Posted on | August 24, 2015
Written by | Jim Clarke
This year’s Vinexpo put the USA on top of the wine world.
We wanted to pay tribute to a specific market: the U.S.,” says Xavier de Eizaguirre, Chairman of VinExpo. “The U.S. has been a great supporter of VinExpo since day one.” That tribute took the form of making the U.S. the featured country for VinExpo Bordeaux 2015, held this June.
This honor shouldn’t have the producers of California, Oregon, and the rest patting themselves on the back; it represents America’s growth not as a producer, but as a market. In 2013 the U.S. became the world’s largest wine market, but Eizaguirre says foreign producers are “very often completely baffled by the way things work here.” So various seminars and events were planned to educate attendees on how to operate in a market that functions like 50 different countries, each with their own attendant set of laws, regulations and ways of doing business.
Even having a featured country is new for VinExpo, a change initiated by a new management team in response to, among other things, the growing profile of Prowein, which has grown to a similar size, drawing around 50,000 attendees each year.
The importer/shipper Europvin had a large stand in Bordeaux this year; their head of communications, Colin Gent MW, was skeptical about the focus on the U.S., not because it was inappropriate but because it hadn’t happened earlier: “It was a no-brainer for us; we’ve been focused on the U.S. for at least ten years. It’s been obvious for a long, long time, and now we’ve reached a critical mass of wine drinkers who are interested and are comfortably well-off. America is by far my favorite visit; no matter where I go people are excited, open to hear a story, and say what they like and don’t like. They’re engaged.”
Coming to America
The panel discussion “On the U.S. Wine Market” included Mel Dick (Southern Wine & Spirits), Michael Mondavi (Folio Fine Wine Partners), Annette Alvarez-Peters (Costco), Helen Mackey (Ruth’s Chris Steak House), David Trone (Total Wine & More), Stephen Rust (Diageo) and Wine Spectator’s Executive Editor Tom Matthews.
If attendees and other imported brands heed the panel’s advice it will be a boon for the airline industry; panelists repeatedly highlighted the need for producers to visit the U.S. regularly and work the market. “The most successful international wineries visit the U.S. regularly to build relationships,” said Mel Dick. “You must spend time in America; you must create relationships.” And you must educate, a point highlighted by Mackey—“Americans are very hungry for information.”
Mondavi added that there’s little room for spin with today’s wine drinkers; they’re interested in authenticity, and they can and do check up on it. “Transparency is vital. Millennials can go on their iPhones and get the information about your brand.” Demand for knowledge goes both ways; during the discussion Trone highlighted Total Wine’s use of technology to understand their consumers’ preferences on an individual level and apply it.
For retailers, there’s a contrast between the two retail panelists’ approaches. “We keep a limited item selection of 380 active SKUs at any one time, rotated every 6-12 weeks,” said Alvarez-Peters. “Margins are capped at 14%. Rotation is key; the treasure hunt atmosphere is a hallmark of our business.” Total Wine has a broader selection at any given time. “Is it better to get velocity on 100 shelves or have 300 shelves for a selection-based plan?” said Drew Hendricks, MS and Vice President of Wine at Standard Beverage Corporation. “It depends on where you are and what you are trying to sell. There’s the Costco model, limited selection and have velocity. Both have their place. The narrow approach offers better efficiency unless you want to be a fine wine specialist.”
Hendricks sees the same division on-premise; many restaurants are choosing to offer a more focused list, often built around a specific country or region. The prestige of the all-inclusive tome hasn’t gone away, as noted by openings like Rebelle in New York City, with its 1,500-bottle list. Meanwhile, retailers are looking to on-premise outlets for trends. “I look a lot to what is happening by-the-glass,” said Alvarez-Peters. “That’s the first chance for consumers to get a wine in their mouth.”
On-premise and off, it may be that the Great Recession played a positive role in expanding the U.S. market. “I think that before the recession, everybody thought they could rely on basically three markets to sell all their wine,” added Hendricks. “California, New York and Florida were all hit harder by the recession, and people began looking at different markets for selling wine. Texas, for one, was insulated from the recession by the oil industry. It’s mostly at the premium and ultra-premium price points because most of the other brands were already widespread.” Importers built relationships in these other markets that have persisted as the economy recovers, and wines in the higher price points continue to grow, whereas the budget category is stagnant.
Is there room, then, for a never-ending flood of new brands? “I see a lot more stuff coming in,” said Hendricks. “A deluge of wine coming into the market. I don’t know how much more imported stuff can make it, what the saturation point is. I don’t know how many more small import companies we can take on.”
At the seminar, Southern Wine & Spirits’ Mel Dick was more optimistic. “The U.S. consumes 327 million cases a year. If the U.S. drank [per capita] as much as the U.K., instead of consuming 327 million cases it would be 740 million cases year. If we drank as much as France, we would be at 1.6 billion cases.” That’s room for a lot more brands.