When Alcohol Wholesaling Starts to Look Like “The Godfather”

Posted by Tom Wark on Oct 21, 2015

WirtzCharmerWirtz Beverage and Charmer Sunbelt, two of America’s biggest box movers have merged. they now are the second largest box movers in the alcohol distribution business. And now, five companies (families) control well over 50% of the alcohol box moving business in the United States.

Remember…the box movers tell us that the three tiers system’s legal mandate that booze move through a wholesaler is a good thing because it prevents producers from dominating a market and exerting pressure on retailers. It prevents PRODUCERS from dominating retailers and exerting pressure.

Rocky Wirtz, Chairman of the former Wirtz Beverge (now the “Breakthru Beverage Group”) told the Chicago Tribune that the structure of this deal didn’t matter. Instead, “What matters is we’re coming together as two families.”

This is I’m sure the line that Vito Corleone would take when he announced the Corleone Family was merging with the Barzini Family. (By the way, the Commission would never have allowed that.)

Meanwhile, Charlie Merinoff, former CEO and Chairman of Charmer and new Co-Chairman of Breakthru Beverage Group, “brushed off the suggestion that the combined company would have more clout negotiating with suppliers.”

As well he should brush that off because the clout and power his new company will wield with be with retailers and restaurants who will be stuck working with this company. And while it is illegal for  wholesaler to demand a retailer purchase a bunch of cases of THAT in order to get this…..Well….

Yes, thank God we have the three-tier system to protect the industry and consumers from big producers. Just remember, the next time you hear anyone try to tell you that the Three Tier System is good for competition, protects consumers or is in any way more than a racket to protect wholesalers from having to actually work for a living in the real world, ask them why they are lying to your face.

Also, after you ask them about their lies, don’t ever again sit with your back to the door of the restaurant.

Posted In: Wine Business, Wine Gossip

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47 Responses

  1. Roger Beery - October 21, 2015

    Here…Here!!!!!!!

  • Colin - October 22, 2015

    It’s going to take a lot of might (Government) to tackle the mafia style 3 tier system we currently have, but these mafia do pay a lot to change the laws in their favor

  • Dasara 2015 - October 21, 2015

    great article!

  • Steve - October 21, 2015

    I agree. Great Article. But now what? What do we do to beat the system?

  • Steve - October 21, 2015

    You do not beat a system run by elite establishment career politicians. These people live off the backs of consumers who pay to keep the system going; even if the consumer doesn’t want or need the system. The Kennedy’s made a fortune in prohibition and a killing after prohibition. Where do people think the money came from? Politicians need money-ever see one of these elites leave office willfully because they were going broke working for the government? Producers pay a spiff to three tier guys who pay for the politicians votes via lobbyist. Heck even McCain is married to a three tier distributor owner. The consumers pay to the producer in the end. No free lunch. Voters are not smart enough to see the scam. distributors control most everything that moves relative to beer, wine, spirits. Even Direct-to-consumer laws are controlled by the Distributors who squeeze state politicians to keep tightening all 50 state laws regulating the purchase of wine direct from producers. The system starts at the state then moves to the Fed level. AZ is one of the really strange state three tier laws. No wonder so many “nice honest politicians” (oxymoron folks) get into government work; how many left poorer when they retire than when they first got the gig? None.
    “A billion dollars here and a billion dollars there and before long you are talking about a lot of money,” Evert Dirksen. Liberal media need politicians and politicians need trade and special interest groups so everything in the establishment is a closed system and the little consumer and producers are on the outside looking in, assuming they even get a peek.
    This is democracy and freedom? God help us.

