Wine Imports: The Little Engine that Could

FILED SEPTEMBER 1, 2009

Dear Client:

The story of wine imports can be summed up in a David vs Goliath type scenario. Large, established wine countries are facing pushback in the recession, which coincidentally has benefited emerging and/or revamped countries. The latest IRI food, drug and c-store scan data in the four weeks to Sept 6 shows us that the big three – Australia, Italy and France – are losing share, while some new world producers like Argentina, New Zealand and Spain are gaining share. Although they may not be total underdogs, they are certainly less established than other importers and have managed to take advantage of pricing and marketing gaps left by those countries.

THE BIG THREE. Out of the big three imports Australia was the biggest loser in dollar sales, although not by much, while France lost in volume. Australian dollar sales were down -3.8%, Italy was down -3.7% and France declined -3.5%. Volume was a different story. French case sales declined -5.2%, while Italy declined -4.7% and Australia was down only -2%. Germany also took a hit in volume (-0.9%) but we should note that they grew 3.4% in dollar sales.

Now let’s take a look at pricing. The average price per 750ml bottle of Australian wine declined -2% to $6.42 in the month, according to IRI. Australia was the only importer to decrease prices across the board which may explain why it did better in volume. But it leads us to wonder. If Australian wines are priced in the sweet spot, why are they losing momentum in the US as a whole? The thing to remember about Australian wines is although they are technically “down” in numbers, they’re still generating millions in dollar sales and volume. We spoke with Wine Australia’s James Gosper who told us: “We’re still growing and our strategic outlook has been very smart in the past few months...we’re a tenacious bunch.” [Ed. Note: Full interview coming soon.]

Meanwhile, France, Italy and Germany all raised their prices. France raised prices 1.8% in the four weeks to $9.56 a 750ml bottle, and Italian wine producers on average raised their prices 1.1% to $7.78. Germany’s inconsistency in dollar sales and volume that we noted above could stem from its 4.4% price increase to $8.81 a bottle.

The only other countries to take more pricing than Germany were Argentina, South Africa and Portugal, which brings us to the next category: other imports that didn’t do too hot. South African producers raised prices 5.9% per bottle to an average price of $8.33. Dollar sales declined -22.3% and volume dropped -26.6%. Portugal went a step further and raised its prices 6% to $7.22, leading dollar sales to drop -8.4% and volume declined -13.6%.

EMERGING CONTENDERS. It’s not as though wines from New Zealand, Argentina and Chile are new to the US but they’re certainly making big inroads in the recession. In the four weeks, dollar sales of Argentinean wines were up an astonishing 57.4% from the same period last year, while volumes grew 45%. The second fastest growing country was Spain. Although it’s technically an “old world” wine country, it’s made vast improvements in recent years and certainly made a bigger name for itself in the US. Dollar sales of Spanish wines rose 15.5% and volumes gained 21%. New Zealand is still chugging along with sales up 15.3% and volume rising 15%. Chile was the fourth growing importer in the period although it was far behind the ones we just mentioned. Sales grew 3.6% and volumes grew 1.9%.

Argentineans took the biggest price increase of all importers (and domestics for that matter) but can you blame them? They’re on fire right now. On average, prices were raised 8.6% to $8.42 a bottle. Spanish producers actually dropped prices -4.6% to $8.35, perhaps partly in response to the stronger euro. New Zealand producers took only a small price increase, up 0.2% in the four weeks to $12.13. Lastly, Chile implemented an average price increase of 1.7% to $6.06 a bottle.

SUPER-PREMIUMS PROMPT GROWTH. Importers as a whole are seeing the most growth come from the $11-$15 and $15-$20 price ranges, according to IRI. The categories to take the biggest hits were wines priced $5-$8 and $8-$11.

Australian importers were really getting hurt in wines priced $5-$15 although this used to be a sweet spot for them. Instead, US consumers are trading down to wines priced in the $3-$5 category, which is seeing dollar sales rise 15.7% and volumes up 15.5%. Pricing is down dramatically for wines $11-$14 (-5% to an average $12.10 a bottle) and $15-$20 (-7.5% to an average $15.79 a bottle). However, this seems to have benefited the latter because wines $15-$20 grew 20.3% in dollar sales 30.1% in volume.

France is down in almost every price category aside from boxed wines priced $2 and above. They’ve continued taking price increases in the US aside from wines priced between $11-$15, where importers decreased prices by -4.7%.

Italian wines also saw declines in most of their price segments other than those in the above $20 range, perhaps due to a nice price decrease of -3.8%. Dollar sales were relatively flat in the $11-$15 price range although volumes were down -3.4%. There was slight growth in dollar sales from Italian wines between $3-$5 but volumes declined -2.7%.

Argentina posted growth in all its price categories except from its boxed wine segment. The $11-$15 range was doing particularly well, followed by $15-$20 and $20+. The largest price increase came above $20, up an average 12.3% to $25.91 per 750 ml bottle.

