Buffett Booze-Wholesaler Buy: Boon or Blow to Consumers?

Harder times for wine lovers are coming now that Warren Buffett’s Berkshire Hathaway owns Chattanooga-based Horizon Wine and Spirits, writes David White, of the Terroirist.com blog.

His beef is that the purchase, technically by the Berkshire unit the McClane Company, is the latest blow in a march toward consolidation of the all-powerful wholesaler, and that a pending bill in Congress could further entrench the system that governs how that bottle of pinot noir gets from the Oregon grower to the dinner table.

“The nation’s six largest liquor wholesalers already control more than 50 percent of the market. So to gain access to most consumers, all the nation’s wineries are fighting for the attention of just a handful of companies.

“Worse, this consolidation of wholesalers would also drive prices higher. It’s estimated that the existence of wholesalers adds nearly 25 percent to the price of every single alcoholic beverage, whether sold at a liquor store, bar, or restaurant.

“Buffett’s acquisition of Tennessee’s Horizon Wine and Spirits suggests that he’s willing to bet on wholesalers over consumers. This is tragic for wine lovers — as it means a free market in wine is unlikely to emerge any time soon.”

A six-pack of beer that starts out at a brewery makes its way through a distributor like Horizon, or like the one owned by failed gubernatorial candidate Mike McWherter, before it reaches the shelves of Frugal MacDoogal or Kroger. The debate over the usefulness and impact of these middlemen, and their three-tiered system of producers, distributors, and retailers, rages. Most recently, voters in Washington state last week rejected a plan aimed at doing away with the middle man and allowing retailers to negotiate prices directly with the producers.

Wine Spectator reports that the next battle will be fought in D.C. (over the same measure that White notes):

“Wholesalers’ next target is the nation’s capitol. They’ve pushed Congress to pass House Resolution 5034, the Comprehensive Alcohol Regulatory Effectiveness (CARE) Act of 2010, since its introduction in April. Opponents of HR 5034, including many wineries, retailers and wine lovers, claim the bill is an attempt by the wholesalers to protect their turf. ‘The wholesalers would like to have protected territories and as little competition as possible,’ said Keith Wollenberg, a buyer at K&L Wines in California. ‘This bill can only serve to raise prices and reduce choices of what wines you get to drink.’”

The magazine reports that the measure is likely to be a serious issue next year and could “completely change how consumers buy wine in the United States.”