Chain stores are biggest movers of wine these days

Specialty shops forced to compete with giants
2012-09-29T22:50:00Z 2012-09-29T23:46:48Z Chain stores are biggest movers of wine these daysHOWARD YUNE Napa Valley Register
September 29, 2012 10:50 pm  • 

More than ever, your local “wine shop” is likely to be the supermarket — or even the drugstore.

Once mostly the preserve of specialist retailers, wine is an increasing target for chain retailers seeking new ways to lure visitors to stay and shop more, wine industry specialists said this week at Napa’s annual Wine Industry Financial Symposium.

Three of the top four wine sellers in the U.S. are now general-purpose food or retail companies, according to Robert Trone, co-founder of the only specialty wine chain in that group, Total Wines & More. Warehouse-store giant Costco moves the most wine by dollar value, a projected $980 million this year, while Trader Joe’s is second and Whole Foods Market fourth, he told winemakers and audience members at the Napa Valley Marriott.

The challenge to producers and specialty sellers will be to prevent wine from becoming such a commodity as to erode profits if it’s sold at some retailers for less money, said Trone, who launched Total Wines in 1991 with his brother David.

“We don’t want it to become the electronics business, where there’s just no profit margin anymore,” he told the wine symposium audience Tuesday.

A declining profit margin in other food and beverage segments has made wine an increasingly attractive target to national grocery and drugstore companies, according to Danny Brager, a wine industry analyst for the Nielsen Co.

Brager reported sales growth and increasing shelf space at nearly all levels of U.S. retailing, from high-end grocers like Whole Foods down to discounters like Target and the Walgreens pharmacy chain.

Further giving a leg up to chain stores with plentiful display space is the steady expansion of brands, varieties and winemaking countries available in the U.S. market, said Bill Cascio, director of winery relations for Glazer’s, a wine and liquor distributor in 14 states.

Along with ever-rising sales for wines from Australia, South America and other nations, he told the symposium audience, existing brands and traditional varieties are being extended to cover ever-changing tastes — producing pink moscato, orange-infused chardonnay and other former novelties.

One company battling the takeover by groceries and variety stores is Total Wine & More, which has expanded to 88 branches in a dozen states. At the Napa symposium, Trone, the chain’s co-founder, attributed the company’s success to providing more than shelf space, describing his goal as the creation of showcases he called “the Barnes & Noble of wine.”

Breaking from the mold of storefront-size independent shops, the Maryland-based chain operates branches that spread wines and spirits across 20,000 or more square feet. Comparing the layout of its shops to the interiors of Whole Food stores — one of Total Wine’s biggest rivals — Trone pointed to a wide variety of stock, and an emphasis on tastings and special events, as the way for specialists to hold their own.

In Napa, the surge of chain retailing into the wine business contributed to the city’s largest specialty shop, JV Wine & Spirits, shutting its doors in May.

The wine emporium at Silverado Trail and First Street had reported declining sales since the Great Recession began half a decade ago, and JV Wine’s owner, Chris Vallerga Burns, also pointed to an erosion of sales as Trader Joe’s and Whole Foods opened Napa branches and other retailers added more shelf space for wine.

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(6) Comments

  1. chunk215
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    chunk215 - September 30, 2012 1:22 am
    You can get good wine for under $10 so why pay more than that? I'm surprised that there's wine sold for more than ten bucks. Conspiracy I say
  2. napablogger
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    napablogger - September 30, 2012 9:18 am
    chunk, when you pay that little all the profit is squeezed out of it, as the article says. All these big chains are destroying the economy by lowering prices so much that all the profit that is left trickles up to a few uber wealthy and all the middle class people who depend on the business get lower and lower wages.

    We have a real problem with our economy, we are heading in the wrong direction. Eventually the middle class will be squeezed so much that it will hurt the wealthy at the top who own all these internationial chains and conglomerates that we all depend on. You can't make money if your customers don't have jobs or jobs that pay subsistence wages.
  3. napa1957
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    napa1957 - September 30, 2012 12:41 pm
    We relinquished membership in a wine club that we have been members of for over 10 years. I find I can purchase my two favorites at a local grocery (not costco) store for less than my "membership discount" when purchasing at the winery. I no longer have to pay for wines that are not my favorite that are part of the club "shipment".
  4. vocal-de-local
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    vocal-de-local - October 01, 2012 11:52 am
    Excellent comment NB.

    The middle class could diminish to the point of non existence if we're not careful. Only large corporations with bulk purchasing power will stay in business to cater to those who do not have the resources to purchase more expensive wines. Small wineries could go out of business if they do not have bulk capacity.

    There's a price to pay for cheaper and cheaper everything.

    Money carried over from a period of time when we had a stronger middle class will make it appear as though everything is just fine (for about ten years). The problem will not be visible for awhile and people will be in denial. After that, we're looking at serious collapse unless we take action to change our economic system.

    Are we going to be comfortable bequeathing to our children a country which became so cheap (selling out to big corporations whose merchandise is primarily outsourced), that we end out with a multitude of poor and a few filthy rich corporations?
  5. Z
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    Z - October 01, 2012 3:22 pm
    You all are missing the reality of "competitive markets" and efficient pricing - that the Adam Smith model of "laisse faire" economic freedom (allowing markets to competitively price products) is the cornerstone of American commerce. Sure it sucks to be making horse-drawn buggies when Henry Ford introduced the Model T, but that's the American way. Likewise with wine retailing - the Costco's of the world have figured out efficient display and distribution to allow 12% margins - and consumers love it. Those who want advice and direction will visit their specialty retailers and pay for the service or detailed selection. Those who don't need it will drink better wine at a lower price. With all the market infomration (or misinformation) available today, it is a different playing field on so many levels.
    Wine clubs are rapidly evolving as well - if they don't offer unique value to their members, adios. This marketplace is never static, always challenging...

  6. ChrisPruett
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    ChrisPruett - June 11, 2014 3:17 am
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