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A humming U.S. economy and consumers' increasing thirst for better wine are making this a good time to be a vintner, particularly of fine wine for which the North Coast is known. But the industry is rapidly adjusting to slower sales growth and a tougher time capturing the attention of consumers with a multiplying myriad of adult beverages and ways to get them, according to experts at a major wine business gathering in Sacramento on Wednesday.

"Tailwinds pushing outweigh some of the challenges," said Danny Brager, senior vice president of Nielsen's Beverage Alcohol Practice, speaking on a "State of the Industry" panel at the Unified Wine & Grape Symposium.

Propelling the business along, he noted, were the "pretty strong economy," positive yet slower growth in wine sales overall and continued growth for higher-end wines — strongest for retail prices of $15–$20 a bottle — a consumer trend often called "premiumization." Other tailwinds Brager sees are a shift in consumption away from beer, greater consumption among frequent wine drinkers — a target demographic for North Coast vintners — more places to buy wine, and product innovations that capture an increasingly wide-ranging consumer palate, namely rose, sparkling wines and alternative packaging such as cans and wines on tap.

On the economy side, some of the latest estimates of fourth-quarter U.S. growth include 3.4 percent from the Atlanta Federal Reserve Bank and nearly 4 percent from the New York Fed. Projected full-year real GDP growth for the U.S. last year was 2.54 percent, up from 2016 and 2017 but down from the postrecession high of 2.86 percent in 2015, according to the Organization for Economic Co-operation and Development (OECD).

Brager pointed to 2017 growth for U.S. wine shipments of 1.3 percent by volume and 2.9 percent by value, suggesting continued growth for higher-priced wines. That's based on figures released earlier this month by BW166 and Gomberg Fredriksen & Associates.

Yet that volume growth is less than half the 2.8 percent rate in 2016, which was a good-growth year, Brager said. Wine from just California, the largest U.S. producer, increased 2.1 percent by volume last year.

Earlier this month, wine market analyst Rob McMillan of Silicon Valley Bank warned of slowing growth for over-$20 wines. He estimated sales growth for bank's fine-wine peer group for all of 2017 was 4.0 percent. That's down from 9.6 percent for all of 2016, 19.8 percent in 2010 coming out of the Great Recession and 7.7 percent–12.2 percent in the intervening years.

Added to the wine sales volume through retail channels are direct-to-consumer shipments, which are growing at a fast rate, Brager said Wednesday. DtC grew last year 15.5 percent to $2.69 billion and 15.3 percent by volume to 5.78 million cases, according to figures put out this month from SOVOS and Wines & Vines. Average bottle price was $38.75, and 97 percent of the 9,645 wineries in the report produce less than 50,000 cases annually.

DtC now has reached 10 percent share of U.S. wine sales.

But good news for the fine-wine business is "high-frequency" consumers of wine — every day or more than once a week — are drinking more of it, Brager noted. Thirty-five percent of them are imbibing more than they did two years ago, and 13 percent are drinking less. He said it is concerning that 29 percent of "occasional" drinkers — less than three times a month — are consuming wine less often, and only 19 percent are drinking it more often.

"We're dealing with a more diverse, demanding consumer, whether that be related to income, gender or age," Brager said.

U.S. households who consume wine, beer and spirits now outnumber those that consume only one or two of those, according to Nielsen Homescan figures. Those who fill all three glasses amount to 26 percent of households and 55 percent of sales dollars for adult beverages.

A Harris Poll conducted Jan. 16–18 found that 39 percent reach for beer first, while 29 percent do for wine, 27 for spirits and 4 percent for hard cider. That’s up for wine from 21 percent who said it was their choice a decade ago but down for beer from 45 percent and for spirits from 32 percent.

"This reflects a shift toward wine as they get older," Brager said.

But younger consumers aren't drinking wine as often as those older, according to Nielsen Scarborough and Wine Market Council. Roughly a quarter of younger consumers (ages 21 to 34 or 39) are drinking wine weekly, compared with 34 percent for those 55-plus (Nielsen) and 41 percent for those 60-plus.

The share of the $242 billion in U.S. adult-beverage purchases has shifted toward away from beer over the past 15 years, per BW166 figures. Beer's share fell below half last year, for the first time, to 49.4 percent, while wine increased to 17.0 percent and spirits to 33.6 percent. That's up from 58.4 percent for beer, 13.1 percent for wine and 28.2 percent for spirits in 2003.

Acquisitions and investments by big adult-beverage companies such as Constellation Brands, E&J Gallo and The Wine Group in the past couple of years reflect shifting consumer preferences to finer wines and spirits, said symposium speaker Mario Zepponi of Santa Rosa-based mergers-and-acquisitions firm Zepponi & Company. Constellation bought The Prisoner and Meiomi brands, which retail for more than $20 a bottle, in the past two years, compared with Rex-Goliath a decade ago, targeting the $7–$10 category.

And in an environment of ever more adult-beverage labels pursuing a spot on limited store shelf space, smaller-scale wine producers should be taking a page from the craft-beer marketing playbook to be more profitable amid the fast movement of large wine companies into the faster-growing premium end of the market, Zepponi said.

"From a small producer, it's hard to manage a 50-state business model and be profitable," Zepponi said at a press conference after his presentation.

Vintners of 7,500–10,000 cases annually should focus on direct-to-consumer sales then strategically distribute, say, 10 percent–20 percent of production in select markets, he said.

But wineries should also learn the "painful lesson" from craft brewers of expanding too quickly, Brager said.

"They began losing their shirts, then they realized they were not as well-known outside the region," he said.

A common winery marketing tactic is the winemaker or proprietor visit to a key or target market, often traveling with wholesaler salespeople to visit restaurants, retailers and other trade accounts. Those trips can result in a sales spike, but multiple return visits per year may be need to maintain momentum, Zepponi said.

"If you're trying to sell 2,000, 4,000 cases nationally, it's going to be insignificant compared to all the producers with much more pull in gross volume," Zepponi said.

And wine brand-building in the future will need to be simplified. Instead of three to five products on a retailer shelf, a vintner may be only able to get one or two.

Here's one way to look at the need for small-scale producers to simplify. Of 42,486 adult-beverage items Nielsen tracked for off-premises sales last year, there were 3,518 newcomers with significant sales. And all those were chasing these average slots on store shelves: 768 for grocery, 167 for a drug store and 1,567 for a liquor store.

"Make it simple for the retailer and wholesaler," Zepponi said. "Meiomi had one SKU (shelf-keeping item)."