July 12, 2022
January 18, 2022
Covid-19 has had a significant impact on nearly all aspects of business, including the wine world. Though restrictions are easing across the country and restaurants have largely reopened, the U.S. wine industry continues to see impacts from the pandemic’s twists and turns.
“Over the past 24 months, the one constant factor in our lives has been change,” St. Supéry Estate Vineyards and Winery CEO Emma Swain noted on the St. Supéry Sips podcast. “That includes changing regulations, changing con.sumer buying and dining habits—and an unpredictable supply chain for anything from our favorite wines to toilet paper.”
Joining Swain on the podcast were industry heavy hitters Christian Miller, proprietor at Full Glass Research and head of research at the Wine Market Council; Danny Brager, founder of Brager Beverage Alcohol Consulting; Jimmy Chavez, California wine director at TS Restaurants; Alec Bruggenthies, general manager for Smith & Wollensky’s national wine program; and Charlene Pontrelli, owner of Cellar 406 wine shop in Chicago. During the panel discussion, the experts offered insights into the latest trends in the wine, hospitality and retail sectors.
According to the latest Wine Market Council survey of more than 5,700 American drinkers, low-frequency wine consumers shifted toward spirits or ready-to-drink (RTD) cocktails in 2021—or reduced their alcohol consumption overall.
Even so, Miller pointed out, other segments showed strong growth. “Core wine consumers—people who drink it every week—are increasing their consumption and continuing to trade up out of the $10-and-under category,” he said.
When on-premise venues shuttered due to pandemic restrictions, many consumers increased wine purchases for at-home consumption and turned to online shopping—including delivery and pickup at retail locations.
“While in some cases [ecommerce] may be down versus 2020, it’s still way ahead of where it was in 2019,” said Miller. “Things aren’t going to go back to where they were.”
To Brager, one of the most striking changes in the off-premise sales channel has been the divergence between what is happening with wines priced under $12 per bottle and those priced $12 and up.
“The lower end is in close to double-digit declines,” Brager said. “I’ve never seen declines to that extent.” This is concerning because the under $12 price segment accounts for a large proportion of wine category sales, and it is where younger consumers come into the category.
The story is entirely different at higher price-points, however, with nearly all price categories over $11 showing impressive gains. Between 10 and 12 percent more Wine Market Council survey participants reported buying wines costing $50 or more during 2021 compared to 2019.
Further, Miller said, “People who had been buying $20 to $30 dollar wines a few times a year were now buying them on a monthly basis.”
Miller also shared results of a recent Wine Opinions Trade Panel survey of more than 5,000 industry professionals at all levels of the trade. The No. 1 concern for all three tiers was a lack of adequate stock due to supply or logistics issues, followed by difficulty finding good employees, the potential emergence new Covid variants, and price increases.
“One thing that came out loud and clear is that the long shadow of the pandemic has not lifted very much for the on-premise,” he noted. “On-premise was hit very hard, down up to 80 percent in some markets. It has recovered, but I think it’s still running about 20 percent below what it had been in 2019, and that recovery has leveled off.”
Restaurant wine sales were also impacted by demographics; because wine consumers tend to skew older than those who favor other beverages, this group has been more cautious about dining out and traveling. “In that sense,” Miller said, “wine was probably more badly hit than spirits or big brand beer.”
Though some reports show that sales are back to pre-pandemic levels at particular restaurants, they do not take permanent venue closures into account.
“There are 20,000 or 30,000 fewer on-premise accounts operating now than there were [before the pandemic],” Brager said. Not only that, the fine-dining segment—which leans toward wine—was hit harder than other types of establishments. “There’s still a ways to go.”
As 2022 progresses, Brager and Miller will be tracking a couple of important trends. One of the most significant is cross-category drinking.
“There are very few exclusive wine drinkers, and the biggest contributors [to the category] are actually people that drink wine and other things,” he said. “So people—especially younger people—are increasingly making choices in terms of what alcohol they’re going to choose for what occasion. It’s a pretty important battle for wine to understand, to be part of, and hopefully win.”
Pricing is another area to watch, and it remains to be seen whether wine producers will be able to raise prices on individual items, Miller noted.
“The wine industry hasn’t done anything about the structural imbalance of power where you have many, many, many suppliers trying to go through a narrow funnel where some large buyers at the wholesale and retail level have enormous pricing power,” he said. Therefore, it can be difficult to raise prices unless you are a major, must-have brand.
Along with financial and logistical challenges caused by pandemic shutdowns, restaurants across the country have had to grapple with supply chain issues. As a result, many have cut back on wine offerings.
TS Restaurants, which operates venues in California and Hawaii, swapped its hard-bound, multiple-page wine lists in favor of front-and-back disposable menus that include both food and drinks.
“The real estate got drastically reduced,” Chavez said. “We were limited to about 50 SKUs per wine list depending on the concept, when most had well over 100.”
Similar shrinkage happened at Smith & Wollensky restaurants. “Coming out of shelter-in-place, we didn’t know if something was going to come back,” said Bruggenthies, “or if all of a sudden we were going to shut down again.”
Though sales volume has not yet rebounded to pre-pandemic levels, diners are splurging on higher-priced wines. To meet demand, Bruggenthies searches the country for older vintages to add to library lists. Last year he managed to find 18 bottles of St. Supéry 2005 Dollarhide Cabernet Sauvignon, and sold them all in seven weeks.
“It’s as if Covid has made a lot of wine drinkers think, well, you only go around once,” he said. “I’ve never sold sparkling wine like the way I have in the past 18 months.”
Because diners have been wary of close contact with restaurant staff during the pandemic, many are opting for familiar wine brands and go-to varieties.
“I’m making fewer table visits because people don’t necessarily want that stranger hovering over them,” Bruggenthies said. “But I have a feeling that eventually people will let me go to the tables again and talk to them about other things that they may enjoy. It’s so much easier to sell something tableside when you’re able to give a personal experience or a fun little narrative to make that wine seem a little bit more special.”
In the meantime, Smith & Wollensky’s digital wine lists allow diners to access information on each selection, from the region to the blend to critics’ scores.
The loss of longtime employees has been another challenge for restaurants.
“Usually the tenured staff members are the ones that are more into wine, and we lost a lot of those people due to the closures,” Chavez said. As a result, there are less experienced servers on the floor and managers don’t have the time or resources to train them.
“We used to do so much more hands-on training and seminars and tastings—all these educational things that were so fun in telling the story behind each wine,” said Chavez. “We’re anxious to get our education programs up and running again.”
Likewise, Smith & Wollensky has cut back on staff trainings, and is now creating a cloud-based platform for employees that includes educational videos and information from wineries and other producers.
“That’s definitely something that’s going to continue,” Bruggenthies said, “though I hope there will be a point when I can bore my staff again with what I think about the new wines I’m bringing in.”
While trading up has been a major trend in both on- and off-premise, savvy wine shop owners like Pontrelli of Cellar 406 have found that it’s important to be mindful of the economic uncertainty caused by the pandemic. To Pontrelli, that means recommending great wines within customers’ budgets rather than trying to upsell.
“We have to overwhelm them with products and underwhelm them with price,” she said. “If I can show you a wine that’s fantastic at $20 and drinks like a $30 bottle, that’s always my goal. When I’m tasting, I’m not buying for myself, I’m buying for the customer.”
Cellar 406 normally limits SKUs to 800 or 900, and that has remained constant. “I always keep the same big cellars that everybody loves,” said Pontrelli, “but if I’ve seen a wine start to slow down in sales, I’ll change it out and find something fresh.”
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January 18, 2022