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First Research Industry Profile - Beer, Wine & Distilled Spirits Wholesalers

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FULL INDUSTRY PROFILE
7.19.2021
Beer, Wine & Distilled Spirits
Wholesalers
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NAICS CODES: 4248
SIC CODES: 5181, 5182
Industry Overview
Companies in this industry distribute beer, ale, wine, and distilled spirits on a wholesale basis. Major companies include
Breakthru Beverage Group, Johnson Brothers, RNDC, Reyes Holdings, and Southern Glazer's Wine and Spirits (all
based in the US); as well as Brindco (India), C&C Group (Ireland), Eastern Empire Distributing Co (China), Endeavour
Drinks Group (Australia), and Nihon Shurui Hanbai (Japan).
Demand for beer, wine, and spirits is increasing in emerging economies worldwide and creating opportunity for alcohol
wholesalers. Africa, the Asia/Pacific region, and Latin America are key growth markets for the alcoholic beverage
industry.
The US beer, wine, and spirits distribution industry includes about 4,500 establishments (single-location companies and
units of multi-location companies) with combined annual revenue of about $170 billion.
Competitive Landscape
Beer, wine, and spirits wholesalers are adapting to regulatory changes in several US states that have made it easier for
beverage manufacturers to sell directly to retailers and individual consumers. Online sales and direct shipping are now
permitted in some areas, and on-demand alcohol delivery services have further blurred the lines of the three-tier system
that props up the industry. To compete effectively, distributors must avoid being bypassed by their suppliers while also
updating their product mixes to align with evolving consumer tastes.
International competition is limited because most wholesalers operate regionally, and large beverage manufacturers
often manage their own distribution networks in countries where that practice is permitted. However, some wholesalers
have become more competitive in emerging markets by cultivating relationships with local beer, wine, and liquor
companies, as well as major nonalcoholic beverage makers such as Coca-Cola.
Large wholesalers leverage their size and operational efficiencies to secure exclusive distribution rights in key markets.
Small operators can compete effectively by distributing rare and premium products. The beer wholesale industry is
fragmented: the top 50 companies account for about 40% of industry revenue. However, competition is more limited in
local markets where large wholesalers have exclusive agreements with major breweries. The US wine and spirits
wholesale industry is concentrated: the top 50 companies account for about 80% of industry revenue.
Competitive Advantages:
Brand Diversification — The growing craft beverage movement and declining sales of major beer brands have
prompted many wholesalers to diversify their product selections. Companies that follow this strategy may appeal to
upstart suppliers by offering specialized services and promotional support for new brands entering the market.
Modern Fleets — Many wholesalers have reduced costs and streamlined operations by replacing old vehicles with
new models that are more fuel-efficient and require less maintenance. Some companies are incorporating more endload trailers and small vans into their fleets to speed up delivery times. Distributors also use a variety of fleetmanagement technologies to plot more efficient routes and track inventories more accurately.
Consolidation — Large beverage wholesalers often grow through acquisitions rather than competing with smaller
companies for market share. In addition to expanding a company’s geographic footprint and product mix, this strategy
can help win business from major suppliers that are looking to minimize the number of distributors they work with.
Companies to Watch:
Southern Glazer's Wine and Spirits is the largest wholesaler in North America, with operations in about 45 US states,
Canada, and the Virgin Islands. The company distributes for more than one-third of the wine and spirits market; it also
distributes imported beers as well as cigars and nonalcoholic beverages.
Republic National Distributing Company, the product of a merger between Republic Beverage Company and
National Distributing Company, is the second-largest US wine and spirits distributor. RNDC offers its suppliers a variety
of services, including trade marketing and category management.
Reyes Holdings is a leading US beer distributor that operates out of about 30 facilities nationwide. The company also
has an extensive international presence, with customers throughout the Americas, Europe, and the Asia/Pacific region.
Breakthru Beverage Group formed in 2016 through a merger between Charmer Sunbelt and Wirtz Beverage Group, a
deal that significantly expanded the company’s geographic territory. Breakthru reports more than $5 billion in annual
sales and participates in joint ventures with other large wholesalers, including Southern Glazer's and Young's Market.
Products, Operations & Technology
Major products are beer, wine, and distilled spirits although distributors tend to specialize in either beer or wine and
spirits. More than 50% of overall industry revenue comes from the sale of wine and other alcoholic beverage. On the
other hand, about 40% of revenue comes from beer .
Most alcoholic beverages sold in the US move through a federally mandated three-tier distribution system. Producers
or importers must sell to distributors, who then sell the product to retailers. There are a few notable exceptions: some
states allow small brewpubs to distribute their own beer, and many states allow wineries to ship directly to consumers.
Thirty-three states are license states that allow private industry to manage the distribution and sale of distilled spirits.
The remaining 17 are control states that solely manage the wholesaling of liquor as a state-run enterprise. Many of
these control states also regulate the retail side of the spirits business, only selling hard liquor in state-run stores.
The distributor industry buys from a variety of domestic suppliers: winemakers, breweries, and liquor distillers. A few
large producers dominate, such as Anheuser-Busch, MillerCoors, E&J Gallo, Constellation Brands, and The Wine
Group. Many large producers have acquired or allied with international suppliers. Major importers include Heineken
USA, Diageo, Molson Coors (which owns MillerCoors), and Anheuser-Busch InBev, the Belgium-based owner of
Anheuser-Busch.
Beer and wine distributors generally have contracts with producers giving them exclusive distribution rights to
certain products within a defined market area, if they don't carry competing brands. Exclusive territories are the
dominant form of distribution, followed by a system of area of primary responsibility (APR). In many markets, for
example, one distributor will carry Budweiser while another will carry Miller beer. Some distributor territories cover
several states and overlap with those of other distributors; however, most are smaller, spanning several counties.
Major inputs include diesel fuel, electricity, pallets for receiving and storage, and vehicle repairs. A distributor typically
owns one or several warehouses, a large inventory, and a truck fleet. Most beer wholesalers are independent, familyrun companies operating from a single location with a fleet of 12 to 15 trucks. Depending on the products carried,
warehouses may need to be climate-controlled or refrigerated. Some distributors maintain a truck service center with
full-time mechanics.
