Beverage Handbook

2014 Wine Handbook 2015 1 The Wine Market In 2014, the U.S. wine market advanced on a 1% growth rate to total 328.6 million 9-liter cases. This followed a 2.0% increase to 325.4 million cases in 2013 where the U.S. overtook France as the world's largest wine market. Even though the rate of volume growth for wine slowed toward the end of 2013 and into 2014, the wine industry was able to add 3.2 million 9-liter cases to the market. In addition, the number of U.S. wineries grew at a larger rate than in 2013. The number of wineries grew from 7,762 in 2013 (which was a 4.3% gain over 2012) to 8,287 in 2014, a 6.8% increase. The economy is improving, plus unemployment levels and gas prices are down, which translates into more discretionary income levels for consumers. Knowing this, some wineries raised prices in 2014 at lower and higher price-points. These increases occurred after many years without increases, but suppliers are finding that consumers are more willing to purchase a new brand at a higher price point than an existing brand that increased its price. It is believed that the majority of wine suppliers are holding on to their inventories until the drought issues play out, especially in California. With the California drought entering its fourth year, groundwater regulations were enacted in the state for the first time with local agencies fining water wasters. Voters approved a $7.5 billion water bond, but it is believed that the extent of the drought will significantly contribute to reduced crop loads in 2015. In reaction, wineries pulled out their weakest vineyards rather than their best to concentrate the water supply on producing more grapes off the newer and higher yielding plantings. In short, they are allocating the water to the vineyards that will make the most returns. From the suppliers' perspective, 2014 was recognized as the third consecutive bumper crop for California, which made up for the supply constraints that followed the 2010 and 2011 crops. In addition to California, Washington and Oregon had favorable growing conditions throughout the spring, summer and early fall that led to record-size wine crops in 2014. However, with California experiencing record levels of drought, the importance of a vineyards' sustainability has never been in such high focus. In addition, wineries are creating more private labels and store-branded offerings for the large retail chains that are expanding across the U.S. as grocery stores consolidate. Premiumization remains alive and well as sales of wines priced under $8 or $10 slowed, but sales of wines from the $10 to $20 price range thrived. Looking into varietals, Cabernet Sauvignon, Pinot Grigio and Pinot Noir all performed very well as did Sauvignon Blanc from New Zealand. Red Blends, a category that only came into fruition a few years ago, grew the fastest and also innovated with major brands expanding with "dark" offerings that boast darker tasting fruits. On the sparkling side, Prosecco continued its phenomenal growth and Champagne sales rebounded. While sales of Moscato softened, Merlot is said to be making a comeback. From a competition perspective, today's consumers blur the lines between beverage alcohol categories. As a result, attention to other segments, such as American whiskey and craft beer and spirits, undoubtedly took a toll on consumers' frequency of wine consumption. Constellation Wines released results from their 2014 Project Genome study that classified three new consumer segments: engaged newcomers, everyday loyals and price-driven consumers. According to the study, 29% of total beverage alcohol volume comes from consumers who are active in all three categories (beer, wine and spirits.) Of these consumers, 32% generate 70% of the volume while 12% generate 40% of the volume. Only 15% of the beer consumers drink only beer while only 4% of wine consumers and 5% of spirits consumers are exclusive to those categories. E & J Gallo recently conducted a Consumer Wine Trends Survey which captured the current state of Americans' wine drinking behaviors. Results show that tastes and trends are evolving due to more adventurous wine drinkers, and this is changing how wine aisles look. One stated trend is that nearly half of younger wine drinkers have purchased a smaller 187ml wine bottle with regularity with the primary reason of consuming at outdoor events. Purchasing the smaller bottles also signifies that today's consumers are more apt to try different varietals without buying the larger 750ml bottles. Younger consumers are bringing wine online; 54% of consumers engage about wine on social media, and 49% of consumers post or share photos about wine. Another finding was that 72% of wine drinkers under 40 years old regularly purchase screw tops which begs the question how relevant corks will be in the years to come. In addition, 58% of consumers have purchased boxed wine with the top two reasons being convenience and large social gatherings. Considering that sales of Black Box and Bota Box wine brands post double-digit increases each year, that's not much of a surprise. When consumers were asked which type of food pairings they choose for sparkling wine, the results were "lighter" fare, such as salads or quiche, brunch foods and desserts that came in with rates of 27%, 26% and 24%, respectively. The Consumer Trends Survey also showed that younger drinkers are eager to experiment with 66% mixing wine with fruit and/or fruit juices, 51% making wine cocktails, 48% mix to make a spritzer, and 46% consuming over ice. What might be most significant is that 81% of consumers agree that you don't need a special occasion to enjoy wine. The top three reasons for wine consumption are "eating a meal at home with the family," "relaxing indoors" and "watching TV." While only 29% of consumers have a glass before dinner time on weekdays, that number jumps to 45% on weekends. In regards to purchasing behavior, even though nearly two-thirds of wine drinkers selected the wine The Year2014 in Review

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