Domestic Wines and Value Brands Gain in a Sluggish Wine Market

Imports and high-priced wines are hurt by the recession
 
Wine consumption in the United States will record its 16th consecutive annual gain by the end of this year, but 2009's expected increase of a mere 0.5 percent in case sales indicates that challenging economic conditions have made Americans more price-conscious than ever before. Domestically-produced red wines are projected to be the industry's fastest-growing segment, led by Pinot Noir and Cabernet Sauvignon, according to The U.S. Wine Market: Impact Databank Review and Forecast, 2009 Edition. Domestic white varietals are also expected to record volume gains, led by Pinot Gris/Grigio, Riesling and, from a smaller-base, popular-priced Moscato.

Imported brands have been particularly hard-hit by the troubled economy, with the exception of some trendy wines such as Malbec from Argentina and Sauvignon Blanc from New Zealand. The continued weakness of the U.S. dollar has led to increased costs for wine importers, resulting in retail prices rising much faster for imports than for their domestic counterparts. Last year, Americans consumed less imported wine for the first time since 1991, a year when federal excise taxes were raised by more than six-fold, according to the Impact Databank report.

More than ever, Americans are seeking value. With a few minor exceptions, the biggest increases in volume among each of the fastest-growing varietals are coming from wines priced between $3 and $7 per bottle. For instance, Pinot Noir is one of the highest-priced varietals on the market, yet its sales have nearly tripled in the U.S. since the movie Sideways was released in 2004. But inexpensive Pinot Noir brands, those priced below the industry average, are now outpacing the higher-end of the spectrum, by roughly twice the rate for both domestic and imported wines, according to Impact Databank, owned by M. Shanken Communications, the parent company of Wine Spectator.

Trading down is most evident within the largest-selling wines in the country. Of the 12 fastest-growing brands by case sales in 2009, ten are priced below $7 per bottle. In fact, the total U.S. wine market is expected to grow by less than 1.6 million cases by the end of this year, the same projected increase as that for one brand alone, Barefoot Cellars from E. & J. Gallo (priced at $5 to $7 per bottle).