Consolidation in the wine business was a big subject at the 2006 Unified Wine and Grape Symposium just held in Sacramento. In the last two years, five of the top 30 wine companies merged into other companies. Three respected wine companies -- Robert Mondavi, Allied Domecq Wines and Southcorp of Australia -- were purchased and combined into other global wine companies. Robert Mondavi is now part of Constellation Brands; Allied Domecq Wines is part of Beam Wine Estates (Yes, the Jim Beam folks) and Southcorp was bought by Foster's, which already owned Beringer-Blass Wine Estates.

As a result of these and earlier deals, four producers now produce two-thirds of the wine made in the United States: Gallo, Constellation, the Wine Group and Bronco (which makes "Two-Back Chuck"). The top 30 companies produce 90 percent of the volume, but only half the dollars, showing that they are focused on less expensive wines -- the type most people drink.

"Consolidation is mostly affecting the brands that sell for under $15," notes Walter Klentz, who ran Foster's Beringer Blass Wine Estates until he retired recently. "And to the consumer, there's no consolidation but a proliferation of brands."

In addition to the moves among the top four companies, giant spirits producer Diageo bought Chalone Wine Group, E&J Gallo purchased Barefoot Cellars after recently buying Martini, Mirrasou and Bridlewood, and Constellation acquired the 500,000-case Rex Goliath brand from Smith and Hook/Hahn Wine Estates. Cline Cellars sold its high-volume Red Truck label to new Axiom Wine Company.

In the last few years: Constellation bought Washington's Columbia and Covey Run Wineries, Sebastiani's high-volume Turner Road operations, upscale Franciscan Estates, Blackstone, Ravenswood and Hardys of Australia.

The secretive Wine Group bought Concannon, Golden State Vintners, Glen Ellen and MG Vallejo. For growers, this is leading to consolidation, too, as they acquire larger vineyards to satisfy their big new customers. Mark Couchman of Pacific Premier Vineyards, for example, has seen two of his top 10 customers merge -- twice -- in the last two years.

The big producers save a lot of money with their efficiency and buying power, and they also give the acquired brands clout in the market. When Beringer was acquired by Foster's, notes Klentz, it gained international distribution while Foster's Australian wine brands gained entry into the United States market. Most of the acquiring companies respect and value the brands, too, unlike the debacles of the past when companies bought and debased leading brands such as Inglenook, Almaden and Paul Masson.

The acquirers also use the acquisitions to quickly fill holes in their product lines, as Constellation did with Rex Goliath, a leader in the $7 to $9 category. Diageo with Beaulieu and Sterling was strong in Bordeaux varieties but weak in Burgundy varieties of wines, Chalone's strength.

Diageo has already taken advantage of the respected Chalone name, too, introducing higher-volume -- but excellent value -- Chalone Monterey wines, and Constellation is expanding the midpriced Robert Mondavi Private Reserve brand while raising quality at the landmark Robert Mondavi Oakville winery.

In a sense, these mergers among wine producers are somewhat self-protective. Their customers -- distributors, restaurants and retailers -- are becoming equally concentrated. Steve Boone, who started or ran Liquor Barn, Cost Plus and Beverages and More, notes that 70 percent of the wine sales are at chains -- supermarkets, clubs and restaurants, and only 30 percent in independents, the reverse of the situation in the '70s. And Costco only carries about 240 different wines of 10,000 offered by US companies.

In spite of the consolidation, boutique brands proliferate. Every day new wine producers appear, not only in California, but all over the United States. Every state now has commercial wine producers, and some are creating significant wine industries. Wine Business Monthly says there are now 5,364 wineries in the United States, up from 4,740 one year ago. Every state has commercial wineries, and Virginia, Pennsylvania and Texas have joined California, Washington and Oregon in having more than 100 each.

Even as Couchman has seen big customers merge, his total number of customers has risen from 44 in 2003 to 85 now.

The potential losers in this whole scenario are the medium-sized producers who make between 50,000 or 100,000 cases per year and less than 500,000 or even 1 million cases. With little clout in the market, yet difficulty in charging premium prices due to exclusivity, they are being squeezed from both ends. We can expect to see some of the companies in this endangered range to sell out -- or even go bankrupt. Interestingly, however, some marketing-oriented brands have done well, including Don Sebastiani and Sons, which has grown from almost nothing to more than 1.4 million cases sold last year. Most buy considerable grapes and even bulk wine for resale rather than investing in land and facilities, however.

One question is what the impact will be on consumers. The wine industry, even after this consolidation, is much less concentrated than most consumer goods markets, and it's unlikely many producers will find it possible to raise prices. Wine lovers are benefiting. They're get better wine at better prices. Unlike in the past, acquiring companies like Constellation seem to be improving the wine of the companies they buy, not dumbing it down. They pay plenty for excellent properties and hardly want to see them deteriorate.