While the weak economy continues to leave its mark on the sales of nearly every food and beverage offering on retailers’ shelves, the vino is still flowing. Although the wine category’s growth rate has slowed, industry insiders say that this affordable luxury is destined to thrive.

“It’s a relatively recession proof industry if you look at if over the last 100 years,” says Alan MacDonald, vice president of marketing and public relations for the Seattle-based Click Wine Group. “When times are great, people drink wine, and when times are tough, people still drink wine.”

According to the New York-based Nielsen Co., total dollar sales of table wine in the food, drug and major market liquor channels for the 52 weeks ended Oct.18 increased 4.6% to over $8 billion. Domestic varieties of table wine, which experienced a 5.3% increase in sales, contributed $5.7 million to the total figure, while imported varieties rose 3% to contribute $2.4 billion in sales.

“Although trend growth is still positive, it has slowed over the past six months,” explains MacDonald. “Overall, people are just consuming a little less than they did before. It’s still positive growth, but it’s less robust.”

While some consumers may be cutting back on their wine purchases, many shoppers would rather trade down to a less expensive bottle of wine than halt their wine consumption altogether, observers note. So-called “luxury” brands, which are priced anywhere from $15 to $19.99 seem to be taking the hardest hit as shoppers opt for “super premium” or “ultra premium” offerings, which are priced from $8 to $10.99 and $11 to $14.99, respectively. 

“One of the things that people are cutting back on is the frequency with which they dine out,” adds Ed LeMay, senior vice president of channel management for Canandaigua, N.Y.-based Constellation Wines U.S. “One of the last things that consumers said they’d give up is their choice of beverage alcohol. People are choosing to entertain inside the home.” 

The increase in home entertaining presents a strategic opportunity for retailers to capitalize on shoppers’ increasing desire to create restaurant-style experiences at home. A proliferation of SKUs, however, has left many grocers wondering which to include when designing an appealing assortment.

“The wine category in terms of SKU growth has exploded, and a lot of our customers are starting to require a more rigorous approach to category management,” says Jake Wheatley, brand director for Purchase, N.Y.-based Jacob’s Creek. “They’re looking at the top performing SKUs and what’s driving them at their stores, and we’re seeing more retailers just cutting out the SKUs that don’t cut the mustard.”

According to Brian Sudano, managing director of New York-based Beverage Marketing Corp. Strategic Associates (BMCSA), Chardonnay, Cabernet Sauvignon and Merlot continue to be the mainstays of the wine category. “All of these varietals are losing share, but it will take years for them to lose their leadership,” he says. “The primary reason for their continued popularity goes back to their legacy. All three were among the first original varietal wines offered by growers in California.”

ON THE LIGHTER SIDE

Insiders note that the grip of the big three has been loosened by the emergence of lighter varietals such as the currently popular Pinot Grigio and Pinot Noir. Considered lighter in taste and easier to drink, these wines have the potential to attract the novice wine drinker.

“You’re seeing more calls for lower alcohol styles that get wines back to that 12% alcohol level,” says Wheatley. “People with contemporary lifestyles want something that’s a little healthier for them. They want to be able to have more than one glass at dinner and not feel tipsy, and they don’t want their wines overpowering their food.”

Additional varietals that are gaining in appeal include sauvignon blanc and Riesling, which experienced dollar volume increases of 10.3% and 14.5%, respectively, for the 52 weeks ended Oct. 18. Malbec, a primarily Argentinean offering and red varietal, is the current star of the imported side of the business. Marked by a notable increase of 36.1% in dollar volume, Argentinean table wines posted $93 million in total sales for the tracked time period.

With these new and attractive varietals popping up on store shelves, insiders say that retailers need to make it a priority to educate consumers about individual wine characteristics. Although it is clear that the average level of knowledge about wine has increased amongst consumers, there is still plenty of opportunity to demystify the category for the wine enthusiast and novice alike.

“Seventy percent of shoppers feel overwhelmed when trying to make their wine purchases, says Louis Lamoureux, CEO of Hinsdale, Ill.-based BuyersVine. The firm offers systems to help select and promote wines. “Retailers who can increase shoppers’ confidence in their purchases will enjoy customer loyalty.”

According to Lamoureux, signage should be accurate and easy to access. He claims that although consumers might want more information about wine than they do for their other purchases in the store, they don’t want to spend more time buying wine. Therefore, details such as the basic taste characteristics and potential food pairings for the varietal should be clearly displayed.

Proper placement of the wine category within the retail store is also key, since consumers often need to be inspired to include wine with their meal. “If you have the wine display on the far side of the store, and it’s going to be one of the last categories engaged, it would beneficial to promote it at the front of the store to set the tone,” says LeMay. “It helps consumers think that wine is part of the table.”

Insiders add that with restaurant sales declining, grocery stores can offer a valuable service by cross merchandising wine with inexpensive yet upscale meal solutions. A display that features the best wines under $10 has also been cited as an effective way to appeal to the growing group of consumers who have a heightened awareness of products’ price tags.  

Herb Smith, general manager of national trade development for Modesto, Calif.-based E.J. Gallo Winery, says that in areas in which it is legal, tastings should be a part of retailers’ wine merchandising strategies. “There’s no better way to educate a consumer whether they drink wine or not than having them sit and taste the product and talk to somebody about it,” he says. “That has proven to be very effective.”

YOUNGER DEMOGRAPHIC

Analysts predict the wine industry to continue to grow, with movement particularly fueled by a rapid pace of adoption among consumers ages 21 to 25. Online outlets for wine, although not traditionally used by supermarket operators, are predicted to be a main attraction for younger drinkers.

“Even if a retailer does not wish to sell their wines online, they can still post information about their wines, so shoppers can discover and peruse them,” says Lamoureux. “If done right, traditional retailers can offer the best of both worlds:  the ability for consumers to get information online and the convenience of purchasing the wine at the store in order to have it right away.”

It is worth noting, however, that while the younger demographic is expected to shape the future of the wine category, there is no particular consumer group that single-handedly bolsters retail sales. True success is achieved when retailers can attract adult consumers of all age groups and knowledge levels to participate in the wine experience.  

“A very small percentage of the U.S. population drives the vast majority of the dollar ring for the category,” says LeMay. “It’s not that we want people to drink more, but we want more people to engage in the category. We envision wine becoming a fabric of the American dinner table.”