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Has the death of $10 wine been greatly exaggerated?

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$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

Does organic wine taste better?

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organic wineDoes eco-friendly wine — organic wine, wine made with organic grapes, or made with grapes farmed sustainably — taste better than conventional wine? Apparently so, says a recent study, and those results are quite surprising given the history of green wine.

Magali Delmas, an environmental scientist at UCLA who has studied eco-friendly wine over the past decade, was almost surprised at the answer. Her most recent study — “Does organic wine taste better?” (written with Olivier Gergaud of the KEDGE Business School in Bordeaux and UCLA’s Jinghui Lim) comes to the conclusion that it does.

That’s news to many of us, myself included, who see green wine as costing more without necessarily tasting any better. Yes, we understand that the extra cost is a good thing, in the way that green production methods are usually a good thing. But few see the extra cost as better quality, in the way that a more expensive organic tomato tastes better. In fact, says Delmas, that perception is so common in wine that two-thirds of producers who do eco-friendly wine don’t label it as such on the bottle.

Nevertheless, she says, there does seem to be a quality difference that can be measured statistically (and allowing for the fact that scores are the only way to measure quality statistically). Delmas and her colleagues used ratings from the Wine Advocate, Wine Enthusiast, and Wine Spectator for 74,148 California wines made between 1998 and 2009; the result, after using sophisticated math to allow for vintage differences, the age of the wines, and critical bias (actually one of the most interesting parts of the study): “eco-certification is associated with a statistically significant increase in wine quality rating” by about one-half point.

So why hasn’t anyone figured this out? Delmas cites the confusion inherent in green wine, where an organic wine is different from a wine made with organic grapes, and which isn’t the case for organic tomatoes. In addition, does sustainably farmed really mean anything? And where does biodynamic fit? In addition, growing an organic tomato is straightforward compared to making a green wine, which further confuses the issue.

My guess? That most green wines are made with better quality grapes by better winemakers, and would likely score higher even if they weren’t green. Generally, cheap wine isn’t green, and the added cost of going green works against the process in which cheap wine is made to hit a certain price and not to taste a certain way.

Big Wine growth 2016

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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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