U.S. wine tops $10-a-bottle average for first time, expert says

Consumer thirst for higher-quality wine has pushed the average price for the equivalent of a standard-sized 750-milliliter bottle of wine sold by U.S. retailers passed $10 a bottle.

“That hasn’t happened before,” Danny Brager, senior vice president of Nielsen’s Beverage Alcohol Practice, told the more than 1,000 gathered to hear the latest on the direction of the U.S. wine business at the 23rd annual Unified Wine & Grape Symposium in Sacramento.

This consumer preference for higher-priced wines, called “upscaling” or, in recent years, “premiumization,” is putting ever more supply and pricing pressure on wineries and growers making or wanting to produce such wine.

It is also showing in faster sales growth in dollars than in volume. Nielsen estimates U.S. wine retail sales grew 1.8 percent by volume and 4.4 percent by value. Sonoma-based BW166 figures the equivalent of 383 million 9-liter cases were sold last year, up 2.8 percent, and the dollar value grew 4.0 percent.

WINE’S COMPETITORS

The good news is that wine is holding its own against beer - even craft beer - spirits and even cannabis, Brager said. In the past 13 years, spirits and wine have been steadily gaining share of the $234 billion American beverage-alcohol pour, rising to 32 percent and 18 percent last year, respectively, while beer has been slipping, to 50 percent, he said, citing BW166 research.

Only 22 percent of regular craft beer drinkers are drinking less wine, while 20 percent are pouring more and 57 percent the same, based on a Harris Poll for Nielsen conducted in July.

When asked in a Nielsen-Harris poll last month how legalized marijuana would impact their consumption of wine, beer and spirits, the North Coast’s top agricultural product fared a tad better than the others, with 10 percent consuming less wine vs. 12 percent for the others.

TROUBLE RAISING PRICES

While consumers are shifting to higher-priced wine, many vintners are having a tough time shifting their retail prices higher, Brager said.

The top 100 wines retailing for the equivalent of less than $3 a bottle raised prices 3 percent in the past two years, and those in the $20–$30 and $30-plus segments increased them 1 percent and 5 percent, respectively, according to Nielsen figures.

But the top 100 wines in each of the $3–$6, $6–$10, $10–$15 and $15–$20 price points hadn’t boosted prices during that time.

“That region is very competitive. People who raise prices may pay the consequences that consumers may buy something else.”

Though “ailing” and challenged by premiumization, the under-$8 wine market is far from “dead,” Brager said. That’s because it still accounts for 58 percent of volume and more than one-third of dollars for sales, considering standard-sized bottles.

WHITE, RED AND ROSÉ

Among varietal wines, chardonnay continues to dominate U.S. retail sales volume, but cabernet sauvignon’s growth trajectory is poised to pass chardonnay in about two years, Brager said.

Red blends strong growth, but sales of rosés are “on fire,” he said.

Among rosés, 60 percent of sales value retails for over $11 and 20 percent $20-plus, Brager said. This segment now has 1.5 percent share of table wine sales and is growing at about 50 percent a year.

PREMISES OF PROMISE

A favorite market for higher-priced wines - restaurants and other venues where wine is consumed on the premises - continues to face challenges, Brager said. Through Nov. 9, wine sales at restaurants and bars slipped 1.0 percent by volume but only 0.2 percent by value, according to Nielsen/CGA figures.

Among the reasons Brager highlighted for this are millennials as a whole have less income than the big wine demographic, boomers, and alternative on-premise wine consumption options are growing. In fact, some of the fastest-growing on-premise wine venues are nail salons, car washes and repair shops, bookstores and theaters, particularly for live performances.

Then there is the rise of what some analysts call “grocerants,” or food retailers with ever-more-upscale in-store wining and dining options, Brager said. Whole Foods Market is among the national retailers doing this. “As groceries try to become more of a community hub and try to offer more of a lifestyle experience, rather than just a boring, typical food store, it’s more about connecting with the consumer in a broader way.”

Jeff Quackenbush (707-521-4256, jquackenbush@busjrnl.com) covers wine, construction and commercial real estate.