How Did This All Start?

Since 1990, the number of American bonded wineries has tripled and total wine consumption has increased 32% to 670 million gallons. With at least one winery in each state, wine country tourism has helped to satisfy America’s growing interest in wine. But heightened tourism exposed weaknesses in wine distribution. In fact, only 17% of wineries are distributed nationally, and 54% of them were unable to find a wholesaler in states where they actively sought representation, according to a 2003 membership study by Wine Institute, a public policy trade association representing 900+ California wineries. Most wineries are small, family-owned and operated and direct-to-consumer sales offered them a pressure relief valve to satisfy consumer demand. And emerging wineries could “seed” new state markets prior to seeking broader distribution through a wholesaler, who had the infrastructure and sales teams to cost-effectively distribute wines to restaurants and retailers. But the middle wholesaler tier consolidated from more than 5,000 wholesaler companies in the 1970s to around 500 today, while the number of wines introduced each year is estimated to exceed 130,000ii. Wineries, wholesalers and consumers fit a classic “hourglass” shape, where the flow of products from producers is constricted in a narrowing middle tier before it gets to consumers. And the two ends – wineries and consumers – are growing in sheer number. Consumers in tasting rooms increasingly asked, “Where can I buy your wine?” The answer was frequently, “only here at the winery.”

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