Is The Wine Category Under Threat?

Posted: Oct 15, 2019

Is the Wine Category Under Threat?

Over the last three quarters wine category depletion growth has dropped between 30 and 90 basis points each quarter and is now in negative territory, down -1.4%. These declines are consistent across trade channel, category, and varietal. The move to negative trends for wine are occurring as the spirits category grows and the beer category stabilizes.

Beer has benefited from continuing growth of Mexican Imports, Domestic SuperPremiums, and more recently the explosion of Hard Seltzers, now surpassing over $1 billion in off-premise sales according to Nielsen, representing over 5% of total Beer sales in the latest months, and still growing at close to +200%

Nielsen retail sales data for Wine is consistent with its volume depletion declines in off-premise, though premiumization (trading up) still is resulting in dollar gains for the category. And while Wine is underperforming its recent historical growth levels, it is trending in line with overall total store (all consumer packaged goods) trends.

One bright area for Wine according to Nielsen is alternative packaging -3L and under Boxed Wines now represent over 5% of Table Wine dollars (and 9% of volume) and continue to expand, Tetra Pak wines are growing +15% year on year, and Wine in Cans are exploding, having just passed the 1% share market, with rapid growth of over +70% year on year.

Spirits Remain Steady

Depletion growth for the spirits category has been between +2.3% and +2.6% for each of the last five quarters (with Nielsen dollar growth about double those levels). Other than Rum and Gin, all major spirits categories are delivering depletion volume growth with Cognac, Tequila, and Irish Whiskey leading the way.

Nielsen Spirits retail sales data, both off and on premise continues to accelerate, led by the Premium and Ultra Premium ends of all segments. In the off-premise, Ready to Drink cocktails are surging with double digit growth backed by considerable innovation, followed by strong growth in Tequila, Whiskey, and Cognac segments, while in the on-premise, Tequila and Cognac growth lead the way.

Wholesalers, Bars and Restaurants Contributing to Cocktail Growth

Today’s consumer continues to seek bold, unique experiences and flavors, which the spirits category has been able to effectively tap into with the “Cocktail Culture.” By leveraging fresh ingredient combinations that satisfy a broad spectrum of occasions and moods, on-premise accounts are leading the way for spirits with a +2.7% growth rate.

According to Nielsen CGA – “Experience is more important than ever in enticing consumers into the trade and with elaborate and creative serves coming from premium mixologists all the way to consistent offerings from the major chains, cocktails can help provide a key point of difference.”

In addition, Spirits are a perfect fit for bar and restaurant owners seeking to maximize sales across multiple day parts - owning both the brunch and late night occasion and encroaching on the beer dominated happy hour.

Cannabis Not Impacting Alcohol-We Think

While there is no definitive data on the subject, early indicators are the legalization of recreational cannabis in 10 states has had a minimal impact on the beverage alcohol category. If recreational cannabis was a significant factor we would expect noticeable and differentiated declines across spirits, wine and beer in these states – and that is not the case.

By Jo Moak
October 10, 2019

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