell one more bottle.
But look on the bright side, as a wine producer, you may be looking out of the window at some lovely vineyards while sipping a glass of your wine. If the cards had been dealt differently, you could be a steering-wheel or brake-pedal manufacturer in an industrial park somewhere in Germany, drinking vending-machine coffee, looking at an empty order book.
The views and opinions expressed in the Devil's Advocate pieces are those of the writer, and do not necessarily reflect the views or positions of the publication. They are intended to provoke discussion and debate. If you would like to offer your own response to this or any other article, please email the editor-in-chief, Anja Zimmer at zimmer@meininger.de.
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