Thursday, October 15, 2009

Shake-Ups in the Wine Business

I apologize for this very business-related post since I think most of y'all probably don't give a fuck. But word on the street is Kermit Lynch Imports, the Berkeley-based importer of arguably the best Burgundies and Southwestern French wines in the country, has left the Henry Wine Group.

Henry Wine Group is one of the largest (if not the largest) California-exclusive wine distributor and s known for having the biggest selection of wines that good restaurants and retailers would actually carry. There are a few bigger multi-state companies, but they mostly carry prestige imports and mediocre mass-produced crap. Henry had the good shit or, at least, the decent shit.

But after having lost Italian powerhouse Winebow Imports last year and Kermit Lynch now (and Spanish oak-monger Jorge Ordonez teetering on the brink of departure), Henry Wine Group appears to be hurting bad.

"The economy" has damaged the wine business, but only kinda. It has damaged the companies that chased prestige wines like Bordeaux and California Cult Cabernets--they've seen their sales numbers plummet. Many of these companies left themselves with few inexpensive wines and the inexpensive wines that they have are so ubiquitous that restaurants and retailers who pride themselves on uniqueness and distinction aren't interested in them, leaving them for chain restaurants and hotels. Distributors who were already positioned for distinctive value are swooping in to take advantage.

Additionally, with better maneuverability, lower overhead, generally better customer service, and more distinction, mid-sized distributors can more easily weather the storm and many are even experiencing singificant growth. People are still going to drink they're just drinking differently. Margins are down but volume's up. They want value across the board.

In my cursory research for this article I stumbled upon Steve Heimoff's Wine Blog and this post in particular about the current financial instability of the wine business caught my attention. What struck me was this quote:

"What California brands will they buy? One clue to that is to see who’s hiring in the sales, marketing and finance areas at The Wine Group. Don Sebastiani & Sons. Henry Wine Group. Bronco. Gallo. Brands, in other words, that hope to be competitive in 2009’s tough economy."

Or maybe these companies are hiring because instability and uncertainty in the corporate structure has seen people leave and get re-organized. Long-time reps are moving to different companies or being forced out, opening up space for newer, cheaper employees. And in a business world where your sales staff is paid largely on commission, there's not a lot of financial risk in hiring more feet on the street as a last-ditch effort to improve sales. Hiring can be just as much a sign of instability, desperation, and flux as it can be a signifier of stability and growth. These could be brands that are doing whatever they can to hold on by the last shred of cotton in their ass cracks brought on by the wedgie that is 2009's tough economy.

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