Cabernet King in USA & Chardonnay Queen

King Cabernet, Queen Chardonnay

The latest sales figures for table wine in the US in off-premise show cabernet sauvignon is still king, only outranked by Queen Chardonnay.

The Nielsen table wine category for the 52 weeks to 31 December 2016 is interesting reading.

Combining domestic production and imported wines, the off-premise market was 4 per cent up in value on 2015 and worth US$13.84 billion ($18.25 billion) in 2016. Nielsen is estimated to cover about 70 per cent of the US off-premise market.

Volume was up 1.5 per cent to 162.9 million nine-litre cases. The average price per 75cl bottle was US$7.08 ($9.42).

Splitting domestic production and imported wines, the figures are:

  • Domestic: US$10.12 billion, up 4.5 per cent
  • Imported: US$3.72 billion, up 2.5 per cent

The top 10 imported countries in order of value:

Italy US$1.25 billion
Australia US$713.6 million
Argentina US$403.1 million
New Zealand US$394.5 million
France US$349.8 million
Chile US$276.3 million
Spain US$167.4 million
Germany US$91.0 million
Portugal US$31.2 million
South Africa US$28.5 million

In sales increases in percentage terms, New Zealand leads the way with 14.5 per cent, closely followed by France at 14.3 per cent. Those declining, in order, were Germany, Chile, Argentina and Australia, which recorded a 4 per cent decline.

According to these Nielson figures there is not a great deal of good news for Australia. In fact, none:

  • Value: down 4 per cent
  • Share of table wine market: down 0.4 per cent
  • Volume (nine-litre cases): down 3.6 per cent
  • Average price of 75cl bottle: down 0.2 per cent

The average price for a bottle of Australian wine was US$4.85, down 2 US cents since 2015. It is the lowest retail price of the top 10 imported countries:

France US$12.65
New Zealand US$11.35
South Africa US$9.52
Italy US$9.21
Germany US$8.72
Portugal US$7.22
Argentina US$7.14
Spain US$6.65
Chile US$5.80
Australia US$4.85

Chardonnay retains the most favoured wine spot, with US$2.55 billion in sales, up 2.3 per cent on 2015. The average retail price was US$6.86 a bottle.

Cabernet sauvignon is going great guns, up 6.4 per cent to reach US$2.33 billion, with an average increase of 18 cents a bottle to US$8.51.

The largest selling price sector in off-premise is US$3-US$5.99 ($3.96-$7.90).

Also out this past week was the Silicon Valley Bank Wine Division State of the Wine Industry 2017 report. It has a great opening paragraph:

“We lead this year’s report with a reminder that while market conditions appear strong in places, some market components are weakening and dangerous, and still  others are overheating as currents of change gain momentum. Once again, ‘average’ is not a useful term when describing the wine business. You need to look below the surface because what you see on top belies risks that lurk in the depths.”

The bank is always up front in predictions. It predicts possible growth of 10 to 14 per cent for the premium wine segment in 2017. It also says there is sufficient interest in top quality vineyard land to keep prices high. It makes sense that Oregon and Washington vineyards will continue to attract interest from larger wine companies.

The baby boomers are coming to the end of their era. The millennials are taking over, but according to the bank are less affluent. They are also ambivalent about their alcoholic beverage of choice.  Wine wise they lean towards the US$8-US$11.99 red blend category, but the bank thinks they will gradually move away from blends and into varietal wines or imports as their incomes improve.

The bank predicts:

  • Sub-US$9 bottled wines will continue to struggle.
  • Wines sold between US$12 and US$25 will grow in demand.
  • Wines sold between US$35 and US$75 will find price increases difficult without the US economy demonstrating improved performance.
  • High-end luxury wines with an established brand will have no problem retaining volume levels and taking small price increases.

If the sub-US$9 bottled wine sector is going to suffer this doesn’t say a great deal for Australian wine at an average price under US$5.

The bank covers restaurant sales in some detail but TKR has kept to off-sales and general trends.

Packaging preferences are changing. Three-litre premium box wine and Tetra Pak formats have continued to grow, with cabernet, chardonnay and pinot grigio each posting more than 20 per cent growth. The bank speculates the growth is driven by millennials and Gen Xers.

The drinking patterns of various age cohorts:

There is a lot more in the report and TKR will return to it at a later date.

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