  • steve - October 21, 2015

    Maybe I am the lady that doth protest too much. However, in a feeble attempt to explain myself I offer a thought. An organization that tells/implies/hints/distorts that wine consumers are functional morons, I think an average freedom loving consumer should grab their First grade Reader and run and run fast. It’s, “I am from the government and I am here to help you.” Government/Three Tier folks (simpatico), for once give us what US consumers want and don’t be so condescending to citizens who are already on the precipice of nominating Vito Carleone to receive the “Three Tier System Saint of the Year” award-ok posthumously. No make it a recognized day of atonement- for the fleecing of America. At least the Three Tier Bandits would receive recognition or an honor they deserve. Remember, there are a lot of laws on the books that have long outlived their relevance. In Missouri there is a law that women cannot wear lipstick.

  • Don Carter - October 22, 2015

    Have someone else start your car for a while, Don Wark.

    • Rich Reader - October 22, 2015

      A remote control for the ignition might take care of starting risks.

  • Liz Holtzclaw - October 22, 2015

    And today, SWS and Glazer’s?!?!? Unfortunately, the only true solution is another Constitutional Amendment, which ain’t ever gonna’ happen.
    Liz Holtzclaw, Holtzclaw Compliance.

    • Craig Stancliff - October 22, 2015

      So, maybe several thousand of us start a petition for a new constitutional amendment?

      • Liz Holtzclaw - October 22, 2015

        Sadly, it will take millions of us to get that done. The bar is incredibly high.

  • John Skupny - October 22, 2015

    With the announcement today of the SWS & Glazer’s wedding, the death star is almost complete!

  • Donn Rutkoff - October 22, 2015

    I think you might be worried a bit too much. The Bigger They Are, The Harder They Fall. A lot of big combines have come apart at the seams, in liquor and other businesses. Fosters Beringer Blass? TWE? Gallo has been buying wineries and brands, while Kendall Jackson has been buying acreage instead. Constellation has bought everything except prestige and good PR. Deutsch married up with Yellowtail, got it huge, and then YT went to bankruptcy situation. I don’t see consumers admiring Deutsch. I know, it is hard for smaller and midsize wineries or breweries to get good distribution. Having more smaller distributors did not assure you of better distribution. If you want to make good wine, you have to realize that you might not make much money.
    Oh, I forgot to mention ATT being dismantled by a judge, then re-grouping over time, and now has very few land lines. IBM is in free fall.
    Does anybody want Amazon to be the alternative to brick and mortar distributors?
    Oh well.

  • Bill Haydon - October 22, 2015

    Lord knows that I’m no fan of Wirtz or Southern or any of the other national wholesalers but allow me to interject a bit of reason into the pitchfork party.

    Regarding small California wineries’ inability to find distribution, that’s just sour grapes. Looking at Wirtz’ home market (Chicago) there are around 150 wholesalers of all sizes and focuses. It is a bitterly competitive market, and every small and medium distributor is looking for producers who will help it gain attention and traction with buyers. If California wine were that ticket, these scores of companies would be eagerly looking to sign up new wineries and introduce their products to the local restaurants and retailers. That they’re not doing so is a reflection of market demand (what their customers are looking for) rather than anything the large wholesalers are doing or not doing.

    Nor is it some insidious plot to hurt the California wine industry. I hate to break it to you, but wholesalers almost never drive the market. They are lazy and want the quick sale, and in pursuit of this, they almost invariably reflect their customers’ demand rather than trying to drive it. If that $80 Barolo is going to be the much easier sale than the $80 bottle of Napa Cab then that’s what the salespeople will be taking out. To paraphrase the Bard, “the fault lies in your juice not in your distributors.”

    • John Skupny - October 22, 2015

      There you go Bill, blame the California Winery’s and producers… same old story from you… it is not only California producers seeking distribution, producers from all around the world seeking access with a provincial sphincter guaranteed by the 21st amendment. Your hate for California limits your scope of understanding.

  • Tom Wark - October 22, 2015

    The solution to the near monopolistic control that the large wholesalers enjoy isn’t a constitutional amendment.

    The solution is a state-by-state effort to change laws that don’t cater to box movers and that have consumers in mind.

    This means changing laws to assure consumers can buy direct from wineries without absurd restrictions.

    It means changing the laws to assure consumers can buy direct from wine retailers located anywhere in the country, not just in their home state.

