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From: lewis.perdue@wineindustryinsight.com

Subject: Why Trading Down May Not Exist - WINE INDUSTRY INSIGHT

Date: 2010-01-20 15:00:12

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EMAIL EDITION - VOLUME II, NUMBER 3 - January 20, 2010

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Does “Trading Down” Really Exist?

“Trading Down” has become the wine industry’s simple explanation for this Great Recession's shifting consumer wine demand, but it may not actually exist in the way many seem to think.

A detailed slicing and dicing of the data shows that -- at the very least -- it is not a strictly price driven phenomenon, is far more complicated than it seems if it's real at all.

DISCLAIMER

This Wine Industry Insight analysis and the four WII-created tables ($VIP), below, are based on a small subset of data extracted from a larger overview of sales in food, drug, convenience, liquor, and other select channels provided by The Nielsen Company..

For more efficient analysis, the article focuses on price-related 52-week data only, extracts price information, and creates a new category calculated from that provided by the Nielsen Company.

The Nielsen Company has not reviewed WII’s use and re-casting of the data and is in no way responsible for the accuracy, methodology or conclusions. Wine Industry Insight thanks Nielsen for providing the data and accepts all responsibility for any errors that might occur.

Premium VIP subscribers may download the original, unaltered Nielsen Company spreadsheet here or by clicking on the thumbnail, below.

nielsen-bevaltablewine-overview_12_12_09-thumbnail

INCONSISTENCY ON MACRO SCALE

“Trading Down” displays no price segment consistency.

The excerpt, below, from Table 4 shows dollar volume growth by price segment.

(VIP Subscribers can click here or on the table, below, to get the spreadsheet with all the table data sorted in four scenarios.)
nielsen-table4-121209-notvip
As expected, the greater-than $20 category is still suffering the most, showing a 5.2 percent decrease for the 52-week period .

However the second worst performance came from the $6-$8.99 segment which declined 1.5 percent followed by $15-$19.99

On the other end of the scale, the two biggest gainers were not the least expensive categories. The number one winner was the $3-$5.99 which gained 9 percent followed by the $9-$11.99 segment, up by 5.7 percent.

The least expensive wines — the $0-$2.99 segment — came in third place, increasing 3.9 percent.

VIP Subscribers click here to read the complete, un-redacted article.

INCONSISTENCY ON MICRO SCALE

The picture becomes even more inconsistent on a micro scale.

Table 3 sorts each major data segment by the average 750ml equivalent price.

Full version available to Premium VIP Subscribers

(The rest of this section is available to VIP Premium Subscribers).

PRICE CUTTING IS MOST MOST CONSISTENT LINK

(The rest of this section is available to VIP Premium Subscribers).

nielsen-table2-121209-notvip

(The rest of this section is available to VIP Premium Subscribers).

nielsen-table1-121209-notvip

(The rest of this section is available to VIP Premium Subscribers).

Also In This Article:

  • LOSING WITH PRICE HIKES; GAINING WITH CUTS?
  • LESSONS IN THE INCONSISTENCIES
  • LOYALTY LESSONS FOR PRICE-CUTTING LOSERS
  • $20+ CATEGORY LOSSES SELF INFLICTED?

MORE REFINED DATA MIGHT RESOLVE INCONSISTENCIES

This analysis shows that price alone is no indicator of revenue growth. Further, it indicates that price cutting works most of the time, but that other factors — perhaps varietal loyalty — create the exceptions to the rules.

Examining each varietal by price category and distinguished by domestic and import could provide some connections that could resolve the standing issues. Unfortunately, that data was not available for this analysis.


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