Full Year: Super-Premium Wines Gain in Grocery

FILED JANUARY 1, 2010

Dear Client:

Despite the downturn and fears from the industry, wines priced $20 and above posted the most growth in food stores in 2009, according to IRI’s most recent scan data in the 52 weeks to January 3. In fact, all premium and super-premium wines posted growth in 2009, while the lower end was a little more sporadic. Dollar sales of $20+ wines grew 11.4% and volume gained 15.2%. The second fastest growing price group was premium wines at $8-$15. Wines priced $8-$11 saw sales leap 5.9% and volumes grow 6.2%. Sales of the $11-$15 category gained 5.4%, while volumes rose 7.2%.

Growth at the lower end was shakier, with downturns in economy wines and growth in fighting varietals. Wines priced below $3 grew a solid 3% in sales but volumes declined -1.9%, likely due to an average price increase of $1.58 per volume. Wines priced $5-$8 declined slightly, down -0.1%, in sales and volume, respectively. Meanwhile, wines in the $3-$5 range were the most successful in the low end, growing 5.6% in sales and 3.7% in volume.

DOMESTICS GAIN IN BOX AND $20+. Strangely enough, domestic wines saw the most growth from box wines and super-premiums. Box wines above $2 grew the fastest with dollar sales gaining 25.1% and volume up 19.9%. The second fastest price category was table wines priced above $20, with sales up 14.1% and volume up 18.1%. Note that there was an average $11 price cut per volume in that category. The third fastest growing category was wines priced $8-$11, with sales up 7.7% and volume up 8.6%.

In looking at just California wines, overall sales grew 5% and volume gained 3.1%. The fastest growing price category was above $20. The weakest category was below $3.

Oregon saw the most growth in 2009 compared to California and Washington. Sales leaped 8.2% and volumes gained 10%. The two fastest growing categories were wines above $20 and wines $15-$20. The weakest were wines priced $3-$5.

Washington dollar sales grew 6.4% and volumes gained 6.3%. The state’s fastest growing price segment was $11-$15, followed by wines priced $8-$11 and $20+. Wines $3-$5 posted the biggest declines by far, followed by the $5-$8 category.

IMPORTS GAIN IN ECONOMY AND $11-$15. Imports were a different story. Wines that sold below $3 grew a whopping 34.2% in sales and 26.7% in volume despite a price increase. The second fastest growing group was wines in the $11-$15 range that saw sales grow 15.1% and volume rise 17.3%. The $11-$15 price category was on fire for most importers last year, which could be a result of an average price decrease of $2.76 per volume and consumers trading down. The next highest price category, $15-$20, also posted strong growth with sales up 9.1% and volume up 9.8%.

The $5-$8 category posted the biggest decline, where sales dropped -3.8% and volume fell -3.7%. Like domestics, importers dropped prices in the $20+ segment but only managed slight growth in dollar sales and 5.6% in volume.

Argentina was the fastest growing import and country overall. Sales gained 57.5% and volumes grew 44.1%. Their fastest growing price categories were $20+, $11-$15 and $8-$11. Interestingly, wines in the $15-$20 range posted some of the lowest growth but were still up double digits.

The second fastest growing region was New Zealand. Sales were up 16.4% and volume rose 13.5%. The most popular priced categories were its least expensive offerings, which fall in the $5-$8 range, along with premium and super-premium wines, $11-$20+.

Spain, Portugal and Chili had a great 2009. Spain saw sales grow 13.9% and volumes gain 18.3%. Spain’s fastest growing price category by far was $3-$5 in terms of dollar sales and $20+ in volume. Chile saw dollar sales rise 9.8% and volumes grow 8.5%. Chile’s fastest growing price segment was below $3 and $11-$15 in terms of both sales and volume. Lastly, Portugal saw sales grow 9.8% and volumes gain 2.5%. Portuguese wines that saw the most growth were priced $8-$15. Big declines came from wines priced $15-$20.

The big three importers – Australia, Italy and France – all posted declines in grocery stores last year. France posted the biggest losses, with sales down -6.2% and volumes down -9.8%. Almost all price segments saw negative growth, with the biggest declines come from French wines priced $3-$8. France’s redemption came from $2+ boxed wines and the “magic” $11-$15 category.

