Tag Archives: wine sales

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

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

wine club expertsThird-party wine clubs — those that aren’t part of wineries — have always made the Wine Curmudgeon smile. How about 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?

Winebits 325: Corks, Mateus, wine sales

Winebits 325: Corks, Mateus, wine sales
Everyone knows the cool kids only drink wine with corks.

? When in doubt, a poll: The cork business announced last week that more than 9 out of 10 wine drinkers associate natural cork with higher quality wine. Which is about as surprising as the Wine Curmudgeon announcing that he wrote a book about cheap wine. We can question poll methodology, who paid for it (and the release is very vague about that), and the like, but none of that is as important as the way the results are phrased. It doesn’t say that wine closed with cork is “better.” It says: “Consumers associate higher quality wine with cork.” Of course they do. What else would we expect, given that most wine drinkers still make screwcap jokes? Even “experts” who are supposed to know about wine are still writing that junk. No wonder I’m so cranky so much of the time.

? What happened to the bottle? Periodically, someone will announce they’ve re-marketing a Baby Boomer wine brand, figuring that people in their 50s and 60s will get a kick out of drinking the same wine they did when they were in their 20s. Mateus, which accounted for one-third of Portugal’s wine exports in the 1980s, is doing just that in the United Kingdom, releasing four new wines that are nothing like the rose the Boomers grew up. A Portugeuse zinfandel blend, anyone? Or a chardonnay and Maria Gomes blend? They’re spending 2 million (about US$3.3 million) on the effort, too, which seems like a lot of money for wine no one will be especially interested in.

? Wine sales growth slows: And the reason may have been craft beer and flavored spirits, reports the Technomics consultancy. “The sluggish economy is creating ever more intense competition for adult beverage occasions,” says the report. “And today’s consumers ? especially Millennials ? have a broad drink portfolio that involves drink spirits, wine and beer, with flavor and occasion as key factors in the what-to-drink decision. Never before has the battle for share of glass been so intense.” Share of glass, indeed. The good news for wine, though growth was only 1.6 percent in 2013, is that total adult beverage volume declined 0.9 percent. Take that, beer.

What drives wine drinkers? Price, of course

wine drinkers priceNot that the Wine Curmudgeon had any doubt. But listen to enough people in the business, and especially to the Winestream Media, and it’s scores and romance and tasting notes and about as much foolishness as you can imagine. But we have better evidence than ever that wine drinkers buy wine based on price, in the form of the 2013 Wine Market Council Study.

And what kind of wine do most of us buy, even those of us with deep pockets and subscriptions to the wine magazines? Cheap wine, of course.

More, after the jump:

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Wine trends in 2014

Wine trends in 2014The wine business in 2014 won’t be so much about varietal or sweet, though both will matter. Rather, wine trends in 2014 will be about the continuing transformation of wine into a truly global business, focusing on:

? Increased retail availability — more wines in more and different kinds of stores, and especially grocery stores. This means attempts to change state laws where that’s illegal

? More consolidation among producers — not just the biggest getting bigger, the trend over the past decade, but consolidation among mid-sized wineries, which will be folded into companies specificially formed for that purpose.

? The growing importance of the consumer, who is beginning to drink what he or she wants and forcing the wine business to adjust, rather than the other way around.

Mixed in with this will be renewed attempts by the neo-Probhibitionists in goverment and medicine to reduce wine consumption. More, after the jump:

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Winebits 312: Sales trends edition

? YellowTail growth resumes: Remember all those stories about how the strong Australian dollar and YellowTail’s financial problems were going to mean the end of an era for Aussie wine? Not true, apparently. The biggest imported brand in the U.S. expects 2 1/2 percent gorwth this year, reaching almost 9 million cases. Driving that growth are the brand’s two sweet red labels, including a sangria. That YellowTail has rebounded from its problems says much about its marketing skill, but also speaks about its clout with retailers. How many other brands could have slumped the way YellowTail did, but not lose shelf space and even added space for two more wines? In this respect, Big Wine is becoming more and more like other consumer goods, be they ketchup or detergent, with all the means — good and bad — for the consumer.

? Is craft beer headed for a bust? This matters to wine not only because craft beer competes for drinkers with wine, especially in the younger demographics, but because the growth in craft beer (“But even such a healthy rise in consumer demand won’t be enough to sustain the many new breweries jumping into the marketplace“) has similarities to what happened in California with “boutique” wineries heading into the recession and with the unprecedented growth in moscato and sweet red over the past couple of years. What’s interesting is that someone in craft beer has noticed what ?s going on, while almost everyone in wine was in denial before the recession and during the moscato and sweet red boom.

? If you can sell wine on-line. ..: You can sell a lot of it. That was the experience of the British supermarket chain Tesco, which doesn’t face the three-tier restrictions that U.S. retailers face in this country. The story, on the drinks business trade magazine site, says sales may have gone up as much as 51 percent over the same period last year, and offers all the reasons why that is so. Contrast this with Amazon’s wine marketplace, which after nine months still can’t sell wine in all 50 states.