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Why Warren Buffett is interested in Wine Investing

We got news today that Warren Buffett is bullish on U.S Wine:

A subsidiary of Warren Buffett’s Berkshire Hathaway has struck a deal to purchase Atlanta-based Empire Distributing, which has operations in Georgia and North Carolina. Empire is owned by brothers David and Michael Kahn. That subsidiary is grocery distributor McLane, worth $34 billion. Bill Anderson’s First Beverage Group, including ex-GE Capital executive Sean McLaren, advised Empire on the deal.

McLane provides grocery and foodservice supplies for thousands of c-stores, mass merchants, drug stores, military locations and chain restaurants, with 38 distribution centers nationwide. Berkshire Hathaway purchased McLane from Wal-Mart in 2003 for $1.45 billion.

Ironically, the beer industry believed not too long ago that McLane would make an entrance and bypass franchise beer distributors. Turns out they had their eye on wine and spirits. So what now? We can only speculate the impact this will have on the industry but it seems unlikely Buffett will stop with Empire Distributing. Recall that Berkshire Hathaway also has $11 billion stake in Coke and used to have a large stake in Anheuser-Busch.

We told you yesterday that Buffett likely paid top dollar since Georgia is a franchise state. A law in Georgia caps acquisition based market share at 25% so it would seem that he can’t buy too much more market share. However, there are indicators that the 25% law won’t always be in place.

This deal could have sweeping implications for the wholesale wine and spirits business. Clearly McLane was smart to obtain their beachhead in a franchise state, where the suppliers are not able to fly. From that established and well-protected base, McLane can move into other regions. This isn’t the last we’ve heard from them. What is unknown at press time is what the wine and spirits suppliers think of such a large public company buying into their distribution system.

What is also unclear is how much McLane, a logistics expert, will integrate Empire’s operation into their own. McLane has 38 distribution centers, including one in Georgia and NC. It already services many of the same off-premise accounts and a few on-premise accounts. Will we see wine and spirits on McLane trucks? Time will tell.

As you can see, there are many unanswered questions which we will attempt to answer for you in the coming weeks. Stay tuned…


Nielsen analyzed the shopping habits of four key generations – greatest generation (aged 64+), boomers (45-63), gen x (33-44) and millennials (15-32) – and gave a rundown on what marketers should expect when targeting these groups. Interestingly, wine is one of the largest spending categories for seniors at $124 per year. Boomers spend $125 per year on wine, while gen x spends $78 and millennials spend $61 annually.

In looking at other trends, the greatest generation is the most frequent shoppers and more deal prone than other age segments. Both the greatest generation and boomers shop club, dollar and convenience/gas channels more frequently. Millennials don’t like to waste much time in stores and shop less than other groups but buy more per trip. Along with gen x, millennials favor mass supercenters and mass merchandisers over more traditional formats like grocery or drug stores which remain a draw for the greatest generation and boomers, says Nielsen.

[Wine And Spirits Daily >>]


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David Wilson

Thursday 21st of July 2011

Good work. Very helpful. Recently me and my wife have been investing into wine, and have seen some remarkable returns. I would recomend reaserching the wine market. It is out performing almost every other asset class.

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