Tag Archives: wine and grocery stores

Winebits 393: Meiomi sale, wine retailers, restaurant wine

Meiomi sale ? Winery consolidation continues: The wine cyber-ether was full of pontificating and prognosticating last week after Constellation Brands, third on the U.S. Big Wine list, bought pinot noir maker Meiomi Wines for $351 million. Most of the commentators were baffled by the sale price, which seemed like a lot of money for the winery, especially since it didn’t include any vineyard land. Still, it wasn’t that surprising, given that Constellation paid $160 million for Mark West, the $10 pinot noir, in 2012, in a deal that also didn’t include vineyards. Meiomi is on track to sell three-quarters of a million cases in 2015, making it the $20 version of Mark West (marked down to $17.99), and as such seems like a perfect fit for the strategy that most Big Wine companies are following. They’ll sell you an entry level product, and then they’ll sell you the next wine when you trade up, and they’ll make sure you will be able to buy both wines in a grocery store. In this, it’s no different than E&J Gallo buying J and The Wine Group buying Benziger — business as usual for Big Wine in the 21st century.

? Retailers and grocers: This otherwise run-of-the-mill post about a Florida liquor chain adding a couple of stores explained the expansion thusly: “[I]n a bid to keep the ever-expanding grocery store channel at bay.” Which means the owners behind Florida’s ABC Fine Wine & Spirits understand what’s going on, even if most wine writers don’t. Interestingly the chain is up to 140 stores, which is still 60 less than it had 15 years ago, and speaks to the power supermarkets have today in selling wine. One national wine retailer told me that grocers thrive on competition, which explains much of their success, and aren’t scared of it the way so many regional and local liquor chains are.

? Restaurant price gouging: One would not expect the New York Post, home to the legendary Page Six gossip extravaganza and headlines like “Four sex scandals rock one hanky-panky high school” to commiserate with anyone who buys restaurant wine. But reviewer Steve Cuozzo, in a story headlined “Restaurants overprice wine because they know you have no idea the pain” spared no punches. Restaurant prices “… can drive you to drink ? anything but wine, that is.” He does an excellent job of explaining the contradictions and discrepancies in restaurant prices, and you can almost hear a bit of sympathy. Almost, of course, because the piece ends with a restaurant charging $100 for a very ordinary $25 retail Bordeaux.

Wine and grocery stores

The wine selection in grocery stores has never been better, and we’re just not talking about high-end and specialty grocers like Whole Foods and Trader Joe’s. Many of the biggest national chains have beefed up their wine departments over the past several years, using wine to better compete with warehouse clubs like Sam’s and Costco.

In this, the national grocers are taking advantage of the recession to offer brands that used to be sold only in wine and liquor stores. Producers and distributors, faced with reduced demand from their traditional retail and restaurant customers, have lots of wine to sell, and so are selling it to supermarkets that they never would have sold to before.

In addition, grocers have noticed two things abut wine: Its increasing popularity among the U.S. public in general, and that many wine drinkers come from an upscale demographic that they want to attract. Hence, the national chains are adding shelf space, holding wine tastings, and even putting in wine rooms with $100 wines in their stores.

“Actually, it makes perfect sense for grocery stores to do this,” says Dan Graham, who works for Dechert-Hampe in San Juan Capistrano, Calif., a consumer products and services consultancy and knows both the wine and grocery businesses. “What is it that grocery stores sell? Food. And what goes with food? Wine. Food and wine pairings are a big deal, and grocery stores should offer that. And if you look at what grocery stores are doing with offering more local food and organic food, then improving their wine selection is doing the same thing.”

Walk through your local national chain, and you’ll see what Graham means. Wine has its own aisle — or more — now, and the selection is two or three times what it used to be. There are shelf-talkers and special displays, and in many cases, the grocery store aisle looks like a mini-wine store.

All this effort is what the experts call a “point of differentiation” — you’re more likely to shop your local Kroger or Safeway if it has something you can’t get at the warehouse store. Warehouse stores do a great job selling cases of wine (and even expensive cases of wine), but they can’t do as a good a job as a local grocer in selling wine to go with dinner, especially when the other ingredients for dinner are in the next aisle.

One caveat: Not every supermarket location, even within the same chain, has made the same investment in wine (and local law prohibits many grocers from selling wine). Typically, the upgraded wine stores are in urban, more affluent and more wine-centric markets. That’s why my Kroger, near one of Dallas’ priciest suburbs, has better wine offerings than another Kroger a couple of miles away, which is in a more working class neighborhood.

“The challenge for grocery stores is that they sell such a variety of categories they inevitably will open stores in areas that do not have great wine potential,” says Graham. “It may still be a good store, but the consumers are just not that interested in wine — they want other things in the store. So the challenge becomes how to have a comprehensive wine program when you have stores that have far different potential to sell wine.”

Still, Graham thinks grocers, despite the progress they’ve made, can do a better job with wine. He sees social media and the social media generations — the two groups younger than the Baby Boomers — as the key. These demographics use Facebook, Twitter, and the like, to make purchasing decisions in a way the Boomers don’t. In addition, they see grocery stores as more legitimate wine retailers than older consumers, who still tend to think of supermarkets as where old ladies with cats buy pink boxed wine.

So supermarkets should use social media to educate and inform, bypassing the traditional sources of wine information, he says.

“That is where the opportunity to talk directly to consumers through social media could have real power,” says Graham. “Much more effective targeting is possible, and if you ?re smart about fulfillment, you can have centralized inventory and just ship to the stores for pickup. The model of ordering online and picking up in store is gaining traction in other categories, so why not wine?”