    It means changing the laws to assure retailers and restaurants can choose to buy hard to find wines directly from producers and not have to go through wholesalers.

    • Steve - October 22, 2015

      In any industry, where power, livelihood, industry reputations or ego’s are involved, every effort will be employed to protect turf. In most cases the consumer is along as what the special interest groups hope are ambivalent by-standers. Monopolies can bring: intimidation, vast financial resources, huge PR campaigns, state and federal machinery to bear on those complaining. Consumers are simply a necessary evil as the grist for the miller. If the Three Tier Monopolies bring so much benefit to society, consumers or producers then their value should be evident and obvious to all consumers. Right now we have the fox guarding the hen house has no hen’s in the house and is simply full of foxes telling everyone that they are doing God’s work by guarding their domain.

    • Bill Haydon - October 22, 2015

      Tom,

      Illinois has had this for several years, yet self-distribution by California wineries has gone absolutely nowhere. It is a complete and utter non-entity in the Chicago market. Now, why is this? I’ll argue that it’s failure is three-fold.

      First, there was NO pent up, blocked, stymied demand for these wines. If nobody wants the product, it really doesn’t matter how easy it is to buy it. And the ease of buying is actually not a positive because……

      Second, it is unworkable on the small winery scale. While distributors are lazy and do follow the path of least resistance, you still need that salesperson in the room. You still need to be sampling, taking orders, making sure that the other guy hasn’t taken over your glass pours. Additionally, a wholesaler can deliver that order next day. How’s the California winery going to accomplish the logistics. Who’s going to run those two cases of btg over on Friday afternoon because Mr. Somm was too busy at a trade tasting on Thursday to do his ordering.

      Third, Napatude and arrogance. The wineries that have tried it have passed none of the savings of cutting out the distribution tier onto the restaurants and retailers. Essentially, they have expected a Chicago restaurant to go through greater difficulty to get a product that’s not in demand with no incentive. I don’t know if it’s arrogance or ignorance.

      The only way that self-distribution ever works outside of the centers of production is for the largest players in the market. Only they have the boots on the ground sales forces, logistics frameworks and economies of scale to make it work. For Joe Napa wanting to sell a few pallets of high-end wine in Chicago or NYC, it’s a fantasy.

      • Craig Stancliff - October 22, 2015

        Point taken…

        • John Skupny - October 22, 2015

          Craig,
          you can always anticipate Bill to bloviate a negative attitude about anything Napa or to a lesser degree, California – He often makes cogent statements tainted with his disdain for Napa or California – We are all idiots out here accordingly.

          • Bill Haydon - October 22, 2015

            No John, I don’t believe that you are all idiots. I do, however, believe that there is a great deal of group think, an obsession with image over honesty (sometimes even to one’s self), a desperate psychological need to lay all problems at the feet of the distributors and a mind numbing level of hubris and self-regard (I didn’t coin the term, “Napatude) out there that reaches its zenith in Napa.

            A better response to my post would have been to tell me why my analysis is wrong and why self-distribution can work. This is the dream, yet it’s been available in a seemingly perfect market (large and concentrated in one city), yet it’s made zero impact. Why is that? Dare I say it, but do the “box movers,” despite all their well documented flaws and shortcomings, possibly do a bit more than just load and unload boxes?

      • steve - October 22, 2015

        I would submit another reason: Once wineries try circumventing Three Tier the Three Tier wrath can and will be felt throughout the system. All Three Tier folks will “black ball” such wineries and will never work with any such winery anywhere in the US.
        I agree that the greed factor at wineries can also show the lack of sophistication on their part. Winery trade groups need to mount a campaign for distribution alternatives and benefits to consumer. Now, why would such a move NOT happen? Maybe the Corleone factor?