Technology
Technology used in the industry includes wireless devices to track retail sales; integrated computer systems to order,
track, and distribute hundreds of products to hundreds or thousands of retailers; smartphone apps; and radio-frequency
identification (RFID) tags that follow cases or kegs as they travel through the supply chain. Direct-store-delivery
(DSD) solutions allow distribution managers to communicate with employees in the field, making it easier to provide
information and feedback in real time. Many companies have improved their fleets' fuel efficiency by using advanced
GPS technologies to track vehicle locations and optimize delivery routes.
Many wholesalers are using technology to make more efficient use of warehouse space, which is becoming
increasingly challenging due to rapid growth in the number of unique beverage product and packaging types, measured
in terms of stock-keeping units (SKUs). Decades ago, warehouses could easily store about 300 to 400 SKUs on pallets
that could be moved by conventional forklifts, according to Beverage Industry. But now some warehouses
accommodate as many as 1,200 to 1,500 different SKUs, requiring the use of special equipment such as automated
storage and retrieval systems (AS/RS) that can sort and lift heavier loads to higher shelves in more compact areas.
Some distributors are tapping into cloud computing to gain better access to large amounts of real-time data. Cloud
computing may help distributors with tight technology budgets by reducing the need to invest in IT equipment,
maintenance, and staff. Artificial intelligence and machine learning are also being explored as a way to more
accurately predict consumer demand and improve supply chain operations.
Wholesalers continue to use technological innovations such as omnichannels and Internet of Things (IoT) to further
improve sales. Aside from mobile apps, beverages are now being sold through an omnichannel such as Amazon which
addresses modern demand with distribution. Wholesalers are also starting to adopt the use of the Internet of Things
through the use of equipment with sensors to improve business planning.
Sales & Marketing
Typical customers are retailers such as private and state-run liquor stores; drug, convenience, and grocery stores; and
bars and restaurants. Sales are sometimes classified as pre-sales (custom orders) or delivery/driver sales (drivers
restocking customer inventory as needed). Sales and marketing is handled by an in-house sales force that often works
in tandem with a supplier's sales team or network of brokers.
Major types of marketing include in-store product samples, beverage tastings, end-cap promotions, consumer word-ofmouth, and retailer discounts. Some states don't allow in-store product samples. Most states require distributors to offer
the same discount to all retailers regardless of size or buying power, though enforcing this rule can vary. Large
beverage suppliers often promote products through mass market advertising channels like TV, radio, magazines, and
newspapers. Distributors must work closely with suppliers that invest heavily in advertising to ensure that stores are
adequately stocked. Distributors may share in the cost of regional or local advertising with manufacturers. Some
distributors have started using social media services such as Twitter and Facebook to promote their services and
connect with customers.
Distributors generally don't sell products on the internet, and the industry opposes attempts by suppliers to direct-ship
alcohol. However, some wholesalers list their products on mobile applications that allow customers to place orders from
local retailers for same-day or next-day delivery. Large wholesalers may require suppliers and retailers to place orders
through a secure intranet.
While the price of alcohol varies considerably, distributors typically mark up products 25% to 45% when selling to a
retailer. High-volume products like domestic beer may have lower distributor markups.
Finance & Regulation
Cash flow in the wholesaler industry is seasonal: sales of wine and spirits peak in the fall and winter leading up to the
holiday season, while demand for beer is highest in the warmer spring and summer seasons. Distributors typically
warehouse from a month to three months of product inventory. Beer wholesalers must balance the need for adequate
stock with retailer and consumer demand for fresh product. The industry is capital-intensive: average annual revenue
per employee in the US is about $810,000.
Providers of large-volume products may provide distributors with credit, marketing funds, delivery trucks, and help with
inventory and operations management. This type of support may make the distributor heavily dependent on the
producer.
Regulation
The distribution of alcohol is highly regulated at local, state, and federal levels. The Alcohol and Tobacco Tax and Trade
Bureau (TTB) issues permits to wholesalers and regulates alcohol imports into the US. Most states are license or open
states, where wholesale and retail sales are the domain of the private sector. In the remaining control states, the state
government distributes and often retails alcohol. Control states may license brokers to serve as intermediaries between
a distiller and the state.
After the repeal of Prohibition, the federal government gave states the authority to regulate alcohol and set rules
regarding its sale and consumption. This has resulted in a patchwork of laws governing contracts and the distribution,
sale, and promotion of alcohol. Distributors must be keenly aware of varying state and local rules covering in-store
samples, Sunday sales, promotional signage, the cleaning of draft lines, and product giveaways.
Franchise states protect distributors from suppliers arbitrarily terminating a contract or working relationship. In states
with franchise laws, the supplier must demonstrate just cause for terminating a contract with a distributor, and it allows
the wholesaler "reasonable time" to rectify the problem before a brand can be transferred.
State law may allow counties and municipalities to set rules governing alcohol. Such local option laws can add
another layer of complexity for distributors. For example, nearly half of all counties in Mississippi are dry, and it's illegal
to transport or consume alcohol within county borders. Other states may have dry counties but wet cities within the
county.
International Insights
Demand for beer, wine, and spirits is increasing in emerging international markets and creating opportunity for alcohol
wholesalers. Alcohol producers use various route-to-market models in order to sell their products around the world.
Depending on laws, companies sell their products overseas through third-party distributors, global or regional duty-free
arrangements, and joint ventures. Major companies based outside the US include Brindco (India), C&C Group (Ireland),
Eastern Empire Distributing (China), Nihon Shurui Hanbai (Japan), and Endeavour Drinks Group (Australia).
Growing markets for beer include Asia, Africa, and Latin America. China leads the world in both beer production and
consumption, accounting for about 20% of the global market in both categories, according to the Kirin Institute. The US
and Brazil are the second- and third-largest beer-producing countries, respectively, with Brazil, Vietnam, and India
experiencing the most beer production growth by volume in the last decade. Beer consumption in Africa is well below
the global average, but the industry expects the continent (and in particular, Nigeria) to be a key growth market as
economic development continues. Meanwhile, Mexico and Argentina are leading recent growth in Latin America beer
consumption.