Spanish table wines saw growth in pockets. Their cheapest wines priced $3-$5 leapt 58.7% in sales and 58.5% in volume, but large growth also came from wines priced above $20. Dollar sales in that price group grew 57% and volume was up a staggering 237.1%. Spain also decreased prices on wines in the $20+ category by -53.4%. Super-premium wines priced $11-$15 grew 15.5% in dollar sales and 16% in volume. Spain’s only decline came from wines priced $15-$20, where dollar sales were down -16.2% and volumes declined -2%. They also took a price cut of -14.6% to an average $13.07 a 750 ml bottle.

New Zealand wines posted the most growth in the $5-$8 price range, followed by wines in the $11-$20+ group where importers also lowered prices. However, all price categories were in the black.

And finally, Chilean wines are seeing the most growth from wines priced $11-$15. Wines above $15, however, aren’t doing so hot and importers are taking price cuts to help compensate.

A LOOK AT THE BRANDS. Yellow Tail (imported by WJ Deutsch) was doing quite well in August with sales up 2.1% and volumes up 4.4%. Interestingly, its Reserve brand declined -17.4% in sales and volume, respectively. Lindemans (imported by Foster’s), however, is another story. Dollar sales declined -5% and volume was down -4.7%. Black Swan (Gallo) did well, growing 2.5% and 8.5% in sales and volume, respectively. Jacob’s Creek (Pernod) declined -3% in sales but grew 0.3% in volume which suggests a price decrease to us. Little Penguin (Foster’s) saw sales drop -3.4% and volume decline -3.7%. Alice White (Constellation) was down a whopping -26.5% in sales and -28.6% in volume.

Italy’s big brand Cavit (Palm Bay) took a hit in dollar sales (-6.7%) and volume (-5.7%). Bella Sera (Gallo), meanwhile, grew 4.3% and 4.8% in sales and volume, respectively. Riunite (VB Imports) also met with similar success. Ecco Domani (Gallo) saw sales drop -5.4% and volumes decline -6.8%. Santa Margherita (Terlato) grew 2.7% in sales and 7.4% in volume. Lastly, Bolla (VB Imports) was down a whopping -21.7% in sales and -24.6% in volume.

New Zealand’s Nobilo (Constellation) brand declined -6.4% in sales and -10% in volume. Monkey Bay (Constellation), however, grew 11.6% in sales and 10.2% in volume.

One of the major German brands, Schmitt Sohne, did well with 4% dollar growth and 2% volume gains, while Chile’s big brand Concha y Toro grew 6.6% in dollar sales and 5.6% in volume. Lastly, France’s Louis Jadot brand declined -2.1% in sales and grew 2.6% in volume. Red Bicyclette declined -0.1% in sales and -3.4% in volume.

BIG SPIRITS BRANDS INCH THROUGH THE YEAR, SMALLER BRANDS SHINE

Yesterday we gave you a snapshot of the spirits business in the 12 weeks to September 6 based on IRI food and drug scan data, but now here’s a look at the brands. Almost all of the “major” spirits brands were down at least slightly in dollar sales and case sales in the 52 weeks to September 6. That includes Bacardi, Jack Daniel’s, Absolut, Jim Beam, Jagermeister, Grey Goose, Bailey’s, Ketel One and Sauza Tequila. Those big brands that continued to post some growth in dollar sales include Smirnoff, Captain Morgan, Crown Royal, E&J Brandy and Seagrams 7 although they were off in volume. Skyy Vodka, Patron Tequila and Popov Vodka were the top performers out of the top 20 brands, according to IRI data. Other big brands that did well in the period were Johnnie Walker, with sales up 0.3% and volume up 2.3%, Maker’s Mark, with dollar sales up 0.2% and volume up 5%, and Jameson, with double digit dollar sales (29.7%) and volume (30%). Similarly, some not-as-hot biggies included Malibu, Stolichnaya, Tanqueray, Soco and Kahlua.

Now before you start writing us angry emails, let’s take a look at some smaller standout spirits brands. Svedka continues to be on fire with sales up 33.4% and volume up 35%. Sailor Jerry Rum grew 87.7% in sales and 83.8% in volume, while Three Olives was up 18.1% in sales and 23.5% in volume. Admiral Nelson’s Rum grew 32.6% in sales and 33.3% in volume. Smirnoff prepared cocktails also posted double-digit growth, along with El Jimador Tequila and Ciroc Voda. New Amsterdam Gin was off the charts with triple digit growth in sales and volume, along with Milagro Tequila. Firefly Vodka really took the cake with sales up 18,000% growth in sales and 17,000% in volume. And finally, Sobieski Vodka and Russian Standard Vodka also did very well in the period with triple-digit growth. Of course there are other “outstanding” brands as well but these were the ones that caught our eyes as we perused IRI’s 52-week data.

WSD BRIEFS:

DIAGEO SIGNS JOSE CUERVO WITH NEW AGENCY. According to AdAge.com, Diageo has moved Cuervo to Crispin Porter & Bogusky without a review after abruptly leaving WPP's JWT.

SUPERVALU’S Duncan Mac Naughton, 47, has resigned as evp of merchandising and marketing, effective Monday, September 28. The company is currently reviewing internal and external candidates.

TO CHECK OUT THE LIST OF NEW WINE INSITITUTE MEMBERS, click here.


Until tomorrow, Megan

“Dreaming permits each and every one of us to be quietly and safely insane every night of our lives.”
William Dement

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