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Tag Archives: wine sales

Update: Sweet red wine is taking over the U.S.

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sweet red wineThe surprising thing about this month’s sweet red wine post is how muted the reaction was. Hardly anyone seemed surprised. Dismayed maybe, or irritated, but not especially surprised. That’s because the people who follow these things had an idea it was going on, and those who don’t — like most of the Winestream Media — don’t consider it important enough to be surprised.

And the wine drinkers buying all that sweet red? They weren’t surprised, dismayed, or irritated. They’re just happy someone is making wine they enjoy. Or, as a 30-something woman told me about her favorite sweet red, Cupcake’s Red Velvet: “It’s really good, and it’s really about the only red wine I like.”

The one thing most everyone agreed on? That the numbers, though imprecise, offered a real sense of how big sweet red has become — the fifth biggest category in U.S. wine sales, behind chardonnay, cabernet sauvignion, pinot noir, and merlot. Given its momentum, I wouldn’t be surprised to see sweet red pass merlot for fourth in the next couple of years.

So it’s not a coincidence that red blends accounted for 40 percent of all new wines over the past two years, compared to just 18 percent for chardonnay and cabernet combined, according to Beverage Media magazine. Yes, not all red blends are sweet, but sweet reds are at least two-thirds of red blends, based on data in the first post. This is another sign of how important sweet red has become.

How sweet is sweet? About 1.0 or 1.2 percent residual sugar, compared to less than .08 residual sugar for dry red wines. Other highlights in the wake of the first story, combined with additional reporting that I did:

• Consumers don’t necessarily see sweet red as sweet, says Christian Miller of Full Glass Research, who has probably studied this subject more than anyone in the country. ” ‘Sweet’ is not an attribute that large numbers of regular consumers use with regards to these wines,” he said. “They are more apt to regard them as flavorful or smooth or interesting. Many consumers jump back and forth between dryer and sweeter versions of these wines.”

• The wine industry remains uneasy about calling a sweet wine sweet, says Miller. “It’s possible that some of these companies have tested adding the word sweet to the label or description, and found it harmful. On the other hand, based on my experience in the wine industry, the number of decisions based on gut instinct, trade notions, or small unrepresentative samples is surprisingly high, even among large MBA-ish companies.”

• Since sweet red doesn’t depend on appellation or specific grapes, it can be made with fruit from anywhere in California, Or, as wine economist and author Mike Vesteth told me, sweet red can be made with all the merlot and syrah that wouldn’t be sold otherwise, and which costs less to use. Hence higher profit margins than more traditional wines.

Finally, no one — not even anyone at E&J Gallo, whose Apothic started all of this — expected sweet red to do this well. Gallo, I have been told, developed Apothic to appeal to Millennials, to compete with the Menage a Trois red, and to earn supermarket shelf space. That it might change U.S. wine never really occurred to anyone.

For more on sweet red wine:
The ultimate Internet guide to sweet red wine 
What’s next for sweet red wine?
Wine terms: Sweet vs. fruity

 

Has sweet red wine taken over the U.S. wine market?

winetrends

sweet red wineIs it possible that sweet red wine sales totaled one-third of all the chardonnay sold in the U.S. over the past year? And did slightly better against cabernet sauvignon? Or that sweet red wine outsold syrah, zinfandel, and malbec over that time period, and almost overtook merlot?

Hard to believe, but apparently true. A leading wine industry analyst, working with proprietary data, has estimated sweet red wine sales in the 52 weeks ending April 25 were about $534 million. That means, besides outselling syrah, zinfandel, and malbec, sweet red also did better than moscato — the current next big thing — and missed sauvignon blanc by just a couple of percentage points.

The analyst — call him Smart Wine Guy — asked not to be identified because his figures are based on that proprietary data, and legal problems could ensue if I used his name. But he has worked in the wine business for most of his life, including stints in retail and for Big Wine.

Smart Wine Guy used sales figures for red blends that cost between $7.50 and $15.49 a bottle and are sold in grocery and liquor stores. That includes most of the wine we think of as sweet red — those blends, like Apothic and Menage a Trois Red, that have more residual sugar than traditional dry red wine. It also includes red blends like 14 Hands Hot to Trot that aren’t identified as sweet red in most sales surveys, even though they’re as sweet as Apothic. Hence Smart Wine Guy’s total is three times bigger than Nielsen’s sweet red total, which is the accepted sales number but which probably undercounts sweet red sales.