In China, slower economic growth and a government crackdown on corruption in recent years have curbed demand for
luxury items including premium wines. However, there are several indications that the industry is poised for a rebound.
Chinese wine producers are rapidly expanding their vineyards, and demand for imports is rising steadily.
US distilleries increasingly rely upon sales outside of the country to boost growth. Major American spirits
manufacturers are targeting growth in emerging markets including Mexico, Poland, and Turkey, as well as developed
markets such as France, Germany, Australia, and the UK.
Change in Dollar Value of US Trade - US International Trade Commission
Imports of wine to the US come primarily from France, Italy, New Zealand, Australia, and
Spain. Major export markets for US wine include Canada, UK, Hong Kong, Panama, and
Netherlands.
31213 WINES
Regional Highlights
In the US, wholesale distribution of alcoholic beverages depends largely on consumer spending and high-density
population centers. California, New York, Florida, Texas, and Illinois have the most establishments and the highest
sales of wholesale alcoholic beverages.
States with the highest levels of alcohol consumption per capita are New Hampshire, Delaware, Nevada, North Dakota,
Montana, and Vermont, as well as Washington, DC, according to government data. New Hampshire is the nation’s
leading beer and liquor consumer per capita, and Idaho is the largest wine consumer.
Although most wine, beer, and distilled spirits distributors are local or regional, a few have national reach. Among the
national wholesalers are importers that resell to other distributors. Beer production and distribution are often regional
operations, as many small breweries lack the resources to scale up and ship products nationwide. The rapid growth of
the craft beer segment has led groups of small wholesalers to establish regional partnerships that specifically focus on
distributing and marketing craft brands.
Human Resources
Average hourly industry wages for the industry in the US are about the same as the national average. Truck drivers
responsible for beer, wine, and alcoholic beverage delivery require special driver training, certification, and licensing.
The annual injury rate in beer, wine, and alcoholic beverage wholesaling is more than double the national average.
Most injuries involve sprains, strains, bruises, and soreness from overexertion, lifting, and driving.
Industry Employment Growth
Bureau of Labor Statistics
Average Hourly Earnings & Annual Wage Increase
Bureau of Labor Statistics
Industry Growth Rating
Demand: Driven by demographics and consumer tastes
Need efficient use of labor, trucks
Risk: Legal challenges to the three-tier system
News and Social
Brewgaloo returns for in-person festival this weekend WRAL.com 18-Sep-2021
Brewgaloo, the state's largest craft beer festival, featuring breweries from around NC, kicks off Friday night and runs through the
weekend. LOOK FOR THE RED BAR ON THE HOME PAGE ON OUR WEBSITE AND ON THE WRAL NEWS AT WORK >>> A
POPULAR DOWNTOWN FESTIVAL IS MAKING A CALM BACK -- COME BACK. IT KICKS OFF TONIGHT AND RUNS
THROUGH THE WEEKEND. WE SHOW YOU HOW YOU WILL BE SLIGHTLY
Skilled Cellar Technician Wine Business 18-Sep-2021
Under general supervision, the Skilled Cellar Technician efficiently performs skilled crush and wine processing duties, operates
general and complex winery equipment, trains less skilled employees, keeps accurate records and ensures work procedures are
conducted in a safe and efficient manner. * Diligently follows safety, GMP, and ISO procedures and policies to safeguard persona
and
New National Beer Launch Is Outlawed in 15 States MSN News - Singapore 18-Sep-2021
Some craft beer makers are known for pushing the limits on flavors and alcohol content, but this season, it's a major national
brewery that's dropping a beer with the highest alcohol content you may have ever heard. This beer brand is definitely popular fo
their fall beer releases —which, while exciting, are usually pretty tame. However, check out the dare they're taking with this▪
Ettore Bugatti, From Making His Own Liquor to Cars and Patenting the Alloy Wheel autoevolution 18-Sep-2021
In his relentless desire to come up with better products, Bugatti ended up creating his own distillery, as he was unhappy with the
era’s liquor. He also designed bicycles, as the ones on the market back then were deemed as not good enough. Motorcycle
frames, security locks, surgical instruments, and a cylindrical razor were also signed by him, and he designed numerous other
items for
Germany: Munich kicks off alternative Oktoberfest DW (en) 18-Sep-2021
Dozens of local restaurants and pubs in Munich are keeping the Oktoberfest tradition alive, while the festival grounds again hosts
COVID-19 testing centers. Munich's unofficial, low-key, alternative Oktoberfest began on Saturday, as local pubs commemorated
powered by
Quarterly Industry Update
7.19.2021
Trend: Vodka Trends - At-home consumption has driven vodka sales through takeout cocktails, easing of regulations,
and growing e-commerce. Vodka, accounting for one-third of cocktail sales, remains the top-selling spirit in the U.S.
According to the Beverage Information Group’s 2021 Handbook Advance, volumes sold spiked nearly 3% in 2020 to
reach almost 80 million 9-liter cases. Pink lemonade is one of the current flavor trends, as well as other fruit flavors and
natural flavors enhanced by botanicals. Citrus-flavored vodkas account for 25% of the flavored vodka market share.
Distilled Spirits Council of the U.S. reported doubled revenue (nearly 11%) in the high-end premium vodka segment.
Consumers are going for larger-sized vodkas. Chopin expects their 1.75-liter business to double by the end of 2021,
according to Beverage Dynamics.
Industry Impact - Companies may experience sales growth in the flavored vodka segment and more demand for
larger-sized and premium vodkas.
4.26.2021
Opportunity: Deregulating the Three-Tier Alcohol System - The US three-tier system for alcohol distribution is being
challenged across the country in favor of simpler laws and easier distribution models. The three-tier alcohol system and
complicated inter-state laws contribute to low wine investment awareness in the country, according to Forbes.
