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GROCERY: Red alert

In an era when the EDLP mantra permeates the American retail landscape, wines hold more promise than ever for supermarkets in the high-stakes game of providing customers choice, service, and quality. Wines have traditionally offered "affordable luxury," and now grocers can use wine not only to attract customers, but also to present them with "added value."

Wine drinkers cook. They're not as snobbish as before, a larger group than previously, and more comfortable buying wine in grocery stores.

For the wine shopper, "It's quick and easy -- in and out," explains Ernie Matherne Sr., proprietor of Matherne's Supermarkets, an independent family-owned three-store chain in Louisiana. "I'd sum up our wine department in three words: selection, value, and price," adds store manager Bill Hounshell.

Historically the wine shopper has been thought of as a high-end shopper -- a connoisseur or aficionado interested only in the creme de la creme. But today's wine consumer comes from every cultural, ethnic, and demographic group imaginable.

"I tend to sell what I like," continues Hounshell. "You can get a great bottle of wine for under $10. We use the wine business to drive the rest of our business. Generally you'll find that people who buy wine still cook. Those people are the ones we love to have shop with us."

Red hot

To begin with, at a time that has seen an overall decline in beverage alcohol consumption -- primarily due to shrinking per caps in the category's mother ship, domestic premium beer -- wine has been virtually en fuego. It's certainly a growing business for supermarkets. In just the four-week period ending Jan. 15, dollar sales of wine in supermarkets climbed 10.1 percent to $342.83 million, compared with the year-ago period, according to ACNielsen ScanTrack data. (ACNielsen tracks sales in supermarkets doing $2 million or more in annual volume.) Unit volume, based on a nine-liter-case basis -- the equivalent of 12 750-milliliter bottles -- was up 5 percent for the period.

One need not be a doctoral candidate at M.I.T. to understand that a 10 percent dollar gain based on a 5 percent unit volume increase is a profitable proposition indeed. The data indicates that the average unit price for wine is rising at a two-to-one ratio.

Drilling down further, domestic table wines have been driving much of the growth. While imports generated nearly three times more dollars ($252.9 million to $90.0 million), American consumers seemed enamored with the value presented by domestic brands, as indicated by a 7.8 percent growth in volume.

On the varietal front, the "Big Three" continue to dominate. Chardonnay, Cabernet Sauvignon, and Merlot all saw healthy volume gains (10.9 percent, 14.2 percent, and 7.7 percent, respectively) over the same four-week period a year ago. Other big winners on ACNielsen's wine radar include Pinot Grigio/Gris (17.0 percent), Sauvignon/Fume Blanc (13.5 percent), Syrah/Shiraz (22.2 percent), Red Zinfandel (10.3 percent), Johannesburg Riesling (14.8 percent), and Gamay/Beaujolais (10.6 percent).

"Chardonnay and Merlot are still the undisputed vanilla and chocolate of the wine world," explains noted wine author and journalist Anthony Giglio.

"Chardonnay is still king, with a 19 percent volume share and 23 percent dollar share," adds David Mirassou, national sales manager for Mirassou Winery in San Jose, Calif. and a member of the oldest winemaking family in the United States. "Merlot is second to Chardonnay, with a 12 percent volume share and 15 percent dollar share. White Zinfandel has slipped to third, and White Grenache is sharply declining."

Not surprisingly, the big win over the past year has been the huge increase in the popularity of Pinot Noir -- a formerly little-known varietal raised to cult status by 2004's surprise hit film "Sideways."

According to David Mirassou, sales for Pinot Noir have gone straight through the roof -- 38 percent in dollars and 33 percent in volume over the past year.

The effect that 'Sideways' has had on the Pinot Noir varietal is not unlike what a 1991 segment on CBS' 60 Minutes titled "The French Paradox" did for red wine in general. The episode suggested that the reason the French can gorge on a cheese-laden, cardiovascular-challenging diet is that red wine plays such a significant role in French culture.

"Before that show, Merlot was practically unknown," notes Giglio. "After it aired, Merlot sales skyrocketed in this country. Fourteen years later Merlot is still one of the most popular reds in the U.S."

The legend of 'Two-Buck Chuck'

The growing popularity of wine overall is not up for argument. According to ACNielsen data, table wine has increased 2.3 percent in volume and 5.8 percent in dollars over the 52-week period ending Feb. 19 in the combined food, drug, and mass channels. Looking closer, domestic wine is up 2.5 percent in volume and 5.0 percent in dollars, while imports are up 8.5 percent and 11.9 percent, respectively.

