Sample Report

While emergency orders remained in wine regions across North America in May, a move toward cautious reopening in many jurisdictions was coupled with an increase in sales through off-premise outlets tracked by Nielsen as well as in on-premise establishments. Consumption habits — both the occasions for consuming wine and for purchasing it — showed signs of adapting to a social landscape that will continue to evolve throughout the summer.

Scan data from off-premise channels reporting to Nielsen indicated sales totaling $1.65 billion in the four weeks ended May 30. The average weekly sales in the latest four weeks was $411 million, approximately 25% above the weekly average in the 52 weeks ended Feb. 29, before declaration of the pandemic by the World Health Organization on March 11.

However, the past month saw lockdowns in various regions ease. While air travel and tourism remained flat as a result of the restrictions, requests for directions on Apple Maps began rising in mid-April. Vehicle directions showed the strongest increase, underscoring forecasts that people would be traveling by car more often than by transit or other means as reopening took hold. This was particularly true in wine country, with vehicle traffic in key counties in Washington and Oregon showing strong and sustained increases in May over the Mother’s Day and Memorial Day weekends.

The greater movement coincided with a slight downturn in off-premise sales in the week ended May 30. Nielsen noted that the period also saw an increase in sales of bottled rather than boxed wines, while the growth of table wines priced $20 and above continued to lead the channel. While it’s still too early to say old habits have returned, it’s a sign that some trends noticed during the pandemic are easing.

Another promising sign is that jobless figures seem to be showing signs of reversal. While total jobless claims exceeded 42.9 million through the end of May, they didn’t quite reach the 46 million the Federal Reserve initially forecast when the pandemic began in March. Now that shuttered businesses are reopening, some of those people are being rehired or finding new jobs. The first flush of hiring is helping to put money into circulation, including funds from many of the relief programs offered in the first month of response.

What’s troubling as the emergency orders ease is that consumers appear to have traded down, or as wine economist Mike Veseth puts it (borrowing the title of the 1967 film), “gone up the down staircase.” Sales have increased and volumes continue to decline, mirroring the premiumization trend seen before the pandemic hit, but the gains are taking place in two key areas: table wines in glass priced at $20 to $24.99 a bottle and boxed wines priced $4 per 750 ml and higher. The two segments were neck-and-neck for growth in the four weeks ended May 16, at 47.5% and 47.3% respectively. The greatest dollar change, however, was in the $11-$14.99 price band that’s also the largest single segment of off-premise sales Nielsen tracks. Sales rose 40.5% in value to $300.4 million.

The shift appears even more sharply in what online consumers are ordering. Drawing on Wines Vines Analytics/Sovos ShipCompliant data, Danny Brager, senior vice president of beverage alcohol practice for Nielsen, noted that “the much more ‘premium’ DtC wine shipment channel” has seen “an inverse relationship over the last couple of months to price.” While value and volume of shipments $100 a bottle and more fell, bottles priced less than $30 saw healthy gains. “These DtC shipment trends are likely a combination of newer or less frequent buyers participating in this channel, along with suppliers offering wines at reduced prices to stimulate demand,” he reported.

Consumers buying online and at lower prices

Several wineries have issued limited-time offers, with discounts of 25% and greater not uncommon. Data for May from Wines Vines Analytics/Sovos showed shipment value up 22% from a year earlier while shipment volumes increased at twice the pace, pushing down the average value of shipments 16% to $30.53 a bottle. This was consistent with activity during the pandemic, with shipments in the three months from March to May also down 16% to $35.10 a bottle versus a year ago.

The phenomenon has been noted not only in shipments from wineries but also in online orders and shipments. A survey of 886 U.S. consumers by researchers at Sonoma State University’s Wine Business Institute and the Texas Wine Marketing Research Institute at Texas Tech University found that many consumers were drinking just as much wine if not more during the pandemic as before. Online orders from both wineries and online retailers increased, reflecting reports from platforms such as Wine.com, Drinks.com and Drizly noting triple-digit increases in activity.

The study also noted that 79% of respondents were spending about the same amount for wine during the pandemic as before, and twice as many were paying more for wine as were paying less (it didn’t indicate the volume being purchased). However, online platforms report that the influx of orders has been in a greater – and lower – range of price tiers. “In the latter half of March (so, two weeks post-COVID mark) we did see an overall lowering/trading down as our $10-$11 price point demand dropped nearly 50%, with demand falling into the $9 or less bucket,” said Zac Brandenberg, CEO of Los Angeles-based Drinks.com, who added that women – disproportionately affected by layoffs during the pandemic – led the trend. “We are seeing an increased percentage of female customers (20% greater share than normal) trading down into slightly lower price points,” Brandenberg noted.

