In 2008, Cyril Penn, the editor of Wine Business Monthly, wanted to make sense of the avalanche of winery mergers, sales, and acquisitions that had occurred over the past couple of years. He commissioned a two-page chart to run in the magazine that showed who had bought what and how the deals had rearranged the California winery landscape.
The chart was a mess.
Penn says with a laugh, “It was too complicated, a real spaghetti strand.” The chart never appeared in print again. It was so complicated, in fact, that when the magazine digitized its back issues, the chart was too difficult to convert for inclusion.
Those six or seven years of winery transactions that were so confusing as to be chart-proof were just the beginning. In the following years, rates of consolidation surged. The biggest multinational drinks companies threw huge sums of money into dealmaking, and then many surrendered even more money when they decided the wine business wasn’t worth the effort. Today, that same chart would be even less coherent.
Since 2008, the US wine business, which always tended toward top-heavy, has become even more so, with the biggest companies becoming even bigger through acquisitions. Today, the top 100 companies control almost 90% of US production, according to Wine Business Monthly figures. The top 10 account for almost 60%, and it was close to 80% before the current industry downturn. GALLO alone may produce one-quarter of every bottle of wine made in the US, and that figure has been as high as one-third.
Along the way, premiumization—the idea that consumers should “drink better” and buy more expensive wine, even if they’re drinking less—became as much a part of the industry as glass bottles and shelf talkers. According to some analysts, that wouldn’t have been possible without consolidation.
Michael Wangbickler, the president of Balzac Communications & Marketing, explains, “Mergers and acquisitions are nothing new to the wine business. But if you look at the way the wine business was then and the way it is today, you can see the difference.”
Internationally, co-ops have played an important role in many countries’ wine industries. These groups share profits with their growers, however, distinguishing them from the large wine brands that have been significant players in the US market. Even so, big companies have long been part of the American wine business. During the 19th-century wine boom, the California Wine Association (CWA), consisting of seven producers, was formed. By the end of the century, the CWA controlled 84% of the California wine business. It was so powerful that the federal government could have used the Sherman Antitrust Act to break it up. The wine historian Paul Lukacs wrote that the CWA focused on profit more than wine; its organizer, an Englishman named Percy Morgan, “did not much care who drank the wines, or what kind of wines they drank. His goal above all else was profit, and he clearly realized [that goal].”
Coca-Cola made its foray into wine in the mid-1970s, assembling what would become the second biggest producer in the country in an attempt to do for wine what it had done for soft drinks. It had some success, with double-digit sales growth and 6.3% of the market for domestic wines, second in the industry. Six years later, though, bothered that the profit margins for wine were just a fraction of what they were for soft drinks, and facing competition from the industry leader GALLO, Coke sold its wine company for roughly what it paid for the various pieces.
What happened at the beginning of the 21st century, however, was about more than a company or two stirring up the business—it was about the birth of big wine.
Jeffrey Bodington is the author of the 2024 study “Mergers & Acquisitions Among Wine Growers and Producers: Consolidation and Increasing Bargaining and Market Powers,” published by the American Association of Wine Economists. He explains, “When you talk about these kinds of deals, you’re not necessarily talking about the wineries involved or even the wines that are being made. You can’t just talk about the wines involved because every deal has a different mix. There are large chunks that go into what is being bought and sold, and they’re not always the same.”
Two deals are generally acknowledged as the first of this new era: GALLO’s 2002 acquisition of Louis Martini and Constellation Brands’s 2004 purchase of Robert Mondavi. In each case, the buyer wanted to add a premium product that it didn’t have in its portfolio, while the seller, facing family- and business-related problems, regarded a sale as a solution to those problems.
At the time, America’s wine industry was thriving. Between 2000 and 2018, US per-capita consumption increased by 50%, and total table wine consumption increased by more than one-third. By 2013, the US was the world’s biggest wine market by volume (though not per capita).
Robert Nicholson, the president of International Wine Associates, a Healdsburg-based mergers and acquisitions firm, explains, “That’s why there were so many different types of buyers—families, public companies, foreign companies, IPOs, investors, and even lifestyle buyers. It had been going on for a long time, but 2000, for sure, that’s a good year for the start of this.”
