Sizing up the Wine Trade


Dear Client:

Most in the wine industry believe that consumers are more price driven than ever before and are mostly settling for less than top quality. This is according to two wine industry surveys taken by John Gillespie and Christian Miller of Wine Opinions who presented their findings at the Wine Industry Symposium in Napa. John began his presentation by stating what you are all probably very aware of: the industry is in the midst of a sea change. John said he doesn’t necessarily buy the “cycle theory,” which is the idea that trading up comes in waves and we’ll eventually return to where we were a couple of years ago. He said that “premiumization is a behavior pattern that has gone into reverse,” and consumers are now making “plan B” wine purchases. The idea is that consumers have fundamentally changed and are expected to be much more cautious in the future – particularly over the next couple of years.

With regards to consumer behavior trends, the survey results reveal that the wine industry is largely neutral or disagrees somewhat that consumers are losing their interest in organic and sustainable wines. When asked if they can still sell a bottle of wine over $30 if they explain the quality to the consumer, most either agree somewhat, are neutral, or disagree somewhat. It’s about making consumers feel that their money is being spent on a worthy product. The biggest disagreement in the industry, according to Wine Opinions, is whether consumers will return to expensive wines in the future. 38% agree somewhat that consumers won’t return to trading up, while 32% somewhat disagree. It’s the million dollar question and unfortunately no one can see into the future.

It’s no secret in the industry that value wines are doing great right now, but what does the future hold for them? Most respondents either agreed or agreed somewhat to the following: one, regions selling value wines now will prosper after the recovery; and two, sales of wines $50 and over are off more than 25%. Lastly, respondents were largely neutral on the statement that the economy has spurred sales of quality three liter box wines. It’s definitely grabbed the attention of the mainstream press but perhaps the trade isn’t seeing it as much.

IS THERE A REPLACEMENT FOR NAPA CABERNETS? Members of the trade were asked what they would tell a consumer who wants to trade down from a $100 Napa cabernet sauvignon to a cabernet in the $20-$50 price range. In other words, what region offers the best value? The most respondents, or 24%, say Washington cabernets offer a “better value.” 22% said that Napa wines are overpriced and would recommend that the consumer trades down to a cheaper Napa cabernet. The thinking here, said John, is that it’s “harder to get consumers to switch appellations.” 16% would recommend a cabernet in Sonoma County because they are “food friendly.” 10% would say Chile, 3% would recommend Australia and 4% say there is no good alternative.

RETAIL SALES. 54% says they’re selling more wine in the $6-$10 price range, while 60% are selling more in the $10-$15. 36% are selling more in the $15-$20 price range. Meanwhile, half say they are selling less wine in the $20-$30 range, $30-$50 (62%) and over $50 (66%).

ON-PREMISE SALES. The on premise is getting hammered, especially for wine as you can see with these results. Out of all the respondents, 53% said they are selling more by the glass wines under $8 and 44% are selling more wines bottles under $30. 42% are selling less by the glass wines over $15 and 43% are selling a small amount of bottles priced over $60. “On premise folks are also changing their mix, not just reducing inventory,” said Christian.

SALES TACTICS. With regards to the importance of sales and marketing strategies, 50% answered that “broadening customer base” is their top priority along with “increasing traffic to retail venues.” Most people either said winery direct sales have “somewhat increased” or are “about the same” via the internet. Tasting room sales are largely “about the same” or “somewhat decreased.”

REGIONS. Over the past 12 months, Spain, Argentina and New Zealand have sold more wines under $20. France, surprisingly, is holding its own, while Australia is down. None of the regions mentioned in the survey is selling more wines priced over $20, but Australia, France, Italy and
Germany are selling less. California wines largely benefited from consumers trading down below $20. Washington and Oregon are selling about the same amount. Within California, Napa was the only region where sales were down and they were only down slightly.

SURVEY DEMOGRAPHICS. To give you an idea of the survey respondents, 3% are millennials, 28% are from generation x, 54% are baby boomers and 5% are older. A majority 65% of respondents are male and 35% are female. Most of the respondents are wine producers, wine retailers, media/educator/academic, restaurant/hospitality or other.


Not only is Tesco continuing to open Fresh & Easy stores in California, but they are now launching environmentally friendly stores with the first one near Palm Springs, reports WSJ. The store has won the LEED gold certification and all new openings will carry the same badge. They are using energy-efficient lighting and refrigerators, and most of their meat, vegetables and other fresh food arrives in reusable plastic containers instead of cardboard boxes.

The US spin-off is also employing other environmental initiatives. Similar to parent company Tesco, F&E chief Tim Mason eventually wants to label products with its carbon footprints. In addition, its distribution center in Riverside has solar panels on the roof, boasting one of the largest in California. It will provide the center about 25% of its power supply although the company won’t see cost savings for another 10 years or so. Since the end of 2007, Tesco has opened about 125 Fresh & Easy stores in the US.


Long Island’s Palmer Vineyards is for sell and being offered in two parcels. The first property, on 61 acres in Aquebogue, includes the winery and a tasting room for $6.9 million. The second vineyard in Cutchogue comprises 62 acres and includes varietals of Pinot Blanc, Chardonnay, Merlot, Sauvignon Blanc, and Cabernet Sauvignon. It’s available for $3.9 million. The Palmer Vineyards brand is not included in the sale, but can be negotiated separately, said the company. The vineyard and winery as founded by Bob Palmer in 1983 and produces about 16,000 cases a year.

Until tomorrow, Megan

Whenever you find that you are on the side of the majority, it is time to reform.
Mark Twain

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