Opportunities, Uncorked

October 28, 2009
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With much of today’s entertaining taking place inside the home - thanks to shrinking disposable incomes and other economic worries - the demand for fun-minded snack fare and beverages is up. And beer, wine and spirits are an important - and growing - part of that beverage mix.
 
Data from the Nielsen Co., New York, show a 4.6 percent dollar sales gain for the total alcoholic beverage category (in U.S. food, drug and mass merchandise outlets, including Walmart) during the 52 weeks ending July 11. Unit sales, meanwhile, rose 2.1 percent.
 
Dollar and unit sales for the total beer category during the same timeframe rose 4.9 percent and 0.7 percent, respectively, while liquor saw 2.8 percent and 1.9 percent dollar and unit sales gains. But the real mover was the wine category, which realized 5.7 percent and 5.6 percent dollar and unit sales increases.
 
Although private label still accounts for a very small share of the beer (0.1 percent), wine (0.6 percent) and spirits (2.5 percent) segments, impressive recent gains in dollar and unit sales here indicate strong retailer and consumer interest. Moreover, the wine category potentially represents the strongest private label opportunity, thanks to this segment’s continuing growth, an abundance of wineries across the United States and more.


Fruit of the Vine

Wine has come a long way in the United States over the past couple of decades, notes Dave Pergl, vice president of Cold Spring, Minn.-based Cold Spring Brewing Co. Back in the 1980s, it was a business dominated by a handful of wineries, with larger jug-type offerings the norm. In contrast, today’s market boasts thousands of wineries producing wine for sale predominantly in 750-ml bottles.
 
And the list of wine lovers just seems to keep growing.
 
“Wine consumption has expanded every year and will continue to grow for years to come,” notes John Corcoran, an owner and vice president, national sales of VinLozano Imports Inc., Winchendon, Mass. “The fastest-growing area we see is the 20-something buyers who have a sharp interest in wine, but perhaps don’t know much about the nuances of wine.”
 
He says retailers need to embrace this younger generation, creating appeal to an ever-wider audience. But packaging (including the all-important attraction-getting label) must strike a balance between younger consumers and the core buyers aged 40 and up.
 
“Capturing the attention of both these groups properly will spark higher sales and wider brand loyalty once established,” Corcoran says. “It’s a fine line for the private label buyer to walk, but the payoff will be longevity for private label brands.”
 
Value-minded offerings also have been instrumental in making the wine category rather recession-resistant, adds Stephanie Grubbs, vice president of marketing for the Winery Exchange of Novato, Calif.
 
“As a higher percentage of meals are consumed at home, so too has home wine consumption increased,” she says, “driving sales in grocery, drug and mass merchandisers. But that growth is coming in the value-oriented offerings, from the ‘extreme value’ wines up through those priced under $10 a bottle.”
 
Retailers can help ensure the success of their private label wine portfolios by incorporating such value-oriented products into the mix, Grubbs says, and by developing brand propositions that exceed the national brand competitors at like price points.
 
Although 750-ml bottles are the dominant force, she also points to interest in larger-format packages such as the 3-liter Tetra Pak.
 
“Consumers will be looking to private label to provide even better value, and pressuring private label wine producers to focus on sustainability in packaging as well,” Grubbs adds.
 
Speaking of sustainability, socially responsible wines also are of growing interest among consumers, notes Mike Morgan, president of Prestige Wine Group, St. Paul, Minn. These wines include organically grown, fair trade certified and sustainable options. Retailers that have had the most success here, he adds, are those that offer these benefits without added cost to the consumer.
 
He points to one retailer’s certified fair trade wines from Argentina and South Africa that help raise money to buy a school bus in Argentina for kids who have no way to get to school, as well as a tourism bus in South Africa to take tourists from the cities to the small farming communities “to see first-hand the positive attributes of fair trade.”


Braving Beer and Spirits

For a number of reasons, the beer segment remains challenging private label territory. According to Pergl, the problem is largely a distribution issue, thanks to what he terms a “triopoly” in regard to the U.S. beer distribution system.
 
Paul Gatza, director of the Boulder, Colo.-based Brewers Association, says he, too, really doesn’t see a boom in private label beer.
 
“Beer has been branded a little differently,” he explains. “It’s less commoditized, and brand name does really seem to make a difference.”
 
That said, both Pergl and Gatza point to potential private label opportunities on the craft beer side.
 
“It has potential, especially in the mid-price/better beer arena,” Gatza says, adding that private label beer is losing its stigma as an economy option.
 
But Pergl stresses that retailers must be willing to market such beers as a true brand.
 
Higher-end options also work better than low-end for today’s private label spirits programs, he adds.
 
“There was a movement in the last couple of years with some premium vodkas,” Pergl notes. “They’re doing it with scotches now, and some of the bourbons.”


Don't Let It Sit There

Whether it’s a value-minded wine or premium vodka, today’s private label alcoholic beverages must communicate the right message - and do so loudly.
 
Pergl says private label beer and spirits, no longer a rock-bottom-price alternative to mid-line offerings, must not be merchandised as an afterthought - they must get the display space and promotional support currently dedicated to the national brands.
 
And merchandising and promotion is even more important on the wine side, where consumer confusion still runs high.
 
“Traditionally, private label wines have been included on retail shelves among the myriad national brand competitors using price to drive trial and sales,” Grubbs says. “The brands’ packages do not clearly communicate the private label positioning.”
 
She says her company’s most successful retailer customers are those that overtly promote the brands making up their portfolios - using displays, in-store signage and advertising to let consumers know these are exclusive brands that have been hand-selected by the retailer.
 
And anything the retailer can do to simplify the wine selection process also helps, Grubbs notes.
 
“Wine is still an intimidating category for the average consumer,” she says. “The sheer number of brands and SKUs to choose from, the luxury nature of the category and the complexity of numerous varietals and appellations make selecting wine a daunting task.”
 
Here, third-party endorsements and professional evaluations of the wine in the form of shelf and display signage help, Grubbs says. And by displaying and promoting the private label wines apart from the national brand merchandising clutter, retailers will be able to establish themselves as “wine curators” in the minds of their shoppers.
 
Corcoran agrees on the importance of educational signage.
 
“People are thirsty for wine knowledge,” he maintains. “If consumers see the wine department as not just an errand, but rather as a destination, the brand loyalty and repeat business will continue for years.”
 
On the organic wine side, Corcoran notes the growing popularity of pairings with organic food items. He says recipe cards can be tagged onto bottles, as can coupons for organic cheese and crackers. Other strategies include take-home dinner packs with a bottle and targeted point-of-sale displays featuring wines and food items.
 
Morgan takes these tactics a bit further, suggesting promotions that marry certified fair trade wines with other certified fair trade items such as coffee.
 
“October is National Fair Trade Month,” he adds, “so it is a great time to promote certified fair trade wine. Promoting these socially responsible wines in store publications is also a great way to get the message to customers that the store is a socially responsible merchant.”
 
Tastings also are important to private label wine programs (and logically to store brand beer and spirits programs, too), Morgan adds, to sell shoppers on product quality. PLB

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