  • John Skupny - October 22, 2015

    Bill, Your analysis is not wrong, you actually make some fine points – but constantly pinning the blame on Napatude shows your limited bandwidth which boarders on trolling. I have been in the business for 40 years, 35 of them on supply side [wine producers] from all over the world, but primarily the North Coast of California and I have lived & worked in the Napa Valley for 31 years… I distribute my wine in 37 states and I do not work with any box movers – I don’t sell boxes – I sell bottle of wine and so do my national distribution partners. The consolidation has been happening for decades and with every wave a new generation of small, passionate distributors are born – and each year thousand of restaurants open that are not well served by large distributors and therefore I can successfully sell and deliver and get the cork pulled for customers. It is a relationship business that takes sincerity , persistence and authenticity to succeed.

    • Joe Jensen - October 23, 2015

      John Skupny,

      Thank you for recognizing that there is a robust competition created in markets when these multibillion dollar companies merge into bigger bad companies!

      As Bill has said there is no shortage of distributors in the Chicago market, since I am one of the newest and fastest growing in the market and you work with Maverick who is one of the best in Chicago!

      Take out Bill’s disdain for Napa and he is almost 100% correct in his analysis of the situation.

      The simplest down and dirty answer is that there are too many brands out there in an already saturated market! Tom Wark can blame the 3 tier system but the 3 tier system did not create the likes of Total or any number of other chains that work to meet there corporate wine goals set by even bigger corporations.

      85% to 90% of the wine sold is from 5 corporations so that leaves 10% to 15% of the market left to be shared by the thousands of wineries in the wine producing world!

      As a newer distributor who is trying to build a California portfolio it is a challenging
      proposition as most of the best wineries out there like yours have representation.
      Wineries run by experienced people like yourself know how to make good wine and know how to bring it to market at a sellable price!

      So many wines we try when we are adding to our portfolio are either to expensive for what they are or they are over manipulated plonk that is being worked over to try to hit the sub $20 price point which is where most sales are!

      Finding first class wines like yours that are made well and compelling to a buyer
      are still a hand sell best handled by companies like Maverick who give their customers great customer service!

      I applaud any winery that can sell a good amount of wine through their tasting room or mailing list but selling in markets on a day to day basis is best left to passionate professionals.

      Cheers,

      Joe Jensen
      Compass Wines and Spirits

      • Steve - October 23, 2015

        I know and am confident that people getting into the wine distribution business are excited about their prospects of making money. But, why not let the market decide if they want to be forced to use a distributor? Distributors should not be trying to save wineries from themselves. If distributors are valued then the market should find that out for themselves.
        Every industry (wine distributors/alcohol in this case) cannot expect the government to protect a market for which they want to own a business within. In the 1970’s Al Kahn under Carter opened up the airline market to free competition. Before that the Fed. regulated prices and gave airlines protected routes with limited competition. Today I think consumers would not want the Feds back in the airline distribution business.

      • John Skupny - October 23, 2015

        Joe, I concur with you and also, as stated, understand Bill’s opin. Maverick is a precise example of being spawned off of consolidation when SWS descended upon Illinois and purchased Direct Wine Import [L&R’s first Illinois Distributor], along with a handful of other fine wine distributors.
        I would agree that there are far too many brands and shrinking wine lists and shelf sets. As an example, when my wife and I started Lang & Reed [1996] we became members of the Napa Valley Vintners; I was serving as President that same year so it seemed prudent. We were member #125 and now there are more than 500 members and no net gain of planted acreage! The direct to consumer and tasting room component is important but has also opened up a Pandora’s box about appropriate use or misuse of agricultural lands. Just read Tom’s missives on is ‘Sonoma a better place to visit than Napa!’…

    • Bill Haydon - October 23, 2015

      –It is a relationship business that takes sincerity , persistence and authenticity to succeed.–

      This is absolutely right, but it applies to small, quality focused distributors too, and that’s something that is lost in Tom’s frequent screeds against the three tier system. Maverick is doing a hell of a lot more than just loading and unloading your wines. They’re building relationships, sampling, sending sales reps through the doors, assuming the cash flow burden, taking the hit when restaurants close with unpaid bills and a lot of other value added roles going into that final sale. In a market that is very eurocentric (sorry, but that’s just the truth of it), you need that daily presence and persistence in the market.

