Tag Archives: wine sales

Has sweet red wine taken over the U.S. wine market?

sweet red wineIs it possible that sweet red wine sales totaled one-third of all the chardonnay sold in the U.S. over the past year? And did slightly better against cabernet sauvignon? Or that sweet red wine outsold syrah, zinfandel, and malbec over that time period, and almost overtook merlot?

Hard to believe, but apparently true. A leading wine industry analyst, working with proprietary data, has estimated sweet red wine sales in the 52 weeks ending April 25 were about $534 million. That means, besides outselling syrah, zinfandel, and malbec, sweet red also did better than moscato — the current next big thing — and missed sauvignon blanc by just a couple of percentage points.

The analyst — call him Smart Wine Guy — asked not to be identified because his figures are based on that proprietary data, and legal problems could ensue if I used his name. But he has worked in the wine business for most of his life, including stints in retail and for Big Wine.

Smart Wine Guy used sales figures for red blends that cost between $7.50 and $15.49 a bottle and are sold in grocery and liquor stores. That includes most of the wine we think of as sweet red — those blends, like Apothic and Menage a Trois Red, that have more residual sugar than traditional dry red wine. It also includes red blends like 14 Hands Hot to Trot that aren’t identified as sweet red in most sales surveys, even though they’re as sweet as Apothic. Hence Smart Wine Guy’s total is three times bigger than Nielsen’s sweet red total, which is the accepted sales number but which probably undercounts sweet red sales.

The other things to know about these figures?

? Some 80 percent of sweet red wine is sold in grocery stores. By comparison, about two-thirds of cabernet sauvignon in the U.S. is sold in supermarkets. This should scare the hell out of liquor stores that assume sweet red drinkers don’t matter.

? Sweet red’s success is just five or six years old, dating to Apothic’s debut. There has always been sweet red, of course, but Apothic was the first brand to treat it like real wine, with a proper bottle, better quality, and well-designed label. In those five years, sweet red has become the one of the top six categories in U.S. wine.

? Sweet red sales increased about 20 percent last year, even though the overall wine market was flat, chardonnay declined almost one percent, and cabernet grew just four percent.

? Apothic, Menage a Trois Red, and Cupcake Red Velvet account for about half of the sweet red wine sold in the U.S. Not coincidentally, all are Big Wine products. If anyone who doubts the power of Big Wine still needs to be convinced, this is it.

? The best-selling sweet reds are just slightly sweet, and aren’t the over the top sweet bombs that many people expected when the sweet red market was developing. This says something about U.S. wine drinkers, who want wine, even if sweet, but not a soft drink.

? Sweet red wine has done all of this without any help from the Winestream Media, which speaks to how little most of us who write about wine understand about what Americans drink.

Big Wine strikes again

Big Wine

“Who do we want to buy next?”

That E&J Gallo bought J Vineyards, the highly-regarded California sparkling wine producer, last month was shocking, but it did make business sense. Gallo, for all its vastness, doesn’t make high-end bubbly and doesn’t have many successful restaurant wine brands, and J does and is. Plus, J owned 90 acres of prime Sonoma vineyards, making the deal even sweeter for Gallo.

So how to explain this week’s news that The Wine Group, second-biggest to Gallo among U.S. producers and with even less of a critical reputation, bought the fiercely independent and much beloved Benzinger Family Winery? The Wine Group has never shown any desire to make wine not sold in grocery stores, and its two biggest brands are Franzia and Almaden, the five-liter box cash cows.

Call it one more step in the Big Wine-ing of America:

? The increasing consolidation in the U.S. wine business, something I wrote about at the beginning of the year. It is getting harder and harder for wineries that make less than one-half million cases to find distributors and space on store shelves. Benziger makes less than 200,000 cases a year, which wouldn’t even make it the biggest producer in Texas, and J sells only about one-third of that. Said the owner of a leading California independent: “My guess is that a winery really needs to be above 200,000 cases to really get the attention of a distributor. But maybe 500,000 is the new 200,000?” A distributor told me: “There are too many labels fighting for too few spots on the shelf or wine list. It ?s crazy.”

