There's a Reason Booze Wholesalers' Margins Keep Widening

Hint: It's not better service

-Wine wholesaling is controlled by a smaller and smaller group of huge companies.

-Wine wholesalers do less and less marketing and sales for producers in their portfolios

-Alcohol wholesalers do fewer and fewer in-person presentations to retailers

-Wine wholesalers are protected from competition through state laws that bar producers from selling directly to retailers.

And so it should be no surprise that wholesalers extract more and more margin from producers and retailers. Consider this remarkable graphic describing margins that are taken by the wholesale tier over time:

The American Association of Wine Economists created the above graph, which shows the margins taken by American wine wholesalers over the past two decades. While durable goods wholesalers and the entire wholesale industry have seen margins either stay the same or fall over the past twenty years, wine wholesalers have increased their margins by 21%.

It’s a remarkable achievement. But there is a reason for this kind of achievement.