Cabernet Underpins Double-Digit Sales Growth

August data show spike in domestic wine overall and continued expansion of direct shipments

by Peter Mitham
scandanavia u.s. wine sales
Strong direct-to-consumer sales, especially for high-priced Cabernet Sauvignon, helped drive total U.S. sales 14% higher than last year.

San Rafael, Calif.—Consumer thirst for premium-priced wine and home delivery of luxury-priced wine drove double-digit growth in U.S. wine sales through August. Cabernet Sauvignon, the top-selling red varietal, was a cornerstone of the growth.

U.S. wine sales totaled $3.1 billion in August 2017, up 14% from August 2016, according to market research firm bw166. Domestic table wines drove the growth, rising 14% to $2.9 billion. Yet the category also includes sales of domestic sparkling wine and bulk imports, which increased 9% and 24%, respectively.

August saw the second month of double-digit growth in bulk imports, which sources last month attributed to a lack of excess domestic juice. Wines at $10 a bottle and up have absorbed available domestic supplies, prompting vintners to serve strong demand for cheaper brands –often boxed wines — with imported bulk wine (see the Wines & Vines article, “Summer Wine Growth Underscores Hot Market for Wine,” Aug. 15, 2017).

IRI sees slow, steady growth
Off-premise sales through multiple-outlet and convenience store tracked by Chicago, Ill.-based market research firm IRI offer a glimpse of the trend. Growth in off-premise sales has been slow and steady. The four weeks ended Aug. 13 showed 2% growth versus a year earlier to $630 million and the latest 52 weeks showing 3% growth to $8.7 billion.

With respect to Cabernet Sauvignon in the IRI channels, 52-week sales increased 5% versus the previous year to $1.7 billion. Trends within the varietal reflect patterns within the U.S. wine market as a whole. Bottles priced $20-$24.99 and $25-plus saw the strongest growth, at 16% and 15% respectively, pointing to willingness by consumers to trade up.

Yet most price segments saw average bottle prices decline by a few pennies, the exception (bearing out the premiumization trend) occurring in the $25-plus segment, where the average bottle sold for $1.16 more than a year ago.

The shift in off-premise Cabernet pricing reflects, in part, strong competition. The biggest hits, by price and percentage, took place in the $8-$10.99 and $11-$14.99 segments, even as sales in the segments increased 5% and 9%, respectively.

Underscoring the importance of bulk imports, the biggest growth was among boxed Cabs selling at $4.50 per 750 ml and up. Sales in the latest 52 weeks increased 21% to $112 million — greater than for any bottled Cabernet Sauvignon.

August is no bellwether
Jon Moramarco, managing partner of bw166, cautions that August sales figures are no bellwether of long-term trends. U.S. wine sales totaled $62 million in the 12 months through August, he reported, with August representing just 7% of the tally. Still, the significant summertime gain underscores solid activity, which gives many wineries heart.

This is especially true in terms of direct-to-consumer (DtC) shipments, which Wines Vines Analytics/ShipCompliant data indicate totaled $130 million in August, up 16% from a year earlier. Shipments totaled 320,754 cases, up 10% from August 2016. The 12 months through August saw value and volumes grow in sync, with each rising 17%.

The top DtC varietal, Cabernet Sauvignon, saw $748 million move in 12 months, up 17% from a year earlier. All price bands saw shipments rise except $80-$99.99, which fell 5% to $80 million.

“Our direct trends are really good, [with] Cab being the most popular red varietal,” Emilie Eliason, vice-president of marketing with Crimson Wine Group, told Wines & Vines. “It doesn’t show any signs of slowing down.”

Crimson’s Cabernet brands include Pine Ridge Vineyards in Napa and Double Canyon in eastern Washington. Single-vineyard wines from Double Canyon sell for $65, while Fortis, the top-end brand from Pine Ridge, sells for $225 a bottle. A score of 98 points for the latter from Robert Parker strengthened demand over the past year.

“We’re seeing record sales in terms of what we’re doing on Fortis,” Eliason said. “We’re seeing no slowdown on $100-plus, $150-plus Cabernets as well.”

Click-and-ship mentality grows
Consumer comfort with e-commerce as well as better tools to help wineries develop and serve club members has helped support the growth, according to Marty Taucher, managing partner with Woodinville, Wash.-based Avennia. He credits Amazon, headquartered a half-hour’s drive away in downtown Seattle, with fostering a growing click-and-ship mentality among consumers.

Those keen on sourcing unique wines join wine clubs, and receive rare — and more expensive — offerings such as Avennia’s 2014 Red Willow Cabernet Sauvignon, which sold out primarily to e-buyers.
Nevertheless, wine flash reseller activity continues to decline, dropping 25% in August versus the previous year, according to Wines Vines Analytics. Offers for the previous 12 months fell 10%.

While the total number of offers has steadily slipped, flash resellers are enjoying some success with Cabernet Sauvignon. The varietal accounted for 28% of all offers in the past 12 months, led by offers for Napa wines. Napa accounted for 60% of all Cab offers and more than for Sonoma and the rest of California combined. The majority of offers for the varietal were between $20 and $40, well above what others fetched.

Winery hiring was flat in August, with activity being among the weakest since 2009. Winejobs.com pegged the Winery Job Index at 277, down two points from 279 in August 2016.

However, demand specifically for winemaking positions was up 17% from a year ago, offsetting declines in all other categories. Hiring activity for sales and marketing positions dropped 10% from a year ago while demand for general administrative staff and vineyard labor dropped 9%.

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