Changes to the Wine and Spirits Industry Affect Commercial Real Estate

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Winewarehouse

By Jimmy Clark
Jones Lang LaSalle

With more than $76 billion in annual revenues nationwide, the wine and spirits wholesaling industry is a lucrative one despite slowed demand being forecasted for 2014.

It has been a historically steady industry compared to others, but regulation will always affect wine & spirits wholesalers both at federal and local levels. The federal three-tier distribution system requires that producers sell directly to distributors, who can only then sell straight to retailers (one of the reasons why revenues remain stable).  Other threats besides regulations are costs associated with maintaining alcohol licenses as well as the growing popularity of direct online alcohol sales.

This can affect wholesalers’ real estate in several ways. On the most basic level, companies need to determine a main distribution hub that is close to clients. This is why the centrally-located Indianapolis has such a strong industry presence for alcohol distributors and wholesalers. The national market share is dominated by Southern Wine & Spirits and Republic National Distributing Company (formerly National Wine & Spirits in the Indy market), and both have a large footprint in Indianapolis.

Figuring out just the right amount of space needed depends on several factors, two major ones being:

  • Adapting to federal and local regulationsIf changes in regulations affect consumer demand, and many pundits believe that this will be the case in 2014, wholesalers will need to be proactive. For example, if local laws change in regards to Sunday liquor laws and/or what can be sold at convenience stores, this might be something companies look at and make sure the footprint is large enough to accommodate more inventories.
  • Adoption to new industry technologiesTo keep capacity where it should be and overhead low, some have spent money up front on technology such as state of the art machines that can fill pallets quicker and without user error. This aids in quicker inventory turnover and avoids the mistake of being over capacity, therefore having a less efficient distribution model.

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