Beer, Wine, and Spirits Distributorships
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Industry Overview
About 4,000 wholesalers distribute beer, wine, and liquor in the US, with combined annual revenue of about $90 billion. Large distributors include Southern Wine & Spirits, Glazer’s Distributors, and National Wine & Spirits. Most distributors are privately owned. The average beer distributor employs 40 and has annual sales of $13 million. The beer segment is highly fragmented: the largest 50 distributors hold about a third of the market. The wine and liquor segment is more concentrated: the top 50 companies hold more than 70 percent of the market.
Competitive Landscape
Demand for alcoholic beverages depends on demographics and income growth. The profitability of individual distributors depends largely on effective sales operations. Small companies can compete effectively by distributing specialty products. Large companies often hold exclusive distribution rights in large markets. Average sales per employee are more than $800,000 for large companies, over $300,000 for medium-sized companies.
Products, Operations & Technology
Distributors tend to specialize in either beer or wine and spirits (hard liquor), but some handle both. About half of industry revenue comes from the sale of beer, 30 percent from liquor, and 20 percent from wine.
Most alcoholic beverages sold in the US move through a three-tier distribution system: from producers or importers to distributors, and then to retailers. State laws generally prohibit producers from owning retailers, but producers are allowed to own distributors, and some distributors are allowed to own retailers.
Some states, called license states, have a privately operated and regulated three-tier system for the supply of alcohol. The basic system prohibits makers of distilled spirits, wine, and beer from selling directly to retailers or consumers, requiring them instead to sell to wholesalers that collect taxes and supply retailers. Eighteen states are control states, which essentially are state-run systems.
The distributor industry buys from a variety of US producers: about 2,300 commercial wineries, 500 brewers, 1,410 microbrewers, and 50 liquor distillers. A few large producers dominate, such as Anheuser-Busch, Miller Brewing, Molson Coors, E&J Gallo, Constellation Brands, and the Wine Group. Major importers include Grupo Modelo, Heineken, Molson Coors, and Diageo. For the last decade, annual per capita consumption of alcohol has remained flat at around 22 gallons of beer, 2 gallons of wine, and 1 gallon of hard liquor.
Beer and wine distributors generally have contracts with producers giving them exclusive distribution rights to certain products within a certain market area, if they don’t carry competing brands. Exclusive territories are the dominant form of distribution, followed by a system of area of primary responsibility (APR). In many markets, for example, one distributor will carry Budweiser while another will carry Miller beer. Some distributor territories cover several states and overlap with those of other distributors; however, most territories are smaller, spanning several counties. Anheuser-Busch has about 700 distributors, Miller about 530, Coors about 550, and Constellation about 1,000.
A distributor typically owns one or several warehouses, a large inventory, and a truck fleet. Some distributors maintain a truck service center with full-time mechanics. Sophisticated computer systems are used to order, track, and distribute hundreds of products, sometimes in small quantities, to hundreds or thousands of retailers. Most beer wholesalers are independent companies operating from a single location with a fleet of 12 to 15 trucks.