      And don’t fool yourself, Maverick has more than a few “boxes” that they move because those wines keep the lights on and provide the necessary infrastructure (financial and otherwise) to allow them the more dedicated sales and marketing task of building your brand and others like it. Hell, I have them too. It’s just that they might be a 9K Chateau bottled Bergerac Sauv Blanc rather than 900K case Avanti (specially crafted for you wily millenials) Sauvignon Blanc. Ironically, mine is actually cheaper, but that’s a whole other issue.

      As for the effect of the Wirtz-Charmer merger, it really doesn’t mean anything on my level. The only thing that I can hope to see from it is actually a positive should it result in clubbing the baby seal that is Wirtz’ cynical little fine wine spin off, but in actuality is just a pawn on the chessboard to buy market share away from small and medium sized companies.

  • Tom Wark - October 23, 2015

    Bill, et al:

    As I’ve said many times before, I think the services the box movers provide are great. And essential. But I always like to ask if the wholesalers and their apologists oppose winery to consumer shipping (they do!), if they oppose retailer to consumer shipping (they do), if they oppose self distribution rights for all producers (they do), if they support franchise laws that tie producers to both effective and ineffective distributors (They do).

    Quality isn’t a question. The success of California wines isn’t a question.

    What I’m pointing to is the regulatory rent seeking that every single wholesaler I’ve ever come across supports.

    Whether or not self distribution isn’t the point, is it. The point is that as wholesalers continue to consolidate (now a mere 4 control over 50% of the U.S. market) their power expands significantly.

    What do they do with that power? They force retailers to buy stuff they don’t want in order to get what they do want. They use their government supported profits and protection from competition to buy more political protection.

    Your view of the viability of CA and Napa wine and self distribution is interesting. But as always, its a non sequitur.

  • Tom Wark - October 23, 2015

    Joe:

    Question for you:

    Would you publicly support the following:

    1. Less expensive access to the direct to consumer market for wineries?
    2. Legal direct shipment to consumers by out of state retailers?
    3. Removal of all Franchise laws?
    4. Self Distribution rights for all wineries and importers.

    Because if you don’t support these things, then as a wholesaler you are simply looking for government protection from competition.

    • Joe Jensen - October 23, 2015

      Tom,

      As far as Illinois goes there is no barrier to entry. So my responses follow!

      1: The only limitation here is the cost of FedEx/UPS, I suppose you could set
      up a shipping center where someone receives wine once a month via a consolidation shipped via one of our truckers which is about $5.00 a case plus
      inbound, handling, etc. Maybe you could bring shipping down from $60 a case
      to about $20ish for shipping costs and services rendered!

      2: If retailers buy a State of Illinois license, pay the excise taxes and invoice
      the local taxes, I am fine with that. A lot of retailers do already!

      3:Franchise laws are stupid and should be repealed!

      4: Any winery or importer pretty much can self distribute in Illinois but
      it is easier said then done!

      So Illinois is an example of a wide open state and yet virtually no winery or importer is setting up shop here.

      If you get everything you want, the market will barely change because the vast majority of wineries do not have the resources to set up a wholesale operation in
      15 or 50 markets, where you staff, hold inventory, hire salespeople, develop relationships, COLLECT CHECKS, ETC!

      More wineries need to follow John Skupny’s lead and stop crying about government protection because there isn’t any in my state which is dynamic
      and pretty vibrant regardless of what Rocky Wirtz tries to do here!

      Cheers,

      Joe Jensen
      Compass Wines and Spirits

  • Thomas Kruse - October 23, 2015

    One of the main criteria I have is that when I look for someone to sell wine I find out first if they cut or twirl their spaghetti. A cutter cannot sell wine.

