August 12 2008
Dateline: August 12, 2008
Today will go down in the wine industry annals as turning point in the wine industry, a day of reckoning, an inflection point for the future of the business. Many might liken it to a day of great tragedy, yet others will view it as a day of triumph. If that sounds like war, with winners and losers, perhaps that is apt; great tragedy for one always creates hope for another.
Southern Wine & Spirits and Glazers, two of the largest distributors nationally, have merged, creating a new class—a super-tier of national wine distribution.
Friends, if you’re a small distributor, winery, retail shop owner or passionate wine enthusiast, today is your Independence day, your day of freedom.
It is simple. A merger of this kind will take at least two years to sort out, with untold collateral damage to employees and customers. Am I grave dancing? Not at all. I am, however, looking at the big picture and realize that a gaping hole has been created in the market, the kind of hole that does not gently request to be filled, but demands to be filled by smaller, middle-tier distributors who have just been handed a gift—a gift of certain growth. With this growth comes greater opportunity for wine shops, which cascades to greater opportunity for consumers, not to mention the robust development that this will yield in the growing online channel for brands seeking an outlet.
1) mega-mergers almost never work based on a) culture b) poor execution in integration c) ego
2) When Sr. leadership makes decisions based on creating value for stakeholders who are not ultimately a customer it is a mistake of colossal proportions.
3) Innovation always, always occurs at small companies and incremental, leveraged gain occurs at large companies
Simply, this merger is not about wine, it is about dollars, supply-chain and logistics.
Pure and simple. This is not about wine. It could be television sets or dairy. It is about moving product from here to there.
This reality from the perspective of a box pusher begets opportunity for those that have customers, real customer relationships.
Large distributors think it’s about logistics and delivery to their customer, but it’s also about relationships and most large distributors treat their sales people like disposable goods and this mega merger is going to cause roils of panic at the rep. level.
All the better for others who can pick up the pieces.
Read the excerpted quotes at Wine & Spirits Daily and tell me where you find a quote about delivering value to the customer. Sure lip service is given to the retail tier, but at the end of the day, it is about wringing more profit from large brands to large retailers.
Much has been made of the consolidation wave and the growth of larger wine concerns, but has Fosters taught us anything? Brand management on a large scale is very difficult to do successfully and represents such a small percentage of the number of wine brands in the U.S.
If I am a small winery, a small distributor, a small retailer, I am making a bet on growth and doing so by providing value where value has just been distracted—from the small retailer and the ultimate end-user, the consumer.
Is today a great day for wine? For many, it will be, and I am not talking about the silver-tongued, gold-pocketed execs at the new mega-distributor.
*Ed Note* For a good contrarian read to the “World is Flat” try “Small-Mart Revolution” by Michael H. Shuman
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