Why Can’t I Find Wines from Small Wineries in Big Stores?
Erin O'Reilly - Certified Specialist of Wine
Prohibition, America’s failed experiment to control alcohol consumption, officially ended in 1933. Repeal hinged on allowing each state to dictate its own liquor laws. No one could envision the bloated regulatory maze that would evolve over the ensuing century.
The Three-Tier System
Today, the US has something called the three-tier system; each tier plays a role in getting alcohol to market.
The first tier consists of the producers, or in this case the wineries, who make the alcohol.
The second tier are the wholesalers. They serve as middlemen who facilitate the movement of alcohol between the winery and the retail outlet where the wine is sold.
The third tier are the stores and restaurants who sell the wine to you.
In many states wineries cannot sell directly to retailers. Wholesalers cannot sell directly to consumers. To say that there are a few roadblocks between a favorite small winery and the corner market is an understatement.
The first tier is obvious to consumers: You know that wineries make wine. But let’s take a closer look at the roles of the middlemen and the grocery store.
How do wine wholesalers work?
Wholesalers fall into two general categories: distributors and brokers. Distributors have portfolios of wine brands, meaning they work with many different wineries simultaneously. Distributors purchase wine from the producer and physically take ownership of it in a warehouse. They have complete control over pricing decisions (including discounts) and sales outlets.
Large chain retail and restaurant businesses work with distributors to select suitable wines for a target market. After receiving an order, the distributor ships the wines from their warehouse.
Volume and pricing guide decisions with distributors. Most of the different brand labels you see on a chain store’s shelf come from the portfolios of a few major distributors. Small wineries that make a couple of thousand cases a year cannot produce the quantity needed to attract the attention of the large distributors servicing the big retail outlets.
Additionally, some wineries with sensitive pricing may choose not to work with a distributor. If a wine label gets discounted in a retail outlet well beyond the winery’s suggested retail price, that can compromise the brand’s value or potentially alienate wine club members.
How do wine brokers work?
Independent grocery stores, restaurants, and wine shops often work with brokers in addition to, or instead of, wine distributors. Wine brokers function as intermediaries between the winery and the sales outlet.
Brokers are independent sales agents who earn commission.
Like distributors, they can represent numerous wine labels at different quality and price points. Unlike distributors, brokers don’t take ownership of the wine. Instead, they orchestrate the sale. The winery receives an order and ships the wine directly to the restaurant or shop. This means that the winery retains control of pricing and placement.
These locations may sell one or two cases of a label each year, which is perfect in many instances for small wineries. The modest volume doesn’t compete with distributors.
Just to keep things interesting, every state in the US has its own variation on these rules. Wineries in California, for example, can sell directly to restaurants and stores. The Safeway grocery chain often works with brokers and a few wineries, in addition to the major distributors. But this isn’t the case for most large chains in most states.
How do grocery stores make money selling wine?
The third tier in the three-tier system includes the grocery stores where you may buy your wine. Grocery stores operate on razor thin margins of around 2.2%. Think of shelf space as real estate and every product taking up residency there is an opportunity for the store to boost its profit.
Low-cost producers that specialize in bulk wines use economies of scale to make cheaper wine with better profit margins, an attractive proposition for both corporations and stores. Some chains even offer advanced contracts to larger companies for a pre-determined quantity of product. This doesn’t leave much room for smaller wineries that cannot compete in volume or price.
In the end, there isn’t a lot of incentive for the store to carry a more expensive product that’s a hassle to source and will ultimately make them less money.
Where can I find boutique wines?
Browse the bottles at your independent liquor shop and grocery store where you’re more likely to find boutique producers. These venues often have knowledgeable staff eager to tell you about their wines, a personalized touch missing in big chain outlets. Understand that the shelf price includes the wine, the freight shipping costs, AND the profit margin, so you should expect to pay more than if you bought a bottle at the winery.
Of course, Gold Medal Wine Club specializes in curating fine wines for you directly from a wide variety of wineries, hand selecting small-lot producers that reflect their personal story of terroir and excellent value for price.
Not only can you sign up for any of their 6 wine memberships and get small-production wines delivered, you can also order from the Online Wine Store!
Author Bio: Erin O’Reilly, Certified Specialist of Wine, is a wine writer and educator. She pens her work from Monterey wine country where she raises a glass to the growers and producers crafting wines that transcend time.