Australia saw sales declined -4.6% in 2009 and volume drop -3.6%. All price segments but one posted declines, with the biggest drops coming from wines priced $3-$5, $8-$11 and $20+. The only price segment that posted growth was $15-$20; perhaps a $12 average price drop per volume helped draw consumers to that category.

And finally, sales of Italian wine dropped -2.7% and volume declined -4.8%. The biggest declines came from $5-$8, with sales down -7.9% and volume down -9.1%. The biggest growth came from $11-$15, with sales up 10% and volume up 9.8%.

German wines posted sales growth of 2.9% and volume growth of 0.1% in 2009. Their most popular price categories were $11-$15 and $20+. South African wines disappointed with sales and volumes declining -20.8% and -26.1%, respectively.

MALBEC OUTPACES OTHER VARIETALS. White wine saw the most growth in grocery stores last year, with sales up 5.1% and volume up 3.6%, while red wine grew 3.9% and 3.3%, respectively.

With all the success coming from Argentina this year, it’s not surprising that malbec far outpaced all other varietals. Dollar sales of malbec grew 82.7% and volume rose 82.1%. Fume/sauvignon blanc was the second fastest varietal, followed by red blends/meritage, pinot noir and riesling. Cabernet posted mid-single digit growth, while chardonnay posted low-single digit growth and merlot dropped -1.8% in sales and grew only 0.2% in volume. As you can see, most of the categories did well in food stores although malbec was the only one to post double-digit gains. Varietals other than merlot that posted declines last year include chianti/Tuscan reds, syrah/shiraz and white zinfandel.

NON-TRADITIONAL PACKAGES WIN. Some of the fastest growing packages in 2009 were tetra paks, 1 liter table wines, 3 liter boxed wines and the 4 liter boxed wines. The 1.5 liter boxed wine and 3 liter glass table wine bottle both lost share.

BRAND WINNERS AND LOSERS. Some of the fastest growing wine brands in food stores last year (in no particular order) include Barefoot, Sterling Vintners, Folie a Deux, Black Box Wines, Rex Goliath, Red Diamond, Edna Valley Vineyard, Dancing Bull, Corbett Canyon box wine, Gnarly Head, Vendange box, St Francis, Golden Gate, Bay Bridge Vineyards, Cupcake Vineyards, Delicato box and Tisdale. Note they are almost all from California.

Some of the wines that took the biggest hit last year include Turning Leaf, Bella Sera, Redwood Creek, Almaden box, Smoking Loon, Glen Ellen, Toasted Head, Bolla, Alice White, Gallo Family Vineyard Reserve, Pepperwood Grove, Rosemount Estates and Kendall-Jackson Grand Reserve.

MILLENNIALS CRAVE AUTHENTICITY IN MARKETING

Keynote speaker Nadira Hira, a reporter for Fortune, told listeners at the Direct to Consumer Symposium that the most important thing to remember in marketing to millennials is that they crave authenticity, according to an article in The Press Democrat. While millennials, or generation Y, are more open to wine at a younger age than baby boomers and generation X, they require a different type of marketing. For example, millennials tend to reject heavy advertising that comes on too strong. They’re more interested in exploring brands on their own, which makes them fickle consumers. They’re also computer savvy, so Nadira suggested that wineries get on social networking sites, set up a blog on their websites and access consumers’ mobile phones – as long as the message is authentic.

WSD BRIEFS:

WASHINGTON STATE is adding 5 new state liquor stores, 10 new contract liquor stores and reopening others as legislators consider privatizing spirits sales to fill budget gaps. Gov. Chris Gregoire didn’t seem too fond of the idea in a recent interview, though. She told the Seattle PI that the state wouldn’t save any money by privatizing spirits sales and that the initiative would end up destroying small liquor stores.

STE MICHELLE ESTATES has struck an agreement to import and market New Zealand’s Villa Maria Estate wines, effective yesterday. This is a part of Ste. Michelle’s “business strategy of owning or representing estate wineries who are leaders in their respective regions,” said the company. Privately owned Villa Maria was founded by Sir George Fistonich in 1961 and has been New Zealand’s most awarded winery for 30 years.

RED BULL NORTH AMERICAN CEO Sélim Chidiac has opted to leave the company effective February 3 to head a gold jewelry brand in the Middle East. Sélim has been with the North American unit for 3 years. Red Bull said they will name a successor “at a later stage.”


Until tomorrow, Megan

“The power of accurate observation is commonly called cynicism by those who have not got it.”
George Bernard Shaw

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