Over two decades later, and with Constellation selling its lower-end wine brands to The Wine Group, it’s not as obvious how business-shattering those two deals were. But they paved the way for billions and billions of dollars in investment from new companies, foreign and domestic, who were eager to get into the US wine business or expand existing companies.
Generally, the history of consolidation in the modern wine industry can be divided into five parts, though the parts often overlap and assigning specific time frames can be difficult.
The first phase was in the early 2000s, with GALLO and Constellation setting the stage. This phase included the growth of companies such as The Wine Group, second on the Wine Business Monthly list, just ahead of Constellation for much of the past decade. Its acquisitions included Golden State Vintners, which it bought in 2004, a deal that increased its production by one-third.
Next, foreign companies, many of them European and focused on spirits, began expanding their wine holdings by acquiring American wine brands. The European companies, faced with declining demand at home, recognized the US market’s growth potential. Diageo, Allied Domecq, Pernod Ricard, and Treasury Wine Estates, as well as the American companies Chateau Ste. Michelle and Brown-Forman Corporation, spent millions of dollars to add dozens of brands to their portfolios, sometimes taking over entire companies. Treasury was formed from parts of four other large wine producers, for example, and Diageo absorbed Chalone Wine Group.
Notably, many of the world’s best-known luxury brands, such as LVMH, AXA Millésimes, and Artémis Domaines, did little more than test the waters in the US. LVMH’s Chandon California effort is one example. Crucially, most of the foreign acquisitions during this period focused on midrange brands, which didn’t interest luxury producers. Also, there were few luxury brands in the US available to purchase during those years, and certainly not in traditional high-end categories, such as sparkling. In one of the most significant deals involving a global luxury brand, the 2007 sale of Stag’s Leap Wine Cellars, Italy’s Marchesi Antinori took just 15%, letting Ste. Michelle Wine Estates front the deal.
This period of foreign investments didn’t last long; liquor companies soon began to leave the wine industry. Pat DeLong, the founder and managing partner of Azur Associates, a mergers and acquisitions advisory service, explains, “The margins weren’t there, so they had better places to put their money.” In addition, many of the liquor companies were publicly held, a challenge in the wine industry given the contradiction between publicly held companies’ need for short-term profit and the traditional long-term financial approach of wine businesses.
Next came the rise of the midtier wine company. These companies, including Precept Wine & Spirits and Foley Family Wines, have varied, extensive portfolios and typically target a certain market segment. Few existed before 2010, but, in recent years, these companies have leveraged their market knowledge to find well-regarded brands that fit their niche and whose owners are amenable to selling.
Most recently, there has been superconsolidation, as the biggest companies bought other big companies during the wine industry’s ongoing slump. This includes GALLO’s purchase of a host of Constellation’s wine brands in 2021 (officially approved by the FTC in December 2020) as well as Delicato Family Wines’s merger with Francis Ford Coppola Winery the same year.
It’s often assumed, especially as demand has declined over the past five years, that the current wave of consolidation is about buying market share. That is, as the pie gets smaller, the biggest companies are buying smaller producers to increase their slice of the pie, since boosting growth organically is that much more difficult. Bodington says, however, that buying market share just to buy market share is a lousy reason to make a deal, and that most of what happened during the past two decades was much more complex than that. For example, a company might have sold brands to refocus its portfolio on one niche instead of several, or to reduce costs in the face of lower margins. Buyers were often looking to premiumize their holdings or to gain economies of scale and amortize costs over more companies.
Larger producers could also cut better deals with wholesalers, which consolidated over this period as well. Christy Frank, now a New York retailer, was a marketing manager for Diageo during its wine heyday and says she spent considerable time doing just that with the company’s distributors.
Tracing the deals that were made over this period is a complicated endeavor. For example, in 2000, R. H. Phillips was sold to Canada’s Vincor International, which eventually assembled a portfolio of 20 million cases that included Canada’s Jackson-Triggs and Inniskillin, New Zealand’s Kim Crawford Wines, California’s Toasted Head Wines, and Washington’s Hogue Cellars, most of which had been fairly large companies on their own. Then, in 2006, Vincor sold to Constellation for $1.31 billion. Another example is Seagram’s—which owned some of Coke’s original wine assets—exiting the wine business in 2000. Diageo and Pernod Ricard split much of the portfolio, and then Diageo sold its wine brands (including some of the Seagram’s labels) in 2015 to Treasury for about half of what it had paid for them.
