The dramatic drop in restaurant and on-premise consumption has been tempered by an increase in supermarket sales, wineries say. Sales of “popular price” brands, generally in the $9.99 to $11.99 range, are on the upswing as consumers realize they can get a whole bottle for what they pay for one glass in a restaurant. Pricing is expected to remain competitive, fueled by favorable growing conditions throughout many major wine regions, which is leading to record harvests of many vintages.
“There is more competition out there with wineries recognizing that people are looking for values,” says Mike Haering, group brand director for Louisville, Ky.-based Brown-Forman Wines, which counts Fetzer, Bonterra, Five Rivers, Little Black Dress and Korbel among its offerings. “At the same time, some retailers are even cutting their margins and using some very popular-priced wines such as Fetzer as an opportunity. People rely on Fetzer. They know it is a good quality wine and so retailers are cutting their margins a little bit to get shoppers into the wine area of the store and while they are there they will see other deals. It has done well for us on several accounts.”
“In this economy, it is all about the value proposition that a brand is delivering to the consumer,” says Steve Sprinkle, vice president of domestic sales for E. & J. Gallo Winery, based in Modesto, Calif. “The good news is that the wine industry is not only growing overall, but nearly every segment of the business is still growing. From super premium wines to economy and box wines, the category is still moving forward,” he says, citing figures from Chicago-based Information Resource Inc. that show a 4% dollar sales growth for the 26-week period ended July 12.
“We feel that current year-to-date trends will be carried forward throughout the remainder of the year,” Sprinkle says. “Seven out of the top 10 table wine brands are gaining dollar share faster than the category.
“The challenge for a retailer is to identify relevant brands that provide a strong value proposition to their customers,” Sprinkle says. “My advice to retailers is to expand on proven brands in both distribution and in merchandising support. Additionally, I would allow assortment for new items or brands that deliver strong value proposition.”
Dale Stratton, vice president of strategic insights for San Francisco-based Constellation Wines U.S., says if retailers are going to maintain sales and margins then they will have to make smart buying decisions. “The consumer is more risk adverse and will seek out the best value,” he says. “This is really less about low price and more about value for the dollar. This means retailers will have to strike the balance between running effective promotions while maintaining proper inventory levels. The consumer is making safe buying decisions and well known brands will rule the day.”
Retailers should look for good deals and strong promotions from many of the better quality wines this fall and winter, experts say.
“This year it’s less about a ‘must-have’ varietal and more about value impact to the consumer,” says Stratton. “We have seen substantial declines in the on-premise channel and wine trends are consistent with the overall restaurant numbers. This has caused many wineries that normally do most of their business in on-premise to turn to retail channels with very attractive promotions. This holiday will be a great year for consumers to trade up in quality and improve their value proposition. Many retailers are taking full advantage of these offers and they should be plentiful this holiday season.”
One big promotion to look out for centers on Constellation’s Cooks Champagne, which is celebrating its 150th anniversary this holiday season. “Our plans include packaging enhancements highlighting a new shipper and a special 150th commemorative label on the bottle neck, making for dramatic holiday displays,” says Dave Nientimp, senior vice president, promotions. “Cooks is also offering a full suite of POS materials including the popular Cooks rounder rack and pole topper, updated with the 150th anniversary theme, a vacuum-formed metallic tone case card and consumer offers.”
Constellation’s Woodbridge by Robert Mondavi and Robert Mondavi Private Selection brands are partnering with Butterball turkeys this holiday season and will offer one million partner coupons, Nientimp says.
Other wineries are also getting into the holiday spirit. Fetzer, for example, has 12 varietals in its portfolio, including Chardonnay, Cabernet, Merlot and Gewürztraminer, a sweet wine similar to a Riesling that is popular around the holidays, when Brown-Forman steps up its promotions. “Advertising is important, but advertising can come in many different modes,” Haering says. “Our advertising is in-store or through our PR partnership efforts.”
This year Brown-Forman is focusing on entertaining opportunities and a sweepstakes offering a trip to Vail, Colo. “We put out a Holiday Entertaining Guide that shows different ways to serve and enjoy the wine, recipes, etc. Sometimes its coupons are intermingled with some of our own partner brands here at Brown-Forman and the recipes will be a big part of that. We’ll also include tasting notes because there is a big interest in that,” Haering says.
Fetzer’s sister brand, Little Black Dress, is taking a different tack. The five-varietal line has dubbed itself “the Official Wine of the Awards Season” and “the Official Wine of the AFI” (American Film Institute). “We have worked in many ways to become part of Hollywood and really become involved from an event, PR, charity and celebrity aspect,” says Kim Charney, brand manager, Little Black Dress. “We do many things in Hollywood. We’re part of many style lounges. We’ve partnered with Us Weekly and their Hot Hollywood parties. We collect celebrity ‘little black dresses’ and donate them to Clothes Off Our Backs, the charity started by Jane Kaczmarek and her husband Bradley Whitford. We have dresses from Kim Cattrall, Jamie-Lynn Sigler and Felicity Huffman. When we are at red carpet events we have them sign bottles and we auction those off as well.”
Peter Click, founder and president of Click Wine Group, a Seattle-based importer of several supermarket staple brands, including Root: 1 from Chile, Fat Bastard from France and High Note from Argentina, is adding Spanish Sons from Spain to its wine rack. Imported in partnership with the Farina family, the wine comes from Central Spain where some of the country’s most expensive red wines are made. “We’ve worked with the Farina family to create a $13 retail Tempranillo varietal,” Click says. “That is the grape of Spain. It is planted everywhere and is sort of the native varietal. It is dry red, deeply colored, chew and earthy. While Malbec from Argentina has been on fire for the last several years, Tempranillo is now growing dramatically, so it is a good category to be in.”
So is French wine. In France, young people are choosing other alcoholic beverages over wine, experts say.
According to Serge Lozach, managing director of SOPEXA’s New York office, domestic wine consumption in France is declining as young people switch to mixed drinks. That has led to a glut of wine in France and other European countries, which should bode well for U.S. consumers.
But first French wines have to over come their pricey perception. “Frankly, the problem is not that there aren’t French wines that are value oriented. The problem is that the American consumer does not understand that those wines are out there,” he says. “They don’t look at the French category with those kinds of wine in mind. And it’s a shame because besides all the famous French wines that everybody knows, there is really quite a bit of value available in the French marketplace, particularly in the South of France.”
Some of the best French red wines are made from the Gamay grape and hail from the Beaujolais Region. “This year’s harvest looks great. We had the ideal weather conditions, not too hot, not too cold, enough rain and so we didn’t need to treat the vines,” says Jean Bourjade, CEO of Inter Beaujolais, based in Villefranche, France. “Most of our wines are in the $10 to $20 range, but because Beaujolais is a French wine, consumers probably don’t have knowledge about it,” he says.
Sangria perfectly matches with just about any cuisine and the upstart Jersey City, N.J.-based Señor Sangria differs from other sangrias on the market because it is all-natural and made with unfiltered fruit juice. “We use orange concentrate, lime juice, natural granulated sugar and a couple of other proprietary ‘trade secret’ juices that give us a unique mouth feel and smoothness,” says Rick Martinez, president. Co-packed by Brotherhood Winery in Washingtonville, N.Y., a 750-ml. bottle of Señor Sangria retails for $8.99, while the 1.5 liter bottle is $14.99.
Initially available in red, Martinez expects to introduce a white version early next year and is looking at other line extensions, including sangria wine coolers and heartier seasonal sangrias with higher alcohol content.