California Wine Consumption Up 3.3% In 2011 As Industry Seeks To Restore ValueJanuary 26, 2012
Consumption of California wine in the U.S. rose 3.3% to 212.3 million nine-liter cases in 2011, according to Impact Databank. The growth rate, bolstered by surging categories such as Moscato and sweet red blends, is the highest since 2007, when California wine consumption in the U.S. rose 3.6% to nearly 195 million cases. From 2006 to 2011, California wine consumption averaged annual growth of around 2.7%.
While volumes showed a healthy uptick, pricing remains a challenge. Some key on-premise players, however, are reporting improvement in that area. “Our average price for wine has bounced back,” says Rajat Parr, wine director for The Mina Group, Michael Mina’s collection of 12 upscale restaurant and bar concepts. “In the heyday, the average price was $115 to $120. Then it went down to $90, but now it’s definitely over $100 again.”
Peter Mastrogiovanni, beverage manager for Abe & Arthur’s Restaurant in New York City, sees a similar trend. “Demand is very high, and the average price per bottle of our California wines has increased over the last six months, from about $80 a bottle to about $120 a bottle.”
“I definitely think the market is becoming more stable and a little stronger—there is some price migration upward,” Chris Catterton, vice president of sales and marketing for Bogle Vineyards, agrees. But Catterton adds that higher-end wines are still retailing at far less than a few years ago. “If you were sitting at $40 a bottle you had to discount significantly to get into a price point of about $29 in order to move boxes,” he says. “And then the $25 to $29 wines had to move to $19 to move boxes. That downward pressure is continuing.”
Light harvests in 2010 and 2011 will likely dry up some of the excess stock that’s played a role in the aggressive discounting of the past several years. How that will affect pricing going forward remains to be seen. Keith LaVine, president of Napa Valley’s Artesa Winery, calls the two consecutive light harvests “divine intervention,” predicting that they will “help clear out our warehouses a bit” and firm up price points. “In 2010, when we were selling off excess Cabernet Sauvignon, we were having to make a lot of calls and really push to move through it,” LaVine adds. “This year people were lined up looking for Cabernet Sauvignon. I think it speaks to another short harvest and to a turnaround in consumer buying habits.”
“It will be interesting to see how the short harvests affect pricing when those wines hit the market in 2012 and 2013,” says Perry Deluca, director and head of wine and spirits at KeyBanc Capital Markets. “Suppliers who contract with growers or buy wine on the bulk market may have to pay more for grapes. Prices may rise as a result. I think there will be strong pressure from retailers and consumers to keep prices where they’ve been.”
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