? Family and independence, two hallmarks of the California wine business since the 1980s, aren’t enough anymore. These are just the latest sales involving long-time family wineries, which saw an opportunity to cash out to avoid succession problems, solve family disputes over winery operations, or to take advantage of Big Wine’s deep pockets. Sale prices weren’t disclosed, but one report said the J deal may have been worth as much as $90 million, which would make the Benziger price well into the hundreds of millions of dollars. Even of the sale price was half of that for each, which is probably more accurate, that’s a winning payout.

? It’s all about the land. Benziger, with sales of less than $10 million, is so small compared to the multi-billion dollar Wine Group that there is almost no way it could affect the parent’s financial performance. This makes the deal even more baffling, unless it was for the 200 or so acres of quality Sonoma vineyards that were part of the sale.

Will Big Wine run their new companies successfully? Certainly, if success is defined by profit. Otherwise, expect the new owners to do what new owners always do, despite best intentions and protests to the contrary — cut costs, eliminate unnecessary products (so say good bye to J’s lovely pinot gris), and “rationalize” operations. Gallo and The Wine Group won’t ruin J and Benziger the way Sears destroyed mail-order clothing retailer Lands’ End, but they won’t be the same wineries they were before the sale. That’s something we’ll have to learn to live with, because consolidation is going to be with us for a very long time.

More about Big Wine:
? How to buy wine at the grocery store
? Downton Abbey claret ? wine merchandising for dummies
? Big wine tightened its grip on the U.S. wine market in 2013

Sweet red wine to merlot: Drop dead

sweet red wineGrocery store merlot’s reason for being is that consumers like its fruity taste and that it seems sweet even though it’s dry. That combination, plus the fact that these wines have little in the way of tannins, translates to “smooth,” the ordinary wine drinker’s favorite descriptor.

So what are we to make of the news that grocery store merlot sales tanked in 2014, while those for sweet red wine went in the opposite direction?

Call it a sign that we may be seeing the beginning of a seminal change in the U.S. wine business.

One year’s sales figures do not necessarily make it panic time for merlot. But it is worth noting that sales of sweet red, which is grocery store merlot without the hypocrisy — truly sweet, very fruity, and no pretense of tannins — rose seven percent last year, according to Nielsen, while merlot (from a much larger base) fell six percent. Zinfandel, meanwhile, which mimics merlot’s sweet fruitiness, also suffered last year, with sales falling two percent.

This should give the wine wise guys something to ponder, no?

A couple of caveats: Sweet red is included in the red blend category, so some dry wines are part of that seven percent growth. But most of the analysts I’ve talked to say it’s safe to say that sweet red is behind the increase. Second, though supermarkets account for 42 percent of all the wine sold in the U.S., it doesn’t include two key states, New York and Pennsylvania, where grocery stores aren’t allowed to sell wine.

Third, people have been predicting the end of merlot since “Sideways” in 2004, and merlot has always proved them wrong. The difference this time is that sweet red offers much that pinot noir, the “Sideways” merlot-killer, didn’t. It’s less expensive and it’s much easier to make, since it’s a blend and the grapes in it don’t matter to most wine drinkers. Plus, it’s easier to market and sell; witness the success of E&J Gallo’s Apothic Red and The Wine Group’s Cupcake Red Velvet, which didn’t exist until a couple of years ago and today are brands that everyone else seems to be copying.

My guess? This may well be the beginning of the end of merlot, at least as it’s sold as a varietal in supermarkets. Merlot certainly isn’t going away, and will certainly be used to make sweet red. And, as the wine business continues to evolve into two parts — a huge, Big Wine-dominated mass market, and a smaller, independent retailer-driven market — merlot will remain important to the latter. But at some point in grocery stores, there may be little difference between a wine like Apothic and Charles Smith’s Velvet Devil merlot, which is sweet red in everything but name.

