The average American consumes nearly 90 kilograms -- roughly 200 pounds -- of beer each year. By weight, beer accounts for nearly 90% of all alcoholic beverages consumed in the U.S.

But despite beer's dominance of the alcoholic beverages market, beer consumption isn't growing in developed markets like the U.S. and Western Europe. For example, the average American consumed about 99 kilograms of beer in 1980, about 96 kilograms in 1990, and about 90 kilograms in 2002. So as you can see, beer consumption by weight has actually been on the decline for several decades.

In dollar terms, of course, beer's dominance of the alcoholic drinks market is far less drastic. Beer sales account for roughly 55% of the total alcohol market. That compares to about 15% for wine and nearly 30% for alcoholic drinks. Statistics suggest that beer's dominance is actually on the wane -- its percent of sales has dropped from 60% of the alcoholic beverage market just a decade ago.

This is not to say that U.S. consumers are spending less money on beer. Rather, beer sales are growing thanks to rising prices. However, the growth in this market tends to be extremely slow, and beer sales are not increasing as fast as the alcoholic drinks business at large.

The big growth in the drinks market is in wine. Our chart depicts United Nation's estimates of annual wine imports into the U.S. over the last 40 years. Because the U.S. imports significant amounts of wine from countries like France, Australia, and Italy, imports are a good basic measure of wine consumption in the nation. And by this measure, the growth in imports has been drastic. 

And, of course, this isn't just a U.S. phenomenon. In just about every developed country, wine is gaining market share in the drinks market. In the U.K., for example, wine consumption per capita in weight terms was up nearly 2.5 times between 1980 and 2002. And in Germany, a country known for its beer culture, wine consumption has actually risen over the past 25 years. Meanwhile, German beer consumption has fallen.

As is the case with most consumer goods, branding is key to the wine business. The best-known Chateaux, producers, and wine labels command premium prices from consumers -- it's not unusual, in fact, for a single bottle of wine from a well-known vintner to cost $500. Wines from the best-known winemakers tend to be in high demand and consistently command such large premiums. These high prices are behind the industry's extraordinarily high profit margins.

Even better, the wine business has been the subject of a great deal of merger and acquisition (M&A) activity in recent years. The reason is simple -- the industry remains among the most fragmented in the world with literally thousands of small producers. In fact, the world's largest producer, U.S.-based Constellation Brands (NYSE: STZ), holds only a 4% global market share and controls just 10% of the domestic market.

Many winemakers have trouble selling their wares internationally at favorable prices. After all, most of the industry's thousands of small players simply don't have the marketing muscle to advertise their brands. Even more importantly, these smaller vintners don't have the distribution power to make sure their wines end up in front of consumers in many different markets.

Smaller winemakers with solid brands represent attractive acquisition targets for major alcoholic drinks companies like Constellation Brands or Diageo (NYSE: DEO). Such firms can leverage their existing economies of scale to garner even higher profitability.

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