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From: lewis.perdue@wineindustryinsight.com

Subject: High-End Wines Began Recovery In January, What Consumers Are REALLY Drinking, Much More In WII's Special Data Issue

Date: 2009-05-19 11:37:36

To: Emailing List Subscriber
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WINE INDUSTRY INSIGHT

EMAIL EDITION - VOLUME I, NUMBER 88 - May 19, 2009

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THIS ISSUE SPONSORED BY:

Hinman & Carmichael,Alcoholic Beverage Law     Miramont Estate: Put our prize-winning wine in your bottles

INSIDE THIS SPECIAL DATA ISSUE:

  • IRI/WII: What Are Consumers REALLY Drinking? Much Of What You Think Is Wrong.

  • High-End Wines Began Recovery In January, Imports Still Lag

  • Mainstay Varietals — Moderately Priced Cab, Chard, WZin — Treading Water, Losing Market Share

  • Market Flux Flummoxes Best Of Predictions



WINE INDUSTRY INSIGHT ORIGINAL REPORTING

High-End Wines Began Recovery In January, Imports Still Lag

New data prepared by Information Resources Inc. at the request of Wine Industry Insight shows that sales of wines priced at more than $20 per bottle began to recover in January, 2009.

highendwinedeclineandturnaround-500px

VIP Premium Content Subscribers, click here to get the  full-sized chart and download the Excel spreadsheet with a complete data set and three more charts. [$VIP]

28-MONTH DATA SHOWS HIGH-END WINES IN DECLINE SINCE 2006

The IRI data [$VIP], tracking high-end wines back more than two years shows that wines selling for more than $20 per bottle began to decline faster than the wine market as a whole as far back as December 2006.

The same data show that the high-end sector began to recover before the market as a whole and has shown greater percentage gains.

BIG HIGH-IMPORT GAINS HELPED SPARK DOMESTIC DECLINES

The data also shows that at the beginning of 2007, high-end imports surged, riding a price wave buoyed by a $5 per bottle price lower average price.

highenddomesticvsimportwinedeclineandturnaround-500px

A comparison of both charts show that high-end domestic wines began to decline just as imports accelerated.

In addition, tracking import and domestic wines separately, also shows that the domestic decline trend line has been far more moderate than imports.

IMPORT/DOMESTIC PRICE DIFFERENTIAL DECLINES 20 PERCENT

The spreadsheet data [$VIP] shows gradual domestic price reductions over the past 28 months. This meant that by the four-week period ending April 19, 2009, domestic high-end wines had cut prices by an average of $1.28 per bottle and imports by just $0.39.  This reduced the price differential to about $4 per bottle.



Not a subscriber? Subscribe now, and get the rest of this original article along with the spreadsheet and everything else on the site every day, including the Data Cellar for just $9.99 per month or $115.88 per year. Click here for more details.

WINE INDUSTRY INSIGHT ORIGINAL REPORTING

IRI/WII: What Are Consumers REALLY Drinking. Much Of What You Think Is Wrong.

The wine industry’s perception that box and value brands own all the growth categories is wrong. This broad-brush conviction  may have been true six months ago, but it is not justified by a detailed and current look at what consumers are really buying.

The market is in flux and opportunities exist for those willing to take a close look at the details of what price categories and varietals are really growing, and those that are losing ground.

TOP 10 GROWING CATEGORIES INCLUDE SUPER- AND ULTRA-PREMIUMS

Significantly, even a look at the broader sales indicators show that recent consumer purchases contradict the idea that cheap wine is the only thing selling.

Wine Industry Insight’s analysis of data from Information Resources Inc. shows that wines selling at an average bottle price of $25.15 are making greater sales gains than box wines with an average 750ml price equivalent of $1.92.

VIP Subscribers click here to read the rest of the article.

The analysis also shows that wines selling at an average bottle price of $12.43 are growing faster than the “Two Buck Chuck” with an average 750ml price equivalent of $2.68.

Clearly something is going on here that contradicts the conventional wisdom. One key principle is that consumers don’t drink a “category” or a “varietal.”  They drink a bottle of something that they paid a given price for.

Consumers are not a mass market, which is why broad-brush data — while offering a quick indication on the overall market –  can be misleading.

DATA GET STRANGER — AND MORE USEFUL — WHEN LOOKED AT IN DETAIL

[Text redacted. Get the full version with your VIP subscription.]

CONSUMER RED WINE PURCHASES THUMB THEIR PALATES AT THE “CONVENTIONAL WISDOM”

[Text redacted.]

TOP SELLING WHITES SHOW SAME CONTRA-CONVENTIONAL CONSUMER BEHAVIOR

Consumer purchases of the top 10 white wine price/varietal categories reflects the same erratic reality as the reds.

[Text redacted.]

The data show that Pinot Gris/Grigio costing an average of $14.83 per bottle is the fastest-selling white price/varietal category coming in at number three in the top ten.

A look at the original spreadsheet shows that cheaper white Zins gave surprisingly poor performances.

Rounding out the top 10: [Text redacted.]

DOWN-TRADERS ABANDONING SMALLER WINE RETAILERS IN FAVOR OF THE SUPERMARKET TOP SHELF?

[Text redacted.]

SLEUTHING OUT THE “WHAT’S HAPPENING” AND “WHAT TO DO?”

[Text redacted.]

