“Over the next 24 months, all three tiers of the wine distribution system face a growing number of traditional and non-traditional competitors.”

Please view our just released report, Perfect Storm Part Four - Predicting Trends and Opportunities, which can be downloaded here. The full 13-page report, appearing in the October issue of  Practical Winery & Vineyards, concludes with the authors offering insights into seven winning strategies to leverage trends and overcome hurdles.

Over the next 24 months, we will see the following developments:

• Capital investments driving new marketing and distribution systems will continue to be slow, impeding innovation and limiting growth for smaller wine businesses.
• Polarization, more than a chasm between the large and the small, will increase as the U.S wine industry splits into two different distribution systems, driven by very different margins.

The authors put forward new predictions for the next 24 months regarding five interlocking dynamics that are game-changing to the wine industry: 1) globalization of supply and demand, 2) producer consolidation, 3) distributor consolidation, 4) retailer consolidation, and 5) U.S. market liberalization.

Figure 1 shows how these dynamics will continue to have a profound effect on all tiers of the U.S. wine industry and how key industry participants at every tier will need to develop new winning strategies.

Says co-author Hinman: “In 2011, the storm is brewing at near-tsunami level, and we maintain that by 2015 a very different industry from that of a decade ago will have emerged. The U.S. wine market is undergoing its most exciting and dynamic cycle in 30 years.

Figure 3 illustrates how billion-dollar producers will continue to align with the very large distribution companies, while small producers seek new or alternative marketing and distribution systems. The long-term impact of these shifts is dramatic on under 250,000-case wineries, especially small wineries with portfolios in the above $30 msrp/bottle categories.

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About the authors

A strategic and data driven marketing executive who leads teams, energizes and grows businesses, Deborah Steinthal is Managing Director of Napa-based Scion Advisors LLC, a leading business and strategy consulting firm with a proven approach that helps business leaders “get to the next stage” ― reposition to grow or prepare for exit. Achieving results across 100 companies and several industries, Scion Advisors comprises seasoned executives with established track records in the food and beverage industry and emphasis in the premium wine sector. For more information please see www.scionadvisors.com.

John Hinman, a wine industry veteran with 35 years of experience representing wineries, retailers, wholesalers, and importers, is a senior partner of the San Francisco alcoholic beverage industry law firm Hinman & Carmichael LLP. Suzanne DeGalan, a corporate, business, and intellectual property lawyer, is an associate at Hinman & Carmichael LLP. The firm specializes in 21st Amendment-specific law, alcoholic beverage licensing, marketing and distribution counseling, and the regulatory defense of alcoholic beverage industry members throughout the U.S. For more information please see  www.beveragelaw.com.