Market Trends
[Three articles on the big picture in U.S. wine consumption]

Wine Flowing like Water in the U.S. - Wine & Spirits Daily, January 3, 2008
Wine popularity is up in the U.S. as Americans continue drinking better wine and more of it, according to a story in the Washington Post. In all, U.S. consumption is projected to have risen for the 15th consecutive year to a record 304 million cases in 2007 after a 4% gain over 2006. That will, for the first time, place the United States ahead of Italy in per-capita consumption, trailing only France. At the current rate of growth, Americans will overtake the French by 2015.

The Post cites the usual factors for increased consumption: health benefits of red wine, an increase in wineries, improved wine quality, a higher number of legal drinkers, a growing number of women with high incomes in the work force, and better wine marketing (think critter labels). “Highfalutin’ turns people off,” says wine consultant Jon Fredrikson, publisher of the Gomberg-Fredrikson Report, to the Washington Post. “People see Yellow Tail, the largest-selling brand in U.S. food stores based on volume, and they say, ‘Gee, this is down-to-earth.’”

So not only are people attracted to more approachable wine labels, but quality is important as well. Wine drinkers looking for a deal can usually find good quality in less expensive wines, while other drinkers are more willing to spend an extra buck or two for a better perceived brand. “I call it the Costco definition of value. They are not looking for cheap wine. They are looking for a deal on quality,” said Barbara Insel of MKF Research in St. Helena, California.

Overall, Chardonnay still reins as king, but not so much among younger drinkers. A survey released in December by Wine Opinions showed that Chardonnay’s most devoted drinkers are 60 or older, with 38% counting it as a favorite. “There is a decided trend away from the overblown, unctuous, often sweet Chardonnay with too much oak, and greater interest in Chardonnay without oak or barrel fermentation,” Gillespie says.

But it appears that younger drinkers aren’t really loyal to anything when it comes to wine. “And these young people have little brand loyalty. They don’t care where it comes from or about the label,” continued Insel. The Post went on to say that South American and Australian wines will continue to be popular among Americans, but European wines will likely drop in favor, for they are projected to rise in price by 10% to 30% due to the weakening dollar.

Consumers Branch out from Chardonnay 
Chardonnay no longer takes center stage among white wine varietals. While it may be the main contender, varietals such as Pinot Grigio/Gris, Sauvignon Blanc, and Riesling are drawing more attention from wine drinkers than ever before, according to a report in Wine Business Monthly by Mary-Colleen Tinney. The report suggests it has something to do with the American palate, which tends to like fruitier, sweeter flavor profiles. Secondly, the alternative varietals tend to pair better with Asian and Mexican cuisines which are increasingly popular in the U.S. Lastly, consumers are much more willing to branch out than in years past.

In the article, chief marketing officer at Beam Wine Estates Chis Lynch said, “There was a lot of commentary and backlash from a small group of people against Chardonnay because the styles were getting very big, oaky, vanilla, and malolactic.” Over the last year, the overall wine market has risen 4% by volume, with Chardonnay under performing the market with 3% growth, according to Nielsen data. Pinot Grigio/Gris has grown 15%, Sauvignon Blanc rose 6%, and Riesling added 24% in volume over the last year.

California Winemaking Style May Be Out of Steep [This article appeared on January 31st in The Sacramento Bee. It has been edited for brevity and emphasis.] The wines you’ll be savoring five years from now are being picked today by enological trendsetters barely old enough to drink. But what they’re looking for - wines that are quirky, regional, with rich background stories - isn’t what the mainstream domestic industry seems to be selling today. “It flies in the face of the way wines are made in California,” said Joshua Greene, editor and publisher of Wine & Spirits magazine. Greene was part of a panel discussing the state of the industry in January at the annual Unified Wine and Grape Symposium in Sacramento, Calif., the largest conference of the year for the US wine business.

In just the last few years, said Greene, whose magazine annually surveys the wine buyers at 2,300 restaurants across the country, there’s been an explosion in the number of sommeliers in their 20s. While sommeliers purchase only a small fraction of the wine bought in the nation each year, their choices play an important role in establishing industry trends for years to come.   The weak economy may bring change to the industry, but 2007 was an excellent year. - Retail sales topped $30 billion, up 4 percent on the year; - Grape prices were up, following the end of a nearly decade-long glut driven by a wave of over planting in the 1990s; - And the industry’s most expensive products continued to be its bestsellers: For bottles $12 and up, sales rose by 20 percent or better.

Still, the cheery sales data came with several cautions, particularly concerning the growing strength of import brands in the US market. Import brands accounted for nearly two-thirds of the growth of wine sales last year. Import brands, especially Spanish and Italian labels, have been especially successful at catering to the whims of a few particularly influential wine buyers: the new generation of young sommeliers at the nation’s high-end restaurants. Imports represent about 31 percent of the total wine market by volume. But they account for a significantly larger share - about 43 percent - of the wine sold at restaurants.

More than their predecessors, the new generation of sommeliers is looking both to have fun and to make a statement through wine, Greene said, and that often means looking for something handcrafted and unique. “Their challenge is to find a wine that they’re as excited about as the chef is about the flavor of his vegetables from the farmers market,” Greene said.

Some California wines, those made from grapes grown on the same piece of land year after year and made using traditional techniques, fit that mold, Greene said. But many winemakers use manipulative techniques such as acidifying and reverse osmosis to reach a target alcohol level. That, Greene said, tends to detract from a difficult-to-quantify but potentially valuable trait of a wine - its “authenticity.” A winery doesn’t necessarily have to be small and old-fashioned, but it needs to know the land on which its grapes were grown as opposed to buying bulk grapes. Traditional winemaking techniques are desirable as is a history of the winery and its people.

Still, said industry analyst Jon Fredrikson, the US market for wine is so vast and diverse that there is probably room for wines-with-a-story as well as the low-priced, bulk-manufactured brands that are consistently the best supermarket sellers. “We way overestimate the knowledge of the American consumer,” Fredrikson said.