The State of the Industry

As consumers, we are buying more wine at better price/quality than most of us ever thought possible. Consumers bought more wine in 2009 than in 2008, spending $10 billion, even though we paid less per bottle for it. These are two of the leading conclusions to come from the Wine Market Council (WMC) and Nielsen 2010 report on the state of the wine industry, released in January. They are among the major trends from 2009 that look set to continue into 2010. Here’s a more in-depth look at the report’s findings. The below is an abridged version of the consumer wine buying feature that appeared in our May 2010 issue.

How do you buy the wines you buy? Check out the left-hand side of our homepage for Wine Enthusiast’s consumer wine buying survey. We’ll publish the best comments later this year.


Let’s Hear it For Youth

Millennials, not necessarily having lost their retirement nor their house, continue to buy wines and craft beer in restaurants and for home consumption. The palate is global, and the wallet is open: they tend to purchase at many higher price points than everybody else, according to the WMC report.

A Financial Reset

But, overall, only 25% of wine drinkers surveyed told WMC/Nielsen they will spend more on wine in 2010; only 21% of spirits drinkers and 18% of beer drinkers said they would spend more in the new year.What wine drinkers appear to want is the same wine quality, often the same brand, at lower prices than they paid in 2008. This is part of a downward “reset” of financial priorities that in 2009 extended across the retail industry.

“The reset doesn’t actually mean we want to drink worse wines, that wasn’t part of the reset equation. What we are finding is that there are some very good wines in the ‘reset’ range. And that means, even though we might be paying less, we actually aren’t drinking less, at least not the core drinkers,” says Danny Brager, the head of Nielsen’s Beverage Alcohol Client Service team. It’s the “ marginals,” people who come and go with wine, who are drinking less, according to John Gillespie of the WMC.

On the Domestic Front

We bought domestic for less money, a trend that began in 2008 when wine sales fell by 2.8%, according to researcher Mintel. In 2009, a slight uptick in sales still left California treading water, with boutique wineries losing shelf space and winery sales and exports sinking. Big retail discounters moved to known brands and, following Costco’s Kirkland, are trending toward private brands—wines made specifically for that company to sell. Washington maintained its market and Oregon grew. Amazingly, the “buy local” factor spurred wine drinkers in Missouri, Michigan, Wisconsin and Indiana to buy their home state wines—a double-digit surge, says Brager.

Bad Times for Bubblies

For imports, the French always take the heat, so why not now? Four in ten consumers stopped buying Champagne, which is largely bought in restaurants. Globally, Champagne value and volume slipped below 2005 levels, after a gradual five-year climb from the post-Millennium fallout. Imports from Champagne to the U. S. declined 29% as importers, distributors, retailers and restaurateurs cleared Champagne inventories, a trend that started in 2008. Destocking is almost over so the bubbles are now very dependent on the economic situation and the Euro.

The Bordeaux Blowout

Bordeaux sales and prices also fell, in part, because Diageo’s Chateau and Estates, Bordeaux’s 14th largest broker, decided to liquidate its entire U.S. inventory. This created a massive Bordeaux blowout that began in the autumn 2009 and continued with the March release of 2007 en primeur wines. Consumers who could bought (and continue to do so), often at a fire-sale prices other importers could not match.

Looking to the New World

We found new ways to drink great, less expensive wine imports: Argentine Malbec or Torrontés white (keep an eye on the peso). New Zealand did well, though there are worries that trend is very last decade. Chile raised its prices and delivered great quality. Australia’s grief about drought, fire, and overproduction somehow spread to our shopping carts.

But Home is Where the Heart is

And, finally, we have discovered that we like to eat and drink at home. Technomics’ 2010 forecast for overall out-of-home spending projects that fine dining will continue to decline by as much as 10%, casual dining by close to 7% and only bars and nightclubs will come in just below no loss-no gain. Restaurant sales of alcoholic beverages overall are expected to decline by 2.5% (up from 2009 where the figure fell to 4.7%) with wine taking the biggest 2010 hit. Forecast: wine down 6.7% vs. beer at 1.8% and spirits at 2.1%.


Published on April 7, 2010
Topics: Wine Industry