Deregulating the three-tier alcohol system may encourage more wine investors to the country: Cult Wines, a global
leader in wine investment, recently expanded into the North American market, citing the US as underserved in terms of
the wine investment market despite its status as a big player. Already, customers and distributors have shifted online,
resulting from COVID-19 restrictions. Moving forward, amending the three-tier alcohol system together with continued
technological and digital innovations may significantly better the alcohol distribution landscape in the US.
Industry Impact - Deregulation of the US three-tier alcohol system may prove beneficial as it may allow significant
growth within wholesalers by inviting investors and opening new revenue streams.
2.1.2021
Opportunity: Shift to Sustainable Alcohol and Processes - The continuing shift of consumer demands towards
sustainable alcohol is forcing wholesalers to offer such products. Sustainability continues to become a necessity rather
than a trend. According to Alfa-editores, more than 50% of US consumers and more than 60% of UK consumers prefer
products that are more sustainable. The increase in consumer awareness is a major factor in companies shifting
towards sustainable efforts as well. Beverage brands that incorporate and improve their eco credentials are more
preferred. As awareness in sustainability increases, alcoholic products such as organic wines are also being introduced
which could cater to about 30% of millenials in the US that drink wine daily. The innovations in sustainability products
and processes may contribute to the expected growth of the beverage industry until 2022.
Industry Impact - To cater to the growing demand for sustainable alcohol, wholesalers may start getting supplies from
manufacturers of sustainable alcohols.
12.21.2020
Challenge: Continued Threats to Wholesalers During the Pandemic - Beer, wine, and distilled spirits wholesalers
are under further threat from monopolies and increased taxes. The driving force of growth in the industry, sparkling
wine, has seen a considerable decline as it was most popular in restaurants. Thus, following the prolonged closures,
wine sales have greatly declined, according to an article by Wine-Searcher. Oregon is also in danger of experiencing as
much as an 800% tax increase which will drive up the cost of beer, wine, and cider, further crippling businesses already
struggling due to the pandemic. Local establishments in Canada have also fallen to struggles following a temporary
reprieve: The Liquor Control Board of Ontario has virtually imposed a monopoly on the market with its partnership with
delivery app Skip The Dishes, threatening smaller, independent sellers.
Industry Impact - Beer, wine, and distilled spirits wholesalers are less likely to fully recover from the pandemic due to
the numerous economic challenges.
Industry Indicators
The average US retail price for diesel and regular gas, a major operating cost for alcohol distributor fleets, rose 36.1%
and 54.1% respectively in the week ending May 24, 2021, compared to the same week in 2020.
Total US wholesale sales of nondurable goods, a potential measure of alcohol demand, rose 20.0% in March 2021
compared to the same period in 2020.
Industry Forecast
Domestic demand for US alcoholic beverages is forecast to grow at an annual compounded rate of 3% between 2020
and 2025. Data Published: December 2020
First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic Research
Fund, Inc. (IERF) in College Park, MD. INFORUM's "interindustry-macro" approach to modeling the economy captures
the links between industries and the aggregate economy. Forecast FAQs
Industry Drivers
Changes in the economic environment that may positively or negatively affect industry growth.
Data provided by First Research analysts and reviewed annually
Energy Prices Change in crude oil and related energy prices
Consumer Spending Change in overall level of consumer spending on goods and services
Government Regulations Changes in federal, state, or local government regulations or business-related
policies
Critical Issues
COVID-19 Impact on Business - The operations of beer, wine and distilled spirits wholesalers is heavily impacted by
the effects of the coronavirus pandemic. Most wholesalers experiences disruptions in their supply chains and shortages
in source products caused by reduction in cargo transportation due to COVID-19. Demand for products was also greatly
reduced as alcohol consumption shifted to household after the closing of establishments such as restaurants and bars.
Reliance on Suppliers and Retailers - Consumer demand depends on suppliers making quality products and retailers
effectively selling these products. When either of these two tiers falters, distributors often feel the pinch, yet they have
limited ability to change the outcome. Consumers can be fickle about beer, wine, and spirits. A distributor's success or
failure can often depend on domestic beverage trends that are out of their realm of influence.
Business Challenges
Legal Challenges to the Three-Tier System - Distributors must actively lobby to ensure the federal three-tier system
remains in place. State and national challenges to the three-tier system can potentially have a major impact on the
distribution business. Distributors worry that any erosion of the three-tier system will eventually lead to direct sales from
producers to retailers. Some states now allow intrastate shipping of wine and beer directly to consumers, bypassing
distributors and retailers. Online commerce has greatly expanded consumer accessibility to small producers.
Vulnerable to Government Regulation - The alcohol industry is closely regulated by states, localities, and the federal
government. While some laws aid distributors, others are largely intended to control and reduce alcohol sales. New
local, state, and federal restrictions on alcohol are a constant possibility. Beer, wine, and spirits distributors actively
lobby state and federal legislators to limit taxes and government regulation.
Small Producers Self-Distribute - US beverage wholesalers are fighting attempts by craft breweries and other small
suppliers to sell their own products directly to retailers, bars, restaurants, and consumers. Rising craft beer sales have
fueled growth in the industry in recent years, but many distributors are concerned that the trend will jeopardize the
three-tier system as more states relax their distribution laws to encourage further growth. Wine wholesalers are also
losing business from grocery store chains that are purchasing larger volumes of private-label wines directly from
manufacturers.
High Taxes Inhibit Consumption - Taxes are high for many beer, wine, and spirit distributors. While suppliers
generally pay the federal excise tax, wholesalers are responsible for all state excise taxes. On a per-unit basis,
beverage alcohol is one of the most highly taxed consumer products in the US. Taxes account for more than half of the
retail price of a typical bottle of liquor, though the Tax Cuts and Jobs Act gave alcohol producers federal excise tax
breaks in 2018 and 2019.
