Raising a glass

Grocers are adding innovative varietals and tweaking their marketing strategies to draw shoppers to the wine category.

By Deena M. Amato-McCoy

While wine drinkers re­main price-conscious, they are increasingly willing to spending a little extra for a nice a bottle of Chardonnay to enjoy with dinner or a Cabernet to uncork while entertaining friends. The key, observers note, is that shoppers have to perceive the purchase to be a good value. This trend favors supermarkets over other retail outlets and some grocers are responding with expanded wine selections that include new varietals and innovative marketing strategies to pique consumer interest.

During the height of the recession, wine was impacted more than other categories as it is on a much longer production cycle than other consumables. “As the economy slowed, it became harder to move product due to higher volumes produced during good times,” says Jim Bernau, president and founder of Turner, Ore.-based Willamette Valley Vineyards.

As a response to slowing sales, the wine industry relied on deep discounts to move the surplus inventory. However, experts say the tide is turning as the economy recovers. “Wine prices are inching back up, which is producing cautious optimism for retailers and manufacturers alike,” says Alan MacDonald, vice president, marketing and public relations for Montvale, N.J.-based Winebow, Inc.

Observers say that even as the economy picks up, many consumers will continue to watch their budgets, trading frequent restaurant visits for more home-cooked meals, a move they say will benefit wine sales at grocery.

“As consumers make the transition from dining out to eating in, they are also doing more home entertaining,” explains Francine Kowalski, assistant vice president and senior brand manager for New York-based Frederick Wildman & Sons. “Therefore, wine sales at grocery have been increasing.”

The wine category generated $5.2 billion in sales at supermarkets for the 52 weeks ended Dec. 26, according to Chicago-based market research firm SymphonyIRI Group. This is almost a 4% increase from a year ago.

Vino with value
While shoppers are willing to dig a little deeper in their wallets when purchasing wine, observers say retailers need to focus on merchandising and selection—not just rock-bottom prices—to keep shoppers interested in the category.

“Oftentimes, retailers promote and display lower-priced wines supplied by large manufacturers, but this leads to missed opportunities,” Kowalski says. “The average price is increasing and consumers are looking for diversity. If more floor space was allocated to premium wines versus those below $10 that often dominate the sales floor, they would realize an increase in their average sales.”

This value proposition is at the heart of the offerings from Livermore, Calif.-based Underdog Wine Merchants. By collaborating with winemakers across the globe, the company features unique, lesser-known varietals from different regions. The company‘s portfolio includes Cupcake, Fish Eye, Big House, Octavin and flipflop, its newest entry.

“Our company over-builds the flavor and quality of all of our wines, so that we can sell them at a lower price point to create more value for the consumer,” says David Georges, vintner for the company’s flipflop brand.

Cupcake, the company’s fastest growing brand in the U.S., retails between $10 and $12. With flipflop’s eye-catching labels, unique bottles, bold personalities and an average retail price of $7, “we are getting consumers excited and they are coming back for more,” he says.

A keen focus on specific varietal characteristics strongly contributes to flipflop’s value proposition, according to company officials. For example the brand features Chardonnay, Pinot Grigio, Riesling and Moscato white wines, and its red portfolio includes Cabernet Sauvignon, Merlot and Pinot Noir options.

Sip something new
Manufacturers and retailers should also tap into consumers’ desire to try different wines, according to observers. “New varietals are always interesting to shoppers,” says Mike Haering, group brand director for Brown-Forman Wines, a division of Louisville, Ky.-based Brown-Forman Corp.

A new varietal for the company’s Fetzer portfolio of wines is a Moscato. Created from the Muscat grape, which is often labeled as one of the world’s oldest grape varieties, Moscato wine features overtones of citrus, melon, even mango, and floral aroma, making it a sweet, floral wine.

“Our new Moscato fits well within our Fetzer taste profile of being fruit-forward and refreshing,” he says.

Since wine makers are creating wines with a blend of grapes found worldwide, consumers’ interest in new wine introductions is growing. With more than 100 harvested grape varieties and an international reputation, California has long lead the charge for America’s wine production and offered consumers many options when shopping for wine, observers note.

Toasting Argentina
However, consumers’ interest in value and pairing wines with specific foods is also enticing them to explore imports, including wines from Argentina. With very low production costs, the country produces bold, flavorful, quality blends at an affordable price—all factors that are important to American consumers, observers note.

“Imports from Argentina are very strong as the category, and the wines produced in South America overall are perceived as strong values,” Kowalski says.

U.S. sales of wines from Argentina grew 18% from 2008 to 2009, according to The Wines of Argentina, the Buenos Aires, Argentina-based trade association.

As more consumers seek the promised value from organic, biodynamic, carbon neutral and sustainable merchandise, they are investing in natural and organic wines. This is good news for Willamette, which reports all three of its vineyards are certified sustainable. According to officials, the company uses natural pesticide management techniques and carefully manages water runoff into streams.

“This niche helps us compete and get retailer attention,” says Bernau. “Consumers are clearly in search of naturally grown, environmentally sensitive products and retail buyers are also showing more interest in companies that produce these products.”

However, some observers don’t see natural options taking off as quickly as expected. “The category continues to evolve, but it’s still a bit of a mystery—consumers still wonder if there a way to ensure products are certified, why are there still sulfites, what is the shelf life?” says Kowalski.

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