Any country that’s imposed a lockdown to halt COVID-19 — and that’s most of them — saw restaurants shuttered and on-premise sales collapse. While off-premise sales continued, not every country laid in supplies with the enthusiasm seen in the United States. Consumers in Canada, the largest national market for U.S. wineries outside the U.S., mirrored domestic trends in stocking up: Supermarket sales of alcohol, primarily beer and wine, increased 76% in the third week of March versus a year earlier, according to Statistics Canada, then settled back to levels similar to those Nielsen reported in the U.S. At the other end of the spectrum, South Africa banned domestic alcohol sales temporarily and even cut exports. “This market was probably the hardest hit by COVID-19,” said Greg Livengood, a partner with Ciatti Co. in Novato, Calif. “They did go into full quarantine, and not only that, all domestic alcohol sales were halted for the entire time they were in quarantine. In addition to that, export shipments of bulk wine were halted two times over a two-month period.”

Other markets occupied a middle ground, with consumption falling as a result of restrictions on retail activity — either the closure of stores or the lack of online options. This scenario played out both in Canada, where many provincial liquor boards do not offer online purchasing let alone delivery, and in South Korea.

“While Canadians maintained their wine drinking — albeit with lower spend per bottle — Koreans have bought less wine, and spent less per bottle, during the pandemic,” reported Wine Intelligence. “South Korea does not have a functioning online wine retail channel, as this is still prohibited by government legislation. The prospect of having to shop for wine in a physical store (along with other everyday food and beverage needs) may have reduced the temptation to indulge in extra wine buying.”

The result underscores the social nature of drinking in many countries, and the dramatic impact this can have when social interactions come to a halt. This was particularly true in Europe.

“Europe is very dependent on on-premise trade, so this has hit them particularly hard,” said Livengood, noting that the European Union is funding a massive distillation project to dispose of more than 750 million liters, or more than 83 million 9L cases, of wine or more. As in other areas, the recovery will hinge on people once again going out, traveling and generally resuming normal activities. Italy reopened to tourists June 3, while borders within the Schengen zone (where border controls are largely lifted) were set to open June 15. Spain was set to welcome tourists on June 30. “As they emerge from quarantine we’re really hoping for a big boost in tourism, and that should help start getting things back on track,” he said.

On-premise pain could be lasting

Traffic at 60,000 restaurants worldwide using the OpenTable reservation platform began rebounding May 1 but remained at just 20% to 25% of normal the first weekend in June. Within the U.S., NPD Group said, restaurant traffic had resumed to 68% of normal as of June 1. However, much of that traffic seemed more interested in food than wine. A survey of 1,600 people that Nielsen CGA conducted in four key states the weekend of June 5-7 indicated that no more than 12% of those who had gone out in the past two weeks were going out expressly for a drink. Those who did skewed younger, between the ages of 21 and 34.

Speaking as part of a global market update that Ciatti Co. hosted June 3, Stephen Rannekleiv, executive director of food and agribusiness research at Rabobank in New York, said on-premise accounts face a lengthy period of adjustment.

“It’s really unlikely that the current challenges we’re facing are going to be overcome in the space of a couple of months,” he said. “The recovery in the on-premise channel is likely to be measured in years rather than months, and it will look very different structurally.”

The shift to takeout orders, and the permission many jurisdictions have given to allow alcohol sales as part of these orders, is key. The shift to takeout was in motion before the pandemic and the trend has accelerated. This will challenge on-premise operators who typically need an occupancy rate of 70% to 80% to break even, as well as by-the-glass programs, which benefitted players across the sector. The margins on by-the-glass programs were healthy, and a placement was often an important entry point to markets for international wines.

“We’ve talked to large suppliers that have great brands that are doing really well in the off-premise, but that are still struggling because their loss is in the on-premise where they have a lot of margins,” Rannekleiv said.

Changes in the on-premise channel also compound the shifts taking place in where and how wine is sold.

“A lot of those on-premise brands are fighting for volume in terms of sales, so they’re taking those brands into the off-premise market, and I think that’s competing a little bit with some of the private label” wines, said Glenn Proctor, partner with Ciatti Co. “It’s causing additional competition to some of that private-label activity.”

Reopenings picked up steam at the end of May but it was a return to anything but normal. Notwithstanding early hopes that the disease might abate in the summer, the prospect of a second wave emerged as a distinct possibility as some analyses of case rates indicated that the key wine-producing states of California and Oregon had recorded significant numbers of new cases.

While many of the increases there were related to food-processing, the numbers fueled fears that jeopardized statewide reopening efforts. This in turn created a conundrum for wineries, which have had to decide whether or not to reopen and face a possible second closure. Demand for tasting room visits seems to be strong, with premises in Oregon that have reopened with strict measures in place quickly reaching capacity and turning away guests. Counties such as Walla Walla in Washington have taken a more conservative approach.

