HOUSE BRAND WINES, JUST LIKE TOOTHPASTE?
Prompted by the huge success of Trader Joe’s Charles Shaw wines (“Two-Buck Chuck” by Bronco Wine Co.), almost every major retailer has one by now. Everyone including 7-Eleven, Costco, and Target has joined the race to bring in the next big “Two-Buck Chuck” and all of the six million cases it produces annually. Even SF Gate thinks Frank Franzia’s brainchild should have been christened the official state wine of California. Wine negociants in France have been doing it for years, so what does that mean for the U.S. industry?
Has wine become just another commodity that retailers can privatize - like toilet paper, toothpaste, and pain reliever? Private-label wine sales at food and drug stores have increased five times in as many years and risen 25% at food stores in the past year, according to IRI and ACNielsen. And last year’s huge grape crop will only prompt the trend to grow, making loads of cheap wine available to big chain stores.
Sales of private label wine brands are growing, and the category looks to be a significant portion of the market in the future. According to ACNielsen, private label brand sales have grown 30% in the 52 weeks ending September 23, 2006, as compared to the 18% growth over the same period in 2005. By contrast, branded wines have grown 10% in the 52 weeks ending in 2006, and 9% in the preceding year.
To be fair, we have to point out that private label sales currently account for about 1.4% of the grocery store wine market, roughly the same size of the Chilean wine or Chianti segments. So it’s easy to see high growth rates off of such a small base.
Most house brands are generally made by large players like Wine Group, E & J Gallo, and even Foster’s, along with middle men companies that buy wines from vineyards and sell it to supermarket chains as private labels. However, much like house-brand napkins and mouthwash, the private labels rarely identifies the actual producer. So while the big boys are eager to make a profit, they don’t want their names associated with the product.
Private labels also generally sell at lower price points, although they are available at all price levels. According to the ACNielsen data, private label brands sell at an average price point of $4.64, 15% lower than the average branded wine price of $5.47.
It’s a way to get rid of extra grape juice – sure, I understand. It gives wine companies an outlet for excess product, and expands itself to the general population. By 2008, the U.S. will be the largest wine-drinking nation (which isn’t necessarily saying much since our population is much larger than any of the contenders), which marks a huge culture shift. Wine is losing that specialness, that snootiness that it has always been associated with, which can be a good or bad thing depending on who you’re talking to.
Assuming that private label wines will become a much larger part of the American wine landscape, traditional, branded winemakers are going to have to decide how to private labeling fits into their business model. The increase of globalization and the effect of grape surpluses around the world will have an impact on private label wines. It’s important to keep in mind that there will always be a region in the world experiencing a glut.
Has wine become just another commodity that retailers can privatize - like toilet paper, toothpaste, and pain reliever? Private-label wine sales at food and drug stores have increased five times in as many years and risen 25% at food stores in the past year, according to IRI and ACNielsen. And last year’s huge grape crop will only prompt the trend to grow, making loads of cheap wine available to big chain stores.
Sales of private label wine brands are growing, and the category looks to be a significant portion of the market in the future. According to ACNielsen, private label brand sales have grown 30% in the 52 weeks ending September 23, 2006, as compared to the 18% growth over the same period in 2005. By contrast, branded wines have grown 10% in the 52 weeks ending in 2006, and 9% in the preceding year.
To be fair, we have to point out that private label sales currently account for about 1.4% of the grocery store wine market, roughly the same size of the Chilean wine or Chianti segments. So it’s easy to see high growth rates off of such a small base.
Most house brands are generally made by large players like Wine Group, E & J Gallo, and even Foster’s, along with middle men companies that buy wines from vineyards and sell it to supermarket chains as private labels. However, much like house-brand napkins and mouthwash, the private labels rarely identifies the actual producer. So while the big boys are eager to make a profit, they don’t want their names associated with the product.
Private labels also generally sell at lower price points, although they are available at all price levels. According to the ACNielsen data, private label brands sell at an average price point of $4.64, 15% lower than the average branded wine price of $5.47.
It’s a way to get rid of extra grape juice – sure, I understand. It gives wine companies an outlet for excess product, and expands itself to the general population. By 2008, the U.S. will be the largest wine-drinking nation (which isn’t necessarily saying much since our population is much larger than any of the contenders), which marks a huge culture shift. Wine is losing that specialness, that snootiness that it has always been associated with, which can be a good or bad thing depending on who you’re talking to.
Assuming that private label wines will become a much larger part of the American wine landscape, traditional, branded winemakers are going to have to decide how to private labeling fits into their business model. The increase of globalization and the effect of grape surpluses around the world will have an impact on private label wines. It’s important to keep in mind that there will always be a region in the world experiencing a glut.
posted at 1:10 PM
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