WINE ECONOMY AND MARKET RESEARCH

Case Study
Rebecca Rodriguez

Part I: US Market Revue

With a population of 313,847,465, the United States is the top ranked wine
consuming country in the world. Consuming 3,217,500 L (10.25 per capita)
compared to China with a population of 1,343,239,923 and a consumption of
1,580,000 L (1.18 per capita). Currently, 1.4% of the American population is 21
years old (the legal drinking age). The US is the number one market for still light
wine and will continue to be so.
In 2014 there was an estimate of 314 million 9ltr cases sold in the United
States compared to the 151 million 9ltr cases sold in China. Between 2011 and
2014 there was a steady increase of about a 5% growth rate of still light wine
consumption. There are about 90 million steady wine drinkers in the United States
compared to 38 million in China, 16.6 million in Canada and 47.7 million in Japan.
Currently, the most sought after price range is between 10$ - 20$. Wines
ranging from 11$ - 14.99$ make up 9% of the volume of wine, 15$ - $19.99 making
up 3.5% and less than 8$ making up 69% of the market. According to style, lighter
wines make up the biggest market in the USA with a potential market of 52M
followed by ros wines. The increase of Ros wine consumption makes the United
States the number two market in the world.
Imported wines account for about 35% of U.S. wine sales in 2012. Eventually,
U.S. wine producers will find it difficult to meet all of the rising domestic demands
which can be a potential opportunity for imported wines. Factoring natural stresses
such as the water shortage in California is another opportunity for foreign wines to
find their way into the American market. In 2011 domestic wines increased in
consumption by 12.61 % (according to the sales of 9L cases) whereas the increase
of foreign wines was only 4.12 %. However, it has been forecasted that the increase
of foreign wines versus domestic wines (in sales of 9L cases) will increase 11.53%
which is only a difference of 0.87% compared to domestic wine consumption.
Overall, since 2007 to 2011 there has been a general increase of consumption of
both domestic and foreign wines of 33.34%.
Currently, the top five supplies of foreign wines to the United States
(according to sales of 9L cases in 2011) are Italy with 29.985M, Australia with
18.205M, France with 10.346M, Chile with 7.076M and Argentina with 6.255M.
Currently, this is the total retail value of wine sales in the USA from 20042014).

This is a graph showing the sales growth of the US wine industry between
2002 and 2015.

Following the
bursting of the
housing bubble in
mid-2007, the United
States entered a
severe recession. In
2008 the United
States entered during
a housing market
correction and a
subprime mortgage
crisis. Both of which
affected the sales
The recession did affect the more luxury brands, however wines of $15, $10
even $7 became more desirable to customers. What this actually did was give
producers the opportunity to showcase their wines at a more affordable price;
proving that quality wines that are both interesting and drinkable, can be well under
$20. This opened a whole new market to the Millennials which are driving a lot of
the wine sales in the United States today.
With 49 million drinking-age consumers of the Millennial Generation (between
21 and 32), the affordable well produced wine has never done better. In the coming
years as well, there are about 23 million potential wine consumers turning the legal
drinking age in the next five years.

Currently, the number of millennial wine drinkers is close to the amount of

baby boomers (whose wine consumption has started to drop). The age bracket
between, 21-38 has become the largest demographic with a population of 79
million, with baby boomers aged 51-59 at just 75 million. Interestingly enough,
between the ages of 21-29, 66% are women, where the average percentage of
women wine drinkers is 56%. The styles of wine that millennials mainly consume
are red wine blends, sparkling wines, sweeter wines, imports and new and
exciting wines. Cultural diversity is another factor when considering the taste of
the millennials as well as the impact that social media has become when reaching
customers. It is also to be noted that domestically, younger drinkers are more apt to
drinking wines from other states other than California compared to their older
counterparts.
This is the percentage of the wine drinking population:

This is the percentage of wine consumed:

This is the percentage of number of glasses per occasion:

Among Millennials, the varieties that they chose to drink the most are
Malbec, Moscato, Pinot Noir and Sauvignon Blanc. Regionally, millennials tend to