While travel has increased significantly, the county doesn’t reopen to tourists until at least June 17. “Visit Walla Walla and the Walla Walla Valley Wine Alliance are not actively promoting or encouraging travel to Walla Walla from outside of the immediate area, and will not encourage outside visitation until the county is approved (for tourism),” said Liz Knapke, marketing director for the Walla Walla Valley Wine Alliance. However, she noted a report from Destination Analysts of San Francisco indicating that 8% of travelers have been doing so whether permitted or not.

While agriculture is deemed an essential service, any resurgence of the disease stands to jeopardize labor supplies and could also affect demand. According to Proctor, many buyers are being very cautious about grape requirements, especially given the lingering abundance of supplies from previous vintages. Ciatti’s sources point to a below-average harvest both domestically and abroad, and that’s not necessarily a bad thing for anyone. “There’s really an uncertain future about what the needs are. Buyers are very hesitant to come in, and I’m going to buy something that I’m going to use in the future because they’re really not very certain what that’s going to be until they really understand this new normal,” he said.

— Peter Mitham

(Editor’s Note: This article was updated at 12:18 p.m., June 18, 2020 to correct the amount expressed in 9L cases of wine that may be distilled in Europe to offset the loss of on-premise demand.)

Within the space of two years, the global wine industry has confronted a rare combination of extreme abundance and extreme slowdown in demand. Combined with this has been a marked shift in international trading relationships toward a more protectionist footing. Globalism as we knew it is changing, and wine is finding its place in the market.

The defining moment in the current market may well have been 2018, which saw global wine production peak at a record 294 million hectoliters. A smaller vintage of just 260 million hectoliters followed in 2019, but it had to contend with an overhang from the 2018 harvest that put downward pressure on prices and slower demand that kept buyers watching their cash flows.

“There’s significant grapes out there still to choose from, so by waiting they’re not necessarily losing opportunities,” said Glenn Proctor, a partner with Ciatti Co. in Novato, Calif., during a review of the global wine market on June 3. “Definitely existing contracts are being renegotiated, both price and payment terms, as buyers try to build flexibility in those given their concerns about where the future’s going to be.”

The pressures mean that growers around the world are aiming for a smaller crop this year. They want to size it for where they expect demand to be as buyers grapple with cash flow while trying to determine post-COVID-19 demand. The global trade in bulk wine means the problem is worldwide. While the excess in California has pushed down prices, forcing some good-quality wine to compete at California-appellation pricing, a similar phenomenon has been occurring globally.

This has played out in two ways.

Europe, home to the three countries that produce 47% of the world’s wine — Italy, France and Spain — plans to distill upward of a billion liters of excess wine into spirit. The project is being funded with marketing dollars that went idle when the pandemic struck, a vivid illustration of how lost sales have pushed producers to move beyond older vintages of mass-produced wine aimed at feeding global demand. While France, Italy and Spain consume 25% of global production, wine sales have been flat and most production is exported; the three countries are the world’s largest exporters of wine. Meanwhile, cheap bulk wine from Argentina, where economic conditions have reduced domestic consumption, is finding buyers and has made exports a larger part of Argentina’s market.

“It’s a great place for buyers to go look today,” said Greg Livengood, a partner with Ciatti focused on the global market.

The price-driven demand for Argentine wine stands in stark contrast to what’s taking place across the Andes in Chile, which has seen steady demand from China. Buyers from Europe, cautious regarding pricing and consumer sentiment, have stepped back here just as they have from South Africa. “China continues to be a good buyer for Chile,” Livengood said. “European buyers are taking a much more conservative approach.”

This where the second impact of the global oversupply kicks in.

An abundance of wine has run into weaker consumer demand now exacerbated by what some expect to be the broadest recession in 150 years. While this will dampen demand among a segment of the population, it also has the potential to introduce a new generation to wines that offer a quality they’ve come to expect at prices they can afford. This may be a deflationary influence, but it could also buoy sales.

“We’re mainly trading in value wine, and that’s wine that could just as easily be sold in a box as in a bottle,” Livengood said. “After years and years of talk of premiumization and consumers trading up and out of the value tier, the current economic situation and the situation that we see looming out there in the future tends for us to believe there may be more demand for value wine going forward.”

Demand from China indicates the ongoing growth in that market, which had plenty of room to expand before the pandemic.

Based in Shanghai, Christopher Beros heads up the Wine Institute’s export program for Asia. China is the world’s most attractive market in terms of growth potential, as the number of consumers there continues to grow by leaps and bounds. The country’s middle class is expected to top 550 million by 2023, and the number of people in China drinking imported wine each month reached 32 million in 2019, up 48% from 21.6 million in 2014.

“It’s going to be very, very big, and it’s growing rapidly,” Beros said in a webinar hosted by the Wine Institute. “It’s still new to the world of wine.”

