Southern Grows

We talk a lot about tipping points in business school: the moments when you’ve won the market. The market seems to be trending towards a tip since the 2016 merger between Southern Wine and Spirits and Glazer.

Southern Glazer’s Wine and Spirits now distributes over 150 million cases of wine and spirits each year. With nearly 400,000 customers, they generate nearly $18 billion in revenue—representing over a third of the market value. Unicorns at a value of $1 billion are the talk of the town in Silicon Valley, but clearly there are other markets where growth isn’t slowing.

I’m curious about how suppliers and retailers feel about this huge conglomerate. On one hand, distribution in 44 states provides a huge potential value for producers, who can more easily garner access to new markets. Cutting out the quantity of middlemen in the process generally makes the system run more efficiently.

However, the challenges of working with such a large (21,000 person!) corporation are also obvious: retailers and suppliers have to deal with bureaucracy, inefficiency, and potentially less personalized service. Additionally, there’s a practice of big wholesalers predominantly pushing the large brands with deep pockets//huge advertising budgets, to the detriment of the smaller labels. As a result, it may prove challenging for a more boutique winery to work with Southern Glazer.

The merged company is so large that it has geographic divisions (Transatlantic, Coastal Pacific, etc) as well as vertical divisions (Fine Wines, Emerging Spirits Brands). The question becomes whether the whole is greater than the sum of its parts.

The rapid growth of SGWS brings into question the future of smaller distributors. I’m curious to see if anyone in today’s class presentations proposes any new distribution methods….