Public Concern About Drunk Driving - Public concern about alcohol-related accidents and deaths has pushed the
industry to sponsor responsible-drinking programs. A blood alcohol level (BAL) of 0.08 is the common standard for
intoxication in all 50 states, but the National Highway Traffic Safety Administration has recommended lowering the legal
threshold to 0.05, a proposal that has drawn opposition from the American Beverage Institute and other service-industry
groups. Bars and restaurants may also be held liable for overserving alcohol to patrons who are later involved in drunkdriving accidents. Stricter enforcement and increased awareness about drunk driving may lower demand for alcohol,
particularly at on-premises accounts.
Dependence on Large Suppliers - Other than specialty beer wholesalers, most beer distributors depend heavily on
the success of a major beer brand. This often means that the supplier has significant control or influence over the
business practices of the distributor. Some brewers offer strong incentives, such as additional marketing dollars, for
distributors that agree to carry only their products.
Growing Product Assortment - Beverage wholesalers are working to make more efficient use of warehouse and truck
space to accommodate an increasing number of unique beverage product and packaging types, measured in terms of
stock-keeping units (SKUs). Decades ago, warehouses typically stored about 400 SKUs, but due to booming growth in
the craft beverage sector in recent years, modern facilities may now be equipped to stock as many as 1,500 SKUs.
Many wholesalers use machinery such as automated storage and retrieval systems (AS/RS) that can lift loads to higher
shelves in more compact areas. The proliferation of SKUs has also required distributors to invest in new devices and
software that allow delivery personnel and sales reps to quickly access information about hundreds of different products
when working in the field.
Business Trends
Consolidation - Many distributorships are family-run, and a growing number of executives are accepting acquisition
bids and retiring from the business. The number of US beer distributors has fallen to about 3,000 from more than 4,500
in 1980, according to the National Beer Wholesalers Association. Diageo, the world's largest spirits company, continues
to consolidate its spirits distribution network. Major producers prefer to deal with a smaller number of large, efficient
distributors.
Employment Rises - Despite industry consolidation and a drop in the number of wholesalers, employment is rising.
Employment in the industry has increased about 20% over the past 10 years, according to GlobeNewswire. Both the
wine and spirits and beer and ale wholesale sectors have seen steady employment growth.
Slowing US Demand - Although the US is the second-largest beer-consuming country in the world, Americans' percapita consumption of alcoholic beverages overall has been generally flat for over a decade. Demand depends partially
on disposable personal income and the state of the US economy. To grow business, distributors usually have to take
market share from competitors or convince consumers to buy higher-priced drinks. Competition for market share and
shelf space is intense.
Diversifying Suppliers - Beer wholesalers in large local markets often rely heavily on a single supplier, but some
companies have diversified the mix of brands they carry as sales of major beer brands have slowed. Rapid growth in
the craft beer segment has created opportunities for beverage distributors to stock larger varieties of items produced by
fast-growing new breweries. Many of these suppliers are looking for distributors that have the expertise to promote craft
brands and the capacity to stock a variety of seasonal and specialty beers. In some areas, groups of wholesalers have
established regional distribution partnerships that specifically focus on distributing and marketing craft brands.
Improving Fuel Efficiency - Distributors are experimenting with on-board feedback systems that coach fleet drivers in
real time to improve their fuel efficiency. This technology enables limiting top speeds and reducing engine idling.
Specialized software programs preview and compare different delivery routes to optimize fuel efficiency. In addition,
smaller distributors can join fuel purchasing cooperatives to improve their buying power relative to larger fleets with
more streamlined operations. Other distributors are converting fleet vehicles to compressed natural gas, which costs
less than gasoline or diesel.
Improving Driver Safety - Like technologies to improve fuel efficiency, beverage fleet managers are looking to
systems that may reduce injuries among their drivers. Employees in the US alcohol wholesale industry experience
injury rates of more than twice the national average. Audiovisual collision avoidance systems can help fleet managers
be virtually connected to vehicles in real time, analyzing driver behavior and reviewing incidents. Some systems
operate in 360 degrees and help drivers see blind spots, while others employ warnings for objects in the road.
Industry Opportunities
E-Commerce Apps - US liquor distributors are working with on-demand alcohol delivery services to sell products more
quickly and efficiently. Mobile apps such as Drizly enable consumers to place orders for alcoholic beverages from local
retailers via smartphone for same- or next-day delivery. Wholesalers can display all products in their warehouses,
potentially offering thousands of items. Because these apps simply facilitate sales made through retail outlets, they do
not run afoul of the three-tier structure. However, apps will likely face increasing competition and regulatory pressures
as they grow.
Promoting Responsibility - Alcohol distributors can improve their community image by promoting anti-drinking and
driving campaigns and donating products to socially responsible movements. Large breweries and small craft breweries
are examining ways to reduce the amount of waste in production and recycle energy inputs and production byproducts.
Distributors can latch on to this interest in environmental responsibility by promoting their own "green" initiatives like
using clean-burning trucks and lowering refrigeration coolant levels.
Growth in Hispanic Market - The Hispanic adult beverage market is expected to expand significantly in the US. By
2045, Hispanic consumers could account for more than 25% of US adults of legal drinking age, according to
Technomic. Compared to the overall US drinking population, Hispanic drinkers tend to be younger, male, and more
likely to prefer beer, tequila, and red wine. The demographic also tends to consume more drinks and spend more per
occasion than the general population. As this market gains buying power, distributors may seek to offer a wider
assortment of products.
Consumer Interest in Local Products - Some distributors may find success specializing in local and regional
beverages. A growing number of consumers want to know the origin of the products they consume, both for
environmental and economic reasons. This interest in "drinking local" may boost sales for locally made beer, wine, and
spirits. Local tours of breweries, wineries, and distilleries builds interest in specific local brands and can increase
distributor sales.
End-Load Delivery Trucks - To improve route productivity and transport larger varieties of products, beverage
distributors are shifting away from delivery vehicles that hold products within roll-up side bays and replacing them with
end-load trailers. Companies that use the newer trucks typically pre-pack orders onto individual pallets that are loaded
into trailers from front to back based on the order in which they will be delivered. Side-bay truck deliveries also typically
involve more manual labor compared to end-load trucks, which can be outfitted with hydraulic lift gates, pallet jacks,
and other equipment that improves efficiency.
