Wine Options Run a Wide Gamut
by Barbara Keck
That wine snob saying,
“Life is too short to drink cheap wine,” has not reached the
millions of consumers who buy at Wal-Mart. According to speakers at the
recent Unified Wine and Grape Symposium in Sacramento, Calif., Oak Leaf
Wines, which run $1.99 a bottle (California store price), may be the
fastest-growing wine in the United States today. Nor has wine-snobism
affected the early-adopter young consumer group who seem largely
responsible for pushing 3-liter wine box sales up 29 percent in 2007.
New packaging formats, adventurous pricing at both the
high and low dollar level, strategies to appeal to those young consumers
referred to as “Millennials” as well as the loyal wine
connoisseur groups, and new distribution channels such as Consumer Direct
are the topics that had the wine industry buzzing at the annual U.S.
gathering of those involved in the wine trade from grape-to-glass.
The U.S. wine market expanded by about 12 million
cases to 314 million cases in 2007, a 4 percent increase over 2006.
“With approximately $30 billion in wine retail revenues, the U.S. is
the world’s largest wine market at retail, and the world’s
second-largest wine market by volume,” noted Jon Fredrikson of wine
industry consultant Gomberg, Fredrikson & Associates, Woodside, Calif.
“Yet, U.S. wine consumption per capita is still tiny, at 2.5
That number is one-fifth the per-capita consumption in
both France and Italy, and one-third that of wine drinkers in Spain,
Australia and the United Kingdom. As a result of the domestic desultory
consumption, the United States is now the major target market for importers
from all over the world. In fact, from 2006 to 2007, imports grew 9 percent
to almost 100 million cases, to account for more than 30 percent of all
wine shipments in the United States — a record high. Wines from
countries often considered new kids on the vineyard block saw substantial
increases last year: Argentina (up 75 percent), New Zealand (up 41
percent), South Africa (up 20 percent), Chile (up 14 percent).
The dynamics are changing as the wine world continues
to flatten, with giant global producers cutting costs and trying to avoid
supply headaches by outsourcing overseas, Fredrikson noted. Supply is tight
and will be getting tighter in at least one major wine-growing region of
the United States — California. California Cabernet is one case in
point. There has been a regional shift in planted grapevine acreage in the
state of California, with most recent plantings being in lower-yielding
coastal areas, and many “removals,” or vineyards taken out of
production, occurring in fertile interior regions.
According to analysis by George Schofield of George
Schofield & Associates, Napa, Calif., near-term Cabernet production is
challenged: “There is currently little ability, short of an
above-normal crop, and except by using inventory from prior harvests, for
California vineyards to meet rising demand. At some point over the next few
years, either demand will have to be satisfied by other sources, such as
imports, or demand will be curtailed.”
Chardonnay and Merlot grape shortages are looming in
California, too. “Recovery may not be evident yet because of surplus
wines, but rising demand and flat capacity will likely cause shortages
sooner than later,” Schofield predicted.
But California is not the total wine picture for the
U.S. wine industry. Washington wines saw 22 percent dollar growth in 2007.
Oregon, Idaho, Iowa, Pennsylvania, New York State and the Carolinas are
pulling out the stops for increased consumer sales. Ted Baseler, president
and chief executive officer of Chateau Ste Michelle Wine Estates,
Woodinville, Wash., sees more consumption of wine going hand in hand with
wider distribution beyond the traditional channels of restaurants, liquor
stores, grocery chains and wine shops.
“The new channels that are helping wine gain
more consumer traction are wine clubs, sports stadiums, Internet sales,
concert venues, movie theaters, and even the small stores associated with
car washes,” he said.
Of all the new distribution channels, wine clubs and
Internet sales received the most coverage. The Consumer Direct movement
offers advantages to smaller wineries, which often cannot get satisfactory
distribution otherwise. The consolidation of wine distributors and the fact
that the largest wineries command attention from wholesalers have propelled
smaller wineries to become more resourceful, the speaker said.
Other notable new marketing trends are these:
promoting the growing region, getting on the “natural wine”
bandwagon, understanding that environmental awareness is creating great
interest in local wines on local shelves, and anticipating the coming
emphasis on ingredient branding. Liz Thach, professor of management in the
wine business program of California’s Sonoma State University noted
that consumers are becoming more concerned overall about ingredients in products.
“They want to know what’s inside the
bottle, how it was produced, were the employees treated well, what country
and region it was produced in, and are the winemaking practices
sustainable,” she said.
Thach stated that packaging is becoming more important
as a marketing tool. Primary packaging continues to be glass, but
bag-in-box is making inroads with such developments as no-muss taps like
the new Viniplus from Worldwide Dispensers, Rugby, England. Removal of
oxygen during the bag-in-box filling process has allowed such equipment
manufacturers as Rapak, Union City, Calif., to penetrate the premium wine
segment with the high-end Black Box brand using this packaging technology.
In the bottled arena, the R&D investment by natural cork manufacturers
to remove odor-imparting TCA from natural cork has resulted in development
of such manufacturing technologies as DrasRed from ACI Cork, Oporto,
Portugal. Screw-caps, introduced largely by Australian winemakers, also are
finding their way onto premium wines.
U.S. consumers are looking at and buying new wines
from previously unheard-of growing regions and small American Viticultural
Areas (AVAs). Category growth is seeing some new favorites coming to the
fore. According to ACNielson, Pinot Noir was up 16.9 percent in 2007,
Riesling 23.7 percent and Pinot Gris 15.4 percent. Consumers are also
moving up the price trellis in their wine purchases: wines priced at $10
and higher now constitute almost 50 percent of winery revenues for
California table wines, for example.
Nonetheless, the market is fiercely competitive.
“Extreme value wines (Two Buck Chuck) are still a factor, with well
over 7 million cases shipped in 2007,” Fredrikson noted. “And
in 2007, the Tobacco Beverage Bureau approved 112,000 wine labels. What a
product choice for consumers.”