Proposed legislation threatens the industry's distribution system and profit margins
New York, NY (PRWEB) April 17, 2014
The Wine and Spirits Wholesaling industry is a vital component of the supply chain for wine and spirits, and the past several years have given industry operators plenty of reason to celebrate. Under the three-tier alcohol-distribution system, industry wholesaling firms are required by federal law to play an intermediary role between the firms that bottle alcohol and the retailers that sell the product to customers. The three-tier system requires that producers sell alcoholic beverages to distributors, who can then sell them to retailers; of the three entities, only licensed retailers may sell directly to consumers. Since the end of Prohibition in 1933, this structure has prevented any form of wholesale bypass, a practice by which retailers integrate their supply chains and operate their own warehousing, stock management, transportation and relationships with producers. As a result, this industry's continued relevance is partly the result of federal law.
According to IBISWorld Industry Analyst Nick Petrillo, “Wine and spirits wholesalers are nevertheless quite vulnerable to sudden changes in consumer alcohol spending, a harsh reality that became apparent amid the recession.” Decreased consumer spending at the end of the previous decade caused many consumers to switch to low-margin value wine products or simply forgo alcohol spending altogether. Luckily, sales of wine and liquor held up in the years following the recession due to a strong trend among consumers to shift alcohol purchases away from beer and toward wine and liquor. Consequently, wholesaling revenue grew 2.3% per year on average during the five years to 2014. As the US economy continues to strengthen, revenue is expected to rebound an additional 2.6% to $90.3 billion in 2014.
Industry revenue is forecast to increase steadily during the five years to 2019. “The industry's largest firms will continue to merge in response to producer and retailer consolidation, while smaller firms will likely increase overall emphasis on regionally based craft spirits,” says Petrillo. Going forward, there is a looming concern among industry firms that the three-tier distribution system may be subject to deregulation. As online direct-to-consumer wine sales have become increasingly popular, external competition and continuing attempts to reform the nature of alcohol distribution will threaten the industry's protected status, presenting a considerable concern for the industry going forward.
For more information, visit IBISWorld’s Wine & Spirits Wholesaling in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
Operators in the Wine & Spirits Wholesaling industry primarily buy and resell wine, distilled alcoholic beverages and ethyl alcohol used in blended wines and distilled liquors. Industry products are purchased from manufacturers and resold and distributed to retailers.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.