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North Bay Business Journal

Monday, October 1, 2012, 6:53 am

Optimism increases in wine industry as premium sales rise

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    NAPA — Wine industry professionals are more optimistic about profitability as sales bounce back in a number and despite looming issues with grape supply, according to a survey of executives presented at a major symposium in Napa last week.

    Of 138 respondents to a July survey conducted by the U.C. Davis Graduate School of Management for the 21st annual Wine Industry Symposium, 74 percent saw themselves as more profitable, compared with 53 percent in last year’s survey.

    “Premiumization is back,” said keynote speaker Jay Wright, chief operating officer of Constellation Brands, to the audience of a few hundred industry professionals at the symposium on Sept. 25. “The recession is behind us.”

    Danny Brager, vice president and group client director for Nielsen’s beverage alcohol practice, said while wine sales in the past 12 months are up 6 percent by value and 4 percent by volume in stores, according to the company’s data, consumers are worried about home prices, stock market fluctuations, more jobs, fuel costs, global instability and inflation.

    “Higher price points are out-performing lower price points,” Mr. Brager said. “That is better than it was two to three years ago.”

    Yet, almost all the wine sales growth in the U.S. last year was concentrated in the top three producers — E&J Gallo, The Wine Group and Constellation Brands — whose sales grew 8 percent and total three times the volume of the next five largest, which grew at 3.5 percent, and 10 times the eight largest following, which grew at 1.3 percent, according to David Freed, a vineyard investor and symposium co-founder 21 years ago.

    Wine sales in casual and fine dining establishments have been growing 1 percent to 3 percent a year since dropping dramatically in 2009.

    “On-premise wine sales are growing again,” he said.

    Pressure to offer promotional prices is trending downward in all but the fiercely competitive $9- to $12-a-bottle price category, according to Mr. Brager.

    “Retailers are fighting for trips, to bring more in consumers and have them spend more per trip,” Mr. Brager said. “Wine is highly desired in retail.”

    Of the top 12 selling categories in grocery stores, wine is No. 9 and is the fastest growing, he said.

    Direct-to-consumer sales are also becoming a large factor in wine sales, Mr. Brager noted. Direct sales of wine have reached $1.4 billion a year, according to ShipCompliant, an alcoholic beverage shipping compliance service provider that powers many fulfillment software systems used by wineries in the North Coast and elsewhere.

    “That is one-fifth of all wine sold in grocery stores,” Mr. Brager noted.

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