In 2014, the U.S. wine market advanced on a 1% growth rate to total 328.6 million 9-liter cases. Even though the rate of volume growth for wine slowed toward the end of 2013 and into 2014, the wine industry was able to add 3.2 million 9-liter cases to the market.
An interesting point is that the number of wineries grew from 7,762 in 2013 (which was a 4.3% gain over 2012) to 8,287 in 2014, a 6.8% increase that suggests the future of the wine industry remains “ripe.” Since the economy is improving, with unemployment levels and gas prices down, consumers have higher levels of discretionary income. How, and where, are these consumers allocating their dollars when purchasing wines in today’s ever-changing landscape?
Increases Led by Off-Premise Retail
For the off-premise, wine retail sales totaled $17.9 billion in 2014, a 4.1% increase. The off-premise added 2.9 million cases to reach 267.3 million 9-liter cases, representing 81.3% of the market. This 1.1% increase was a slowdown from the 2.0% growth rate the off-premise sector accomplished in 2013. The slowdown could partly be attributed to wineries raising prices in 2014 at lower and higher price-points.These increases occurred after many years without increases, but suppliers are finding that consumers are more willing to purchase a new brand at a higher price point than an existing brand that increased its price.
In the traditional off-premise retail trade channel, table wine is primarily being sold through grocery stores (43%) which accounted for approximately 114.9 million 9-liter cases last year. Liquor stores claimed 35% of table wine sales, which equated to 93.6 million 9-liter cases, while warehouse clubs held a 19% share of table wine sales with 50.8 million cases. Drug stores and others accounted for the remaining 3% of table wine sales in 2014.
Technology Drives Trends
Technology continues to play a significant role in off-premise, with winery-to-consumer direct shipping recording its best year ever in 2014. By value, winery DTC shipping increased 16% to reach $1.82 billion in sales, while the average price per bottle shipped increased 1.6% to $38.40, according to ShipCompliant and Wines & Vines. Additionally, shipments of both pinot noir and Oregon wines increased at the most significant amounts in comparison to 2013. Shipments of pinot noir increased 22%, while the average price per bottle rose 9%. Shipments from Oregon expanded 46% by volume and 53% by value.
Another trend impacting the off-premise is on-demand delivery with services that continue to pop up in major metro markets. The major service providers include Drizly, Minibar and Thirstie, which all use technology as the key selling point, completing the majority of business through smartphone applications. These services are gaining so much attention that the Wine and Spirits Wholesalers of America has acquired a minority stake in Drizly, since it works hand-in-hand with the three-tier system. Drizly, the largest of these services, moved nearly the same amount of wine and beer (38% and 39%) in 2014, but spirits only made up 23% of alcohol volume sold on Drizly.
As wine makes up 38% of Drizly’s sales, only one wine brand made their leading brands list which combines spirits, wine and beer. Oyster Bay Sauvignon Blanc, owned by Oyster Bay Wines USA, ranked 20th overall for Drizly. The fact that only wine brand made the list wasn’t very surprising due to the plethora of brand SKUs in the wine industry, as well as wine consumers not being as brand loyal as in the spirits and beer categories. Consumers using Drizly ordered more often toward the end of the week, with Friday and Saturday seeing the most orders (22% and 23%), while Sunday and Monday saw the least (9% and 10%).
Innovating to Keep Up
Suppliers and marketers of wines are also attracting the attention of today’s consumer though innovative packaging moving beyond the traditional glass bottle. While boxed wines, such as Bota Box and Black Box, continue to outperform the industry, single-serve wine offerings are becoming more prevalent. Most recently, single-serve packaging has been updated from the mini-glass bottle to canned offerings. The Wine Group extended its Flipflop line with new canned offerings which includes a Chardonnay, Pinot Grigio, Fizzy Sangria and Fizzy Crisp White. These single-serve options allow consumers the opportunity to bring their wines to outdoor venues such as sporting events.
Overall, the beverage alcohol landscape has never been so competitive when taking into account the fact that today’s consumer no longer drinks one type of beverage. Instead, they make their alcohol purchase dependent upon how it will enhance their occasion. Knowing this, spirits and beer marketers are vying for the attention of today’s wine consumer in order to steal occasions. Defending their occasions, wineries are offering the aforementioned innovations and techniques. This bodes well for the wine industry’s future in this ever-changing landscape.