Beer, meanwhile, is down 1.3 percent in volume and up slightly, 1.9 percent, in dollars. Do we detect a trend here? "Sure we do," says Jim Koch, founder and president of the Boston Beer Co., brewer of Samuel Adams Boston Lager. "All the growth in the beer category has come from the high end for the past 10 years."

And, according to the numbers, many drinkers are also defecting from the beer category to wine. "The numbers speak for themselves," admits Koch." I believe that it's the same desire for products with quality, variety, richer flavor, and history that are driving wine demand. It's all part of the same phenomenon. People are drinking less, and drinking better."

But the streaming multitude can't realistically be expected to jump from a $7 six-pack of high-end brew to a $15 to $20 mid-range 750-milliliter bottle of wine overnight. A little introduction to the category is necessary, and some experimentation. Often that's done through purchases at on-premise establishments -- bars, restaurants, and wineries.

But a few years back, Trader Joe's introduced an amazing concept to American culture when the grocer launched its store-brand Charles Shaw line -- much better known as "Two-Buck Chuck." Not only was it inexpensive, but by most accounts it was also actually good. (Apparently private label is a wine segment whose time has come. See the sidebar on page 88.)

"Nobody can actually make money selling a 750-milliliter bottle for $1.99, but they can get a hell of a lot of buzz, which is what Two-Buck Chuck did," observes Giglio. "I think it helped people see that value in wine doesn't necessarily mean 'cheap.'"

After enticing new consumers to the category with an extreme-value price point, the next challenge is getting them to trade up.

"Two-Buck Chuck has made it mandatory for all wineries to make sure they have value in the bottle," explains Mirassou. "I think Chuck has moved people who might have had a 'jug wine' mentality into the 750-milliliter size, which is good for the industry and good for the retailer. It 'trades consumers up' into the next categories of wine."

It's pouring promotions

Given the red-hot market, wine initiatives are plentiful this spring. Canandaigua, N.Y.-based Vendange has introduced Vendange Pinot Grigio in 750-milliliter glass bottles, the third packaging option for the popular varietal.

New to the scene this spring from Gonzales, Calif.-based Pacific Wine Partners is Twin Fin. Targeting 25- to 35-year-old consumers with fun, retro-California surfing imagery, the Twin Fin portfolio includes six varietals: Merlot, Shiraz, Cabernet Sauvignon, Chardonnay, Pinot Grigio, and, of course, Pinot Noir. The suggested retail price is $9.99.

As the centerpiece of a three-pronged cross-promotion, Alice White, the top-selling Australian wine brand, offers consumers the chance to save up to $6 on the purchase of the Meet the Fockers DVD and Emerald Nuts. Promotional neckers showcase Alice White's role in the hit film and offer consumers a chance to save $3 on the DVD and $3 off any two packages of Emerald Nuts. Both are mail-in offers.

Lodi, Calif.-based Talus Collection encourages consumers to try all eight of the approachable, food-friendly wines in its portfolio with the "Experience the Flavors" promotion. Running through May, the program offers consumers the opportunity to save on a purchase of two 750-milliliter bottles of Talus Collection with a $5 mail-in refund offer.

Woodinville, Wash.-based Covey Run urges consumers to make the most of spring with the "Great Wines-Great Outdoors" promotion, designed to generate incremental sales with a spring picnic theme and special money-saving offers on President cheeses and Lahvash crackers.

Blackstone Winery in Gonzales, Calif. also celebrates the season with its "Warm up to Spring" promotion. The promotion features POP displays, including a custom potting table display to help spread the gardening bug, as well as a classic wooden display to show the artisan feel of the brand. Special consumer offers include savings on fresh spring flowers, the Monterey Pasta Co., and select Classico products.

In celebration of its 150th anniversary, Mirassou Winery has unveiled a new line of premium wines. The five varietals -- Chardonnay, Sauvignon Blanc, Pinot Noir, Merlot, and Cabernet Sauvignon -- display bright, fruit-forward flavors and pair well with a wide assortment of food styles.

Finally, a new in-store kiosk initiative from is designed to enhance consumers' wine-buying experience with recommendations for complementary cheeses and recipes. The kiosk is the first commercial electronic toolset that enables retailers in the grocery channel to market an entire consumer experience around wine and food pairings.
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