Monday, Feb. 08, 1943

California Invasion

The distilling industry is staging an all-out invasion of the wine business.

Such was the news from California last week. Distillers Corp.-Seagrams had just bought the Mt. Tivy Winery in Fresno County, was eying three others to boot; agents of Hiram Walker and Fleischmann Distilling were reported hotfooting through the California wine belt (which produces 90% of all U.S. wine) for good properties; the whole industry was abuzz with big deals to come.

This assault is actually nothing new: it started in a small way about four years ago, gradually highballed into a big push. First in the field was prophetic, hard-bitten Lewis S. Rosenstiel, board chairman of giant Schenley Distillers. His company paid $300,000 for venerable Cresta Blanca

Wine, then $6,400,000 for Roma Wine (biggest U.S. winery) and $4,000,000 for Central Winery. Not to be outdone, National Distillers bought two big wineries, including Italian Swiss Colony. Results: 1) the distillers now own 25%of all U.S. wine-making capacity (some 200,000,000 gal. annually); 2) the wine industry is shifting from a ramshackle collection of hundreds of large and small units into a fast-moving business with big capital, big production and nationwide distribution.

All this came about quite naturally. The outbreak of war cut off Europe's wine supply, left the import divisions of most U.S. distillers with a crack sales and distributing setup but nothing to do. So the distillers began switching to domestic wines, bought wineries outright because it was far cheaper than starting from scratch. Then last August WPB stopped all whiskey production, ordered the distillers to convert to war alcohol (TIME, Sept. 14). The distillers looked over their whiskey stocks, discovered they had 480,000,000 bbl., enough to last only two years unless the U.S. stops drinking so fast and hoarding so much. If the war lasts that long it would mean no whiskey to sell, dry rot in costly distributing organizations and the fade-out of valuable trade names. So the distillers went after wine with a rush. And they picked a good thing: U.S. wine consumption has jumped from 66,000,000 gal. in 1937 to 111,000,000 gal. last year, and demand is still going up.

The Good & Bad. This concentration has both its good and bad points for the long pull. The distillers will probably be able to cut down wine distribution costs (since wine and liquor are usually retailed through the same outlets) and advertise wines in a bigger & better way. Already Schenley is on the air with a 4 5-minute nationwide radio show to boost wine consumption. On this score even the independent wineries are happy. Said San Gabriel Vineyard Co.: "The big fellows will publicize wine as it has never been publicized before."

But while all this may happen, the "big fellows" may also destroy competition, as has been the case in many another industrial merger. Moreover, distilling hard liquor and producing wine have almost nothing in common; hence distillers have for the present nothing to add to vineyard technique. This is especially true in the case of high-grade wines, where small discriminating wineries such as California's Paul Masson Winery and Wente Bros, have labored hard to collect an educated clientele. Best hope is that despite the invasion of big-time money the small fellow will still compete in producing both cheap table wines (as in France) and also the higher grades which require the finesse of experts.

This file is automatically generated by a robot program, so reader's discretion is required.