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Wine trends in 2016

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winetrendsWine trends in 2016? Expect to see consolidation continue, producers continue to aim at the consumer smooth tooth, and retailers focus even more on private label. And, not surprising given all of this, more of us move away from wine in favor of craft beer:

Distributor and importer consolidation: Big Wine will get bigger in 2016, which won’t be anything nothing new. The real news will take place among distributors and importers, as the biggest among those two groups buy smaller companies. We’ve already seen some of this, and there will be more for two reasons. First, historically low borrowing costs, which will make it possible for the biggest companies to buy more smaller companies than usual and even to overpay. Second, the graying of the family distributors and importers who started their businesses in the 1980s and 1990s and who brought us so much interesting wine. If you run a family business and you’re nearing retirement, and someone throws a ridiculous amount of money at you, wouldn’t you sell, too?

Keeping it smooth: The number of red blends and pinot noirs, which have grown like crazy over the past couple of years, will keep growing. This includes (most importantly) sweet red wine, as well as any red blend tasting of massive amounts of fruit and without much in the way of tannins. It includes pinot nor, because pinot made for less than $20 is usually blended. It also includes Prosecco, which has jumped in sales the past couple of years and is increasingly being made to fit the smooth flavor profile even if that doesn’t necessarily taste like Prosecco.

Bring on the private labels. One of the most important statistics about wine was buried in a Nielsen marketing report last year — 4,200 new wines were introduced in 2014, about 12 1/2 percent of the market. Those weren’t necessarily wines from new producers or new wines from old producers, but wines made for specific retailers, whether grocers or chain wine stores and called private label wines. They can be sold for a little less than national brands, or even the same (right, Kroger?) but reap more profit. 

Flat wine sales. Since the recession ended, annual wine sales have hardly grown at all. As wine market analyst John Gillespie has written, that could be because we’re switching to craft beer, where sales have surpassed almost everyone’s expectations. The most telling number: The craft beer market is worth $24 billion, which is two-thirds of the entire U.S. wine market. And it’s not like craft beer has been around for very long.

Call me cranky, but the first three things on this list explain the fourth. If wine is becoming boring — the same kinds of wine made by the half-dozen producers who dominate the U.S. market, why wouldn’t we look for something else to drink? Throw in that these are increasingly ordinary products, which so much private label is but  are sold for higher prices, and wine’s sales slump seems obvious.

Wine trends in 2014

winetrends

Wine trends in 2014The wine business in 2014 won’t be so much about varietal or sweet, though both will matter. Rather, wine trends in 2014 will be about the continuing transformation of wine into a truly global business, focusing on:

• Increased retail availability — more wines in more and different kinds of stores, and especially grocery stores. This means attempts to change state laws where that’s illegal

• More consolidation among producers — not just the biggest getting bigger, the trend over the past decade, but consolidation among mid-sized wineries, which will be folded into companies specificially formed for that purpose.

• The growing importance of the consumer, who is beginning to drink what he or she wants and forcing the wine business to adjust, rather than the other way around.

Mixed in with this will be renewed attempts by the neo-Probhibitionists in goverment and medicine to reduce wine consumption. More, after the jump:

Big Wine: 5 companies, 60 percent of sales, 200 brands

Call it serendipity. Shortly after my blog posts about Big Wine at the end of last year, a Michigan State study offered even more data about how Big Wine works and how it has changed the business.

The paper, “Concentration in the U.S. Wine Industry,” was compiled by Phil Howard, an associate professor who studies consolidation. After doing soft drinks and beer, he told me, wine was the next logical step.

“And even I was surprised by what I found,” Howard said. “Wine was much different than what I thought. If you go to the stores, it seems like you have all these choices, because the shared ownership is not very apparent. We wanted to help consumers understand what they were really buying.”

The study consists of two parts – third-party sales data and store visits from Howard and his graduate assistants. The former, displayed in some very nifty charts on the study website, paints a fascinating picture of market share as well who owns what labels. Three companies – E&J Gallo, The Wine Group, and Constellation Brands, account for more than half of wine sales in the U.S.

This is my favorite chart. For example, you can see how important Cook’s champagne is to Constellation Brands (about as much as Robert Mondavi, believe it not), and that Bronco, which makes Two-buck Chuck, has a bigger market share than much larger companies like Diageo and Altria, which owns Chateau Ste. Michelle.

The store visit results were even more fascinating.  Howard and his graduate assistants counted wine at 20 Michigan retailers, where they found more than 3,600 unique varieties (where chardonnay was one variety, merlot another, and so forth). Those wines came from more than 1,000 different “companies,” although, as the study noted, the ”top firms each contribute to an illusion of diverse ownership by offering dozens of brands (and hundreds of varieties), many of which do not clearly indicate the parent company on their label.”

The reason for that, said Howard, is not difficult to figure out: “A company known for producing cheap wine and not quality wine does not necessarily want to be identified with a premium, high-end brand.”

Other key points:

• The only unique varieties of wine found in more than half the retailers were Clos du Bois chardonnay, from Constellation, and Cavit pinot grigio. In other words, wine has no national brands, in the way every retailer in beer carries Bud Light and Coke and Pepsi are in every store that sells soft drinks.

• Half of the stores carried the same six varieties – Blackstone merlot, Ravenswood zinfandel, and Woodbridge chardonnay, all from Constellation, and Apothic red, Barefoot chardonnay, and Ecco Domani pinot grigio, all from Gallo. What this says about retailer selection, customer preference, and distributor clout is worth a second study.

• The top six wine companies in the U.S. accounted for more than one-fifth of the varieties found in the stores. That it’s not higher speaks to retailer determination to carry other brands, something else not seen in soft drinks or beer.

• Howard said that the variety and number of wines, as impressive as it is, would probably be even more impressive in states that are less regulated than Michigan, which has one of the tightest three-tier systems in the country.

Finally, though Big Wine isn’t as top-heavy as Big Beer, it may be headed that way, said Howard. He said the wine business resembles the beer business in the 1950s, when 30 companies dominated the market. Today, just two beer producers — AB InBev and Molson Coors — account for three-quarters of all sales.

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