Targeting Millennials - Millennials, a generation known for craving new experiences, are continuing to influence
alcohol product selection as they age. Alcohol producers are experimenting with brands targeted to millennials,
launching campaigns on YouTube, Snapchat, and Spotify. With more buying power than any other generation,
millennials account for 35% of US beer consumption, 32% of spirit consumption, and 42% of wine consumption,
according to Nielsen and the Wine Market Council. Millennials also increasingly show a preference for imbibing at
home, which distributors can take advantage of with on-demand delivery.
New Drinking Outlets - As consumer demographics change, so do their outlet preferences for drinking alcohol.
According to Nielsen data, nontraditional outlets will continue to gain importance as millennials get older and
Generation Z turns of age. About 65% of US millennials visited a brewery tasting room or Tiki bar more in the past year
than they did previously, while 60% of all US drinkers increased their brewery visits recently. About one-third of
consumers do so to try something new or obtain specialty or limited-run beer options, while more than half want a
different selection of beer. Bars in movie theaters, axe-throwing bars, and other new types of social clubs also are
growing in popularity.
Executive Insight
Chief Executive Officer - CEO
Protecting Three-Tier Distribution System
All states require the separation of alcohol manufacturers and retailers, and most mandate the use of distributors as an
intermediary between suppliers and retailers. The traditional tiered system is being eroded, particularly in wine
distribution, with many states legalizing direct shipments from wineries to consumers. To combat further erosion,
distributors are lobbying state governments to preserve the three-tier distribution system.
Finding Additional Suppliers
Because of demand growth and exclusive territorial contracts with large suppliers, distributors seek new suppliers to
broaden their product lines and gain shelf space. New specialty spirits, such as flavored vodkas and popular foreign
wines, are being added by distributors.
Chief Financial Officer - CFO
Buying Other Distributors
Consolidation is common among beer, wine, and spirits wholesalers as companies seek to expand their geographies
and add lines to their product mix. Major producers prefer to deal with a smaller number of larger wholesalers. Diageo
continues to consolidate its spirits distribution network.
Financing Inventory
Distributors have large inventory levels; while large producers may provide credit terms, this support often requires
exclusivity arrangements. Many distributors look to other means such as sophisticated inventory management systems
that minimize inventory investment.
Chief Information Officer - CIO
Developing Sales Systems
Having access to current information to improve efficiencies has been a focal point of distributors, especially with flat
industry demand. Many companies have incorporated the most up-to-date technology using mobile technology and the
internet in order to allow greater data accessibility by field sales staff.
Improving Warehouse Systems
As the industry has consolidated, greater emphasis is on efficient warehousing. With longer routes and a larger
inventory of beverages, computerized bar code systems are being installed to track items, reducing loss and mistakes
while improving customer service. Some companies have installed automated material handling systems, including
scanners and automated conveyors, to move items automatically from storage locations to the loading dock.
Human Resources - HR
Providing Staff Training
Distributors have added new systems such as inventory control and computerized ordering and truck-routing
capabilities that require new skills. HR professionals train staff on these systems. Companies are also training retail
partners on new product lines, especially premium products.
Improving Worker Safety
The industry's annual rate of injury and illness is more than double the national average. Most workers are involved in
material handling and transportation. Companies that have automated logistics and adequate training on handling
materials have reduced the need for forklift use and have lowered breakage rates.
VP Sales/Marketing - Sales
Supporting Retailers with Promotional Materials
Distributors provide supplier promotional materials to retailers. No matter the size of the company, service is local, so
distributors work at being closely aligned with their retailers to determine marketing needs and help provide appropriate
marketing materials. Distributors often coordinate sales efforts with a suppliers' sales team or third-party brokers.
Working with Craft Breweries
Craft beer is taking a larger share of the beer market, and small breweries are growing much faster than mass-market
brands. Despite distributors’ ongoing opposition to attempts by small producers to expand self-distribution rights, many
wholesalers are looking to capitalize on the segment’s rapid growth. Distributors that market their services to small
breweries must demonstrate that they have the expertise to promote craft brands and the capacity to stock a variety of
seasonal and specialty beers.
Executive Conversation Starters
Chief Executive Officer - CEO
How are changes in the traditional three-tiered structure impacting the company's business?
The traditional tiered system is being eroded, particularly in wine distribution, with in-state shipments allowed from
winery to consumer.
What new product suppliers would the company like to work with?
Distributors seek new suppliers to broaden their product lines and gain shelf space.
Chief Financial Officer - CFO
What recent developments in industrywide consolidation have impacted the company?
Consolidation is common among alcohol wholesalers, as companies seek to expand their geographies and add lines to
their product mix.
How does the company finance inventory?
Distributors have large inventory levels; sometimes large producers may provide credit terms.
Chief Information Officer - CIO
What new technologies could improve the company's sales systems?
Having access to current information to improve efficiencies has been a focal point of distributors, especially with flat
industry demand.
How could new technologies improve the company's warehouse logistics?
Computerized bar code systems are being installed to track items, reducing loss and mistakes while improving
customer service.
Human Resources - HR
How does the company monitor employee training programs?
New systems such as inventory control and computerized ordering and truck routing capabilities require training.
What programs does the company have to reduce workplace injuries?
The industry’s annual rate of injury and illness is more than double the national average.
VP Sales/Marketing - Sales
What procedures does the company have to keep its retailer promotional materials up-to-date?
Distributors provide supplier promotional materials to retailers.
What is the company's fastest-growing customer segment?
Craft beers and microbreweries are taking a larger share of the beer market.
Call Prep Questions
Conversation Starters
How is the company affected by COVID-19?
The operations of beer, wine and distilled spirits wholesalers is heavily impacted by the effects of the coronavirus
pandemic.
What strategies does the company have to combat slow growth in consumption?
Consumer demand depends on suppliers making quality products and retailers effectively selling these products.
How does the company promote the value of its role in the supply chain?