    • Steve - October 23, 2015

      I would look for someone who eats spaghetti with their napkin tucked in the collar of their shirt and sucks each spaghetti through pursed lips and lets the residual sauce slap against their cheeks as the last 2 inches of the spaghetti slides through their lips. Now that is a real dedicated and class act and displays wine knowledge.

      • John Skupny - October 23, 2015

        Yeah, like McCluskey at Louis’ Restaurant in the Bronx!

        • Steve - October 23, 2015

          Yeah, Now that is livin’ and is a certain sign that a Three Tier mogul is a class act. At their next Three Tier Association meeting with congress persons and their lobbyist, the badge of success is spaghetti stains on each side of the mouth and on the white shirts at approximately the bulging belly line.

  • Happy Diwali - October 23, 2015

    I really loved reading your blog. thanks for sharing with us.

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  • Edward Donegan - November 4, 2015

    My dad always told me never forget were you came from. I never did and the wine industry should also remember their path.

    Now I’ve have sat on both sides of this debate having been a National Sales & Marketing Director and a senior manager of a wine & craft-beer distributorship. So for many years I thought it was a wholesalers problem then a supplier problem. Today as a industry consultant I believe it’s a supplier problem.

    Without the fiscal power of the 3 tier system the wine industry would be much smaller and weaker today. I can also tell you a wine only distributorship is not highly profitable. The wine industry has been raised on the back of the spirits industry and more recently the craft-beer industry. This is directly tied to inventory turnover rate ratio difference between spirits, craft beer and wine. Also the 3 tier system provides time effectiveness. How much time does the on-premise wine manager have to manage the list? The distributorship model provides that time

    But the root cause of this problem is the inability to meaningful-differentiate their brand, in such a way that it supports consumer self-identity. What has resulted is a “Sea of Sameness” in the marketplace, substitutes everywhere because the products dimensions of differentiate are a like. The industry has changed in so many ways except in it’s branding methods over the years. They still believe they can speak to the cognitive brain, having their message encoded into consumer or trade memories. This method has proven not to be effective over the years. Why, because 93% of decisions are formed in the emotional brain not the cognitive. Sure the industry use’s luxury, now green as the emotional stimulus to the transaction. Or price discounting to satisfy the emotional brain,which this is really good at. But these points of differentiation are easy and quickly match

    Until wineries learn how to construct a meaningful-differentiate brand message, personality and voice, they will continue to swim in this highly competitive “Sea” no matter the distribution model. Distribution models have little effect on great brands.

    One last point without the 3 tier system, the wine industry would be even more price-driven then it is today. It actually protects their profitability.

    • Steve - November 4, 2015

      I am thoroughly confused, which I often am, but now even more so. Mr. Donegan makes the following points:
      1. His experience is as a wholesaler of Beer and Wine.
      2. But I am confused as to what the problem is, that he addresses, relative to it being a wholesaler or supplier issue?
      3. I think he is making the point that 3 Tier Disbributors are very wealthy and powerful. They got that way primarily from Spirits and NOT wine or beer. Wow who would have thunked?
      4. 3 Tier guys are doing wine producers a favor because wine producers aren’t overly bright and the 3 Tier guys free up winery guys to manage lists.
      5. Producers have “the inability to meaningful-differentiate their brand, in such a way that it supports consumer self-identity.” What? I frankly have been buying a lot of wine over the years and the only person who helps me identify the wine I want is the retailer, super store or grocery store. Never have I seen a distributor taking me by the hand and helping me do squat.
      6. Cognitive brain or emotional brain? I have not seen a distributor yet with an industrial psychology degree or one that was the kennel manager for Pavlov. I think Mr. Donegan is right, 3 Tier Distributors will sell what makes them them most money and I have not seen a lot of the 3 Tiers guys go broken in such as way as to devastate the wine or beer or spirits industries in any market. Free markets do work quite often.
      7. Wineries will NEVER learn to construct a differentiated brand message or personality because-Surprise Surprise- they are in a competitive market. This kind of warps my sensibilities relative to logic.
      8. But I do agree with Mr. Donegan, the 3 Tier System will never let wineries manage their brands, because the 3 Tier System has a savior complex-I am a 3 Tier Distributor and I am here to help you- they relieve wineries of their intellectual development and money.
      By Law the 3 Tier guys–When they have you by the (cojohnes) your hearts and minds will soon follow, whether you like it or not. Charles Colson
      I enjoy this discussion which seems to assume consumers are more ignorant than winer producers and are generally absent in this discussion.

