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02.03.2014  
 

Wine's New Competition: Craft Beer

Experts urge wineries to stand their ground against rival in beverage sector

 
by Andrew Adams
 
 
“wine
 
Santa Rosa, Calif—Americans may be buying fewer 12-packs of mass-marketed light beer, but they are buying more six-packs of special-release IPA—and that could be at the expense of bottles of Cabernet.

Those who sell craft beer are also taking their cue from some of wine’s strongest selling points to earn a greater share of the market. “From a shelf space perspective, we need to hold our ground,” said Danny Brager, senior vice president of Nielsen’s Beverage Alcohol Practice Area. Brager’s comments came during the Wine Market Council’s annual presentation on U.S. wine consumer trends.

Brager said craft beer sales are up nearly 23% in volume and 20.6% in value, and in regions like San Francisco and Portland, Ore., craft beer has seen growth of 30% or more.

Those strong sales, however, can’t buoy the general beer market, which continues to decline at a slow rate. In 2002, 60% of Americans favored beer, 27% preferred spirits and 13% favored wine, Brager said. By 2013, beer had slipped to 51.1%; spirits rose to 33.7% and wine grew to more than 15%.

People who enjoy craft beer say it offers a broader selection of choices, and they view it as a local product that pairs well with food, according to John Gillespie, president of the Wine Market Council.

Based on survey information from the most active beverage buyers, Gillespie said 66% of high-frequency wine drinkers claim to have enjoyed craft beer, and 49% of those said they enjoyed several craft brews per week. Brager said Nielsen’s data show that 13% of shopping carts with wine also contain craft beer.

While the growth of craft spirits and beer should be of concern to wineries, Gillespie recalled the microbrew boom of the 1990s that prompted similar worries. “I don’t see it as a huge threat to the industry,” he said.

The “high-frequency wine drinker” is a term coined by the council to describe consumers who drive wine sales in the United States. Gillespie said these wine drinkers enjoy wine daily or several times a week as opposed to “occasional” wine drinkers who only imbibe once per week or less. The council estimates the number of high-frequency drinkers in the United States at 34 million and occasional drinkers at 67 million.

Of wine drinkers, about 30% are “high-end wine buyers” responsible for buying most of the wine priced higher than $20, but these buyers purchase wine across all segments. While they may be stocking the cellar with Harlan Estate and E. Guigal Cote Rotie, they also are buying everyday red wines from Trader Joe’s for $9.99.

Wine Club Survey
Gillespie also shared some results from a national survey of wine club members. He said they are split 54% female and 46% male; 57% are part of the baby boomer generation, while only 11% are millennials.

Most are members of clubs operated through wineries, and 76% said they became members after visiting a winery. The most important factors when considering wine club membership were discounts on wine, special tastings and access to special events.

Satisfaction is also fairly high, with 35% of members saying they were “extremely satisfied” and 49% reporting they were “very satisfied” with their memberships. More than half (51%) claim they plan to stay a member indefinitely. Only 5% said they planned to stay for about a year. When they did quit, those surveyed said were no longer enjoying the wine (24%), membership became too expensive (22%), or that the wines were no longer interesting (21%).

Wine consumption strong
Total wine sales in 2013 came to $14 billion in the off-premise sector, which accounted for 178 million cases, according to Nielsen’s numbers. The Beverage Information Group estimates total wine sold in the United States will reach 297 million cases per year, which is a 1.6% increase and continues a streak of 20 years with growing wine consumption, Gillespie said.

In the past two years, Brager said more than 5,000 new wine items have appeared on retail shelves. Of these, 30% are priced in the $9-$11.99 range, and the average price for wine has risen from $8.76 to more than $9 per bottle in 2013. This has pushed the total value of wine sales higher, yet volume has slowed in recent years. The top 10 wine brands account for 87% of wine’s total sales.

There are now 522,420 outlets selling wine on- and off-premise in the United States, Brager noted. He said the good news is consumers can now find wine almost everywhere, adding that the convenience store chain 7-11 is making a special push to sell premium wines from multiple price points at most of its locations.

In the e-commerce sector, however, wine continues to have to fight its way up-river. Michael Osborn, vice president of merchandising of Wine.com, joined Brager and Gillespie on the panel and said American shoppers still buy far more shoes online than wine. “We have a lot of room to grow,” he said.

Osborn said 56% of the wine sold through the site is imported, and California wine accounts for 37% of Wine.com’s sales. France holds the largest share of sales by import nations at 15%, followed by Spain (8%) and Italy (13%).

He said the site’s customers prefer red wine, which accounts for nearly 70% of all sales, and Cabernet Sauvignon is the most popular—although its share has dropped by about 10% as consumers appear to be trying a wider range of varieties and blends.

Osborn said sparkling wine represented 9% of Wine.com’s sales. He said if retailers make a point of highlighting sparking wines throughout the year and not just during the holidays, consumers appear keen to buy it as an everyday wine.

When asked about how the site chooses its wines, Osborn said they seek brands with proven success in a particular market (such as restaurant or re tail accounts) and if the company can easily purchase and ship wine from a winery’s wholesaler. “We want to sell where there is demand,” he said.

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