Tag Archives: wine analysis

Wine trends 2022

Look into the Future
“Yes, yes.. mindful drinking.. I can see that.”

Welcome to “mindful drinking,” as consumers re-examine how much — and what kinds — of wine they drink

This is the second of two parts looking at wine prices and wine trends in 2022. Today, Part II: Wine trends 2022. Thursday, Part I: Wine prices 2022.

Call wine trends 2022 more of the same, as the wine business struggles to return to some sort of pandemic-era equilibrium. Of course, this prediction comes with the caveat that we’re in an unprecedented economic environment, where everything going on hasn’t happened at the same time before. So forecasts, usually iffy, are even more iffy this year:

• “Mindful drinking,” in which wine drinkers – any alcohol drinker, for that matter – make a conscious effort to drink less. The catch here is the definition of less: It’s just not the low- and no-alcohol and “healthy” wines that have popped up over the past couple of years. It’s also drinking less when they do drink, like two or three glasses with dinner instead of an entire bottle, as well as drinking wines that aren’t as boozy. That means lighter reds instead of 15 percent California bombshells, more 12 percent whites, and more sparkling wine – not because it’s sparkling, but because it’s less alcoholic.

• The beginning of the end of the way varietals dominate the wine business. I’m working on a trade magazine story, trying to figure out what the next big wine will be, the way it was once white zinfandel and has been sweet red blends for almost a decade. And every expert I talked to said the same thing: Wine trends aren’t necessarily about varietals any more – they’re about what one analyst called “specific consumer segments.” So while people will still look to buy cabernet or chardonnay or whatever, more and more wine drinkers will buy a wine because it’s organic or “healthy” or no-alcohol or lower in sugar. And no, I don’t necessarily believe this. But that’s what some really smart people think.

• The beginning of the end of the heavy glass wine bottle. Again, a lot of really smart people say this will happen. I’m more skeptical. This is not to say it shouldn’t happen, but I know how the wine business works, and solving the “bottle crisis” is not high on its agenda.

• More three-tier reform, as well as continued efforts from the second tier to block as much of it as possible. I’m not expecting as much here as others are; been burned once too often. But incremental progress is progress nonetheless, and I’ll settle for that.

Photo: “Look into the Future” by Reiner Girsch is licensed under CC BY-ND 2.0

Update: Wines prices 2021 – wine and the law of supply and demand

wine prices
Will pandemic-related shortages empty wine store shelves?

How long will wine prices continue to defy the most basic of all economic laws?

This is the second of two parts updating the wine prices 2021 post. Today, Part II: The pandemic, wine prices, and the law of supply and demand. Part I: The end of the Trump wine tariff and prices?

The only certain thing about wine prices, six months into the year, is that the situation is just as unsettled and just as contradictory as it was in January. That’s when I wrote: “How else to explain a wine world which continues to deny the existence of the law of supply and demand?”

On the one hand, there are what my friend Dave McIntyre at the Washington Post called pandemic-related shortages, where the “the crunch is probably coming in late summer and maybe — if all goes well — easing by the holidays.” Or, as some Wisconsin retailers are telling their customers, “Hoard! Hoard!” And we probably won’t see much relief from the end of the Trump wine tariff, and especially for the wines that most of us drink.

All of this, of course, should keep prices higher.

On the other hand, retail sales remain weak and unemployment is still too high (despite Texas’ attempt to force restaurant staff back to work so state officials can eat out more more easily). The economic surge that so many predicted, the post-pandemic boom, has not yet arrived.

In addition, there are worrisome problems in wine. Overall, demand remains flat, and restaurant traffic and wine sales have not picked up appreciably. And yet more studies have come out insisting that Americans won’t return to restaurants, opting for more meals at home.

Complicating matters firther, several leading wine analysts have said some grape prices are completely out of whack; read the story in the link closely enough, and there are hints that a pricing bubble could crop up – which would be disastrous for the wine business.

So when is the law of supply and demand going to kick in, bringing wine prices back into some sort of equilibrium? Your guess is as good as anyone else’s – after all, we’ve never seen an economic situation quite like this.

Me? I’m done guessing. We’re watching economic history being made, the kind of thing that’s written about in textbooks. And I’m not nearly smart enough to decipher that.

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

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?

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

Do wine drinkers trade up?

trading up
We assume wine drinkers trade up, but much of the evidence says otherwise.

Trading up is one of the most basic assumptions in the wine business, fitting hand in glove with the concept of a gateway wine. The idea is that one starts drinking wine with the gateway — something cheap and probably sweet, like white zinfandel — and then moves up in price and quality, eventually buying expensive, highly-rated wine and talking like someone who writes for the Winestream Media.

Talk to enough people in the wine business, and they’re convinced — or they let themselves be convinced — that this is the way the world works.

It’s much more difficult, though, to figure out whether this actually happens.

Trading up seems logical, in the same way that teenagers start with cheap used cars and buy better and more expensive new cars as they get older and make more money. That this happens in wine just seems so sensible that it must be true. After all, isn’t that what each of us did? The problem is that we, alone, are a very small sample size, and there is almost no statistical evidence that wine drinkers trade up. In fact, what evidence there is suggests just the opposite.

“Wine drinkers are more skeptical that higher prices are a harbinger of higher-quality and are not as predisposed to trading up as spirits drinkers or beer drinkers,” says David Decker, the president of Consumer Edge Insight, which studied the issue last year. “This will make it more difficult for the wine industry to take price increases and to follow the spirits companies’ strategy of migrating consumers to more premium-priced brands. Premium wine brands need to do a better job making the case to wine drinkers why they cost more.”

A 2008 study, looking at the British wine market, found much the same thing: “These results, therefore, query the effectiveness of much research activity which is aimed at developing marketing strategies to encourage entry point and low involvement wine consumers to trade up. Instead the results suggest that further research is needed to identify whether or not triggers to trade up actually exist in these two groups of wine consumers.”

In this, the missing element is education. If wine drinkers don’t trade up, it’s because they don’t know enough about wine to feel comfortable doing it. Or, as one regular visitor to the blog said in an email: “I hate to spend money on a wine I don’t know anything about.” That comment is supported by a 2013 Canadian study, which found that a majority of the students in a wine education class drank wine more often and spent more money on wine after taking the class. The most intriguing statistic — 90 percent of the study participants said the class changed their behavior as wine consumers, and 91 percent said they felt more comfortable choosing wine when the class was over.

Given that, for most wine drinkers, wine education is something someone else does, the question should not be if they trade up, but that they would even know what it was.