Vintners battle sluggish sales with new strategies on prices, wine by the glass
NORTH COAST - From consumer cellars to store shelves to restaurant wine lists to distributor warehouses, the buzzword in wine distribution is inventory.
A year and a half into sluggish economic conditions, wines retailing for less than $10 a bottle are selling best, those going for $10 to $15 are having modest success and many new labels retailing for more than $25 a bottle have been struggling, particularly in restaurants, according to Bruce Herman, senior vice president of sales for Foster's Wine Estates. It's part of Australia-based beer and wine giant Foster's Group and makes North Coast brands such as Beringer and Chateau St. Jean.
"It's a very challenging environment out there with the slower economy," Mr. Herman said.
Donny Sebastiani, a principal of Sonoma-based negociant Don Sebastiani & Sons, likened the wine market currently to highway traffic.
"It's like the freeway when each person is tapping the brakes a bit and eventually everyone is at a standstill," he said. Real-time, actionable financial information, something the company hasn't had extensively since its founding in 2001, is what's needed to adjust to distributor and retailer inventories, so the company is in the midst of upgrading its computer systems.
Sales of the Don & Sons' two main brands - Pepperwood Grove and Smoking Loon - have been hurt in recent scanner data from grocery, drug and liquor stores. For example, Pepperwood Grove ranked last among the 100 largest wine brands, but the nearly 32 percent decrease in volume sales from mid-May to mid-June from a year before was better than the brand's almost 42 percent year-over-year drop from a month before, according to Information Resources Inc.
Mr. Sebastiani attributes the results to the company's decision to increase the price by $1 a bottle to featured retail of $6.99 for Smoking Loon and $5.99 for Pepperwood Grove on the West Coast. However, the company has enjoyed more revenue so far this year compared to last year because of the bump in price, despite the hit to volume, he noted.
The hit to the mainstay brands came from competitors with similarly priced brands shaving prices to move inventory, and the value-wine market has become "hypercompetitive" as brands languishing in the restaurant market are being repositioned at lower-prices, according to Mr. Sebastiani.
Yet Don & Sons has decided not to fight on price and even introduced a five-varietal, restaurant-oriented Smoking Loon extension brand called Flock, positioned at $15 a bottle and $10 a glass.
Creating more by-the-glass opportunities is Foster's strategy with its portfolio of wines retailing for more than $25 a bottle, according to Mr. Herman. The company made a recent sales push with a Knights Valley cabernet sauvignon, Chateau St. Jean pinot noir and chardonnay, and St. Jean's Cinq Cepages flagship blend.
"We're placing them at fine casual and white tablecloth restaurants that are moving to by-the-glass wine sales rather than full bottles," Mr. Herman said. "Selling by the glass allows restaurateurs to use their dollars to sell more volume than by selling everything by the bottle."