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Total Wine & More Sharpens Focus on Winery Direct

wholesalers clearing wine for reduced margins enables retailer to sell wines from smaller producers more profitably
by Cyril Penn
March 22, 2018

Total Wine, the largest family owned wine retailer in the United States with 174 stores and roughly $1.4 billion in wine sales - the fourth largest wine retailer in the country after Costco, Albertsons/Safeway, and Kroger - is sharpening its focus on winery direct sales – with wholesalers clearing the wine at reduced margins, enabling the retailer to sell wines from smaller producers more profitably and at relatively low prices.

“It’s common sense. It allows great products to get to consumers at a reasonable price at a margin where the retailer can then invest in the brands,” Robert Trone, co-founder and co-owner of Total Wine said.

”We believe Total Wine can be a better partner with more wineries throughout the world and with smaller wineries especially, and that we have common interests. The brand equity becomes shared between the winery and the retailer.”

In a keynote speech at the WiVi Central Coast Tradeshow in Paso Robles, Trone said the model involves wholesalers clearing wines for “a dollar or two” per case instead of for a 25 percent margin, acting as a logistical partner rather than a brand builder. He said the program is a fit for wineries making as little as 2,000 to 5,000 cases and that Total Wine already works with some 600 wineries around the world this way.

“As the wholesalers become consolidated, their ability to handle new projects, new wineries, and new brands, is going to become more and more focused on the big wineries," he said, “Less focused on family-owned individual wineries. That’s just common sense."

Trone said his business is about getting more customers in the door and making more money through higher sales or higher margins.

One way Total Wine has done this is by emphasizing private labels where the retailer owns the brand, a model other major retailers have also pursued, with the retailer owning the brand and the producer becoming a manufacturer – not a brand builder.

In the winery direct model, however, brand equity is shared between the producer and the retailer. Trone said it can be a good fit for wineries that sell direct to consumer through the tasting room and are looking to build additional volume.

“If it sells, everyone benefits, and a retailer can’t take it away from the winery because it’s their brand,” he  said.

“It allows great products to get to consumers at a reasonable price at a margin where the retailer can then invest in the brands. That’s the key for us. We can invest in a brand if we make enough margin: Our staff gets excited, our customers get excited. We have the margin to put it on the floor and really grow that business.”

Trone emphasized that wine is key to Total Wine’s business, accounting for 46 percent of sales, compared to 33 percent for spirits, and 16 percent for beer - and the margins for wine are higher.

Total Wine operates in 22 states and plans 210 stores by 2019 with the goal of reaching $4 billion in sales by 2021. Its largest markets are Florida, followed by Texas, New York, and perhaps surprisingly, Minnesota. 

Trone, visiting Paso Robles for the first time in twelve years, also outlined some current wine sales trends he’s seeing at Total Wine:

Volume Growth is Slowing: Trone said the 3-to-4 percent case volume growth he’s seen in recent years has slowed to about one percent and he called it “a little bit of an alarming trend.”

Premiumization: Total Wine, on average, sells wines for roughly $15 per bottle, and does well with high-end wines and imports. Trone said pricing hasn’t increased on most brands for five years but that consumers are increasingly willing to try new brands at slightly higher prices. He said nearly 10 percent of Total Wines’ wine sales are at more than $50 per bottle.

Cabernet Sauvignon Rising: Total is more weighted toward Cabernet than other retailers. At the above $20 price-point, Cabernet leads, followed by French Champagne and wines from Bordeaux. Trone said Cabernet is growing very fast and that the average price point for Cabernet is going up slightly. He said he sees tremendous upside potential for Paso Robles Cabernet.

Chardonnay Stalls: Trone said Total is seeing no growth in Chardonnay and that some markets are experiencing negative growth on Chardonnay case-wise, though there’s some price premiumization with Chardonnay.

Pinot Noir Stalls: Trone said he is seeing some case volume reductions on Pinot Noir though prices are still rising.

Red Blends: Trone said red blends are “still on fire," but that he sees no premiumization of red blends, that they are "stuck" at $8.99 or $9.99 price point.

Sauvignon Blanc’s Rapid Growth: Trone said Sauvignon Blanc continues to grow rapidly. “I thought New Zealand Sauvignon Blanc wave would be over but we really saw a lot of new Sauvignon Blanc’s from New Zealand at lower price points – and customers really moving toward Savingon Blanc again with really no price inflation,” he said.

Zinfandel Outsells Merlot: Trone said Zinfandel has come up and is even outselling Merlot, which has continued to drop.

Dry Rose Zooms: Rose sales rose 50 percent in 2017 at Total Wine and another 50 percent in the last four months of 2018. Trone cautioned that prices will likely fall for Provance style roses with so many new producers coming on line.

Imported Rhones Not Growing: Total Wine “carries a ton” or Rhones but that the category is seeing little growth.

Italian Prosecco: Prosecco grew by 80 percent last year at Total Wine

Trying Cans: “I’m not sure if cans will work,” Trone said. “We’re trying a big push on cans this year and will see if cans will work. We really haven’t had any success in cans so far. Our sales have been incredibly small, but that said we should try it.”

Home Delivery: With Amazon’s acquisition of Whole Foods, a decline in grocery store traffic, and the rise of delivery apps such as Drizly, there’s a rush to provide last mile delivery for wine, beer, and spirits. What will Total Wine look like in ten years as the store paradigm and the delivery paradigms change? Trone said Total Wine is working on last mile delivery and will be rolling out same day delivery starting with San Francisco, adding, “We think it’s going to be huge part of our business – whether it’s 10 or 30 percent – nobody knows."

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