Distributors must actively lobby to ensure the federal three-tier system remains in place.
What technology does the company use to increase efficiency and customer service?
US liquor distributors are working with on-demand alcohol delivery services to sell products more quickly and efficiently.
What benefits does the company gain from promoting socially responsible alcohol use?
Alcohol distributors can improve their community image by promoting anti-drinking and driving campaigns and donating
products to socially responsible movements.
Which emerging markets are most important to the company?
The Hispanic adult beverage market is expected to expand significantly in the US.
Quarterly Industry Update
What factor has driven the sales growth of vodka?
At-home consumption has driven vodka sales through takeout cocktails, easing of regulations, and growing ecommerce.
Operations, Products, and Facilities
How much does the company compete with brewpubs and wineries?
Some states allow small brewpubs to distribute their own beer. Many states allow wineries to ship directly to
consumers.
How many exclusive distribution contracts does the company have?
Some beer and wine distributors have contracts with producers that give them exclusive distribution rights to certain
products within a certain market area, if they don't carry competing brands.
What are the company's major operating expenses?
Common inputs for distributors are diesel fuel for trucks, electricity, pallets for receiving and storage, and vehicle
repairs.
How does the company service its fleet?
Some distributors maintain a truck service center with full-time mechanics.
How effectively does the company warehouse climate-sensitive products?
Depending on the products carried, warehouses may need to be climate-controlled or refrigerated.
Customers, Marketing, Pricing, Competition
Who are the company's customers?
Typical customers are retailers such as private and state-run liquor stores; drug, convenience, and grocery stores; and
bars and restaurants.
What are the company's sales channels?
Sales are handled by an in-house sales force that often works in tandem with a supplier's sales team or network of
brokers.
How does the company market its products?
Major types of marketing include in-store product samples, beverage tastings, "end-cap" promotions, consumer wordof-mouth, and retailer discounts. Large beverage suppliers often promote products through TV, radio, magazines, and
newspapers.
How challenging are retailer discount rules to company profits?
Most states require distributors to offer the same discount to all retailers regardless of size or buying power, though
enforcement of this rule can vary from state-to-state.
How well does the company work with its suppliers in marketing efforts?
Distributors must work closely with suppliers that invest heavily in advertising to ensure that stores are adequately
supplied. Distributors may share in the cost of regional or local advertising with manufacturers.
How invested is the company in online marketing?
Distributors generally don't sell products on the internet. However, some wholesalers list their products on mobile
applications that allow customers to place orders from local retailers for same-day or next-day delivery.
Regulations, R&D, Imports and Exports
If located in a control state, what are the company's challenges distributing within the state?
In the 17 control states, the state government manages liquor wholesales and often regulates retail sales of spirits.
If located in a control state, how satisfied is the company with its third-party brokers?
Control states may license brokers to serve as intermediaries between a distiller and the state.
How does the company ensure it follows current state and local regulations?
Distributors must be keenly aware of varying state and local rules covering in-store samples, Sunday sales, promotional
signage, the cleaning of draft lines, and product giveaways. States with local option laws can add another layer of
complexity for distributors.
If located in a franchise state, how important are franchise laws to the company?
Franchise states protect distributors from a supplier arbitrarily terminating a contract or working relationship.
Organization and Management
What skills or training does the company require of its workers?
Truck drivers — responsible for beer, wine, and alcoholic beverage delivery — require special driver training,
certification, and licensing.
Who owns the company?
Many distributorships are family-run and serve only a local geographic market.
Financial Analysis
How does seasonality affect company cash flow?
Cash flow in the wholesaler industry is seasonal due to higher consumer demand for wine and spirits in the fall and
winter, and higher demand for beer in the spring and summer.
What is the company's average inventory?
Beer wholesalers must balance the need for adequate stock with retailer and consumer demand for fresh product.
How much does the company rely on producers for financing and operational assistance?
Large producers may provide a distributor with financing, credit, marketing funds, delivery trucks, and help with
inventory and operations management.
Business and Technology Strategies
What new technologies has the company invested in?
Distributors use technologies such as wireless devices to track retail sales; integrated computer systems; and RFID
tags that follow cases or kegs as they travel through the supply chain.
What plans does the company have to expand operations?
Large companies have advantages in exclusive distribution rights in large markets.
If a small company, how can the company compete against larger operations?
Small operations can compete effectively by distributing specialty products.
Financial Information
COMPANY BENCHMARK TRENDS
Quick Ratio by Company Size
The quick ratio, also known as the acid test ratio, measures a company's ability to meet short-term obligations with liquid
assets. The higher the ratio, the better; a number below 1 signals financial distress. Use the quick ratio to determine if
companies in an industry are typically able to pay off their current liabilities.
Financial industry data provided by MicroBilt Corporation collected from 32 different data sources and represents financial
performance of over 4.5 million privately held businesses and detailed industry financial benchmarks of companies in over 900
industries (SIC and NAICS). More data available at www.microbilt.com.
Working Capital Turnover by Company Size
The working capital turnover ratio, also known as working capital to sales, is a measure of how efficiently a company
uses its capital to generate sales. Companies should be compared to others in their industry.
Financial industry data provided by MicroBilt Corporation collected from 32 different data sources and represents financial
performance of over 4.5 million privately held businesses and detailed industry financial benchmarks of companies in over 900
industries (SIC and NAICS). More data available at www.microbilt.com.
Current Liabilities to Net Worth by Company Size
The ratio of current liabilities to net worth, also called current liabilities to equity, indicates the amount due creditors
within a year as a percentage of stockholders' equity in a company. A high ratio (above 80 percent) can indicate trouble.
Financial industry data provided by MicroBilt Corporation collected from 32 different data sources and represents financial
performance of over 4.5 million privately held businesses and detailed industry financial benchmarks of companies in over 900
industries (SIC and NAICS). More data available at www.microbilt.com.
