Wine Slightly Outpaces Spirits in Dollar Sales

FILED NOVEMBER 1, 2009

Dear Client:

Wine grew at a slightly faster rate than spirits in the 13 weeks to October 17, according to Nielsen scan data from food, drug and major market liquor stores. Table wine grew 2.8% in dollar sales and 1.6% in volume. Meanwhile, dollar sales of spirits grew 1.1% in the 13-weeks and volume grew 1.7%.

WINE BIZ RUNDOWN. White wine outperformed red wine in the period, with riesling, fume/sauvignon blanc, pinot noir and zinfandel posting the most growth. Not surprisingly, domestics once again outpaced imports, with dollar sales of domestics up 4.2% and imports down -0.5%. Volumes of domestics grew 2.2% and imports declined -0.4%. Once again Argentina was the fastest growing import, followed far behind by New Zealand, Spain and Chile. Out of the big three, France declined -7.4% in dollar sales, while Australia fell 5.1% and Italy declined -3.9%. In terms of volume, France fell -8.8%, Italy was down -4.1% and Australia declined -2.9%.

The $20 and below category declined -3.7% in dollar sales and -5.3% in volume in the 13-week period as a whole. Solid growth was posted by wines priced below $6 and between $9 and $15. Wines priced $6-$9 fell -1.2% in dollar sales and volume. Wines $9-$12 grew 5.4% in dollar sales and 6.7% in volume. Lastly, wines $15-$20 declined -20% in dollar sales and -0.1% in volume.

SPIRITS BIZ RUNDOWN. Once again vodka out-grew the other spirits categories, particularly in dollar sales, followed by rum, tequila and prepared cocktails. Dollar sales of vodka grew 4.2% and volume climbed 5.7%. Dollar sales of tequila grew 0.9% and volume increased 4.3%. Rum saw sales rise 1.3% and volume was up 1.9%. Lastly, dollar sales of prepared cocktails grew 2% and volume gained 0.2%.

Scotch and Canadian whiskey dragged down the whiskey category as a whole, while bourbon and Irish whiskey posted growth in both sales and volume. Brandy, cognac, gin and cordial/schnapps all declined in the low single-digit range.

In terms of price, the biggest drag on the spirits business by far was ultra-premium brands. Dollar sales of ultra-premiums declined -1.7% and -0.7% in volume. All the other price categories posted growth in the 13-weeks, with the strongest results coming from mid-priced brands. Dollar sales of mid-priced brands rose 2.1% and volume gained 3%.

COMMENTARY FROM DANNY BRAGER. When contacted by WSD, Nielsen vp Danny Brager said he believes alcohol is “recession tough and resilient”, though not entirely immune from the effects of the economy. “In a relative sense, compared to many other categories we measure, Beverage Alcohol hangs in there pretty well,” he said. “While consumers may not be able to afford some of the bigger ticket items they once did, alcoholic beverages are still regarded as an affordable luxury, and come with an incredible array of variety and price points.“ He went on to say that adult beverages are able to meet a variety of consumer needs such as comfort, relaxation, and socialization, among others. Danny added that “it’s quite likely that with all the economic chaos going on these days, many consumers may be looking for a diversion from some of that turmoil, without spending a lot of money.”

AUSTRALIAN VINTAGE CHAIRMAN SAYS TALKS ONGOING WITH CONSTELLATION

Australian Vintage (formerly McGuigan Simeon Wines) chairman Ian Ferrier said at the company’s annual general meeting that merger talks with Constellation are making headway but there are still issues to iron out. Recall that Constellation and Australian Vintage are discussing merging their Australian and UK wine operations. "We do see significant benefits, particularly given the structural imbalance in the industry in Australia, of reduced costs and other synergies from the combined operation," he said to investors. He said he would update shareholders on the situation next month.

One consideration is whether or not Australian Vintage would take a controlling stake in the new company: "I can't be definitive, but our discussions at this stage are focused on a deal where Australian Vintage would purchase part of Constellation's business with Australian Vintage shares and existing (Australian Vintage) shareholders would hold the controlling interest in the combined business."

Ian also commented that the Australian wine industry continues to produce 30% more than demand, or 20 to 40 million cases. "The surplus already exceeds 100 million cases. And at the current rates of production, surplus will double in two years."

WSD BRIEF:

B-F FOUNDING FAMILY MEMBER TO SELL 1 MILLION SHARES. A member of the Brown family, Ina Brown Bond, plans to sell up to 1 million shares of her 4.6 million shares of Brown-Forman’s Class B stock by the end of the year for tax planning purposes and general investment diversification. At Tuesday's closing price, the 1 million shares would be worth more than $51 million. In a statement, Ina said she’s “as supportive as ever of the company and management.” The 1 million shares represent less than 1% of the company’s total outstanding stock. Ina is the daughter of the company's late president and chairman W.L. Lyons Brown and Sally Brown, and served as a director from 2002-2006.


Until Monday, Megan

“There is no abstract art. You must always start with something. Afterward you can remove all traces of reality.”
Pablo Picasso

--------- Sell Day Calendar ----------
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YTD sell days Over/Under: -1

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