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California Wine Crosses 200M Cases In U.S., But Retailers, Suppliers Remain Cautious On Pricing

March 8, 2013

California table wine continued its long-term upswing in the U.S. market in 2012, rising 3% to an estimated 204 million nine-liter cases, according to Impact Databank. Since 2002, consumption of California table wine in the U.S. has increased by more than a third.

While pricing pressure continues to be a key factor at all levels of the market, wines above $20 continue to surge, driving much of the category’s progress.

“The California wine business saw very strong growth in 2012,” says Roger Nabedian, senior vice president and general manager at E&J Gallo Winery. “The premium business in particular has been driving sales.”

The American wine consumer is still looking for value in the wake of the recession, but that doesn’t necessarily mean rock-bottom prices. Glen Knight, domestic wine buyer for The Wine House in Los Angeles, says the “hot price” in his store is currently the $20-$40 range, but adds that many of those purchases are wines that previously retailed for much more but dropped price during the recession.

Price promotion remains necessary at all tiers. “We have BevMo with its ‘5-cent sales’ and Total Wine & More now in California, and we have supermarkets offering 40% off the purchase of six bottles or more,” Knight says. “We do a lot of in-store deals to combat that kind of discounting.”

For Bob Smith, owner of the Grape & Grain Exchange in Jacksonville, Florida, the pressure is less intense. “A few years ago people were trending down to the $5 to $8 or $10 range. Now they’re moving back up,” he says, adding that most of his wine inventory is in the $20 to $60 bracket, and consumers are responding positively.

“At the high end, there is only so much Napa Valley wine out there, and we’ve started to see demand rebound a bit,” adds Derek Bromley, senior vice president and chief marketing officer for The Hess Collection Winery. But, he cautions, “At the lower price points, there’s a lot of pent-up need for suppliers to take price, and we’re seeing the ones on the firmest footing start to test those waters.”

Still, some say the consumer outlook remains too fragile to hike prices in certain segments, even in light of a reduction in global wine stocks. “Globally the stocks are somewhat depleted, but that really hasn’t affected pricing yet,” says Chris Fehrnstrom, chief marketing officer, Constellation Brands. “Honestly, we don’t anticipate that in the $5 to $15 band there is going to be a lot of price movement over the course of the next year.”

 

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