COMPANY BENCHMARK INFORMATION
NAICS: 4248
Data Period: 2021
Last Update July 2021
Table Data Format
Mean
Company Size
All
Large
Medium
Small
Over $50M
$5M - $50M
Under $5M
5969
268
1682
4019
Net Sales
100%
100%
100%
100%
Gross Margin
24.2%
25.5%
21.2%
22.5%
Officer Compensation
1.3%
1.2%
1.2%
2.3%
Advertising & Sales
1.3%
1.3%
1.2%
1.2%
Other Operating Expenses
19.1%
20.0%
17.2%
16.9%
Operating Expenses
21.7%
22.5%
19.6%
20.4%
Operating Income
2.6%
3.0%
1.6%
2.2%
Net Income
1.4%
1.6%
0.9%
1.2%
Cash
10.1%
10.1%
10.1%
9.8%
Accounts Receivable
17.3%
17.6%
16.5%
16.9%
Inventory
23.6%
24.3%
21.9%
22.0%
Total Current Assets
55.8%
56.8%
53.4%
53.7%
Property, Plant & Equipment
11.4%
10.9%
12.5%
12.1%
Other Non-Current Assets
32.8%
32.3%
34.1%
34.2%
100.0%
100.0%
100.0%
100.0%
Size by Revenue
Company Count
Income Statement
Balance Sheet
Total Assets
Accounts Payable
17.1%
17.6%
16.1%
16.3%
Total Current Liabilities
31.6%
32.0%
30.7%
31.0%
Total Long Term Liabilities
19.8%
18.2%
23.4%
25.4%
Net Worth
48.6%
49.8%
45.9%
43.6%
Quick Ratio
0.90
0.89
0.90
0.90
Current Ratio
1.77
1.78
1.74
1.73
Current Liabilities to Net Worth
65.0%
64.1%
66.7%
71.2%
Current Liabilities to Inventory
x1.34
x1.31
x1.40
x1.41
Total Debt to Net Worth
x1.06
x1.01
x1.18
x1.29
Fixed Assets to Net Worth
x0.23
x0.22
x0.27
x0.28
28
30
25
27
x7.12
x6.61
x8.58
x8.05
Total Assets to Sales
45.2%
46.5%
42.1%
43.9%
Working Capital to Sales
11.0%
11.6%
9.6%
9.9%
Accounts Payable to Sales
7.8%
8.2%
6.8%
7.2%
Pre-Tax Return on Sales
2.3%
2.6%
1.4%
2.0%
Pre-Tax Return on Assets
5.0%
5.6%
3.3%
4.4%
10.3%
11.2%
7.2%
10.2%
Interest Coverage
x5.06
x5.21
x4.15
x5.45
EBITDA to Sales
3.8%
4.2%
3.0%
3.5%
Capital Expenditures to Sales
1.5%
1.4%
1.6%
1.6%
Financial Ratios
(Click on any ratio for comprehensive definitions)
Days Accounts Receivable
Inventory Turnover
Pre-Tax Return on Net Worth
Financial industry data provided by MicroBilt Corporation collected from 32 different data sources and represents financial
performance of over 4.5 million privately held businesses and detailed industry financial benchmarks of companies in over 900
industries (SIC and NAICS). More data available at www.microbilt.com.
ECONOMIC STATISTICS AND INFORMATION
Change in Producer Prices - Bureau of Labor Statistics
Retail Annual Sales Growth - Census Bureau
Change in Consumer Prices - Bureau of Labor Statistics
Wholesale Annual Sales Growth - Census Bureau
VALUATION MULTIPLES
Beer, Wine & Distilled Spirits Wholesalers
Acquisition multiples below are calculated medians using at least 3 US private industry transactions completed between
1/2008 and 12/2020 and are based on middle-market transactions where the market value of invested capital (the selling
price) was less than $1B. Data updated annually. Last updated: December 2020.
Valuation Multiple
MVIC/Net Sales
Median Value
MVIC/Gross Profit
0.5
MVIC/EBIT
0.9
MVIC/EBITDA
5.2
4.6
MVIC (Market Value of Invested Capital) = Also known as the selling price, the MVIC is the total consideration paid to
the seller and includes any cash, notes and/or securities that were used as a form of payment plus any interest-bearing
liabilities assumed by the buyer.
Net Sales = Annual Gross Sales, net of returns and discounts allowed, if any.
Gross Profit = Net Sales - Cost of Goods Sold
EBIT = Operating Profit
EBITDA = Operating Profit + Noncash Charges
SOURCE: DealStats (formerly Pratt's Stats), 2021 (Portland, OR: Business Valuation Resources, LLC). Used with permission.
DealStats is available at https://www.bvresources.com/learn/dealstats
Industry Websites
Alcohol Policy Information System (APIS)
Statistics and resource for alcohol-related policies.
Beverage Industry
Trade magazine covering trends and issues.
Beverage Information Group
Industry news and opinion.
Beverage Wholesaler
Industry news, features, and job postings.
Brewbound
Craft beer industry news.
Canadian Association of Liquor Jurisdictions
News, publications, events and links.
Decanter Magazine
Industry news and awards for trade and consumer audiences.
Distilled Spirits Council of the United States (DISCUS)
Trade association with industry-related insight.
Just Drinks
Beverage industry magazine with news, features, conferences, legislation, and briefings.
National Alcohol Beverage Control Association (NABCA)
National association representing control states.
National Beer Wholesalers Association (NBWA): America's Beer Distributors
Trade organization for beer wholesalers.
National Transportation Safety Board (NTSB)
Statistics on alcohol-related accidents.
Wine & Spirits Wholesalers of America (WSWA)
Trade association for wine and liquor distributors.
Glossary of Acronyms
APIS - Alcohol Policy Information System
APR - area of primary responsibility
AS/RS - automated storage and retrieval systems
BAC - blood alcohol concentration
BAL - blood alcohol level
CNG - compressed natural gas
DSD - direct-store delivery
EDI - electronic data interchange
NABCA - National Alcohol Beverage Control System
NBWA - National Beer Wholesalers Association
NTSB - National Transportation Safety Board
RFID - radio-frequency identification
SKU - stock-keeping unit
TTB - Alcohol and Tobacco Tax and Trade Bureau
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