Sunday, February 3, 2013

News: Big Bud Gets Denied and My Extrapolations

By now a lot of you have read about this, but in a definite reversal of fortune (and industry trend), the giant, all-devouring beer octopus known as ABInBev has had its planned purchase of Mexico's Grupo Modelo denied by the Justice Department.  Invoking anti-trust and monopoly arguments, the DoJ felt that another huge acquisition by ABInBev would grant an even larger share of the domestic beer market to the biggest boy on the block.

This is a good article that lays out what this means for the beer world:
And if that's a bit technical for you, there's a great movie called Beer Wars that explains the broader picture of what this type of consolidation in the beer market means for both consumers and producers. 

Two major considerations as this relates to the wine world

A) What is curious to me are the parallels and implications  for the wine industry.   Will we see this kind of consolidation among wine producers?  To some extent, we already do, with a few companies that a have a vast umbrella under which many, many brands operate.   While nobody has the kind of market share enjoyed by ABInBEv, there is a bit of a squeezing effect on smaller producers. 

B)The other question revolves around the homogenization of wine styles.  While the wine world presently enjoys the greatest democratization of knowledge and technology in the history of humankind (regarding both vineyard management and enological technique), what is being lost?  Thanks to international air travel, globetrotting wine consultants, world class enological programs at universities all over the planet and the attendant advanced understanding of grape biology and wine chemistry, wine regions all around the world are able to produce amazing products, and often at very reasonable price points.  It quite literally is the best time in history to be drinking wine.   But, the question is begged, are they all beginning to taste the same?

Will the wine industry ever see the type of consolidation and control that has become the norm for the beer industry?  And will a "dumbing down" of flavor profiles be the inevitable result of such an acquisitive conglomeration?

Will wineries (big and small) seeking market share pursue a strategy of making wines geared to a specific flavor profile in an attempt to appeal to the broadest possible cross section of consumers?  Do we face a future of endless variations of Menage A Trois and Apothic red?  Where all high end reds are made in a style geared to attract high scores from He Who Must Not Be Named?

And what does this mean for a wine retailer?  Are those retailers who seek unique wines putting themselves at a disadvantage by not stocking the mass-appeal wines so common to the aisles of the supermarkets and beverage superstores?

I believe that the answer to all the above questions is a resounding YES.

But that doesn't mean that all hope is lost.  As we have seen with the craft beer revolution, which in the eyes of the statisticians only occupies a 6% chunk of the market, there is a quest for authenticity and craftsmanship that is driving a dedicated segment of consumers to fuel a renaissance of small and medium sized brewers in the USA, and even worldwide for that matter.  And that 6% market share is putting a real hurting on the Big 3 brewers;  some of their previous flagship brands are in serious trouble, and it is also forcing them to diversify their product lines, to manufacture beers in styles that previously had been the provenance of  craft brewers.  And the same is true with the huge wine conglomerates.  Even under their umbrellas, there is a tremendous diversity of wine, in price point, terriors, and flavor profiles.  And just because a winery is acquired by a large wine conglomerate, it doesn't necessarily mean that the production of that wine will radically change, the way the recipe for Beck's changed when it was acquired by ABInBev and production was moved to the USA.

I think that a phenomenon of tradition and uniqueness is, to a certain extent, already built in to the wine world.  The old world traditionalist bastions may make certain adaptations for the international market's preferences, but they are stubbornly bound by a degree of tradition that does not exist in, say, California , Chile or Argentina.   The modern "Dukes of Burgundy" have, for the most part, little interest in what may be currently fashionable.  They will make the wine in the methode ancienne, with some cursory nods to modernity.  While they may modernize their equipment,  they also seek to preserve the traditions of flavor and style that have made them a cultural treasure for France.  (The tradition of naked Frenchmen plunging into the fermenters to break up the caps may or may not still be employed, on a winery-by-winery basis). 

Likewise, these small, traditional producers, be they in Spain, Portugal, France, or Germany, BECAUSE of their uniqueness, will ALWAYS present a certain cachet for smaller importers and retailers, not to mention the upper crust of consumers.  The diversity of wine producers, even in an increasingly crowded and cowed market, ensures that like a hungry A&R music exec, there will always be a wine importer eager to bring the "next big thing" to market.  And trust me, an importer who finds that nugget in the river stands to make a decent living, and can use that as the cornerstone of a portfolio, bringing the rest of their book to market, riding on its coattails.

While the Big Brand grocery store/ superstore brands will always have a certain level of domination,  I think that in the wine world, the little guys have a decent shot, provided their production capacity can keep up with demand, and more importantly they can convince an importer or distributor to pimp their wares.   Fighting for shelf space however, may be a different story.  Without the advertising, promotional and quid pro quo muscle of the big boys, it will be difficult for them to get their products noticed and more importantly, promoted. 

Craft beers are, in my opinion, just really getting started.  I think that they are a model smaller vignerons should investigate.  In my market, our AB distributor struck distribution deals with small and medium sized craft brewers, something that would have been inconceivable a decade or two ago.  I think that smaller, more artisianal winemakers will always enjoy a certain share of the market.  It is hard to industrialize terroir, and retain what makes a hand-crafted wine stand out in the crowd.

I welcome your comments in the space below, as I know a lot of you have strong opinions on this subject.

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