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 gallons.”

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.”