  • Edward Donegan - November 5, 2015

    Your reply left the entire family in tears of laughter especially the self-identity part that was really good.
    1. Yes, i was a GM of a craft-beer & wine distribution company for 8 years, National Sales & Marketing Director for 7 years and partner in a French Wine Importing company for 6 years. So I know the industry on multi-tiers.
    2. The ” problem” is who is responsible for the products market demand? Supplier or Wholesaler. My opinion the supplier, not the wholesaler. But some suppliers, like noted by Bill, will lay the sales problems at the feet of the distributor. I wonder if Steve Jobs would lay poor sales performance at the feet of there distributors. ACCOUNTABILITY.
    3. Yes some distributors have made a lot of money and they bought power. But many distributor ventures have fail. Especially portfolios that are wine-only because the inventory to sales ratio is too high. Now I work with David Milligan former co-founder & president of Chateau & Estate Seagram’s. He knows a few things about portfolio cash flow analysis that he taught me over the years.
    In 2005 our distributorship was 95% wine sales, at that time our accounts payable was exceeding 90 days for over 80% of our suppliers. By dramatically changing our portfolio we reduce our payable’s to under 30 days in 1 year. That is the power of sales to inventory turnover rate.

    4. Would self-distribution work? This model would never work because it violates 2 very import rules of a service industry business, time and convenience. This model sounds great from a supplier viewpoint but not from an on-premise or off-premise account bases.
    5. I believe you did not take psychology 101 in collage? Because you would understand the term self-identity. Which has nothing to do with help in product selection. It has to do with WHY people consume products.
    6. An industrial psychologist would not be needed but a consumer psychologist or a neurobiologist would, one that possesses clear understanding of the consumer’s decision making process. If one knows how decisions are made they then can drive or change human behavior. Causing consumers to select your brand over all others, I think they call that brand loyalty. Free markets do work that is why there are so many buy-outs, death is good because it spurs additional growth.
    7. ( you will not understand this but bare with me) They will never construct a meaningful-differentiated brand if they believe their product is there brand, if their dimensions of differentiation are driven with product facts. They will continue to participate in the wine mutual fund, always facing high competition and low loyalty rates. All industries are highly competitive today but certain brands succeed and it’s not do to the uniqueness of the physical product. I think they call it brand equity, not product equity.
    8. Distributors would love and cheer any winery properly managing their brand, but they have no brand, they are selling products. Thus transferring brand-relationship power away from themselves to the distributor and their sales representative.
    They are able to take you by your cojohnes because you have failed to construct a meaningful-differentiated brand that supports consumers inner & social self-identities.

    • Steve - November 5, 2015

      Good reply.
      Winery folks always have hope that if they produce it, people will come. I do agree that boutique folks (whatever that size cut-off is) slap the boutique moniker on the label, apply a cute label and pray for rain and call it branding. The sheer number of varietals, vintages, and wineries in the world with different nomenclature’s, AVA’s etc. makes branding seem difficult. I have a good friend that does sales work for a very large sonoma wine producer group and from conversations it seems also that costs can easily get away from producers. That is a killer in any business. Take a guy like Bill Frick, a small producer that is creative and puts his heart into a fine group of products has built a brand slowly but steady and I buy his wine because he is up front with his consumer. It is not unheard of him to call you out of the blue to ask what your opinion of a new wine he produced.
      Oh, well I were so smart I would be better looking, have more hair and not be pissed off because wine is too damn expensive. Maybe that is God’s way of protecting our livers. Also, tell Wark his math problems are getting to complicated.

