$20-Plus Wines Gain Share in October

FILED DECEMBER 1, 2009

Dear Client:

In perusing some data today from IRI we were surprised to discover that wines in the $20+ range were the fastest growing table wine category in the 4 weeks to November 1 (or the month of October) by a long shot. Their growth in October was several percentage points higher than in September, and also seemed to steal some share from lower end wines. Could this reflect Halloween and the approach of the holidays? Are suppliers kicking up promotions? Both are likely true.

The lower priced wines, $8 and under, lost some momentum in October as compared to September, according to four-week food, drug and c-store scan data from IRI. Wines in the $11-$15 declined in October as well.

Meanwhile, wines priced $8-$11 gained share in October when compared to September. The top two price segments measured by IRI in this data ($15-$20 and $20+) both made gains, with the $20+ segment doing especially well. In dollar sales, $20+ grew 9.8% in September and 14.8% in October. In terms of volume, $20+ grew 14.2% in September and 19% in October. This is good news for super-premium wines, although it may mean that consumers who typically spent $50 on a bottle of wine are trading down to $20 or $30. How are the holidays panning for you so far? Let us know at megan@beernet.com.

DIAGEO EXTENDS RELATIONSHIP WITH WIRTZ BEVERAGE ILLINOIS

Diageo has signed a long term agreement with Wirtz Beverage Group to distribute its brands in the state of Illinois. The two companies originally struck an agreement in 2003, and since then Diageo’s brands have been sold and marketed by a separate and dedicated salesforce in the state.

Wirtz Beverage Group has approximately 3,000 employees nationally and 1,100 in the state of Illinois. In a statement, Wirtz Beverage Group president Rocky Wirtz said his company “is recognized for achieving industry-leading growth for our premium supplier partners.”

In addition to employing more than 400 people in Plainfield and Chicago, Diageo contributes approximately $1.2 million in local property taxes and $1.2 million in payroll taxes to the state. The alcohol beverage industry employs more than 131,000 people in Illinois and contributes more than $3 billion in wages, and nearly $979 million in state and local taxes.

GOLDMAN SACHS DOWNGRADES CONSTELLATION

Goldman Sachs has downgraded Constellation from “neutral” to “sell.” Analyst Lindsay Drucker Mann issued a note to clients explaining that the wine industry will likely face pressure from consumers in the next 3-6 months as they continue to suffer from unemployment and other effects of the recession. As the largest wine company, Constellation is expected to feel the pain as wine sales slide. Key challenges include: "(1) lackluster consumer alcohol spending, (2) escalating wine price competition, and (3) STZ's portfolio share declines." Lindsay said Constellation’s stock is likely to drop after several months of increases. In afternoon trading, shares were down 6.2% to $16.18.

MORGAN STANLEY UPGRADES PERNOD AND REMY

Meanwhile, Morgan Stanley upgraded Pernod Ricard and Remy Cointreau because they have a stronger presence in developing markets (namely Asia) and alcohol categories that are popular overseas (such as cognac). Diageo remains the firm’s top spirits pick due to its strong balance sheet and earnings.

FIRESTONE LAUNCHES MILLENNIAL FRIENDLY WINE

Firestone Vineyard is one of the latest wineries to develop a brand meant specifically for millennials. Firestone Discoveries wines include a Chardonnay, Cabernet Sauvignon and Merlot at a suggested retail price of $9.99 – one of the fastest growing price segments today. Featuring “Ignite The Senses” tagline, the wines will be launched via word-of-mouth social media outlets such as YouTube, Twitter and Facebook. This seems to be the most popular way companies appeal to the millennial age group, and not to mention less expensive than traditional advertising.

WSD BRIEFS:

ARTESA VINEYARDS & WINERY has named Walter (Rich) Richardson to the position of general manager, effective Monday, December 14, 2009. He was most recently vp, director of sales and marketing at Justin Vineyards and Winery. According to a statement, he’s also held senior management positions with Opus One and Robert Mondavi wineries.

ZINFANDEL ADVOCATES & PRODUCERS are offering the Donn P. Reisen Memorial Scholarship to students in the Wine Business MBA program at Sonoma State University beginning in 2010. The scholarship will cover some portion of the cost of tuition and books, and is in memory of Donn Reisen who was fundamental in ZAP’s growth.

CLARIFICATION. We want to clarify that in our Fed Ex and UPS story yesterday, the following quote was taken from the statement by the Specialty Wine Retailers Association, not the letters from UPS and Fed Ex: “Since Texas is not authorized, they warn that wine retailers face losing ‘their status as authorized wine shippers anywhere serviced by Federal Express and/or UPS, which would effectively shut down their businesses.’” Sorry for any confusion.


Until tomorrow, Megan

“The brain is a wonderful organ. It starts working the moment you get up in the morning and does not stop until you get into the office.”
Robert Frost

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