Analysts identify several key developments that resulted from these years of consolidation. Perhaps the most important is what Nicholson calls professional management. He explains, “I think it has focused companies on performance. Mom-and-pop wineries can make great wine, but it’s [harder] for them to survive on the business side. They aren’t as nimble, and they can’t react as quickly to changes in the industry as bigger companies can—because change is the nature of the wine business, and bigger companies can give consumers the changes they want.”
These changes were not lost on the wine business 20 years ago, says Mike Dunne, the longtime wine critic for the Sacramento Bee newspaper, who extensively covered the beginning of consolidation. But there was a sense then, he says, that the large companies and thousands of small producers could coexist, with the former offering professionally made wines for the mass market and the latter making higher-priced, more terroir-driven wines. That is more or less what happened starting in the mid-1990s and continuing until 2015 or so, when the number of wineries—almost all of them small, making fewer than 10,000 cases—grew as never before. In 2023, there were some 12,000 wineries in the US, twice as many as in 2000 and a more than tenfold increase from 1990.
But some don’t think that this trajectory is continuing. Dunne says, “In 2005, there was a sense that even if consolidation had long been part of the wine trade, small wineries would continue to proliferate at a fast clip. That was true then, but I don’t think so today. More labels, for sure, but not so many wineries.”
In fact, Dunne’s reporting in 2005 identified many of the issues that consolidation has brought to the fore, such as premiumization and its higher prices for high-end wines, as well as the lack of selection for mass-market wines. While this is how the markets for most major agricultural products function, it has attracted attention and questions in the wine industry, where some believe that the industry could, or should, function differently.
It is possible that the appeal of these mass-market wines is waning, however, as reflected in declining sales figures for the biggest-selling national brands, according to figures compiled by Karl Storchmann, a professor of economics at New York University. Seven of the top 10 brands declined in volume between 2022 and 2023. Compare this with the overall US wine market, which has been fairly flat for both volume and dollars for the past four or five years, or with sales of wine costing $15, which, analysts say, remains the healthiest part of the US wine market.
Yet is that the only consideration? Dan Petroski, who sold Massican, his 13,000-case white-wine winery, to GALLO in 2023, understands it differently. Last year, he told Stevie Stacionis, who writes the Resilient Wine Substack, that GALLO ownership provides financial stability, better pricing for equipment and supplies, such as corks, and improved distribution. GALLO, he told Stacionis, offered him the opportunity to make wine without the hardships that come with being a small, independent producer. Petroski explains, “Never in 15 years of Massican did I pay myself a salary. Now that I’ve been hired as a consultant with GALLO via the sale to them, I’m making a salary for the first time, ever.”
Few analysts expect consolidation to slow dramatically. They point out that, especially if demand continues to slide as it has over the past five years, the wine business will need the professional management, economies of scale, and supply chain efficiencies that large companies provide. The best evidence of this is the deal between Constellation and The Wine Group, which allows the former to focus on its premium and superpremium brands while allowing The Wine Group to bring the marketing and sales skills it has demonstrated for supermarket brands to its new acquisitions.
It’s also important to recognize that, if the US wine market continues to decline, it won’t need as many producers, large or small. There are still many large family-owned wineries that want to sell, enabling the midtier producers to choose the best fits for their portfolios and furthering their expansion. There is also encouraging evidence that the largest producers understand the need to offer new drinking experiences to younger consumers. Interestingly, two of the three top brands that didn’t post sales declines between 2022 and 2023 were boxed wines.
If there is a slowdown in consolidation, say those interviewed for this story, it could be caused by economic factors outside the wine business, such as a US recession or higher interest rates. A recession could further cut demand, making all but the most advantageous deals economically impractical, while higher interest rates, as the Federal Reserve tries to reduce tariff-based inflation, could raise borrowing costs and essentially have the same effect.
Regardless of what might be ahead, the history of consolidation offers a reminder of how the wine industry has evolved in ways both expected and surprising, requiring flexibility from all who hope to build a sustainable future for wine in America.
Says Wangbickler, “We’ll have to find a new way to put all that together, maybe positioning wine not about the product as a prestige collectible but as a part of a lifestyle. This is a unique time for wine.”
And consolidation will certainly play a role in it.
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