As Their Mainstream Brands Struggle,

Beer Wholesalers Turn To Spirits And

Wine

Earlier this year, Constellation Brands made news with its move to transition its wine and spirits brands from Young’s Market Co. to Columbia Distributing in the Pacific Northwest. While Constellation’s decision to consolidate across wine, beer, and spirits with Columbia came as something of a surprise, there may be more such deals ahead, as beer wholesalers look to diversify their revenue streams with the better-performing wine and spirits categories.

Columbia Distributing already handled Constellation’s beer brands—which include Corona, Modelo Especial, Ballast Point, and others—and it added the spirits and wine portfolio in June. The agreement covers both Washington and Oregon. While Portland-based Columbia previously had a shared-services agreement with Young’s to warehouse and deliver wine and spirits, it had no wine and spirits sales structure. The expanded agreement for more than 2 million cases of Constellation’s wine and spirits “provided a new opportunity to take on wine and spirits directly,” explains Chris Steffanci, Columbia’s president and CEO. “We’re increasingly selling across categories, because more and more consumers are drinking that way,” he says. “Retailers need to offer the variety to meet that demand. It makes sense to be a one-stop shop for retailers.”

Chris Stenzel, president of Constellation Brands’ wine and spirits division, also sees consumer consumption patterns as drivers of the Northwest move, noting, “55% of total beverage alcohol dollars are spent by consumers who drink across all three categories.” In determining the best route to market, Constellation looks for “coverage and capabilities” that properly address the supplier’s diverse portfolio, he says. “We have products that sell in convenience stores, brands that are in fine wine shops and high-end restaurants, and everything in-between. We found Columbia was best equipped in the Pacific Northwest for our wine and spirits business, and they happened to be our beer distributor.” Overall, Stenzel sees opportunity for beer distributors to help grow wine sales in some trade channels where they excel, such as convenience stores and the on-premise.

Steffanci says the move was a big investment for Columbia—which is owned by the Meritage Group, a private equity firm. It included compensating Young’s for the rights to the spirits brands in Washington, along with scaling a sales staff. He says the biggest challenge so far has been “understanding the breadth of the wine and spirits portfolio.” But the company remains undeterred. “We’re involved in dialogue with other wine and spirits suppliers, with a particular focus on spirits. We’re hoping to secure large spirits partners in the next few months,” Steffanci says.

Columbia isn’t the only beer wholesaler interested in tapping into wine and spirits. “As suppliers diversify, distributors are too,” notes Craig Purser, president and CEO of the National Beer Wholesalers Association (NBWA). “It’s about the right product mix.” Pointing to the dramatic “concentration” of wine and spirits wholesalers today, Purser says some beer wholesalers have found “a huge opportunity to fill their market with new products, such as lower-alcohol spirits and small wine brands.”

“For the last 15-20 years, there’s been a big wave of wholesaler consolidation,” adds Joe Thompson, president of industry consultancy Independent Beverage Group. “That’s taken costs out of the system, and a more efficient mega-distributor has emerged.” Now those distributors are seeking continued growth through diversification. “Expanding their distribution business into other categories, including wine, spirits, and non-alcoholic beverages, makes sense,” Thompson says.

Texas Vodka Western Son Boosts Capacity Amid Rapid

Growth

Pilot Point, Texas-based vodka brand Western Son, an Impact “Hot Prospect,” has broken ground on a new expansion of its distillery, with an eye toward keeping pace with rising demand and upgrading its tourism facilities. Western Son co-founder and CEO John Strait tells SND the distillery’s capacity will rise to 750,000 cases via the $3 million investment.

Western Son’s expansion will also include an enlarged tasting room and event space that can hold up to 300 people, complementing its existing outdoor venue. Carlos Guillem, the company’s COO, noted that the distillery hosted 20,000 people last year and could double that total in 2019.

Western Son is vying to become the third Texas-based vodka to transcend its local presence and make an imprint on the national market, following Tito’s and Deep Eddy. According to Impact Databank, the brand rose from 17,000 cases in 2015 to 100,000 cases in 2017, and it has continued on a strong upward trajectory this year.

News Briefs:

•Bermuda-based Goslings rum has introduced a new single barrel expression. Goslings Papa Seal Single Barrel Bermuda rum was aged for over 15 years in Bourbon barrels, is at 41.5% abv, and retails at $199 a 750-ml. Each bottle features the barrel number, bottle number, and bottling date handwritten on its label. The luxury offering is rolling out to select retailers in the U.S. in a supply of 2,592 bottles. The Goslings range, part of the Castle Brands portfolio, also includes Black Seal, Gold Seal, 151 Proof Black Seal, and Family Reserve Old rums.

•Vineyard Brands is debuting a new South African wine label, Lievland Vineyards. A new project from South Africa’s Man Family Wines, Lievland will launch three wines nationally in October: Old Vines Chenin Blanc, Bushvine Pinotage, and Cabernet Sauvignon (all $19 a 750-ml.) Man Family partners José Conde and brothers Tyrrel and Philip Myburgh acquired the Lievland estate, located on the northwestern slope of Simonsberg Mountain between Stellenbosch and Paarl, in 2017.

•Rémy-Cointreau’s Mount Gay Rum has launched XO The Peat Smoke Expression, a new rum finished in Islay Scotch barrels. The 57%-abv spirit is aged between eight and 15 years before blending and finishing for six months in peated whisky barrels. The cask strength release will retail for a suggested price of $250. Only 6,120 bottles will be available worldwide, with 1,200 allocated to the U.S. market. Last year, Mount Gay depleted 176,000 cases in the U.S. market, according to Impact Databank.

•Justin Vineyards & Winery has opened a new tasting room in downtown Paso Robles. Open seven days a week, the new space features a wine-tasting bar, lounge, and a full dining room offering rotating a la carte items and seasonal pairing flights. The new tasting room joins Justin’s existing Paso Robles estate, which includes its own tasting room, inn, and restaurant. Justin, a subsidiary of The Wonderful Company, is known for its Isosceles Bordeaux-style blend. The Justin brand was up 25% to 250,000 cases last year, according to Impact Databank.

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