Premiumization: Are wine drinkers really trading up?

premiumizationThat’s the top trend in wine this year, that we’re feeling better about the economy and trading up: Buying more expensive wine than the wine we bought during the recession, moving from $4 bottles to $8, from $8 to $12, from $10 to $15, and from $15 to $20. The wine business calls this trend premiumization, and the salivating at the prospect has reached epic proportions.

That’s because the wine business doesn’t necessarily want to sell cheap wine — it’s not as profitable and it doesn’t carry the prestige that selling more expensive wine does (a much more important reason than consumers can possibly imagine). Plus, selling cheap wine requires more work. You can move a tanker truck of $25 wine in 20 minutes if it gets a 95, but cheap wines don’t get 95s, the competition for shelf space is ferocious, and most cheap wine is sold by the biggest retailers, who demand the best deals and which makes cheap wine even less profitable.

Hence premiumization, which some of the smartest people in wine say is here and isn’t going away. I’m not so sure, and I don’t say this just because my livelihood is cheap wine. As I continually remind people, there has never been a definitive study made public that demonstrates that wine drinkers trade up. Everyone just assumes it’s so. But does anyone know a wine drinker who went from Barefoot to Bogle to Hess or Rodney Strong to Silver Oak?

More, after the jump: Continue reading

Winebits 376: Apothic, restaurant wine, wine consumption

apothic ? A revolutionary product? Gallo’s Apothic, which revolutionized sweet red wine when it was introduced in 2007, may be doing it again. The company has released Apothic Crush, a slightly sweet red wine with 14.5 percent alcohol. In this, it appears to be the first sweet high alcohol wine that actually admits to being sweet and high in alcohol. For most of wine’s history, sweet table wines had less alcohol than dry wines not only because that’s how fermentation worked, but because no one thought consumers would drink a high alcohol sweet wine. But that has changed, first with the trend toward riper, more alcoholic wines, and second, with improvements in winemaking technology. In this, who knew Robert Parker, who has championed riper, higher alcohol wines, would pave the way for a Gallo product? Or, as the noted philosopher Mick Jagger has said more than once, “You can’t always get what you want/But if you try sometime you find/You get what you need.”

? Less hope for wine lists? Is the end coming for the independent restaurant? That may be one of the conclusions from a recent study, which found that the number of independents fell by two percent in the U.S. in 2014, and that the number of full-service independents dropped three percent. Chains, meanwhile, continued to grow in the low single digits. Why does this matter to wine drinkers? Because those independents, and especially the full-serves, are the last best hope for improved restaurant wine lists. Chains usually don’t care about wine and make decisions in a corporate office based on price, which means they have the crummiest and most overpriced wine lists. Independents, for all their problems with wine, generally do a better job than chains. So any drop in the number of chains should be worrisome for wine drinkers who want choices that aren’t from Big Wine.

? Beer, wine, or spirits? This chart, from Ghost in the Data, should answer all questions about whether the U.S. (or any other country in the world) is a wine drinking country. We’re not — it’s still beer. In fact, save for part of western Europe, the world is mostly indifferent to wine. This is something my colleagues in the Winestream Media should pay more attention to, instead of patting themselves on the back because we drink more wine than any other country in because we have more people than France and Italy.

Winebits 375: Grocery store wine edition

grocery store wineThis week, how grocery stores are changing the wine business:

? Suing the state: Texas doesn’t allow non-residents to own more than five liquor stores, unless the owners are related to each other. This “just us kinfolk” exception (as a lawyer friend of mine calls it) has allowed Texas-owned chains like Spec’s and Twin Liquors to put together hundreds-store operations. It’s also why Walmart is suing the state to overturn the kinfolk law and why it and Kroger are pushing two bills in the state legislature to eliminate the exception. Neither are likely to go anywhere — courts have traditionally ruled in favor of these kinds of laws, citing three-tier and its constitutional protections, and the legislature almost always avoids offending the big Texas liquor chains. Still, that Walmart and Kroger are willing to spend the money on a seemingly hopeless cause speaks volumes about how they think the world is changing. Starting now may give them a chance later to reform beer, wine, and spirits retail sales in Texas.

