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Tag Archives: wine sales

Winebits 431: Arsenic, private label, craft beer

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arsenicNot in my legal system: A California state judge has dismissed the infamous arsenic lawsuit filed against two dozen California wineries, apparently on a technicality related to the warning labels that most wine bottles have. Needless to say, the plaintiffs were not happy and vowed to appeal. contained illegal and toxic levels of arsenic. My favorite part of the story? This line: “… budget wines produced by more than two dozen California wineries contained illegal and toxic levels of arsenic.” Because, of course, we have to distinguish between the cheap wines in the lawsuit to protect the real wines produced in California — the non-budget wines — from guilt by association.

No more private label: Talk to retailers, producers, and distributors, and a great many are wary of private label wines — those sold only in one retailer, like Trader Joe’s Two-buck Chuck. In public, though, a discouraging word is rarely heard. Why is that? British wine writer Jamie Goode explains: “Private label is bad for the consumer, because most of the time they end up paying rather too much for a pretty mediocre wine.” Goode’s post is one of the best explanations about how private label works, why it’s so popular, and why wine drinkers don’t have any idea what’s gong on. It’s the sort of wine writing we don’t see enough on this side of the Atlantic.

Wine in the rearview mirror:  Lew Perdue at Wine Industry Insight reports (according to research firm bw166.com and published in Wines in Vines), that 2015 U.S. wine sales totaled $38 billion. “Since California Wine Institute data estimates that California represents 65 percent of U.S. dollar sales, that means $24.6 billion in 2015 U.S. wines sales came from California.” He estimates, given craft beer’s 16 percent growth rate, compared to three percent for wine, that craft beer sales in the U.S. could overtake the entire California wine industry by the end of this year: $25.8 billion vs. $25.3 billion. But talk to people in the wine business, and they’ll tell you that everything is OK, mostly because of premiumization. And I make millions of dollars a year from the blog.

Has the death of $10 wine been greatly exaggerated?

winetrends

$10 wineThe death of $10 wine, according to the wine pundits, is just around the corner. That corner, though, looks to be in a completely different part of town.

How else to make sense of U.S. sales figures for the 52 weeks ending Jan. 24, where 19 of the top 20 selling brands cost less than $10? And that eight of the top 20, all selling for less than $10, showed double digit sales growth in a market has been essentially flat for the past three years?

In this, what is happening with wine sales shows again the divide that has developed between the top end of the market and the wine that most of us drink. The Winestream Media and the analysts can talk all they want about the growth of wine that costs $15 or more, but that they continue to ignore what’s happening at $10 speaks to their wishful thinking. Barefoot, at $5.59 a bottle, is the best-selling wine in the country, selling almost 10 million cases last year, according to these sales figures. That would make it the seventh biggest winery in the U.S. if it wasn’t part of E&J Gallo; how can analysts continually dismiss this as the exception that proves the rule?

Also big sellers: Black Box, the boxed wine that is the equivalent of four bottles, up 18 percent at $5.01 a bottle; my beloved Bogle, up 14 percent at $9.49 a bottle; and 14 Hands, up 14 percent at $9.79 a bottle.

So why the $10 wine blind spot?

• Too many wine writers are snobs about cheap wine, and look for sales data that supports their bias. So if sales at $15 and more are growing more quickly, even if it’s from a smaller base that was depressed during the recession, it’s evidence that the stuff they think is beneath them is going away.

• Let’s hop on the Millennial bandwagon, because they are going to spend more money on wine than their parents did. This is about as wishful as it gets, as Rob McMillan at Silicon Valley Bank has shown, but it still gets recited as gospel.

• These are grocery store wines, and grocery store wines don’t count. Would I buy most of the wines on the top 20 list? No, but that doesn’t mean there isn’t quality for the price, including Bogle, 14 Hands, and Chateau Ste. Michelle. 

Yes, wine that costs $5 and less is seeing sales declines, some significant, but this has less to do with price than with demographics. The audience for those wines is aging and doesn’t buy as much as it used to, in the same way the big beer brands are seeing significant sales declines as their audience drinks less. My guess is that the Millennials are buying Black Box instead of their elders’ Franzia, and it’s probably not a coincidence that a craft beer costs about as much as a Black Box bottle. But who in wine wants to believe that?

More about wine sales trends:
Big wine growth 2016
Is the U.S. wine boom over?
Wine prices in 2016

Big Wine growth 2016

winetrends

Big Wine growthThree sets of numbers — two public, one passed to me by my source in Big Wine — show just how dominant Big Wine continues to be, and how Big Wine growth will affect everything we drink.

The first public chart, reproduced here, was compiled by Lew Perdue at Wine Industry Insight, and shows that the three biggest companies — E&J Gallo, Constellation, and The Wine Group — control almost half of the U.S. wine market. In this, the eight biggest companies sell 60 percent of the wine in this country, which leaves more than 7,500 wineries to fight over the other 40 percent.

Those are almost the same numbers in the second public study, the annual Wine Business Monthly top 30 producers list, which are similar to the finding in the magazine’s 2014 report, when Gallo, Constellation, and The Wine Group controlled half the U.S. market. Meanwhile, the top 30 companies in the 2016 report accounted for 74 percent of all the wine sold in the U.S. Interestingly, that’s less than they reported in 2014, when the top 30 sold 90 percent of the wine; chalk that up to bigger companies, like Diageo, selling their brands to smaller companies.

The three biggest companies (again, Gallo, Constellation, and The Wine Group) controlled about half the U.S. market in the landmark 2011 Big Wine study conducted by Phil Howard at Michigan State.  

It’s important to understand how big big is. First, the Wine Business Monthly top 30 total just .04 percent of all U.S. wineries, which makes the infamous One Percent look like an all-inclusive kumbaya sing-along. Second, Jackson Family, which makes Kendall Jackson and is about as close to a national brand as wine has, isn’t one of the half-dozen biggest producers in the U.S. It’s eighth in the Wine Industry Insight chart and ninth in Wine Business Monthly’s rankings with almost six million cases. That’s still big, but the biggest companies are so gigantic that even some of their brands, like Gallo’s Barefoot, sell more than all of the Jackson Family portfolio.

In other words, every time we buy wine, the odds are better than not that we’re buying a Big Wine product even if we don’t want to. My colleagues in the Winestream Media pooh pooh this whenever I write it, arguing that wine drinkers have more choice than that. What about those other 7,500 wineries? The catch, and what they don’t understand, is that most of us don’t shop in places that sell wine from the other 7,500. We shop at Costco and Walmart and grocery stores, and those retailers account for almost half the wine sold in the U.S.

Case in point: Sales statistics for 2015 that my source in Big Wine passed to me for 10 U.S. states (none of which are California), and where Big Wine (defined as a company that appears in either the Howard study or the Wine Business Monthly top 30) dominates at all prices:

• 9 of the 15 best-selling wines between $15 and $20 are from Big Wine, including La Crema (Jackson Family), Louis Martini (Gallo), and Meomi (Constellation).

• 12 of the 20 best-selling wines between $12 and $15 are from Big Wine, including Wild Horse (Constellation), Kendall Jackson (Jackson Family), and Chateau Ste. Michelle (Altria). And I didn’t include Hess and Rodney Strong, both on the Wine Business Monthly Top 30 list but family run.

• All of the 20 best-selling wines between $9 and $12 are from Big Wine, including Menage a Trois (Trinchero), Cupcake (The Wine Group), and Apothic (Gallo).

 

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