Sonoma Sees Strong Sales as Growth Plateaus

DtC shipments rise, cans and premium box wines emerge as dynamic segment

by Peter Mitham

As Sonoma County direct-to-consumer shipments begin to rival Napa County, at least in volume, Pinot Noir leads in average bottle price.

San Rafael, Calif.—U.S. wine sales totaled $3.3 billion in June, according to market research firm bw166, the value unchanged from a year ago in a market where growth shows increasing signs of reaching a plateau.

The threat of growth coming to a halt was among the issues discussed at this year’s Unified Wine and Grape Symposium in Sacramento, Calif., where vintners mulled the challenges of getting consumers to pay more for the brands they love. An adventurous consumer, it seemed, was more willing to ante up for new brands rather than familiar ones.

The phenomenon found expression in June sales data, where the strongest growth was seen not in overall wine sales or even off-premise sales, which increased 1% to $651 million through multiple-outlet and convenience stores tracked by IRI in the four weeks ended June 17.

Rather, it was direct-to-consumer shipments, which increased 12% versus a year earlier to $132 million, and wines sold in boxes and cans (up 7% and 43%, respectively), that posted the strongest growth. The overall market may be posting incremental growth, but wine on the doorstep and those in alternative packaging are a growing part of the mix. Premiumization hasn’t ended, but neither has the overall democratization of wine consumption.

The latest numbers point to Sonoma County as a key example.

Sonoma rivaling Napa
Data from Wines Vines Analytics/ShipCompliant by Sovos indicate the county rivals Napa as the leading source of wines shipped DtC in the latest 12 months, with each dispatching more than 1.7 million cases.
But while Napa leads the nation in terms of DtC shipments, shipping $1.3 billion worth of wine at an average price of $64.01 a bottle in the latest 12 months, the same volume of wine pouring out of Sonoma is worth $611 million, or $29.66 a bottle.

The two are serving significantly different segments of the market, but together, the expanding range of the market is being served.

And the expanding range and reach of the market is apparent in the fact that the average price of the bottles Sonoma wineries ship DtC has inched down since last year as growth in case volumes (26%) outstripped that of shipment value (25%). This was true for each of the region’s top varietals, except Zinfandel, which saw its average bottle price rise 4% to $27.67, just short of the regional average.

The expansion of the market is also evident in the rise of alternatives to glass packaging, which remain a small but dynamic segment of the market. Off-premise sales of domestic box wines, driven by the more expensive brands priced at $4.50 per 750ml and up, increased 7% in the 52 weeks ended June 17, according to IRI. This translated into an additional $68 million worth of wine sales over the past year, and pushed box wines to nearly 15% of domestic table wine sales.

Sparkling wine in cans popular
But even more interesting, sales of domestic sparkling wine in cans increased 43%. Cans represented less than 1% of domestic sparkling wine sales in the latest 52 weeks, at less than $3 million. However, 295 ml cans followed by four-packs of 250 ml cans saw strong growth, with sales increasing more than 1,000%. Conversely, sales of single 250 ml cans dropped by a third in the latest 52 weeks, the only category of canned domestic sparkling wine to decline.

The areas that saw strong growth punctuate an otherwise lackluster month in which bw166 managing partner Jon Moramarco sees signs of decelerating growth.

While the Alcohol and Tobacco Tax and Trade Bureau (TTB) has not yet released any data pertaining to wine sales in 2018, shipments from the three key wine producing states of California, Oregon and Washington have been weaker. Off-premise sales data from IRI for the latest 52 weeks has also been stubbornly stuck at below 4% since last August, with the latest 52 weeks reporting 2% growth in sales to $8.9 billion.

While bw166 data indicate the value of packaged imports rose 8% in the latest 12 months, volumes rose just 3%. Moramarco believes shifting exchange rates may be crediting the segment with greater value, a point underscored by the lower growth in actual volumes.

Still, with harvest just around the corner, wineries are hiring.

Winejobs.com’s Winery Job Index remained robust at 440 in June. While this was down 3% from a year ago, it remained robust. Hiring activity in the latest 12 months was up 6% versus a year earlier and accelerated in the latest six months. Year-to-date statistics indicate that hiring activity increased 8% in the latest six months.

The strongest growth in June was for finance positions, up 92% from a year ago, while demand for vineyard and winemaking positions fell 16% and 10%, respectively. Demand rose 4% for sales and marketing roles and 3% for general administrative staff.

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