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Tag Archives: wine sales

Wine sales, price, and what doesn’t get enough attention

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wine sales priceRegular visitors here know that cheap wine outsells expensive wine in the U.S., and that the Winestream Media spends most of its time genuflecting about wine that most of us don’t buy. And when I say most of us, I really, really mean most of us, thanks to these two charts totaling U.S. retail wine sales — expensive and overall — from wine industry trade magazine Wines & Vines. Here are the charts — overall and and expensive.

Several caveats: The charts don’t match on dates; expensive wine covers the 52 weeks ending June 2014, while the other chart is June 2012 to June 2013. This probably helps pricey wine, since its business picked up substantially over the last year. Also, since these are retail-only numbers, expensive wines that focus on restaurants are almost certainly under-counted. Finally, since the number of cases sold for the less expensive wines isn’t on the chart, I used third-party sources in the discussion below where necessary.

Still, the numbers are stunning:

 • The best-selling expensive wine (more than $20 a bottle) was Santa Margherita, with 147,925 cases and $36.5 million in sales. The best-selling wine overall was Barefoot, with $323 million and some 11 million cases. How big is that disparity? In grocery stores, it’s the difference between Kroger, a national chain, and Save Mart, a company only people in certain parts of California have heard of.

• The 15th- through 20th-ranked expensive producers all had $4 million or less in annual retail sales. It’s not so much that those totals are two-thirds of what Barefoot sells each week, but that I have a friend who owns a Dallas magazine company whose annual sales are $2 million. You’d think high-end, well-known pricey brands would be doing exponentially better than someone with a one-city media company.

• Menage a Trois, 16th on the overall list, doubled the dollar sales for Santa Margherita, and every producer on the overall list sold at least one-third more than Santa Margherita.

• Only two brands on the overall list, which tracks retail wine sales, cost more than $10 a bottle, and one of them, Kendall-Jackson, was at $12.

Hence anyone who doesn’t believe that only five percent of U.S. wine drinkers buy wine that costs $20 or more hasn’t been paying attention.

Are we facing a cheap wine crisis?

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cheap wine crisis

“What happened to all that great $10 wine I used to drink?”

What if most cheap wine tasted mostly the same — the reds with sweet fruit and almost no tannins, and the whites a jumble of fruit and sugar, and maybe (or maybe not) a little crispness?

That prospect — terrifying as it is to those of us who care about quality wine we can afford to buy — is not as impossible as it sounds. The quality of too many of the cheap wines I’ve tasted this year, combined with a number of interviews with wine business executives, suggests the possibility of a $10 wine world dominated by just that kind of wine.

In 2013, reports Nielsen, wine priced $10 to $15 more than doubled the sales growth of wine from $6 to $10, and the average price of a bottle increased to $8. Contrast that with sales during the recession, when just the opposite happened. As Rob McMillan of Silicon Valley Bank told me, “I see this as reflective of the economy. There are improving sales conditions compared to last year… [Wineries see] improved opportunity in future years as consumers trade up again. I know the last part won’t make you happy, but the worst segment today is right below $10.”

We’re not there yet, but here are three reasons why we could eventually face a cheap wine crisis:

• Cheap wine production is dominated by the handful of biggest wine companies, whose reason for being all but guarantees that kind of technically correct but simple wine. Just three brands — Barefoot, Two-buck Chuck, and Yellow Tail — account for 8 1/2 percent of all the wine sold in the U.S. each year. Trinchero Family Estates, whose labels include Menage a’ Trois and Sutter Home, has five percent of the U.S market, according to the 2014 Wine Business Monthly top 30 wine companies ranking. How many of us have even heard of Trinchero?

• The biggest companies, thanks to economies of scale and sales volume, can be profitable selling an $8 bottle where smaller companies can’t. Constellation Brands, after all, is a $4.9 billion company. So the smaller producers, who often make the most interesting cheap wine, have to find a more profitable price niche. Increasingly, as McMillan noted, that’s $15 and up.

Increasing consolidation among distributors. This means fewer and bigger distributors, who prefer to work with the biggest producers. So even if a smaller company can make money with cheap wine, it may not be able to find a distributor to sell its wines to retailers. And, if it can’t find a distributor, it can’t sell its wines through retailers and restaurants because of the restrictions imposed by the three-tier system that governs U.S. wine sales.

Not encouraging news, certainly. But many people were predicting the end of quality $10 wine in 2007, and we know what happened then — the beginning of the golden age of cheap wine.

Image courtesy of The Economist’s More Intelligent Life blog, using a Creative Commons license

“Our panel of experts:” Irony and non-winery wine clubs

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wine club expertsThird-party wine clubs — those that aren’t part of wineries — have always made the Wine Curmudgeon smile. How about the the website that rates wine clubs, and that also rates the wine clubs that the site operates? Or the wine club that offers “first-class” cabernet sauvignon from Spain, a concept that makes as much sense as coming here to find cult wine recommendations from Napa Valley.

Typically, most third-party wine clubs don’t tell you the wines you’re going to get or how they pick the wines you’re going to get. They trade on the group’s name, but are otherwise separate; hence a  newspaper wine club is a marketing tool that has nothing to do with the newspaper’s wine reporting. Mostly, there’s flowery language — “small-batch wines of real flair and value,” which means absolutely nothing when you try to parse it — and lots of promises about how good the wines are. Plus tasting notes, because all wine needs tasting notes, doesn’t it?

Which makes me wonder: Most of us wouldn’t buy shoes this way, sight unseen and trusting to someone else’s judgement. So why would we buy wine this way?

My newest smile is Global Wine Company, which runs the New York Times and Washington Post wine clubs plus those for retailer Williams-Sonoma, More and Food & Wine magazines, and celebrity chef Michael Mina. Check out the people who run the company — accountants and bankers, and a woman who helped make the PowerBar famous. There is no mention of the “panel of experts” who pick the wines, and about the only wine-related information I could find was this: “GWC handles all global wine sourcing, state compliance, and customer fulfillment, which enable partners to expand their brands into wine and drive recurring revenue.”

Mmmm, drive recurring revenue. How yummy does that sound?

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