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Hundreds of unique wines but few brands in US retail

200 brands offered by the five largest wine firms in the US. The top firms each contribute to an illusion of diverse ownership by offering dozens of brands, many of which do not clearly indicate the parent company on their label

In the supermarket you can find hundreds of types of wines, but a recent study by Philip Howard (Michigan State University) reveals that the wine industry is actually quite concentrated.
Researchers recorded more than 3,600 unique varieties of wine, and traced their relationships with more than 1,000 different firms.
Despite this incredible degree of choice on the shelves, wine sales are dominated by a much smaller number brands, and an even smaller number of firms.
This retail landscape is not as concentrated as beer and soft drinks, particularly at the brand level, as leading products in these categories (Bud Light, Coors Light, Coke, Pepsi, etc.), can be found at almost every store. In contrast, the only unique varieties of wine found in more than half the retailers in our inventory were Clos du Bois chardonnay (Constellation Brands) at 13 out of 20 stores, and Cavit pinot grigio (Cavit) at 11. Half of the stores carried the following six varieties:

Constellation Brands
- Blackstone merlot
- Ravenswood zinfandel
- Woodbridge chardonnay

E & J Gallo
- Apothic red
- Barefoot chardonnay
- Ecco Domani pinot grigio

The vast majority of varieties were far less common, with 72.8% recorded in only one store, and 87% in two or fewer stores.
The top firms each contribute to an illusion of diverse ownership by offering dozens of brands (and hundreds of varieties), many of which do not clearly indicate the parent company on their label. The graphic below, for example, shows some of the more than 200 brands offered by the five largest wine firms in the U.S



We found the illusion of diverse ownership to be strongest at chain drug stores. CVS and Rite Aid each offered more than one hundred unique varieties, but the majority were supplied by E. & J. Gallo or Constellation Brands, and fewer than 20 firms were represented on the shelves. It was weakest at local retailers with extensive wine selections. One wine shop we visited offered products from 446 different firms, and no firm represented more than 2.6% of the varieties.

Part of the reason wine remains far less concentrated at the brand level when compared to beer and soft drinks is that wine distributors do not usually stock the shelves directly, and stores have retained more control over their selections. Many retailers rely on “category captains,” or staff from beer and soft drink distributors (which carry products primarily from one producer) to plan the alignment of all of these beverages on their shelves.

Another reason for so many brand choices among the top firms is that wine has a much larger price range than other beverages. A single company may offer products in niches that range from inexpensive boxed wines on the bottom shelves, to $100+ bottles on the top shelves. Interestingly, Constellation Brands’ recent strategy to increase profitability is to focus on offering higher-priced, premium wines. This firm sold its lower-priced brands Almaden, Inglenook and Paul Masson to The Wine Group in 2008. Constellation also announced in June 2012 that it would be introducing more than 50 new brands and line extensions during the year.

Although it is not at the same level as the beer and soft drink industries (where two firms control approximately three-quarters of all sales in the U.S.), the wine industry is becoming more concentrated each year. A large number of acquisitions and mergers have taken place in the past decade, such as Constellation Brands acquisitions of Mondavi ($1.3 billion in 2004), Vincor ($1.3 billion in 2006) and Fortune Brands’ wine business ($885 million in 2007). Although choices remain abundant, particularly for those with access to non-chain retailers, it is increasingly difficult for consumers to recognize which companies they are supporting with their purchases.

by Graziano Alderighi
07 january 2013, World News > America

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