Wine Industry Totals
The U.S. wine industry, currently the second largest in the world, is poised to become the largest wine market in the world in 2012, with the total retail value of all wines (domestic, imported, still, sparkling, and fortified) projected to be $44 billion.
Total Retail Value of U.S. Sales in Billions US$
The U.S. wine industry witnessed the first decline in over 15 years in 2008 due to the economic recession, from $30.4 billion in 2007 to $30 billion in 2008.
Since 2004, the total retail value has increased 25% from $24 billion to $30 billion in 2008.
Total estimated 9-L cases sold in the U.S. reached almost 317 million cases in 2008, an increase over an estimated 314 million in 2007, despite the economic recession.
Total Estimated 9-L Cases Sold in the U.S. 2000-2008
Distinguishing between the number of brands, number of wine labels, and the number of SKUs makes hard numbers of any of these three criteria difficult to track, since not all wines are sold through the three-tier sales channel or into retail where scan data would capture them. Estimates of more than 7,000 brands are common, but seemingly do not account for the true number of wine labels. The highly regarded wine industry statistical research firm, Gomberg, Fredrikson & Associates, notes that it tracks over 15,000 wine SKUs in accruing data.
The number of brands and labels competing in the U.S. market has seen steady growth over the last decade as shown by the number of COLAs (certificates of label approvals) approved by the federal government’s Alcohol and Tobacco Tax and Trade Bureau (TTB).
Total number of COLAs approved by the TTB 2000-2009 (projected)
Despite the proliferation of brands and labels, chances are that a bottle of wine purchased anywhere in the U.S. came from one of only 30 companies. Multinational wineries such as Gallo and Constellation, and alcoholic beverage conglomerates such as Diageo market a plethora of labels, domestic and imported, in all 50 states. These multinational, multi-brand companies create brands to gain market share through competitive pricing that takes advantage of economies of scale small wineries can’t attain, and distribution clout through multi-state distributors.
Imported Wines in the U.S.
Imports into the U.S. also continued to witness growth in total retail value up to the current economic recession; 2008 witnessed a decline of 3% to $11.4 billion from $11.8 billion in 2007.
Total Estimated Imports Retail Value in the U.S. 2000-2008
Unlike total (and therefore, domestic) wines, imports also witnessed a decline in volume of cases in 2008. Cases sold fell from 121.4 million cases in 2007 to 120.4 million cases in 2008.
Total Estimated Imports 9-L Cases Sold in the U.S. 2000-2008
The Impact of the Economic Recession on the U.S. Wine Industry
Imports continue to be the most negatively impacted wine sector in the U.S. due to the recession. In the two weeks leading to July 5, 2009 compared to the same period last year, imported cases sold declined a further -4.4%, while domestic cases sold increased 1% due to interest in boxed wines and assisted by consumer-direct sales.
Imports are also fighting an unfavorable exchange rate, putting severe pricing pressures on U.S. importers and their wholesale distributors. In the 12 weeks leading up to May, 2009, domestic pricing grew only 0.8% while import pricing was up 3.5%.
This is in spite of the deflation of consumer goods pricing happening in the U.S. Currently the YTD inflation rate for 2009 is only 0.14% (and -2.10% for July 2009) versus the decade’s historical rate to-date of 2.9%.
To date, consumers have maintained their consumption of wine through the recession. Consumers have reacted to the economic recession by buying less expensive wines and foregoing eating out at fine-dining restaurants. Sales of super-premium, ultra-premium and luxury priced wines have seen a sharp decline, while wines priced below $20 SRP have generally seen sales rise. This consumer purchasing habit trend is at exact odds with the pricing increases taken by imports.
It is possible that the U.S. wine industry will see continued growth in volume in 2009, but sales dollars will most certainly be down due to purchasing trends. Many economists predict the economic recession will formally end in 2009 or early 2010, but that consumer purchasing behaviors will not return to their previous patterns or volumes.
The double effect of rising unemployment and foreclosure rates will keep consumers cautious and spendthrift. Until unemployment begins to go down, and wages stabilize, consumer spending will likely remain lessened for the next couple of years.
Imports are likely to continue to have difficulties in the U.S. wine market, with the exchange rate essentially hovering at a 1.4 to 1 ratio (US to EU) through the end of the year.
Historical Exchange Rates EU to US 2007-2009 YTD
The soft on-premise market also impacts imported wines more than domestic, and fine-dining on-premise sales will likely remain weak through at least the first half of 2010; on-premise is very much sensitive to unemployment (and foreclosure) rates.
- Compiled by Tincknell & Tincknell, Wine Sales and Marketing Consultants
- The Wine Institute
- Gomberg, Fredrikson & Associates
- Wine Business Monthly
- “Impact: The U.S. Wine Market, Impact Databank Review and Forecast”, M. Shanken Communications, Inc.
- “VinQuest 2009: U.S. Consumer Direct Wine Sales Report”, VinterActive LLC
- “Market and Nonmarket Barriers to Internet Wine Sales: The Case of Virginia”, Alan E. Wiseman, Ohio State University, and Jerry Ellig, Mercatus Center at George Mason University