New Database Opens up Wine Retail

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| The new database will cover distributor depletion data.

The latest data from SipSource – what the Wine & Spirits Wholesalers of America (WSWA) calls the leading source for aggregated distributor depletion data – offers a new insight into US wine spending habits.

The new database shows pricing data over a one-year period and breaks it out into six price tiers for spirits and sparkling wine and seven for table wine.

The tiers vary from under $4.50 and $7.99 respectively for table and sparkling wine to the highest tier being $50-plus for table wine and $75-plus for sparkling. The report debuted in April and it focuses on data from March 2021 to 2022. It will update every other month with alternate channel shift reports and a price-tier performance scorecard, according to Dale Stratton, a Sip Source analyst.

It also, according to a press release, “provides analysis of category growth and consumer spending habits, including the impact of inflation on that spending”.

Detailed new database

Danny Brager, another Sip Source analyst who collaborated on the report, notes that it only covers the sales that are conducted within the three-tier system and not direct to consumer (DtC). He adds that everything is based on volume, rather than dollar value.

SipSource originally launched in 2019 and currently is based on data from 13 wholesalers. Brager adds that the report’s numbers reflect what distributors are shipping into these locations – stores, hotels and restaurants – both to the on- and off-premise.

He adds that American distributors depend on this data “as they don’t know what their competitors are selling and the trends”.

Suppliers – of all sizes – will benefit from it as well. “Although there may be a perception that the data is of more value to larger brands, in fact, it is of benefit to all brands that engage in wholesale channel sales. The information allows brands to benchmark their performance against the growth rates of their best-in-class competitors and the respective growth trends of their broader retail price segment,” shares Mario Zepponi a wine merger and acquisition advisor at the Santa Rosa-based Zepponi & Company. 

Brager goes on to note that the new data set allows users to take a deep dive into price tier, varietal or country of origin. “What is unique about is that it covers both the on- and off-premise.”

Given the amount of sales channel shifts we have seen over the course of the last two years, during the pandemic, it high time the wine industry had access to data that covers the full range of stores, restaurants and hotels.

Typically, industry leaders – such as Nielsen and IRI – didn’t cover both major channels. In terms of seeing the big picture, “it is hard to look at an individual channel because of Covid”, shares Brager.

“They generally measure scan data sales in larger retailer accounts. The information does not capture 100 percent of wholesaler three-tier sales, but rather approximately 30 percent to 40 percent of such sales,” notes Zepponi.  

“The data and sales trends captured by SipSource provides a much-needed data point for wine and spirits sales. The information enables one to assess the sell-through proficiency of brands as measured by the quantity and frequency of distributor reorders.”

Key findings

Some of the report’s major takeaways include that while the bulk of the wine sales volume has been under $17 a bottle, the lower end isn’t as healthy as the higher-end, according to Brager.

According to the report: “For table wine, the three lower price tiers [collectively less than $11 per equivalent 750-ml bottle] account for almost 75 percent of the category’s volume, while all three price tiers are currently declining at double-digit levels.”

Zepponi goes on to note: “The pandemic initially benefitted producers of lower priced wines. However, as the pandemic continued on, luxury wines sales accelerated in both the wholesale channel as well as direct-to-consumer channel. This was very likely a function of consumers gradually overcoming their worst-case scenario economic and world health fears and adjusting their lifestyles to remote or hybrid work models.”

According to the Sip Source report, before the pandemic, wine accounted for approximately 14 percent of on-premise sales, according to Brager. It plunged to less than 6 percent during the heart of the two-year market rollercoaster. It is now steadying itself at an 11 percent share, he notes.

Some of this, Brager notes, can be attributed to the fact that people have not been going to restaurants and bars that frequently over the past year. Another factor that may have contributed to the decrease in the lower-tier of table wine pricing is that while many had to moderate their spending, and potentially not indulge in higher-end wine or purchase it at all; those who had the money – and weren’t spending it on events – skewed to the higher high of wine purchases.

“Twelve-month comparisons through March 2022 versus the year prior still include the extreme pantry loading that started when Covid shelter-in-place directives had a significant impact on consumer behaviors,” notes Brager. Stratton adds that it will continue to do so for another 60 to 90 from the end of March.

As much recent data has shown, wine has continued to lose share to spirits consumption, notes Brager. “Ready-to-drink spirits are just killing it,” he adds. 

Part of what is driving spirits, and cocktail, consumption at restaurants is the challenge of making a good cocktail at home. Wine, Brager notes, is easy to drink everywhere, whereas consumers are less inclined to make a complex cocktail at home, but “they are happy to order it out”.

Sparkling wine on the rise

Bubbles benefited the most over the past year, according the report’s data. That includes Champagne, Prosecco and Cava, according to Brager. He attributes the category’s growth to people bringing the celebration home during the pandemic.

The more expensive sparkling wines, those priced in tiers four to six, from $18 to more than $75 saw the greatest increase with an increase of 19.4 percent for tier four priced at $18 to $34.99, 12.1 percent for tier five priced at $35 to $74.99 and 19.6 percent for tier six, priced at $75 plus.

“The sparkling wine PTP Scorecard is a strong one with growth right across the board from the low end to the high end,” said Brager. “However, we anticipate that the current large growth rates at the higher ends we’re seeing will moderate somewhat.”

Brager hastens to add that growth of the Prosecco category was steadier than others, such as Champagne. It is a factor he attributed to Champagne, in particular, being more “oriented to the on-premise sector than other sparklers”. Pre-Covid, he continues, more than one quarter of the Champagne business was conducted on-premise – compared to table wine, which was just 10 percent at the same time.

As a result of consumers’ prolonged shut-in time during the pandemic, Brager also points out that buyers are much more aware of the price difference of wines purchased on- versus off-premise. As a result, restaurant and hotel wine directors have to manage wine costs more carefully than ever before.

Restaurant closures and shifting sales trends during the two years of the pandemic have polarized wine sales in some respects, according to Brager. He adds that the wine category’s high-end options continue to preform well while the lower-end isn’t.

“The high-end will come down and low-end sales trends will be better.”