New Age Wine

New Age of Wine MarketingWAWGG Annual Meeting 2011

Christian MillerResearch Director, Wine Opinions

Data Sources

Wine Market Council – annual national surveys of all wine drinkers, sample sizes range approximately 600-100. Core wine consumers are those who consume wine 1+ times a week, roughly 46 million adults responsible for 91% of wine purchases.

Wine Opinions Consumer Panel – 5000+ person national panel of wine consumers that represents the 18 million high frequency, high involvement consumers responsible for the majority of wine purchases over $10. Sample sizes range 800-1000.

Wine Opinions Trade Panel – panel of 800+ trade members, not projectable, sample sizes rang from 100-300.

Nielsen Scan Data – scanned sales in stores, covering most grocery and drug stores, some mass market and liquor stores.

Wine Business/Ship Compliant DtC model – direct-to-consumer sales of wine, shipments (not carryout) only

Percentage Growth in Total Table Wine Consumption(Percentage gain/loss)

-2.9

5.6

4.5

7.2

4.1

2.5

3.4

4.7

1.3

5.7 5.4

3.8

2.5

3.7 3.5

0.9 1.1 0.9

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Source: Beverage Information Group

42

8

50

35

7

58

2114

65

13 13

73

More Less Same

Millennial +34

Gen X +28

Baby Boomer +7

65+ 0

Change in Wine Consumption Compared to a Few Years Ago(Percentage)

Source: Wine Market Council

Generation Net Shift

*% drinking more minus % drinking less

More severe than previous two recessions, comparable to 1981‐82.

Financial/wealth component: stocks, house value, income. Big difference: this one impacted the baby boomer wine‐drinkers

Recession Psychology

A Brief Review of the Wine Recession

Percentage Buying “More” or “Much More” Wine by Price Segment & Financial Condition

Source: Wine Opinions consumer panel 2009

48

16

2

48

26

14

9

34

25

21

18

34

0 20 40

Buying More $6‐10

Buying Less $6‐10

Buying More $20+

Buying Less $20+

Improved

No Change

Much Worse

The Effects - Consumer

Trade Down was real and substantial

Luxury wine segment plummeted

Decrease in purchase frequency above $20

Increase in purchase frequency below $15

Stabilized with some comeback $15-30

Channel Shift

Big drop in restaurant visitation

Increased purchasing in warehouse, mass market, grocery

Mixed picture in wine stores, direct

Younger wine consumers more optimistic, increasing consumption much faster

9

41

18 23

83

33

1326 23

1

3118

2721

1

31

7

29 29

Lot Better Little Better Unchanged Little Worse Lot Worse

Millnls Genx Bby Boomers 64+

Wine Consumer Perceptions of U.S. Economic Conditions by Generation

(Percentage)

Source: Wine Market CouncilSource: Wine  Market Council Oct 2010

The Effects - Trade

Channel Shift – consumers, then inventory and deals. Many retailers increase revenues, traffic. Off-premise retail is optimistic.

Wholesale tier most pessimistic

most concerned with cost-cutting and inventory reductions

margins reduced with shift from on-premise

high end sales drop results in expensive slow inventory

Distribution funnel effect made much worse; wholesale tier backs inventory into wineries, squeezes winery margins.

Wineries struggle with channel shift, inventories, weak bargaining position. Is Direct-to-Consumer a safety net?

Wine Opinions Trade Panel Survey (preliminary Jan‐Feb 2011)

Wineries report:– Direct to Consumer sales up (even clubs, which were down in 2009)

– Sales to distributors extremely variable, but more up than down

Distributors/Importers report:– Supermarket, mass market and warehouse club sales up

– Liquor/Wine store sales up but more variance

– Chain and mid‐priced restaurant sales flat to up, variable

– Fine dining sales extremely variable, more down than up

– “Fine Wine Shops” majority increased but average pricing down

Nielsen Retail Scan Data: Trend by Origin

Lat 52 $ Share Origin (bottled)