lean toward more domestic areas with 30% consuming Washington and Oregon and
internationally from Chile, Argentina, Germany, Portugal and South Africa.
This trend in consumption has also affected the wine industry itself. In order
to keep up with the millennial drinkers, wine producers are now marketing
specifically for them. Packaging of wine has become more unique and interesting in
order to stand out with the millennials whims. On premise, restaurants have caught
on and have noticed a fall in bottle sales and an increase of glasses being ordered.
With this new push for wine by the glass, wine kegs have been developed to insure
optimal freshness and decrease in oxidation. An example of this comes from Free
Flow Wines which are the leading wine kegging company, since their establishment
in 2009, they now offer over 450 different wines on tap. Off premise, wine drinkers
are savvier and a bottle of wine is now being scrutinized by country of origin and
grape variety. Aware of this, wine producers are presenting their wines with more
information on their labels as well as their overall package (more boxed wines and
six bottle packs).
Reflecting back on how women impact the wine industry, women make 57%
of the wine volume in the USA. Women are interested in more sustainable and
organic products with 51% aged 21-24 saying that, that impacts their wine buying
decisions. In general more women (38%) versus men (32%) think that sustainable
wine practices are important in general and in their wine purchasing decisions.
When looking for a label, what female wine drinkers are looking for are traditional,
classic and sophisticated, specifically labels that are more interesting and eye
catching. In terms of curiosity, women are also more willing to try wines that they
have never had before based on label, recommendation from a friend or family.
They are also more likely to purchase a wine due to recommendations from on and
off premise staff rather than seeking a wine they read about.
In terms of varietals, men and women do not different significantly, unlike the
old preconceived notions that, Women prefer white wine. Men only drink red.
Women like sweet wine. Men purchase less wine. The top favorites between men
and women are Cabernet Sauvignon and Merlot for reds and Chardonnay for white.

In wine buying trends both men and women know that they are going to shop
for wine and will purchase something even if they havent thought about what they
have in mind beforehand. Their differences do however lay in the price ranges in
which the two sexes lean towards. Unlike women, men tend to purchase wines that
are <6$ whereas women tend to buy wines that are more than 15$. When it comes
to planned purchases women are more likely to plan a purchase of boxed wine
(75%) whereas men are not. Sparkling wine is also a huge contender in the planned
purchasing habits of women.
In regards to wine knowledge, female wine drinkers are categorized in three
different groups: highly involved, regular wine drinker but not a hobby, and not very
knowledgeable. In general, one-fifth of women are what are considered highly
involved; knowledgeable about wine, have a strong interest and considering
themselves collectors.

Women that are highly involved wine drinker fall in the demographic of
older Millennials (30-38 years). These women are often urban-educated
professionals, and tend to be more ethnically diverse.
These are the trends when it comes to the likes of women wine drinkers:

When marketing specifically to women, producers need to be careful. The

female drinker is aware of this target marketing and will turn their noses on
obviously marketed wines.

Conclusion
After studying the market it is safe to draw the following conclusions before
considering entering the American market.
1. Price smartly: High end wines will always have their niche. If you price your
wine in the desirable range (between $10-20$) there is a higher chance of
becoming successful.
2. The high demand of domestic wines vs the amount available can be in the
advantage of the international wine. Understand the styles that are being
demanded and see if the style of wine that you are offering falls in that
range.
3. Millennials will pay your bills. Do not underestimate the power of the
Millennial. This is a very plugged in generation with great access to a lot of
information. This is a smart knowledgeable consumer that understands that
they have an abundance of choices and will go with what works well with
their budget and pallet. The millennial is not impressed by flashy and

expensive; they are more grounded and are interested in learning and trying
a lot of different things. Curiosity runs this consumer and this is very
important to keep in mind.
4. Women are very important. Millennial women are a high percentage of the
consumers in this generation as well as in general. Women are well aware of
target marketing so be careful with packaging. Women will spend more
money and will buy a product even if its more expensive. Advertising should
be smart as well and targeting to this consumer who will listen to word of
mouth and recommendations. Women drink as seriously as men and are
collectors as well. Women with disposable income are just as powerful if not
more powerful than the male consumer.
5. Organic, Biodynamic, Sustainable, Organic, these are all big buzz words.
People in general are becoming more environmentally aware and care about
purchasing products that makes them feel good. Boxed wines and other
environmentally stable packaging is now highly acceptable and even very
sought after.

Part 2: Threats and Opportunities

Threats
- Emergence of craft
beer
- USA is a heavy beer
drinking country
- Mixology
- Climate impacts on
wine growing regions
- Saturated Market
- Economy
- Quick trends

Opportunities
-

Millennials
Social Media
Women
Organic, bio,
ecologically
sustainable
- Quality low/
reasonably priced
wines
- Educated/curious
consumer

Part 3: Winning Marketing Mix on the US Wine Market

It seems as though to be part of the current wine movement it would be
important to be in either category.
Millennial Market
Price: $10-$20
Taste: Light red/ interesting / whites
Variety: Pinot noir, Merlot, Grenache (Softer round wines with less tannin). It would
even be possible to be a more unknown exotic variety
Packaging: Interesting and story telling

Possibly bio dynamic, organic, or sustainable packaging

Interesting market for international wines from lesser known countries (such as
Georgia)

Women
Price: <$15
Taste: A wide range from sweet, sparking, heavy reds such as cabs
Variety: Less exotic, better known
Packaging: Smart, elegant and not too cheap
Bio, Organic, Sustainable
Keeping the environment in mind is very important
Higher end boxed wines

If a wine producer is able to be somewhere in the middle or can offer

something specific targeting either consumer, they have a good chance on being
successful in the USA market. Knowing that Millennials and women are some of the
driving customers in the USA, makes knowing where to strategically place your
product.