Robust Sales for Premium, Small-Production Wines

March 15, 2018
Higher priced wines have seen some of the strongest sales growth.
While sales of domestic wines were flat in February at $2.8 billion, a deeper dive into the data points to relatively strong growth in off-premise movement of $25-plus wines and shipments from wineries producing fewer than 1,000 cases a year.
The big picture, as reported by market research firm bw166, shows steady sales of U.S. domestic table and sparkling wines as well as bulk imports. A minor drop in sales wasn't statistically significant, and rounding smoothed over the difference. Sales in the past 12 months showed marginal growth of 1%, rising to $41 billion.
The lackluster performance underscored what bw166 managing partner Jon Moramarco said was a slow start to the year for U.S. wine sales, a phenomenon highlighted by the stronger performance of packaged imports. U.S. wines enjoy a commanding lead in the market, with domestic table wine sales 2.2 times those of packaged imports.
Yet sales figures for February saw domestic table wines slip 1%, while packaged imports gained 4%. Packaged imports also gained 5% in the latest 12 months, a gain of $956 million that drove total 12-month wine sales 2% higher to $62 billion.
Those high-level figures masked the real excitement, taking place at multiple-outlet and convenience stores tracked by market research firm IRI as well as shipments made direct-to-consumer (DtC). While general off-premise sales through multiple-outlet and convenience stores in the four weeks ended Feb. 25 increased 1% versus a year earlier to $682 million, IRI data pointed to 14% growth in the $25-plus category. Worth just $210 million annually, the price tier showed the strongest growth of any segment, followed by sales of bottles priced between $15 and $24.99 that increased 10%.
The gains logged at the upper end of the market came at the expense of wines priced $7.99 and less, which declined 3%. Nevertheless, the segment is worth $2.9 billion annually and represents the biggest share of off-premise sales of domestic wines in glass packaging at 39%.
The growth in more expensive wines is encouraging after speakers at several wine industry events this winter highlighted the intractable nature of consumers, who have been happy to pay more for something new while resisting paying more for the favorites they know. "People are unwilling in general to spend more for the same wines, but they may be willing to pay more for a different wine," said Mike Veseth, who is the editor of The Wine Economist blog and professor emeritus of international political economy at the University of Puget Sound in Tacoma, Wash., at a session of the Washington Winegrowers meeting last month.
Good times for expensive wines appear in DtC shipment trends, with some of the strongest growth in the channel coming from one of its tiniest segments - wineries producing fewer than 1,000 cases a year. Small wineries -those producing 5,000 to 49,999 cases a year - represent 46% of shipments, dispatching $1.3 billion worth of wine in the latest 12 months. While mid-sized wineries boosted shipments 21% in the last 12 months, pointing to the channel's growing popularity, the average value was $33.21 a bottle. This gave them a third-place ranking by value, even though cases shipped were second only to small wineries.
This is where the 18% growth limited production wineries logged stands out. With bottles averaging $66.69 apiece - well above the channel average of $38.73 a bottle - consumers demonstrated their willingness to step up to more expensive wine shipments. With some observers fretting about the lag between Boomers winding down spending and Millennials having yet to ramp up, the sales figures mitigate potential concerns about what Rob McMillan, executive vice-president and founder of Silicon Valley Bank's wine division, has called the "indulgence gap."
The gap that appears to be concerning wineries most is in terms of labor.'s Winery Job Index increased 18% in February, on par with the increase posted in January. Demand for winemaking positions led the increase for the third straight month, rising 56%. Demand for vineyard workers followed at 29%, while sales and marketing staff saw an 18% increase in postings. Hiring people who can make wine and take it to market are the key challenges for wineries as demand remains strong.