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    Red, White & New | The State of the US Wine Industry

    December 6, 2010 1:19 pm - Posted by Kevin in Learn

    We’re not really big on statistics or facts and figures around the Wine Portfolio offices. We prefer to see wine as an emotional product, not a rational one. But wine is an industry and not just a passion and so understanding how the business works and what trends are driving the sector is important. Knowing who the consumer is and what they want is critical. And so each year our creative team sits down to go through research reports to pull out the trends that will shape the world of wine in the year to come. Because as the consumer changes so too will the product we all love.

    This year we cracked open a bottle or two (perhaps more but we’re not saying) of Malbec, currently the ‘hottest’ varietal in the US, and we poured through the most recent Nielsen Table Wine Report along with various other sources to compile some interesting tidbits that even the most non-mathematical of you will find fascinating.

    This is the first of a few stories on our findings.

    The good news is that total wine sales were up in the US last year by 3.2% to nearly $9.2 billion dollars which is impressive in tough economic times. The bad news is that we only have reliable data for the US, sorry to all of our international fans but the US figures are still very insightful for the industry as a whole.

    So if sales are up, which category of wine is increasing? It is the price conscious buyer who is growing.  Cheaper bottles in the $9.00 – $11.99 range primarily led the growth with a whopping 9.1% increase in year over year sales. Sales of bottles that retail for $20+ were also up by 7.4%. The category that lagged overall sales growth figures was bottles that sell for $15.00 – $19.99 as their sales were only up 2.5%.

    It seems as if the US consumer doesn’t perceive a large quality difference for bottles that are $9 or $19. And if the quality is similar the value proposition is better for less expensive wines. Therefore the mid-price wines, those between $12 & $20 aren’t selling as fast as the lower priced ones, or as well as the more expensive ones. We can assume consumers use $20+ bottles as an affordable luxury and a little treat as their sales were also up impressively.

    Now before we start to congratulate ourselves for becoming real wine connoisseurs let’s look at what price points the majority of wine sold for at retail. Here, the news isn’t so bright.

    • $0 – $2.99= $794 million
    • $3.00 – $5.99 = $2.69 billion
    • $6.00 – $8.99 = $1.90 billion
    • $9.00 – $11.99 $1.87 billion

    Yep that’s right, over 1/3 of all wine sold in the United States last year retailed for under $6 bucks. We’re not snobs but we think this trend probably doesn’t reflect a refined palette (is there an emoticon for sarcasm).  A winemaker in Chile told us not to worry about these stats, as the sales of all wines under $12 reflects a growing number of new wine drinkers who are just starting to explore the world of wine. This is good news for the industry as a whole and a wake up call for industry. Clearly American wine drinkers want value and are price conscious, no wonder Chile and Argentina are doing so well. But you’ll have to wait for another post to see just how well they’re dong.

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