Value % Chg Volume % Chg Lat 26

Avg PriceLat 52 Lat 26 Lat 52 Lat 26

100% Ttl Table Wine +4.5% +4.8% +3.2% +3.5% $6.3671.5 Domestic +5.8 +5.9 +4.2 +4.4 $5.9765.2 --California +5.7 +5.5 +4.1 +3.9 $5.704.0 --Washington +5.1 +6.0 +5.5 +5.5 $8.760.8 --Oregon +15.3 +16.8 +18.7 +17.4 $14.76

28.5 Imported +0.4 +1.0 +0.2 +0.7 $7.34

Source:  Nielsen Total U.S. Food/Drug/Conv/Liquor Plus; thru 1‐8‐2011

Consumer Buying Trends 2010, Wine Opinions Panel

2010 Buying more Buying less No changeDon’t buy from

this country/region

Napa Valley 17% 18% 59% 5%

Sonoma County 22% 7% 66% 5%

Mendocino 7% 5% 59% 29%

Santa Barbara 9% 7% 62% 21%

Lodi 9% 6% 48% 36%

Monterey 6% 7% 62% 25%

Paso Robles 20% 7% 51% 22%California (no region on

label)14% 9% 65% 12%

Washington 23% 6% 55% 16%

Oregon 21% 9% 54% 16%

Source: Wine Opinions Consumer Panel December 2010

Share of Direct‐to‐Consumer Sales

3.3%2.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Share of Volume Share of $$

Rest of US

Washington

Oregon

Rest of CA

Sonoma

Napa

(Mail/Website/Club shipments, no carryout)

Source: Wine Business Communications & ShipCompliant Model

DtC: Variety’s Share of Total Cases

19%

10%

13%

6%

5%

4%

4%

17%

18%

6%

2%

0%

13%

1%

7%

22%

0 0.05 0.1 0.15 0.2 0.25

Cab Sauv

Chard

PN

Zin

Syrah

SB

Merlot

Red Blends

WA

All States

Washington vs. Total for All States, no carryout

Source: Wine Business Communications & ShipCompliant Model

DtC: WA Share of Varietal Totals

4%

5%

12%

9%

4%

5%

3%

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00%

Cab F

Merlot

Riesling

Syrah

Red Blends

White Blends

All Wines

WA Share of Volume

Washington Wineries’ Share of Varietal Total, no carryout

Source: Wine Business Communications & ShipCompliant Model

11

9

80

14

11

9

76

Bought through a winery website

Bought from an online retailer

Bought through a website of a brick-and-mortar

retailer

Did not buy wine online

2008

2010

NA

Online Wine Purchases, 2010 (Percentage who purchased wine online in the past year)

Source: Wine Market Council

Washington Wines in

The U.S. Market

Market Penetration by Region, Core Wine Drinkers

(% who purchased wine from region in past 3 months)

Source: Wine Market Council

89

2229

4442

2229

CaliforniaOregonWashingtonFranceAustraliaNew ZealandChile

Quality Ratings by Region, Core Wine Drinkers(% giving top “Excellent” rating to wine from this region )

Source: Wine Market Council 2010

43

3228

54

383932

CaliforniaOregonWashingtonFranceAustraliaNew ZealandChile

Value Ratings by Region,

Core Wine Drinkers(% giving “Excellent” rating to wine from this region )