China also underscores how politics are influencing trade. While its purchases from Chile remain strong, China has threatened to boycott wines from Australia as a result of calls for an investigation and potential repercussions against China for its early handling of COVID-19 (the pandemic originated in Wuhan, China, with the first cases identified there in December 2019). Other countries, including the U.S., have also leveled criticism at China, ratcheting up pre-existing trade tensions including tit-for-tat tariffs that have pushed down China’s imports of U.S. wine from $82 million in 2016 to $39 million in 2019.

Meanwhile, the U.S. has imposed its own 25% retaliatory duties on various EU products, including many still wines from France, Spain, Germany and England. A review of EU tariffs is set to begin later this month with a final decision set for mid-August.

“Global politics, trade disputes, civil unrest – these are all things that as a bulk producer or a buyer you probably weren’t that worried about five years ago. Today, wine seems to be involved in all of it,” Livengood said. “I don’t know what we did to all these places. China is talking about wine tariffs on Australia, we’re putting tariffs on French wine, and it’s going all over the place.”

On a positive note, the U.S.-Mexico-Canada Agreement takes effect July 1. USMCA includes a significant win for California, granting its wines equal access to grocery store shelves in British Columbia. Canada is the world’s eighth-largest importer of wine by volume, consuming 2% of the global total, and the largest national market for California wine outside the U.S., making greater access an appealing prospect. Moreover, similar demographics mean there are fewer cultural barriers to overcome than elsewhere.

Summarizing the market for a Wine Institute webinar, Danielle Giroux, director of California Wines Canada, said U.S. wines command a premium in the market and hold 16% of the market by volume, equaling France and Italy. U.S. wines average $15.18 a bottle in Canada, a dollar less than French products and comfortably above Canadian wines, which average $9.41.

Prior to COVID-19, anything brand priced for more than $20 saw growing sales, Giroux said, but that’s not the sweet spot. According to Scott Montgomery, vice president of international business for Palm Bay/Taub Family Vineyards, the target price in markets like British Columbia — where the government effectively establishes the base price — is $20 a bottle, and exporters seek enhanced margins. But this means shipments would need to be less than $60 a case F.O.B. out of American Canyon, Calif.

While many provinces have opened to grocery store sales, what’s stocked are mostly mass-market brands retailing for less than 15 (Cad.) dollars a bottle. There are also certain constraints: In Ontario, for example, the wines are limited to those also stocked by the Liquor Control Board of Ontario. It’s the world’s single largest wine buyer but also tightly controls what consumers can select.

While the opening of B.C. supermarket shelves to California wine was a victory in the new trade agreement, Giroux said Save-On-Foods, the chain that kicked off supermarket sales of wine within the province five years ago, has said it will not stock anything but domestic wines. However, there’s a consolation prize: The prospect of wholesale pricing for hospitality accounts in B.C. would amount to the biggest win for imported wines since the provision allowing supermarket sales, she said, because it would make them more affordable for restaurants to list.

However, with local restaurants facing the same long road back as U.S. restaurants, the opportunity underscores just how much potential has yet to be discovered as the world finds its footing following COVID-19.

—Andrew Adams, Peter Mitham

Adam Ivor sees a whole new world of potential wine sales that has been largely unclaimed by U.S. wineries.

Literally a world of potential sales, as he says wineries are missing out on selling directly to foreign wine consumers who have little to no access to the wines of the majority of U.S. wineries. Many of these consumers also aren’t blocked by the vast sea of red tape that inhibits direct shipments within the United States.

Ivor is one of the founders of the company Gliding Eagle, which he helped launch in 2015 with the goal of helping wineries and consumers ship and track wines internationally.

Gliding Eagle based in American Canyon, Calif., ensures secure and safe delivery of wine by tagging each bottle with a small holographic label and 12-digit alphanumeric code that is also tied to a case ID code. All that information is linked to the company’s shipping partner, FedEx, which moves the wine. The system allows international visitors who purchase wine at one of Gliding Eagle’s American clients to get it back to their home country quickly and securely.

That still represents the core of Gliding Eagle’s business, particularly getting wine into Asia, but Ivor said he strongly believes U.S. wineries could better connect directly with wine consumers in many of the world’s major wine-drinking nations. “It’s just the natural progression of the industry,” he said. “There’s a massive opportunity.”

Growth in DtC sales more vital than ever

Ivor described the potential of the overseas DtC market in a session at the 2019 ShipCompliant Summit in Napa, Calif., but he said there was limited to no interest from wineries in subsequent months.

Then the whole world changed, and in recent weeks, he said, he’s been in touch with several wineries interested in setting up a program to capture direct sales from other countries through their own websites.

He said it’s not just because of the COVID-19 pandemic, but also the pain felt by wineries when tasting rooms were forced to close because of wildfires or because the power was shut off to prevent wildfires. Consumer buying habits have also changed, and how people visit wine country has evolved. The traditional tasting room sales model is not as dependable as it once was. Visitation counts are down as consumers linger longer at fewer wineries when they do come to wine country. “You have to create new points of customer acquisition and access,” he said. “We have to change up distribution and the route to market.”