? Stopping at the supermarket: Nielsen reports that U.S. grocery stores (including Walmart, Costco, and their ilk) sold $8.6 billion in wine in 2014, which accounted for about 42 percent of the country ?s store-purchased wine. In other words, almost half of the wine sold in 2014 came from a grocer. Imagine what that number would be if Pennsylvania and New York allowed grocery store wine sales. We can write about Robert Parker all we want, but that’s not the news in the wine business. The real news, the development that wine writers should be paying attention to, is that most of our readers have no idea (and don’t care) who Parker is, and they want to know what wine to buy at their Walmart or Kroger. Which is why a grad student named Mark Thornton may be the next Parker.

? One more time: Speaking of Pennsylvania, its state house has approved a bill to end the state’s liquor store monopoly. This is apparently as much a tradition in the Keystone State as Punxsutawney Phil, and makes as much difference in changing the law as groundhogs do in forecasting weather. Still, the debate is fun. Said one lawmaker: ?The other side is talking about the No. 1 drug, alcohol, like it ?s milk and bread. We ?ve got to have more of it, more convenience, for the No. 1 drug in our communities.” The other side, that wants to reform the system, didn’t miss a beat, either: “Even Russia and China have given up on the idea of a state-run monopoly.” So you’re a commie if you oppose reform, and a crack dealer if you support it. Politics is a grand business, no?

Are Americans going to drink more wine?

wine market councilOver the past decade, U.S. wine consumption has set all sorts of records, and most observers expect that to continue. This year’s Silicon Valley Bank report called for a 14 percent increase in high-end wine sales, while a study commissioned by the VinExpo trade show said U.S.wine drinkers will power world growth.

But not everyone is convinced.

It ?s not that I ?m not optimistic, it ?s that the reality of the market when you look at the hard data of total table wine sales over the past three years following the recession,” says John Gillespie, the president of the Wine Market Council, which tracks U.S. wine drinking habits. The group released its 2014 report last week, and it seemed to be at odds with what the others have been reporting.

Gillespie’s point: After more than a decade of substantial growth, in which per capita wine consumption in the U.S. finally passed that of the early 1980s, sales coming out of the recession were nothing like the previous 15 years. Perhaps, says Gillespie, this more or less flat growth is the new normal, the sign of what economists call a mature market.

Which raises two questions: Why is this happening, and what does it mean for wine drinkers? Gillespie says it’s difficult to know why consumers do what they do, but that the Wine Market Council figures suggest some of us are drinking less wine and more craft beer.

My theory isn’t as nuanced (and doesn’t have Gillespie’s experience or data to support it) and should not be surprising to regular visitors. It’s about price; consumers don’t want to pay the higher prices the industry is trying to impose, and aren’t happy with the quality they’re getting at lower prices. Hence, they’re looking for something else to drink. The Silicon Valley Bank report said producers are focusing on premiumisation, the idea that better quality wine should cost more money. In this, they want consumers to trade up from their $10 and $12 bottles to $18 and $20 bottles.

Could the flat growth that Gillespie sees be consumers rejecting premiumisation? Will we start to look elsewhere, like craft beer, for value? If so, the wine business could face problems over the next decade, since producers expect pre-recession growth. If growth is flat, we’ll have more wine, and especially more high-priced wine, than there is demand for, and prices could collapse again, just like they did during the recession.

Which may be welcome news for consumers, but hardly anything the wine business wants to hear.

More about the Wine Market Council reports:
? The 2013 Wine Market Council report
? The 2012 Wine Market Council report