Six US wine retailers worth watching

db highlights the key US wine retailers worth watching over the next few years for their ability to drive change and disrupt the US retail market.

The US retail market is one of the largest in the world, and one that is growing, providing great opportunities for producers and retailers. However, it is also one of the more complex markets, thanks to its history and regulation rooted in Prohibition, which is controlled by alcohol license regulators on a state-by-state basis. But some retailers have challenged this status quo through the courts to liberalise and modernise controls in some states, and competition is beginning to increase, with savvy retailers winning with exclusive wine ranges and creative merchandising that appeals to the US consumers’ expanding wine knowledge.

Although the largest wine retailers in the US remain the major grocers, Kroger and Albertson’s, warehouse club Costco, which sells a lot of more premium wine, quasi-national wine specialists such as Total Wine and More, BevMo, and Walmart, there is potential for change in the US retail system, and a number of disruptive players have emerged on the scene, both new and existing. The following list highlights the key retailers worth watching over the next few years, as chosen by analysts and wine producers to reflect the retailers considered most likely to drive change and provide disruption in the US market over the coming years…

Please see the August issue of The Drinks Business for an appraisal of the US retail market, or click here.

Total Wine­ & More

One of the specialists wine stores, Total Wine has 162 superstores in 20 states across the country, and is noted for being a good business model, with the ambition to expand to 200 stores by 2018. Its mix includes a lot of own-label and exclusive wines that are bought direct, which shows they have “grasped the opportunity to build their own margin and cut out some of the more convoluted elements of the US supply chain”, says Wine Intelligence’s Richard Halstead.

Trader Joe’s

“Very well run and professional, with a good offer,” is the verdict of the analysts on California-based Trader Joe’s, another retailer at the forefront of exclusive wine sales. Owned by German company Aldi Nord (which was divided from sister company Aldi Süd, which operates Aldi in the US and UK, in the 1960s), it comprises 465 stores in 41 states. “They are looking at sourcing more and eventually having a system in place that can get through the hoops that the US’s three-tier distribution systems demands through long standing relationships with a small group of distributors,” one analyst noted.

Publix

Publix is the largest employee-owned company in the US. It is known for its weekly ‘buy one, get one free deals’ and boasts an extensive wine selection that not only champions local produce in its stores but offers wine tastings and samples of food at special events in store. The grocery chain has recently expanded into its seventh state.

Aldi

Aldi US plans big store expansion

Aldi is already in more than 1,500 locations in 30 states – mainly in the Northeast, Midwest and South, but last month it announced ambitious growth plans to add 900 stores to its estate over the next five years. Wine is a hero in the range, as it is in the UK, and it has recently revamped its format with new wine fixtures that bring the range closer to the front of the store. It also actively promotes its award-winning credentials.

Lidl US

Lidl US Store Exterior [Image: Lidl US]A late entrant to the US market, Lidl only opened the doors of its first stores in June, centred around Virginia, North and South Carolina, but with the promise of more stores to follow. Bearing in mind the success the German discounter has enjoyed in the UK with its bi-monthly Wine Cellar promotions, it’s not unreasonable to expect the retailer to make a big mark on the US retail scene. Beers, wines and spirits is headed by Adam Lapierre MW and offers a mix of mostly exclusive home-grown wines and classics from the Old World, firmly highlighting the US wine awards its wines have already won.

Amazon / Whole Foods Market

Opinion is divided on what impact of the Amazon/Whole Foods Market merger might have on the wine-retail scene, but what does seem certain is that the online giant’s acquisition of the natural and organic food retailer will put “other big-box stores on notice”, as one analyst said. Although Amazon dabbled unsuccessfully in wine several times before, it now appears to be serious about the category, while Whole Foods prides itself on its wine merchant credentials (in the stores where it can sell wine), which lie under the auspices of global wine buyers Doug Bell and Devon Broglie MS.

Online retail

Ok, so it’s kind of cheating to sneak this one in, but online is a huge area of growth potential just waiting to be tapped, a recent report by analysts Profitero reported.

Distant and online wine selling in the US has been fraught with difficulty for years, Richard Halstead of Wine Intelligence told db, pointing to the host of start-ups that have tried to crack the market, but disappeared after failing to unlock the value or profit from a large and complicated supply chain.

Stephen Rannekleiv, global beverages strategist atRaboResearch Food & Agribuisiness notes that Amazon, Wine.com, Ebay and a number of others are doing “a fantastic job of making wine more convenient and readily available”, and pushing bricks and mortar retailers to up their game within the confines that individual state laws permits.

However, as Bryan Gildenberg, chief knowledge office at Kantar Retail points out, the models that seem to be winning online are online ordering systems that can “ignore” a lot of the legal issues. Companies like Drizly, Vivino and Instacart, for example, work with local retailers and deliver wines to homes, providing a service that is much easier to operate and also helps local retailers thrive.

Meanwhile the recent acquisition of Whole Foods Market  by Amazon is bound to accelerate interest in the market, although Ignacio Izcue, export manager for the US market at CYT agrees, even though it is still too early to see how it will play out.

“As the line between off-line and online continue to merge, it is part of a reasonable evolution in the market as other retailers are dedicating substantial resources to their e-commerce platforms,” he said. “And the key behind all this will be to understand the shopper and the shopper experience. Today, that person has many choices and almost infinite information available on the cell phone, or tablet. So it will be very interesting to see what will happen next.”

Please see the August issue of The Drinks Business for an appraisal of the US retail market, or click here (subscriber access).