One winery that does have a simple, minimal-click way to process international direct sales is Opus One in Napa Valley. From the winery’s homepage, it’s just a few clicks to determine that the entire cost — including taxes, duties and fees —  to ship a half-case to Slovakia would be $2,764, to Malaysia $2,532 and $2,686 to the United Kingdom.

Opus One has an international reputation that is unmatched by most U.S. wineries and even most Napa Valley wineries. Through its Bordeaux-based distribution network, the wine is in 90 countries, and more than half of its annual production, roughly 25,000 cases, is sold internationally. When consumers can’t find the wine in their local market, the winery’s website (available in English, French, Japanese, Chinese and Spanish) enables them to buy it directly.

“This is not new business for us, as we have been managing our international direct sales since 2010,” said Christopher Barefoot, the winery’s vice president of communications and guest relations. (He said the website also had a German version at one point, but the winery determined that German-speaking customers were more often than not using the international English version.)

Barefoot said all international orders are fulfilled from the estate in Napa Valley and shipped via FedEx, which has integrated into its system the duties and taxes required. “This way we are able to clearly show the customer what the full costs will be, as well as permit them, where it’s legal, to prepay these duties,” he said in an email.

While he said he couldn’t disclose specific figures on sales, Barefoot did say Japan and Hong Kong represent a “significant” portion of total DtC revenues, and these have been growing by average order value even as overall international direct sales have softened a bit recently.

He said the one major market Opus One does not ship to is mainland China, as the nation has imposed limits on the value of wine shipped directly. China’s limit on wine value is one of the barriers to international shipments, and some of the world’s top wine-drinking countries, such as Spain are closed to direct consumer shipments. Other major markets currently closed to consumer shipments include Denmark, Argentina, India and the Philippines.

Many countries also limit the amount of wine that can be shipped DtC, yet these limits generally only apply to that particular parcel so orders can be broken down into smaller shipments to ensure compliance. Germans can receive one case, or 9 liters, per shipment, while the limit on shipments to the UK is 100 liters and Japan allows a maximum of 18 liters per shipment.

Stop telling your customers ‘no’

Sandra Hess, owner of the consumer engagement and direct sales consultancy DtC Wine Workshops, said there is huge potential in global DtC sales.

Hess said those managing a winery’s DtC team should ask themselves how often they’re telling customers “no” as in: “No, we can’t ship to Japan or France or Australia.”

If that is happening more and more, she said it was time to figure out how to serve those customers as there are now tools to make that happen. Most wineries may think foreign shipments are an option for the largest wineries, but Hess said it’s actually a better fit for wineries producing less wine at higher prices. Based on her own case studies, she said it appears to be a great option to incorporate into a winery’s DtC program.

She said one Sonoma County winery she has been in touch with is a regular stop for tour buses, which typically are half filled with international visitors. All those tourists were just tasting and leaving, and now the winery is working out a system to retain them as DtC customers. “I think it’s a very smart strategy to take even 5% to 10% and allocate it to a proven model,” she said. “It’s a wonderful next step to consider.”

According to a 2018 study by Visit Napa Valley, there were 3.8 million visitors to Napa in 2018 and about 20% of these were international travelers. Most of these were visiting from Canada (18%), China (17%) and the UK (14%) and on average they were 44 years old, spent $162 per day and visited four wineries.

Ivor attributes the lack of foreign DtC sales to the U.S. wine industry’s tendency to stick to what’s always worked in the past. But he said running a business just on what’s worked before or what’s working now may leave one unprepared for what will work in the future. “In 1997, I didn’t know I needed an iPhone,” he said. “If you’re really good, you know what your customers want before they do.”

The company is now working with around 140 wineries, mostly in Napa and Sonoma counties, with some in Washington and Paso Robles, Calif. The company’s largest market is Hong Kong, followed by Japan, the U.K. and other major Asian markets. Ivor said the average bottle price per shipment is $100, with an average order size of about two cases. He said with duties and taxes, global DtC shipments make the most sense for wineries producing wines at higher prices or roughly $40 per bottle and higher.

In an example provided by Gliding Eagle, the company can ship a mixed half case containing three bottles of Sauvignon Blanc costing $40 each, two bottles of Cabernet Franc at $80 each and a bottle of reserve Cabernet Sauvignon priced $160 to a German customer for $285 or 80% of the wine’s total retail price.

Gliding Eagle has also found some success with international e-commerce retailers that can now list U.S. brands as well as the total prices for home delivery. Ivor said this is proving to be a faster and more economical route to market than traditional exporting, with the consumer paying less while the winery is paid more and paid more quickly. “I’m serious. It’s easier for us to ship to Japan in two days than it is within our own country,” he said. “We can’t ship to Utah.”