WHAT ARE CONSUMERS DRINKING: MONTHLY WII FEATURE

As the market continues to change, Wine Industry Insight will visit these numbers with each month’s fresh batch of IRI data.


WINE INDUSTRY INSIGHT ORIGINAL REPORTING

Mainstay Varietals — Moderately Priced Cab, Chard, WZin — Treading Water, Losing Market Share

Wine Industry Insight’s analysis of data from Information Resources Inc. shows that while many unexpected price/varietal categories have shown astonishing growth [$VIP], most of the top 10 market mainstay categories — moderately priced Chardonnay, Cab and white Zin –  have lost share, or have maintained some growth through price reductions.

mainstayvarietalsstagnate-april2009

OLD STANDBYS NO LONGER LEADING GROWTH EDGE

As the full spreadsheet makes clear, [$VIP] these top 10 market share leaders still have a lot of life in them, but they are no longer the growth leaders of consumer tastes.

WHAT’S ERODING THE GROWTH? BOREDOM? LOW-COST QUALITY?

So far, no solid data has emerged on why the stalwarts of wine consumption are suffering. A wide series of emails and conversations have so far produced just two conjectures:

  1. Consumers have grown more adventuresome and are seeking new tastes.
  2. Quality has migrated down the pricepoint scale. Inexpensive varietals like Syrah have replaced even less-expensive generic reds.

WHAT ARE CONSUMERS DRINKING: MONTHLY WII FEATURE

As the market continues to change, Wine Industry Insight will visit these numbers with each month’s fresh batch of IRI data.

VIP Subscribers click here to read the rest of the article.


Not a subscriber? Subscribe now, and get the rest of this original article along with the spreadsheet and everything else on the site every day, including the Data Cellar for just $9.99 per month or $115.88 per year. Click here for more details.



Market Flux Flummoxes Best Of Predictions

Quickly changing economic conditions and consumer wine purchases have created an industry in rapid flux that has flummoxed even the best of projections for the coming year.

Wine Versus Dow Showing Wine's Recent Upturn - Click to Enlarge

Wine Versus Dow Showing Wine's Recent Upturn - Click to Enlarge

The resulting uncertainty has complicated investment and lending decisions, especially at the high end of the market.

HIGH-END MARKET ESPECIALLY HARD TO PIN DOWN

While scanner data covers nearly two-thirds of the wine sold in the United States, the results are skewed mostly toward lower price points.

Of late, higher price points have shown up among the fastest growing categories in scanned data, (See Wine Industry Insight article on this [$VIP]), but the higher the bottle price, the lower the scanner representation. Luxury brands ($50 to $100 per bottle and up) are not represented at all.

HIGH-END DATA DROUGHT INCREASES UNCERTAINTY

Because most information about high-end wine sales comes from anecdotal data lacking in any significant relevance, decisions about this sector as a whole entail a greater “seat of the pants” assessment.

Scanner data has the advantage of being an objective, third-party source of information, not subject to bias or changes by wineries, distributors or retailers.

By contrast, wines not tracked by scanners must be individually reported by private wineries whose actual sales can be distorted by accounting rules, or other considerations and cannot easily be independently verified.

Further, the data from these sources is private, closely held and not made available on a frequent basis like scanner data.

This means that investors and lenders, in the absence of better industry data, must apply even tougher standards to each individual winery.

SILICON VALLEY BANK: THE BEST HIGH-END DATA GAME IN TOWN

Silicon Valley Bank’s “2009 - 2010  State of the Wine Industry” remains the best source for high-end data. Based on surveys from more than 500 wineries in California, Oregon and Washington, SVB said that, “Price points below $35 are selling, but wines between $50 and $125 are in a “dead space,’ with only established labels selling.

svb-2009-2010-winerysamplebreakdown1

“Companies are more pessimistic as their price points increase with $40-65 and >$90 the most concerned. Our own experience is that under $35 works for red wines (less for white), $35-50 is a gray area and $50-125 is a dead zone with only the best brands doing well. Ironically, wines that can sell for more than $125 to this point are selling out.”

RECENT MARKET UPTURN CONTRADICTS SVB DATA

SVB’s  market study illustrates the challenges that even the best prognosticators must face in a rapidly changing economy.

svb-2009-2010-growthratedeclines

SVB predicted, among other things that, “[T]he year will end essentially flat in terms of overall growth in the fine wine segment, and show modest growth in higher volume segments.

However, scanner data indicates substantial gains in every price category for three of the first four months of 2009. (See “April Domestic Wine Sales Up 9.5%, All Price-Points Gain [$VIP],” WII, May 4, 2009 for details.)

CAN INTELLIGENT EXTRAPOLATION  OF SCANNER DATA FILL THE HIGH-END DEFICIT?

The nature of small, high-end, private wineries makes it unlikely that this price segment can ever have a steady, frequently updated and independent third-party source of sales data like that provided by scanner information.

What could fill that deficit? One would hope that someone is working on a way to extrapolate the highest-end scanner data price point ($20 and above) to provide a statistically significant measure of the total high-end market.


 A NOTE FROM THE EDITOR: I will be in New York state for a special event until May 28, so I hope the data, spreadsheets and analysis will tide you over until I return. Thank you for your understanding and support. -- Lew



================= CONTACT DATA ====================
Lewis Perdue
670 W. Napa St., Suite H, Sonoma, CA 95476
Phone: 707-326-4503, fax: 707-940-4146
Email: lewis.perdue@wineindustryinsight.com