Red, White & New | The State of the US Wine Industry

December 6, 2010 1:19 pm - Posted by Kevin in Learn

We’re not really big on statistics or facts and figures around the Wine Portfolio offices. We prefer to see wine as an emotional product, not a rational one. But wine is an industry and not just a passion and so understanding how the business works and what trends are driving the sector is important. Knowing who the consumer is and what they want is critical. And so each year our creative team sits down to go through research reports to pull out the trends that will shape the world of wine in the year to come. Because as the consumer changes so too will the product we all love.

This year we cracked open a bottle or two (perhaps more but we’re not saying) of Malbec, currently the ‘hottest’ varietal in the US, and we poured through the most recent Nielsen Table Wine Report along with various other sources to compile some interesting tidbits that even the most non-mathematical of you will find fascinating.

This is the first of a few stories on our findings.

The good news is that total wine sales were up in the US last year by 3.2% to nearly $9.2 billion dollars which is impressive in tough economic times. The bad news is that we only have reliable data for the US, sorry to all of our international fans but the US figures are still very insightful for the industry as a whole.

So if sales are up, which category of wine is increasing? It is the price conscious buyer who is growing.  Cheaper bottles in the $9.00 – $11.99 range primarily led the growth with a whopping 9.1% increase in year over year sales. Sales of bottles that retail for $20+ were also up by 7.4%. The category that lagged overall sales growth figures was bottles that sell for $15.00 – $19.99 as their sales were only up 2.5%.

It seems as if the US consumer doesn’t perceive a large quality difference for bottles that are $9 or $19. And if the quality is similar the value proposition is better for less expensive wines. Therefore the mid-price wines, those between $12 & $20 aren’t selling as fast as the lower priced ones, or as well as the more expensive ones. We can assume consumers use $20+ bottles as an affordable luxury and a little treat as their sales were also up impressively.

Now before we start to congratulate ourselves for becoming real wine connoisseurs let’s look at what price points the majority of wine sold for at retail. Here, the news isn’t so bright.

  • $0 – $2.99= $794 million
  • $3.00 – $5.99 = $2.69 billion
  • $6.00 – $8.99 = $1.90 billion
  • $9.00 – $11.99 $1.87 billion

Yep that’s right, over 1/3 of all wine sold in the United States last year retailed for under $6 bucks. We’re not snobs but we think this trend probably doesn’t reflect a refined palette (is there an emoticon for sarcasm).  A winemaker in Chile told us not to worry about these stats, as the sales of all wines under $12 reflects a growing number of new wine drinkers who are just starting to explore the world of wine. This is good news for the industry as a whole and a wake up call for industry. Clearly American wine drinkers want value and are price conscious, no wonder Chile and Argentina are doing so well. But you’ll have to wait for another post to see just how well they’re dong.

3 Responses to “Red, White & New | The State of the US Wine Industry”

  1. Susie B says:

    Interesting that Americans still drink so much cheap wine and that the $20 and above wines are also sells $50 Napa bottles for $25 but never has French or Italian on sale. Can’t say as anyone in Atlanta seems to lean old world.

  2. Roland Hulme says:

    Those are some truly fascinating statistics.

    Living in France, I learned to play ‘wine roulette’ with cheap wine – seeing just how low you could go price wise and still get a drinkable plonk. I think we got it down to 0.88 centimes in the end (for a wine called, no joke, Chateau Mutant.)

    The irony is that a bottle costing two Euros can often be as good, if not better, than one costing five times that.

    I don’t think that’s a pattern repeated in the USA so much, largely because American ones tend to be made from a single grape, which means you can’t blend cheap wine into drink-ability. But there are some surprisingly dirt-cheap gems about. I just discovered Trader Joe’s, who do a $2.99 ‘two buck chuck’ as a ‘Nouveau’ mimicking the style of Beaujolais Nouveau. It is, astonishingly, very very good – especially for the rock-bottom price.

  3. Kevin says:

    Roland I know what you mean, there are some true values in the US that housing see too many places. That said last night in Buenos Aires I had a $4 malbec that was wonderful. And that was in a little cafe/restaurant.