— Andrew Adams

Value of Domestic Wine Sales for 12 months ended May 2020:

• -4%     U.S. wines sales including bulk imports,  bw166

Other Wine Industry Metrics May 2020 data:

• +30%  off-premise sales value, Nielsen channels
• +22%  DtC shipments value, Wines Vines Analytics/Sovos
• – 53%  Winery Job Index, Winejobs.com
• – 8%    on-premise sales (ended April 18) Nielsen CGA

Consumer spending on domestic wine, including bulk imports, fell 4% to $48.4 billion in the 12 months ended May, market research firm bw166 reported. The decline affected all components of the market, with domestic table wine sales down more than 3%, domestic sparkling wines down nearly 2% and bulk imports down nearly 3%. Volume increased 1% on average. The greatest growth was seen among bulk imports, a sign that the global oversupply was working its way through the international supply chain.

The total wine market in the U.S. in the latest 12 months was worth $71.4 billion, 3% lower than a year ago. Spending on packaged imports slipped 2% to $23 billion.

The decline is primarily attributable to the impact of COVID-19, which has closed tasting rooms, bars and restaurants across the country and changed how consumers buy wine. On-premise wine sales were down 89% both in value and volume in May, a minor improvement from the 90% decline reported in April. The reopening of premises that began in late May will be reflected in June numbers, but significant declines from a year ago are expected for much of this year.

“We will see improvements, but come December we may still be looking at 50% declines versus prior years on a month to month basis,” bw166 managing partner Jon Moramarco said.

Sales of domestic table and sparkling wines through Nielsen off-premise outlets approached $1.1 billion in the four weeks ended May 16, a 30% increase versus a year ago. Table wine sales drove the increase, rising 28% to nearly $997 million while sparkling wines gained 27% to exceed $67 million. Volumes increased nearly 24% during the period to nearly 11.5 million cases. The slower pace of growth reflected consumer preference for pricier bottles, with the $20-$24.99 price tier posting the strongest growth of any price band Nielsen tracks.

Domestic wine sales in the latest 52 weeks totaled $11.9 billion, up 6% from a year ago. Domestic table wines accounted for $11.2 billion of the total, up 6% from a year ago. Sparkling wines increased 7% to $729 million. A closer examination of weekly data provided by Nielsen during the pandemic indicates that sparkling wines enjoyed especially strong sales in the week of Mother’s Day. Case volumes increased nearly 3%, with table wines increasing in line with the market as a whole and sparkling wines outpacing overall growth at 5%.

With respect to off-premise sales, imported table and sparkling wines represented 30% of the channel in the 52 weeks ended May 16. Sales totaled $5.2 billion, of which table wines accounted for $4.1 billion. Italy was the leading source of imported table wines with $1.3 billion in sales in the period, or 32% of the category. Australia saw $749 million in sales, or 18% of all imported wines, while New Zealand ranked third with $552 million in sales. New Zealand also claimed a 13% share of total sales value, on par with France, which saw the fastest growth in the period at 10%. Among the major countries exporting to the U.S., Argentina saw the greatest decline with sales dropping 8%.

The first full month of on-premise sales data during the pandemic period from Nielsen CGA offered a less rosy picture of the impact COVID-19 had on wine sales this spring. The closure of most restaurants in mid-March continued in April and led to an 8% decline in on-premise wine sales to $16.4 billion in the 52 weeks ended Apr. 18. All types of wines were impacted, but sparkling and rosé sales were the least affected. Domestic wines, which hold 66% of the channel, saw sales more impacted than imports, falling more than 8%.

Direct-to-consumer (DtC) shipment value totaled nearly $303 million in May, according to Wines Vines Analytics/Sovos ShipCompliant, up 22% versus a year ago. Shipment volumes increased at twice the pace, up 44% to 826,280 cases. This was the third straight month that growth in volume exceeded value, pushing down the average bottle price of shipments to $30.53, 16% lower than a year ago.

Premium regions such as Napa County have not been immune to the downward price pressure. During the latest 12 months, shipments from the region totaled $1.5 billion on a volume of 1.9 million cases. Cabernet Sauvignon led shipments, claiming a 46% share of value at $699 million, followed by red blends at $264 million and Pinot Noir at nearly $113 million. Total shipment value increased 5% but volume increased 10% versus the previous year, pushing the average bottle price down 4% to $65.29.

The trend accelerated during the most recent three months, which saw DtC shipments increase as restrictions related to COVID-19 kept consumers sheltering in place. Shipments in the three months totaled $469 million, up 5% from a year earlier. But average bottle price dropped 16% to $58.05. This reflected a significant increase in shipments of bottles at less than $40. While $60-$79.99 was the most popular sub-$100 price band a year ago with $60.5 million in shipments, this year the $20-$39.99 band took that honor with shipments increasing 55% to more than $86 million. Meanwhile, shipments in the $100-plus range declined 14% to more than $191 million.

