The Question of Survival

The question of survival constantly swirls around independent, fine-wine retailers, and plagues small wholesalers and brokers. It’s not just the horrid economy that threatens us. The wine retail market, for all it’s growth, has gotten exponentially competitive over the past ten years, with lots of new players, many of them very powerful. Costco, the largest retailer of wine in the US, with 3 billion in sales, is not the only player among the giants. Total Wine from the South-East is now encroaching in California having opened a number of stores in Southern California and Sacramento, and Safeway has thrown it’s considerable weight back into the fray with expanded selections and periodic 30% off sales.

Golden Rule Wine & Liquor Store (1934), 457 Hu...

Golden Rule Wine & Liquor Store (1934), 457 Hudson Street, Greenwich Village, New York, New York (Photo credit: lumierefl)

This has brought with it, a lot of hyper-competitive pricing practices, and these have all squeezed many independent retailer into a corner. The result is there are fewer customers due to increased competition for every dollar, lower margins on the most highly desirable wines, and now limited supplies of what have traditionally been bread and butter items. This created a niche market for small producers that aren’t found in the chains, and are not subject to the larger independent’s deep-discount marketing strategy. But this too has become fiercely competitive, with everyone fighting for the crumbs.

IT’S HARD OUT HERE FOR A (wine) PIMP

On the wholesale end, the competition is incredibly fierce. Worldwide improvements in winemaking has brought a huge influx in high quality imports to the market, many of which have received critical acclaim. This coupled with an explosion of domestic brands has  a demand for new small brokers and distributors.

But the new brokers and distributors selling so many wineries that are new to the market, there is little to no access to the big players in the retail industry. So there are more and more representatives pushing more and more wine on stores like mine, and many of them are going hungry.

I have a friend who started a small distributorship. He said “I started two years ago with $25,000 and now I have several hundred thousand in inventory. Things are selling: three hundred cases of this will blow out, and 200 cases of that, but I’m like, how come there’s no money?” Another friend, a broker, said “I’ve got some great wines I represent, but I need one big one that will keep the doors open.” He’s looking for that bread & butter brand.

 “One rep volunteers that he’s given it 9 months and he’s not making it.”

Today was another jam-packed day. I saw at least 10 vendors, all with different desperations.  Some were tasked with winery ride-withs, and were just needing places to take the winery sales manager, and kill-off the day. Others were really hungry. Many of these people I have good relationships with. I rely on them for my business, and they rely me for mine. To some degree, I need to at least show them a few minutes of my time.

I taste very quickly, and can turn through 3 reps with pouring 20 wines in a half an hour. I rarely have the luxury of time to take notes, other than mental ones. The store is very full with wine, so something really has to wow me to get my attention. Of the 50 or 60 wines I taste, I found a couple real contenders, and order only one of them, a delicious, small production Napa Valley Merlot that I have never heard of that I can retail for around $15. The rest I have to turn away empty handed.

One rep volunteers that he’s “given it 9 months” and he isn’t making it. “I know my wines are good, but there is so much competition.” he adds. I agree with him. I tell him that I have so many reps that call on me, and I want to help them all to make a living, but it just divides the pie into smaller and smaller pieces. We talk about the limited number of accounts that small vendors have access to. They can’t just walk into Costco or Safeway or Total Wine, and get an appointment. So they all come to us. The fact is, we just don’t have the space or business to support them all.  I have often wondered how these small vendors can possibly make enough money to live. The answer is sometimes they can’t.

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