  • Edward Donegan - November 6, 2015

    Steve, thanks for the reply.
    Your right, they truly believe it is branding but it is not. In fact the “branding” methods now being implemented by the industry are identical to the cigarette industry in the 1800’s. But there are vast fields of opportunities for wineries to still create a meaningful-differentiate brands, because no one else has.

    Concerning the cost, in 2000 I met with the CFO of Robert Mondavi, he stated they were spending 8% of Gross Revenues in rebates to distributors ,to move supply through the marketplace. So proper branding of your products are offset by the reduction in price discount. For every transaction are brains conduct the “emotional-brain must be satisfied for the transaction to take place. The producer can either satisfy the E_brain using discounts or through the emotional element of the brand. Now the emotional element is not related to the physical product in anyway .Branding is actual a bottom line cost reducer.
    Enjoy the weekend and Roll Tide

  • Steve - November 6, 2015

    If Tom Wark were running a newspaper the ink bill here would bankrupt a wealthy wine expert like him. After this e-mail I will destroy any thing relating to this subject from Wark’s blog, it is killing me.
    Price, Place, Product and Promotion and the last one I forgot.
    Without a product differentiator, branding is somewhat more complicated. If you can’t baffle them with BS, Dazzle them with intellect. Further, if a person tries a product/brand and does not like it the brand value is moot. For example, I like a Zin by a producer in Lodi. I do not know the name and I frankly look for the color of a label on the shelf. If I grow to not like the aroma’s or taste (because of vintage change or taste)-good bye. I do not know what other wines they produce and do not care. Viognier-I will go to Frick because I like him and his humble swagger. Point being?-Branding to me is a varietal I like at that fleeting moment, price, label identifiers (visual) and recommendations from a friend. Too many wineries today deal in selling the sizzle and not the steak. Arrogance reigns supreme in Napa and Sonoma and now “sustainable” is part of the new branding approach. If it adds any $’s to the price then let let the wind blow your hair back.
    I like the story I just read about Michael Mondavi-hardworking, humble, good guy, risk taker, and committed. A brand is not the building or architecture, it is people who know the product and are proud of it. Every wine has it’s own pedigree and sells to a market segment and that segment is fickle with taste that change. Thank God for White Zin. because that started many younger people into more complex wines. Remember the First Miracle-Water to fine wine.

  • The Top Wine Stories of 2015 - Fermentation - December 2, 2015

    […] Middle Tier Consolidation In the span of a couple of weeks it was announced that Wirtz Distributing in Chicago would merge with Charmer-Sunbelt, while also reported that Southern Wine & Spirits would merge with Glazers. With these mergers […]

  • Matthew Fuchs - September 17, 2020

    I worked for the late Herman Merinoff for many years, when living back east…adore and miss him, i surely do! So, here’s some fresh insight on this tiring matter…
    The three teir system isn’t just “good”, per se, it’s necesasary for the betterment of our very souls. It’s crucial! An absolut must!!

  • Matthew fuchs - September 17, 2020

    C’mon now guys, the three teir system effing rocks! It’s where the actions at, and you darned well know it! It’s the fresh air we breath atop the highest peaks immaginable! Proud to have been part to it!
    Proud to have humbly served!

  • Matthew Fuchs - September 18, 2020

    I call your attention to exhibit A, and then perhaps you’ll see where i’m coming from, and why i’m just fine with every thing, hint ,hint…the three teir system.
    Exhibit A: an obituary artical in the NewYork Times, dated june 29th, 2006.
    Once upon a time a young man needed a hero, and found a god in wonderful, triumphant lieu.

  • Matthew Fuchs - September 18, 2020

    The three tier system ultimately and always prevails! Always! Time to get with the program, you guys. Time to not only admit defeat, but feel it’s scathing burn as well. And this, for the good of the industry and greater society in general!
    PS, you may fear you inevitable defeat at first, but don’t worry, it comes with the territory. Coping with ABSOLUT defeat, is, afterall, part to life!
    It’ll get better
    Promise.