Trends in Wine: Out-Innovated By Beer, Under-Indexing With Hispanics

Despite Growing Availability, Wine Faces Some Ominous Trends

By Published on . 3

Is wine losing its buzz?

Lately the category has been out-innovated by brewers, who have flooded the market with new beer flavors, brands and line extensions, fueling a resurgence that's coming at the expense of wine.

Wine volume sales grew 1.5% in 2012, slowing from a 4% increase in 2011, according to Nielsen. By contrast, beer and other malt beverages grew 2%, reversing a 0.8% slide in 2011. Liquor also jumped 2%.

Wine is popping up in new places, including Starbucks.
Wine is popping up in new places, including Starbucks.

The hottest wine varietals -- moscato and malbec -- have lost some momentum, and nothing has come along to fill the gap, said Danny Brager, VP-group client director for Nielsen's beverage-alcohol team. "I keep saying, "What is the next big thing?'" he said. "And I don't know what the magical answer is." But it "feels like there is a need for something because beer and spirits are doing a lot [innovation] right now and I think that's helping them."

Some 44% of beer's incremental sales growth at bars and restaurants last year came from innovation and new brands, compared to 32% for wine, according to hospitality-industry analyst GuestMetrics. The danger for beer is that it will become too much like wine -- so that styles are more important than brands, a risk that brewers call "winefication."

For wine, there are some bright spots, including growing availability at Starbucks, Walgreens and even dollar stores. But other trends are ominous, including underperformance with Hispanics. Here's a closer look at the category:

WHAT'S HOT?
New Zealand wine volume sales jumped 23.5% in the 52 weeks ended Jan. 5, according to Nielsen. Kim Crawford Wines sales jumped 23% in 2012, according to trade publication Shanken News Daily, citing Impact Databank. Meanwhile, the sweet-tasting moscato varietal, while slowing, continues to post impressive numbers -- sales were up 30.9% in the year ending Jan. 5, according to Nielsen.

WHAT'S NOT?
Australian wines are struggling, with volume falling 1.6% in the 52 weeks ending Jan. 5, Nielsen reported. Mr. Brager blamed large surpluses in recent years, which led to cheaper prices that caused the category to lose its "premium-quality image." In response, government-run Wine Australia has launched a marketing effort called "Next Chapter" that spotlights mid-tier and regional Aussie wines at trade shows such as one recently held in San Francisco.

WINE IS EVERYWHERE
Wine is popping up in new places. Walgreens and Dollar General have been particularly aggressive, while Family Dollar is testing wine. Chipotle, Starbucks and Noodles & Co. are adding wine to draw more customers and increase check prices. All told, there are more than 500,000 wine-selling locations in the U.S., a 50,000-spot jump from five years ago, per Nielsen.

IS IT A WINE OR A BEER?
Talk about mixed drinks. Some brewers are blending wine grapes into beer, creating concoctions like Blue Moon's Vintage Blond Ale and Allagash's Victor Ale, made from red grapes. Absolut is selling Absolut Tune, which mixes vodka and sauvignon blanc.

TROUBLE WITH DEMOGRAPHICS
Wine continues to under-index with Hispanics, according to Nielsen. "Is it because Hispanics don't embrace wine or is it because the wine community doesn't embrace Hispanics?" Mr. Brager said, noting that it's probably a combination of both. Marketers must get Hispanics to make wine more of an "everyday beverage," rather than for special occasions, said Elizabeth Barrutia, president of Baru Advertising in Los Angeles, which ran an Hispanic campaign for Beringer in 2010.

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