Overall DtC shipment data indicates a slight narrowing in growth of value versus volume but the influx of new consumers and acceptance of DtC shipments heralds a significant change in channel utilization.

Winejobs.com’s Winery Job Index stood at 272 in May, down 53% from a year ago. The reading was the worst for the month since 2012. Weaker demand for sales and marketing staff as well as direct-to-consumer positions, including tasting room and retail staff, drove the decline. Production roles and vineyard labor remained the most resilient job categories, with demand down just 32% and 49%, respectively. The two categories were also the most significant components of the index for the month.

With lockdowns in several jurisdictions easing just in time for the Memorial Day weekend, the hiring picture was brighter than in April, even for DtC and sales and marketing roles. Similar to March, sales and marketing positions saw the weakest demand since 2009, an improvement from April when the reading for the month was without comparison in any prior period.

While the Winery Job Index reported year-to-date hiring down 40% from a year ago, demand has picked up steadily since bottoming out in March. Demand in May was stronger than in April, and is steadily increasing as tasting rooms reopen and harvest approaches. The greatest demand has been for harvest labor, with exceptionally strong demand apparent as June began.

King Estate in Eugene, Ore., is one of just three wineries in Oregon producing more than 300,000 cases a year and the third largest, by annual case production, of the state’s 803 wineries. The winery was founded by Ed King Jr. (1921-2012) and his son Ed King III, who is the current CEO.

King was born in Kansas City, Mo., where his father had founded and operated the avionics firm King Radio, and later earned his MBA from the University of Oregon in Eugene. After a career in health care and education, King and his father purchased 600 acres of land outside Eugene in 1990 and established the winery in 1991. As King’s family became involved in the business it expanded, and the estate now comprises more than 1,000 acres. In 2009, the company launched the Acrobat brand, which quickly grew into national distribution and was sold to Foley Family Wines in 2018. The estate was certified biodynamic in 2016, and in that same year it also became part of the Willamette Valley AVA after leading an effort to change the boundary to include the property.

Q: How have you responded to the COVID-19 pandemic, and how have you managed relations with your distributors and key accounts?

Ed King: We have had to make a lot of changes. Some of the hardest aspects are getting people to consistently distance from friends and colleagues. It has not come naturally to most. With a restaurant and active tasting room and other guest facilities, we immediately closed all public-facing spaces and began moving all possible staff to remote working. We began at an early point to take temperatures of staff still on site, implement distancing and stagger shifts. Winemaking, bottling, some administrative staff and agricultural activities are still located at the winery. Even with the staff that works out of doors, new protocols were adopted.

Sales has posed another set of challenges, but there has been a de-emphasis on all personal contact. Of course, the on-premise sales efforts ceased. Communications with distribution has been important and necessarily remote. If you do not already have those relationships, it is much harder. Nationally, we are around 70% off-premise with our brands, so the impact was lessened for us. These shifts will continue, and new mini channels to customers will grow, whether it is delivery or online wine retailers.

Expensive, restaurant-directed wines will probably be a reduced part of case sales volumes for wine in America for some time to come.

Q: Have you reopened the tasting room?

King: We are only open for bottle sales to go. For now, we do not see all of this “reopen” effort as being safe or economically viable. Things will change favorably over time, but the way business is conducted will be changed.

Q: When you sold Acrobat in 2018, did that also come with a greater focus on direct-to-consumer sales? Has that strategy changed at all in the course of the pandemic?

King: It has. Our return to focus on King Estate and our many small-production wines has been gratifying, but the marketplace is in a massive shift, as we all know. Expensive, restaurant-directed wines will probably be a reduced part of case sales volumes for wine in America for some time to come. The value segment has every reason to grow with high uncertainty and high unemployment.

Q: Have you had to change DtC strategy at all to account for the pandemic?

King: We are looking at everything from tele-sales to ways to get onto online grocery ordering sites. It seems that people have had some extra time on their hands and are willing to do more shopping online and taking delivery. We have seen an uptick in new club membership. I think that is mostly based on individuals looking for wines to receive at home – and maybe having more time to deliberate and be selective. But what is happening is really all sorts of other mini-channels opening or becoming more active, such as telesales and active email campaigns.

Q: You launched Soldier, which is a Columbia Valley Cabernet. Do you plan any further acquisitions to support this new brand?

King: Soldier really comes from our long-time activity in Washington winemaking. We have worked with vineyards for fruit from all Washington AVAs over the years, made wine at several locations in Washington, and powered our North by Northwest brand from those vineyards. The Soldier is really about innovation and I think innovation continues to be important. It is a noisy, crowded marketplace and new wines of great value, strong messaging, and striking packaging will have an even greater opportunity as customers turn to new offerings for solutions.

Q: Do your most loyal customers live in Oregon or other states?

