Top-End Wines Show Double-Digit Growth

Off-premise sales jump 22% for bottles priced $20-$25

by Peter Mitham
wine metrics off-premise sales
San Rafael, Calif.—Consumers continued to show a willingness to trade up in February, helping national wine sales maintain a consistent level of growth through what is historically one of the slower sales periods of the year.

Sales of U.S wine hit $2.9 billion in February 2017, according to market-research firm bw166, up 4% from a year ago. Sales for the 12 months ending February 2017 remained steady at $39 billion, up 3% from February 2016.

The growth is strongest at the upper end of the market, a phenomenon observers across the board have underscored in recent months.

“The higher you go up in the price segments, the higher the growth rate,” Christian Miller of Berkeley, Calif.-based Full Glass Research observed last month during comments to the Oregon wine industry.

Off-premise wine sales
A breakdown of multiple-outlet and convenience store sales over the 12 months ending February 2017 indicates that the trend toward premium wine is supporting the sales growth. Sales of bottled table wines at the upper end of the market increased at double-digit rates, while those priced $7.99 and less saw sales shrink, according to Chicago-based market-research firm IRI.

The most dramatic off-premise sales growth was in the $20-$24.99 price category, where sales increased 22% to $302 million. This was equivalent to a $55 million increase in sales, or just 16% of overall growth in off-premise sales.

While all price segments north of $11 per bottle posted double-digit growth, consumers haven’t fallen out of love with mid-priced wines: 70% of the growth in dollars was claimed by bottles in the $8-$14.99 bracket, which logged $4.3 billion in sales over the past year. Moreover, $4-$7.99 wines claim the greatest share of sales at $3 billion over the past year, or 34% of multiple outlet and convenience store sales of bottled table wine.

DtC shipments
A similar phenomenon is evident in trends among direct-to-consumer shipments, which have long been popular with small and mid-sized wineries. These smaller wineries typically see the channel as a way to manage distribution independent of the big beverage companies (especially as consolidation among distributors continues, with the formation of Southern Glazer’s Wine and Spirits LLC among the most recent examples).

Wines Vines Analytics/ShipCompliant data indicates that wineries producing 500,000 cases and more increased DtC shipments 66% in the 12 months ending February 2017. This was the most aggressive increase of any winery segment over the past year and comes off a low base: The big wineries represent just $128 million worth of DtC shipments, or 5% of activity.

The gain comes on shipments that had an average bottle price in February 2017 of $17.66—the lowest of any segment of wineries. This compares to an overall average bottle price in February of $41.96.

The one set of wineries to see DtC shipments decline was those producing less than 1,000 cases annually. While their production is less (and perhaps more prone to run out earlier in the face of strong demand), the annual data indicates a 10% drop in shipments to $73 million. This worked out to a percentage point drop in market share, or one effectively gained by the biggest wineries.

Wine industry hiring
Despite the strength of DtC shipments, winejobs.com data indicate wineries cut back on hiring DtC, retail and tasting room staff as well as sales and marketing personnel in February. The categories contracted for the first time since January 2016, with DtC hiring falling 11% and sales and marketing pared by 8%. Offset by 8% growth in winemaking positions, the overall Winery Job Index fell by a scant 1%.

Wineries typically ramp up hiring going into the final quarter of the year, explained Dawn Bardessono, managing partner of human resources firm Benchmark Consulting in Napa. A mix of factors including the lingering effects of the wave of consolidation that swept through the industry in 2016, resulted in slower recruitment activity as the new year dawned.

“It takes a while for that to filter itself out,” she said of recent mergers and acquisitions. “We saw a huge expansion-contraction in 2016, and the contraction all came together at the end of January/February of this year. That’s across all positions—production, sales, marketing, finance.”

While there’s still demand for people, many positions right now are being filled through internal postings or word of mouth rather than public postings, Bardessono said.

Flash sales
Meanwhile, postings on flash sites enjoyed a boost in February as Last Call Wines got back in the game, increasing 14% for the month over February 2016. The $20 to $29 segment accounted for the single segment of flash offers at 28%, and accounts for 33% of all wineries.

Invino, which often sets the pace for the total number of flash offers, offered more than 100 wines on Valentine’s Day, helping to ensure that February’s offers outpaced the same month last year. All told, Invino offered 174 wines in February, or 34% of all flash offers for the month.

Lot 18 made just 13 offers in February and most of those were for wines the company produced itself.

Currently no comments posted for this article.