The other things to know about these figures?

• Some 80 percent of sweet red wine is sold in grocery stores. By comparison, about two-thirds of cabernet sauvignon in the U.S. is sold in supermarkets. This should scare the hell out of liquor stores that assume sweet red drinkers don’t matter.

• Sweet red’s success is just five or six years old, dating to Apothic’s debut. There has always been sweet red, of course, but Apothic was the first brand to treat it like real wine, with a proper bottle, better quality, and well-designed label. In those five years, sweet red has become the one of the top six categories in U.S. wine.

• Sweet red sales increased about 20 percent last year, even though the overall wine market was flat, chardonnay declined almost one percent, and cabernet grew just four percent.

• Apothic, Menage a Trois Red, and Cupcake Red Velvet account for about half of the sweet red wine sold in the U.S. Not coincidentally, all are Big Wine products. If anyone who doubts the power of Big Wine still needs to be convinced, this is it.

• The best-selling sweet reds are just slightly sweet, and aren’t the over the top sweet bombs that many people expected when the sweet red market was developing. This says something about U.S. wine drinkers, who want wine, even if sweet, but not a soft drink.

• Sweet red wine has done all of this without any help from the Winestream Media, which speaks to how little most of us who write about wine understand about what Americans drink.

Big Wine strikes again

winetrends
Big Wine

“Who do we want to buy next?”

That E&J Gallo bought J Vineyards, the highly-regarded California sparkling wine producer, last month was shocking, but it did make business sense. Gallo, for all its vastness, doesn’t make high-end bubbly and doesn’t have many successful restaurant wine brands, and J does and is. Plus, J owned 90 acres of prime Sonoma vineyards, making the deal even sweeter for Gallo.

So how to explain this week’s news that The Wine Group, second-biggest to Gallo among U.S. producers and with even less of a critical reputation, bought the fiercely independent and much beloved Benzinger Family Winery? The Wine Group has never shown any desire to make wine not sold in grocery stores, and its two biggest brands are Franzia and Almaden, the five-liter box cash cows.

Call it one more step in the Big Wine-ing of America:

The increasing consolidation in the U.S. wine business, something I wrote about at the beginning of the year. It is getting harder and harder for wineries that make less than one-half million cases to find distributors and space on store shelves. Benziger makes less than 200,000 cases a year, which wouldn’t even make it the biggest producer in Texas, and J sells only about one-third of that. Said the owner of a leading California independent: “My guess is that a winery really needs to be above 200,000 cases to really get the attention of a distributor. But maybe 500,000 is the new 200,000?” A distributor told me: “There are too many labels fighting for too few spots on the shelf or wine list. It’s crazy.”

• Family and independence, two hallmarks of the California wine business since the 1980s, aren’t enough anymore. These are just the latest sales involving long-time family wineries, which saw an opportunity to cash out to avoid succession problems, solve family disputes over winery operations, or to take advantage of Big Wine’s deep pockets. Sale prices weren’t disclosed, but one report said the J deal may have been worth as much as $90 million, which would make the Benziger price well into the hundreds of millions of dollars. Even of the sale price was half of that for each, which is probably more accurate, that’s a winning payout.

• It’s all about the land. Benziger, with sales of less than $10 million, is so small compared to the multi-billion dollar Wine Group that there is almost no way it could affect the parent’s financial performance. This makes the deal even more baffling, unless it was for the 200 or so acres of quality Sonoma vineyards that were part of the sale.

Will Big Wine run their new companies successfully? Certainly, if success is defined by profit. Otherwise, expect the new owners to do what new owners always do, despite best intentions and protests to the contrary — cut costs, eliminate unnecessary products (so say good bye to J’s lovely pinot gris), and “rationalize” operations. Gallo and The Wine Group won’t ruin J and Benziger the way Sears destroyed mail-order clothing retailer Lands’ End, but they won’t be the same wineries they were before the sale. That’s something we’ll have to learn to live with, because consolidation is going to be with us for a very long time.

More about Big Wine:
How to buy wine at the grocery store
Downton Abbey claret — wine merchandising for dummies
Big wine tightened its grip on the U.S. wine market in 2013

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