Wine Sees Improved Pricing in February

FILED MARCH 26, 2010

Dear Client:

Table wine gathered some momentum in February compared to the 52 week period ending March 6, based on Nielsen food, drug, c-store and liquor store scan data. Dollar sales of table wine in the four weeks to March grew 4.6%, but only gained 2.9% in the 52-week period. Meanwhile, volume growth lagged behind dollar sales, rising 3.4% in the month and 1.6% in the year. Not only does this show that dollar sales and volumes are likely improving, but it also suggests prices are up slightly overall. The average price of a 750 ml bottle of table wine was raised $0.07 in the 4-week and 52-week periods compared to the same periods a year ago.

IMPORTS STILL DISCOUNTING, DOMESTICS TAKE SLIGHT INCREASE. Imported wines, however, are still discounting at the off-premise, which is where most discounting activity takes place. As a whole, they knocked off $0.07 in February but raised prices $0.01 cent in the 52-weeks. Compared to January trends, pricing was stronger for most imports in February. New Zealand and South Africa discounted the most in February, dropping prices $0.86 and $0.71, respectively. Australia followed with a -$0.23 discount, while Chilean prices declined -$0.17 and Spanish wines dropped $-0.15. Italian prices were down only 2 cents. Not surprisingly, Argentina took an average price increase of $0.59 and also managed to post growth (see below). France also took a slight increase, up $0.06, but did not have similar luck.

Domestic wines (made up largely of California wines) collectively raised prices $0.11 in February and the 52-weeks. In the 13 weeks to March 6, prices were up 9 cents.

NEW ZEALAND AND ARGENTINA WIN WITH DIFFERENT STRATEGIES. Dollar sales of domestic table wines gained 5.8% in February, while dollar sales of imports rose only 1.5%. Domestics and imports saw volumes increase 3.7% and 2.5%, respectively. As you can see, domestics are still outpacing imports but imports are trying to take back share by discounting. New Zealand benefited from price cuts, with volumes gaining 30.5%. They also still managed to grow dollar sales by 21.6%. Chile had solid numbers, with sales up 4.9% and volume up 7.9%. Dollar sales of South African wines suffered from discounting (-12.9%), with volumes also taking a hit (-5.1%).

Despite taking a price increase, Argentina came in strong with sales growing 36.3% and volumes rising 26.2%.

Out of the "big three" (Australia, Italy and France), Italy by far had the strongest February. Sales grew 1.8% and volumes gained 2.1%. Dollar sales of French wines fell -4.9%, while volumes declined -5.5%. Australia saw sales drop -5.7% and volumes slide -2.3%, which is likely a result of discounting. Italian wines were improved from January, while French and Australian wines were worse off in February.

PINOT AND RIESLING MAINTAIN SHARE WITH DISCOUNTS. The varietals and varieties with the biggest dollar sales gains in February (in order) were Sangiovese (13.8%), Pinot Noir (13.1%), Riesling (10.9%), Fume/Sauvignon Blanc (9.8%), Zinfandel (9.6%), Cabernet Sauvignon (6.4%), Pinot Grigio (3.4%) and Chardonnay (1.9%). Volumes for Pinot, Riesling, Sauvignon Blanc, Zinfandel, Cabernet, Pinot and Chardonnay all outpaced dollar sales, which suggests discounting. Pinot Noir and Riesling took the highest price cuts, dropping the price of an average 750ml bottle wine by $0.35 and $0.30, respectively.

SIGNS OF STABILITY FOR $20+ WINES. Wines priced above $20 showed solid growth in dollar sales (12.6%) and volume (10.7%). This could be the beginnings of an improvement in that price range, but it also suggests discounting by higher priced wines. Wines priced $9-$12 and $12-$15 continue to be strong categories, with volumes outpacing sales. They also dropped prices more than the other categories, with $9-$12 down -$0.31 and $12-$15 down -$0.45. Meanwhile, wines $3-$6 and $15-$20 continue to post growth in the mid-single digit range.


HISTORY OF THE ROTHSCHILDS. The Financial Times featured an interesting article on the history of the Rothschild family. It focuses mainly on the family's banking business, but also highlights their history in wine. Baron James de Rothschild purchased Château Lafite, the family's flagship Bordeaux vineyard, in 1868. Baron Eric took over the management of Lafite in 1974 and has since added châteaux in Bordeaux and other regions of France. Now a bottle of Château Lafite-Rothschild 2005 Pauillac sells for $1,050 a bottle.

VIRGINIA GOV MCDONNELL APPOINTED J. Neal Insley commissioner and chairman of the ABC Board and Wayne Ozmore commissioner yesterday. They join Sandra Canada who was already appointed commissioner.

DIAGEO HAS APPOINTED Philip Gladman as marketing director for its British unit, effective June. He is currently senior vp and replaces Philip Almond who became global marketing director for Baileys in August.

Until Monday, Megan

"The truth does not change according to our ability to stomach it."
Flannery O'Connor

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