Source: Wine Market Council 2010

343031

33

25

3230

CAOregonWAFranceAusNZChile

Quality Ratings by Region, Wine Opinions panel

Source: Wine Opinions Consumer Panel August 2010

Answer OptionsOne of the

bestVery Good

Good Fair PoorDon't know

Napa Valley 49% 37% 11% 2% 0% 1%

Washington 11% 40% 30% 5% 1% 14%

California 30% 40% 26% 4% 0% 0%

New Zealand 9% 31% 38% 8% 1% 14%

Sonoma 37% 43% 16% 2% 0% 3%

Australia 10% 36% 36% 11% 2% 4%

Oregon 13% 42% 24% 4% 0% 18%

Value Ratings by Region, Wine Opinions Panel

Source: Wine Opinions Consumer Panel August 2010

Answer OptionsOne of

the bestVery Good

Good Fair PoorDon't know

Napa Valley 10% 20% 30% 27% 11% 1%

Washington 8% 30% 36% 9% 1% 15%

California 11% 30% 40% 15% 2% 1%

New Zealand 8% 35% 33% 8% 1% 15%

Sonoma 9% 30% 39% 16% 2% 4%

Australia 13% 40% 32% 9% 2% 5%

Oregon 7% 26% 34% 13% 1% 19%

Cabernet Substitute Question, Wine Opinions Trade Panel Preliminary 2011

Source: Wine Opinions Trade Panel Preliminary January 2011

$50‐100 Napa Cabernet SubstituteResponsePercent

Cabernet Sauvignon from Sonoma County AVAs priced below $50 23%

Napa Valley Cabernet Sauvignon wines priced below $50 22%Cabernet Sauvignon from Washington State pricedbelow $50 27%

Cabernet Sauvignon from Chile priced below $50 11%

Cabernet Sauvignon from Australia priced below $50 3%

There is no suitable substitute for Napa Valley Cabernet Sauvignon wines priced between $50 and $100 5%

Social Media

Activity Core Marginal

Read customer ratings or reviews of products and services 51% 38%

Maintain a page on a social networking site such as Facebook or MySpace 43% 43%

Read blogs or online forums 29% 23%

Post reviews of products or services 28% 14%

Comment on blogs or participate in online forums 19% 15%

Follow people on Twitter 11% 10%

Top Wine Drinker Online Activities

Source: Wine Market Council

(Percentage by activity in which respondents participate*)

*25% cite “none of the above”

Category Core Marginal

Information about various types of wine 64% 65%

Information about specific wines 55% 43%

Looking up wine prices 49% 49%

Information about wineries 47% 33%

Information about a wine region 34% 22%

Looking up critics’ wine ratings 31% 23%

Looking for a retail store that carries a wine 31% 22%

Top Categories of Wine Information Online

Source: Wine Market Council

(Percentage by type of information and segment)

65

27 3021

116

66

23 2619

84

Facebook MySpace YouTube Twitter LinkedIn Flicker

Core

Marginal

Social Media Service Membership, 2010(Percentage)

Source: Wine Market Council

43

12

65

20

28

Facebook Twitter YouTube

2009 2010

23

(Percentage)

Social Media Service Membership, 2009 -2010

Source: Wine Market Council

Usage of Social Media

38% of Core wine drinkers report using social media to discuss wine.

45% of core wine drinkers who use Twitter “follow wine people” on Twitter. 46% tweet family or friends about wine.

41% of core wine drinkers are “smartphone” users. Among them, 39% use wine/food/restaurant apps.

For all the above, the numbers for marginal wine consumers are much smaller.

Source: Wine Market Council 2010

Wine Opinions Trade Panel: Change in Influence of Media Channels since 2008

Greatly increased

Somewhat increased

No change

Somewhat decreased

Greatly decreased

Wine magazines (print) 3% 22% 54% 18% 1%

Wine magazines (online) 7% 40% 51% 2% 1%

Wine bloggers 17% 46% 32% 5% 1%

Wine discussion boards 10% 38% 45% 7% 1%

Winery websites 12% 46% 38% 3% 0%

Wineries or wine marketers using Facebook 31% 44% 22% 2% 1%

Wineries or wine marketers using Twitter 15 % 44% 36% 4% 1%

Winery, wine company, or trade associations’ email newsletters 7% 36% 45% 12% 0%

Newspaper wine columnists 3% 33% 46% 16% 2%

Wine retailer online communications (newsletters, sites, etc.)

19% 52% 27% 3% 0%

Source: Wine Opinions Trade Panel Jan 2011 Preliminary

Generation Shift (but we knew that)

New Normal? Value* rules for now

Economics vs. Demographics vs. Psyche

Communications Shift

“Age” – or just half a decade?

New? Age?