King: Our strongest state sales are in Oregon, but we also do very well in the southeast of the U.S. Many Oregon wine customers are actually looking for wines with a sense of place or a legit story. The customers seem to know that it does make a difference in their wine experience when they seek their wines just a little more carefully than just grabbing something on sale in the wine aisle. Oregon wine drinkers know that time invested in the effort to learn about the wines is well worth it.

Q: How have you been trying to connect with younger consumers or those who aren’t regular wine drinkers?

King: Any way we can. I think many of the younger customers are looking to make their own brand allegiances and make their own discoveries. The success of new approaches and packages aligns with this. Just because someone’s parents drank a brand regularly probably does not go too far with younger clients.

You have companies from other states buying Oregon fruit and taking it to their states where the legal winemaking ingredients and standards are lower, and then selling the wines as “Oregon” but at a price that is not consistent with Oregon standards.

Q: Have you found much success on the export side of the business?

King: Exports have been tough. We have sold wine all over the world, from Australia to Norway, but global competition is significant. Many people want to play. We have focused on the U.S. and Canada.

Q: Since officially becoming part of the Willamette Valley AVA, have you seen a corresponding increase in the value of the brand?

King: Our location was literally feet from the Willamette Valley AVA. Some of the original creators of the Willamette have told me it was just an arbitrary line drawn 45 to 50 years ago. We had done well going our own way, but the actual inclusion has resulted in a lot less explaining about our location and terroir, and a lot more effort on our part to advance the cause of the Willamette Valley as active industry members.

Q: Is the Oregon wine industry threatened by companies in other states developing brands with either purchased grapes or bulk wine from Oregon?

King: Yes, this is a problem. You have companies from other states buying Oregon fruit and taking it to their states where the legal winemaking ingredients and standards are lower, and then selling the wines as “Oregon” but at a price that is not consistent with Oregon standards.

Q: Do you think it’s best addressed with more in-state regulations? If not, is there a better way to address it?

King: The out-of-state brands issue is based on the AVA system in the U.S. and gaps in the way we regulate them. There needs to be legislation in Oregon, from Oregon lawmakers, and perhaps an interstate compact with California about double standards being applied to cross-state production, and could also be addressed at the federal level. If the goal is truly transparency and getting information to the public and customers, we need to follow through on this. What’s going on now is confusing at best.

Q: Aside from the pandemic and the resulting effects on the national economy, where do you see Oregon wine’s biggest challenges and opportunities?

King: Realigning with where the customer prioritizes as we recover and adjusting the number of active wineries in the state to the survivors. There are a lot of business models in the Oregon wine industry, but many are small enough to be very dependent on cellar-door sales. And yet our population is relatively small. Many smaller wineries also depended on selling to restaurants and bars as well, and that may be sufficiently damaged as to require a long time healing.

Oregon has the climate, the culture and the courage to recover and thrive as the world comes through the crises. However, the wine business as we know it will be changed forever — there’s no going back. Key now is to do the hard work of adapting to many new realities.

— Andrew Adams

All events listed here may be delayed or moved to a webcast format depending on public health recommendations. 

Aug. 4, 2020: Pack, Wine Packaging Conference

This year’s conference has been moved online and will feature several webcast sessions as well as a virtual trade show featuring the industry’s top packaging vendors.  Pack Wine Packaging Conference

Aug. 26: Central Coast Insights

The economic and financial conference in Paso Robles, Calif., for the wine industry of California’s Central Coast.  CentralCoastinsights.com

Aug. 27: WiVi Central Coast

WiVi Central Coast, is the premier wine and viticulture symposium and trade show for the wine industry of California’s Central Coast. Now the largest wine industry event south of San Francisco, WiVi takes place in Paso Robles, Calif., and features nearly 200 exhibits and hundreds of new products, product demonstrations, educational seminars and networking opportunities for winemakers, grape growers, winery owners and managers. This one-day conference and trade show features sessions by top industry leaders on regional viticulture, enology and DtC topics and gives attendees the opportunity to understand and experience new trends and technology. WiviCentralCoast.com

Sept. 1: Winejobs.com Summit 

Winejobs.com Summit is a forum for HR professionals to connect with their peers and discuss the hiring, retention and training of winery employees. The event is a full-day conference taking place at The Archer Hotel in Napa, Calif.  winejobshrsummit.com

Sept. 15: Wine Industry Technology Symposium

The Wine Industry Technology Symposium is the only conference focused on successfully deploying technology solutions in the wine industry. The conference takes place at the CIA Copia in Napa, Calif. wbwits.com

Sept. 15-16: Wine Industry Financial Symposium

The Wine Industry Financial Symposium is the premier event covering the financial, business and strategic issues of the wine industry. Attendees to the financial symposium can also attend sessions of the Wine Industry Technology Symposium, which will take place concurrently at the CIA Copia in Napa, Calif., on Sept. 15.  wineindustryfinancial.com