Latest Nielsen Wine Trends for July

FILED AUGUST 1, 2009

Dear Client:

WSD took a hard look at the latest Nielsen data to see what’s cooking in the wine world. There was little variance if any in liquor, grocery and drug store trends in the 12 weeks to July 25. But it’s important to note that there is more growth than the industry is getting credit for particularly among domestic wines and wines priced below $20. The biggest losers in all this appear to be Australia and France, but honestly that’s nothing new. Meanwhile, South American regions and New Zealand continue to carve a nice place for themselves in the industry. And finally, fighting varietals appear to have the least success off-premise.

PREMIUMS AND UP POST GROWTH. Contrary to popular assumption, most wines in the $20 and below categories are growing in volume and dollar sales. The only one to show consistent declines in the recent period is wines priced $6-$8.99. Why is that? For some reason it seems that consumers who used to drink wines in that price point are trading down to the category right below ($3-$6). Consumers that drink more expensive wines seem hesitant to go below the $9 point. We’ve heard several experts in the industry say that although consumers are eating and drinking more at home, they are willing to splurge a little bit on wine at retail.

Wines priced $3 and below exhibited growth in dollar sales but declined in volume. This seems to suggest that suppliers recently went up in price. Wines in the price range of $9-$20 are doing well, up an average of 3.7% in dollar sales and 4.3% in volume. Lastly, the $20 and above range declined -1.1% in value and grew 0.3% in volume.

ONE LITER GAINS MOMENTUM. The one liter continues to topple other package sizes. The 1.5L showed solid growth in dollar sales and volume but still did not match the traditional 750ml. Lastly, the 3L, 4L and 5L grew an average of 6.8% in dollar sales, but declined an average of -2.7% in volume. The 4L was the weakest out of the three.

GAMAY MAKES INROADS. The relatively “exotic” varietal Gamay is making huge inroads off-premise. It grew 25.6% in dollar sales and 29.1% in volume.

In terms of the better known varietals, Fume/Sauvignon Blanc, Pinot Noir and Riesling continue to lead the pack in both dollars and volume. Varietals that were lagging in both dollars and volume in the 12 weeks include: Syrah/Shiraz, Chianti and especially Sangiovese. Recall that the Italian government has investigated claims that certain Sangiovese producers were tampering with the wines. The case has since been dropped, so it will be interesting to see if their sales start to rise in the U.S.

Merlot declined -0.4% in dollar sales, while Chardonnay (3.5%) and Cabernet Sauvignon (6.6%) grew in sales. In volumes Merlot rose 1.7%, Chardonnay grew 4.4% and Cabernet was up 8%.

EASTERN EUROPE AND FRANCE EXPERIENCE TOUGH QUARTER. Domestic and import wines both grew in volume and value in the 12 weeks, although domestics grew at a faster pace. In dollar sales, French, Italian, Australian and Eastern European wines took a dive. In volume, however, you can add German and South African wines to the list. Eastern European wines did the worst overall followed by France. Argentina, New Zealand, Chile and Spain once again dominated import growth. This is a trend we don’t expect to level off anytime soon.

FOURTH CIRCUIT DENIES REQUEST FOR A RE-HEARING

The Fourth Circuit Court of Appeals said thanks but no thanks to the state of Maryland's request for a re-hearing. According to the order, not one judge asked to keep this 10 year old case going.

As you may recall, judges ruled in favor of retailers but against the state and wholesalers in TFWS v. Franchot by banning price posting, price holding and volume discounts. The decision was made in mid July.

The greater significance of the case is that it pits the Ninth Circuit (yes the Costco Case) against the Fourth Circuit Court. To put it simply, the Fourth Circuit ruled that volume discounts violate the Sherman Antitrust Act but the Ninth Circuit says volume discounts are okay.

Maryland will have to decide now whether to appeal to the Supreme Court. If they do, and the SCOTUS agrees to hear it, it could conceivably be good, as we'll get more clarification on these issues that have been argued now for years. But the bad news is that the Supreme Court’s decision could ultimately hurt either side of the industry depending on their decision.

To read more background on the case, click here.

TEXAS SIGNS NEW VOLUME LIMITS FOR DIRECT WINE SHIPMENTS

Texas Governor Rick Perry signed HB 1084 that expands the number of gallons in-state and out-of-state wineries can ship to consumers in Texas. Currently licensed wineries may ship up to three gallons of wine within “any 30-day period,” reports ShipCompliant Blog, who’s VP of Compliance Jeff Carroll considers “perhaps the most difficult, and most commonly violated rule in a compliance check out of all state limitations.” The standard limit in most states is one or two cases. The rolling 30-day period also made it complicated for many wineries.

Effective September 1, three new volume limits will go into effect. Wineries may ship a maximum of 9 gallons, or 46 bottles, to residents within any calendar month. At that point, the same Texas consumer is allowed no more than 36 gallons, or 181 bottles, within any 12-month period. And finally, wineries are not allowed to ship more than 35,000 gallons (14,721 cases) to any Texas consumer annually. Jeff points out that the annual consumer limit stays the same at 36 gallons although some outlets are reporting a “tripling” of the volume limit. “It simply would allow wineries to ship somewhat larger quantities of wine to Texas consumers during the cooler seasons of the year,” he said.

WSD BRIEFS:

PERNOD NAMED NEW INTERNATIONAL BRAND DIRECTOR for its Irish Distillers unit, which oversees Jameson Irish whiskey. The current brand director for Beefeater and Plymouth gins, Nick Blacknell, will replace Richard Black October 12. Richard, meanwhile, will become marketing director for Pernod Ricard Japan beginning September 1.

KAHLUA WILL RELEASE A LIMITED EDITION coffee cream liqueur in the US from October 1 through December 31. It will retail around $17.99 for 750ml.

HIRAM WALKER, meanwhile, will reintroduce its limited release of Pumpkin Spice and Gingerbread Liqueur during the same time period. The suggested retail price will be $8.99-11.99 for the 750ml size.


Until tomorrow, Megan

“To invent, you need a good imagination and a pile of junk.”
Thomas A. Edison

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