Illinois' second- and third-largest liquor distributors, Judge & Dolph and Union Beverage, will effectively combine in a joint venture that will rival in size the state's largest liquor wholesaler.

The venture is the latest example of consolidation in the alcoholic-beverage business, and will result in two companies controlling over 90 percent of the state's wine and spirits wholesaling. It also signals that Wirtz Beverage Group, Judge & Dolph's owner, may be eyeing further partnerships in other states with Union's owner, Dallas-based Glazer Distributors.

Union, which distributes Brown Forman spirits, E&J Gallo and a number of smaller brands, will cease operations in the state effective June 30. Its brands will likely migrate over to Judge and Dolph LLC, a newly formed company to be co-owned by Glazer and Wirtz. The latter firm is owned by Chicago's wealthy Wirtz family, whose holdings also include the Chicago Blackhawks.

Wirtz Beverage Chairman and Chief Executive W. Rockwell "Rocky" Wirtz will become president of the new Judge and Dolph when the deal is completed. The exact ownership structure of the venture was not released.

Judge & Dolph, with more than $560 million in revenue and brands that include Diageo and Barton, is the second-largest wine and spirits distributor in Illinois, behind Southern Wine and Spirits. Southern has about 46 percent of the market, said Paul Jenkins, executive director of Wine and Spirits Distributors of Illinois, a trade group.

Combined, Judge & Dolph and Union also would have about 46 percent, he said. "They would end up being roughly equal."

That assumes Union's major accounts will move to the new Judge and Dolph and not bolt to Southern. "I fully expect those companies currently at Union will in large part go to the new company," Jenkins said.

The alcoholic-beverage business has been swept with a wave of consolidation over the past decade. It started with the makers of spirits and wine, but in order to keep pace with bigger and more dominant liquor companies, distributors are increasing in size just to compete.

A decade ago, Illinois had four major distributors; now it will have two. Miami-based Southern, the nation's biggest liquor distributor, entered Illinois in 2002 when it bought Bolingbrook-based Romano Brothers, while Glazer bought into Chicago-based Union in the late 1990s. Union has estimated revenues of about $300 million.

The latest marriage evolved over the past several months, Rocky Wirtz said. "It was kind of mutual. We were just talking about what made sense."

The two companies may find such ventures make sense elsewhere too. In a letter to employees Friday, Rocky Wirtz said the new joint venture is "we hope, the first of many strategic initiatives to bolster the Wirtz Beverage Group position as an industry leader."

In an interview, he said initiatives could include acquisitions in other states or other partnerships with Glazer. "We certainly would love to talk with Glazer about other opportunities that might exist," Wirtz said.

Glazer, which like Wirtz Beverage is family owned, has operations in 12 states and is the largest wine and liquor wholesaler in Texas, Louisiana and Arkansas. Wirtz Beverage has significant wholesale operations in Minnesota, Wisconsin and Nevada.

Daniel Clausner, executive director of the Illinois Licensed Beverage Association, a trade group for alcoholic-beverage retailers, said he doesn't think the latest wholesaler consolidation will lead directly to higher prices for consumers. Spirits and wine prices are driven primarily by the cost of such supplies as grain or grapes, and the cost of fuel, a crucial transportation cost.

Despite all the consolidation in the wine, spirits and beer industries over the past decade, the average annual price increase of alcoholic beverages—2.4 percent—trailed the average price increase of 2.6 percent for all food and beverages, according to data from the U.S. Bureau of Labor Statistics.