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Land, Brand or Label?

These days, winery success stories happen about as frequently as a DRC tasting at Safeway.  Yet, there are success stories to be found in the far-reaching corners of the wine business.  For example, private-label wines are hot and according to one insider, business is “booming.”

It’s an acknowledged reality that terroir or land-driven wineries with an established brand will come through this economic climate a little frayed, but alive, with some earned wisdom moving forward.  Wines that emphasize brand before the land coupled with good distribution will be just fine and probably stronger.  And, labels that are value-driven and hitting the right price points are doing extremely well and growing.

If a winery doesn’t fall into any of the above buckets, well, it seems the times are tough.

While the mainstream media has a gallows humor based fascination with the “death” of the high-end, what they haven’t discussed is where exactly the growth is coming from in the “value” and “trading down” equation. Yes, I understand that under $20 wines are selling, and $8-$12 dollar wines are selling even better, but what kinds of wine are moving?

Based on interviews with Dana Fehler from Adler Fels and Lisa Giglio with Sonoma Wine Company, it seems private-label wines, an infrequently observed niche in the wine business, are driving much of the “value” segment.

Most casual wine lovers understand the stratification of independent winery versus corporate owned winery, and even the negociant model, but the tale of the tape rarely reaches into the private-label business, a segment so benign that it doesn’t even rankle the wine purists—those that frown upon corporate ownership of wineries and brand development. 

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Yup, private-labeling is an area of the industry that moves along in quietude outside of the brand and land fray.

Adler Fels Winery and other wine companies that predominantly create private label wine for retailers are seeing tremendous growth in their business.  Some reports indicate business is up 25% or more in this sector.  According to Dana Fehler, the Sales & Marketing Manager at Adler Fels, “Business is booming.”

Head to a Trader Joe’s or a Cost Plus with a discerning eye and you’ll notice it as well.

On a recent trip to Trader Joe’s I counted at least seven different Trader Joe’s branded wines in addition to a raft of private labels not seen anywhere else at retail. 

A recent interview at RJ’s Wine Blog with Doug Bell, one of two wine buyers for Whole Foods, indicates the organic grocery store chain has in between 90-100 private label brands in their store at any given time.

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Fehler notes, “Many major grocery chains across the nation have come to us this year asking for multiple private labels to compete with major national brands across all categories.”

Every third-grader knows Newton’s Law of Motion – for every action, there is an equal and opposite reaction.  With the trending we’re seeing in the wine business – increasing wine consumption, sales velocity at lower price points, increasing amounts of wine on the bulk market, and the 3-tier system shutting down on taking new brands, the equal and opposite reaction is growth by those that can capitalize on the equation—large retailers.

The deductive reality is that women buy the majority of wine, the majority of wine is purchased at places other than a wine shop and large retailers are continuing to try and capitalize on earning a greater share of the consumer wallet with rising wine consumption.  Voila! Private labels.  And, a significant benefit to private label wine is the margins are better for the retailers because they “clear” the wine into a state, paying a distributor a fraction of the cost instead of traditional mark-up, and consumers can’t price shop the wines because they aren’t sold elsewhere – and that equals more profit.

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So what does this all mean for a wine consumer?  I’m not sure it means anything on a granular, immediate level—these ebbs and tides happen in cycles.  However, at a very high level the trends are interesting:

1) The wine industry is unwittingly feeding competition between the private label wines, driven mostly from the bulk market, against corporate wines at the same point of sale – big box retailers.  It’s like Dad putting two brothers into the ring to box each other, knowing that he’ll benefit from the prize money either way.

2) “Clearing” wines into a state by a large retailer is hardly ever discussed, but frequently occurs.  This “2.5” tier model certainly allows programs like winery-to-retailer direct-to-trade to gain larger mindshare, if not a bigger foothold, as smaller retailers look to continue to differentiate and compete against the big box retailers.

3) Smaller wineries with their own vineyards, caught with existing inventory, are likely reducing the size of their production, declassifying wine and selling it on the bulk market, particularly because a 2nd label of their own creation (to maintain “brand” and price integrity of the main label) will still have a difficult time earning distribution and nobody wants to get caught holding the bag twice.

4) Quality wine, already notable in large chunks of the under $20 wine section, will seemingly get better and better as higher-quality finished wine finds its way into the secondary market.

5) Several of these new to newish private labels are one 94 point score (or a rumor about origin) away from creating a buying frenzy

Perhaps the biggest factor that I see is the notion that smaller wineries will reduce the size of their production trying to right-size with demand for ’09 and beyond.

The obvious signs point to luxury wines getting rarer and rarer in quantity.  Are 2000 case wineries destined to become 1000 case wineries? 1000 cases will become 500 cases?

Can it be an eventuality that the divides in the wine market will continue to grow stronger and sharper?  The division between enthusiast and the elite will grow wider?  Wines of secondary provenance will continue to be the introduction and, perhaps, the placeholder for most wine enthusiasts while the luxury wine market becomes more unobtainable, based not on price because of the illusion of quantity, but rather strictly based on quantity?

It’s sport to predict when and whether the high-end of the wine market will come back.  Of course, consumers will come back to it, eventually.  We always do. In my mind, that’s not the question.  The question is: What will we come back to?



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Posted in, Wine: A Business Doing Pleasure. Permalink | Comments (11) |


Comments

On 10/01, Dr. Horowitz wrote:

Nobody knows exactly what we will come back to, but I bet that the success of future trophy wine people/brands will correlate to the number of their facebook fans and twitter followers.

Lookout Aston Kutcher cab!

On 10/03, bruce nichols wrote:

Finally way down in point 4, I saw the quality issue raised, although not quite in the manner I thought.
My personal experience with private labels has not been quite as rewarding. It is so “hit and miss” when you have zero background on the wine, producer, importer etc.

Total Wine, which has mega-stores north of 50 in number (including California) is perhaps the best example. I think they advertise having over 5000 labels on the shelves, but consumers would be hard-pressed to recognize 4500 of them. While many of their wines fall in the “value” price point bucket, I have been less then thrilled with 3 of 5 bottles I buy there. Make that used to buy there.

Same with Costco and other discounters,
There’s something to be said for sticking with names you trust, be it producers or importers and for that matter - retailers.

On 10/03, jeff wrote:

Hi Bruce,

Thanks for the comment.  Generally speaking, I agree with you—many private label wines are just plain bad, unbalanced, insipid, and flawed.

The reason I didn’t talk about this is because, generally, both of the companies i talked with—Adler Fels and Sonoma Wine Company—send out quality wine.  And, it’s hard to throw a blanket on the entire category.

You mention Total Wine—personally, I’ve had poor experience with Wine Styles, where $18 wines have been total crap.

It’s a reality that a lot of private label wine is horrible, but I think it speaks more to the retailer that sells it than anything else.  If they overprice bad wine it’s their own business they hurting.  That’s kind of self policing in and of itself.  Caveat emptor.

Thanks again for commenting!

Jeff

On 10/03, Dylan wrote:

Very good point, Jeff. All a retailer does by over-valuing poor product is hurting themselves in the long wrong. They will make their initial sale, but who will come back? Not to mention how much more quickly bad news travels than good news.

On 10/05, Christopher Jones wrote:

This is a great blog and really gets the the crux of a shift in the fine wine trade.  The momentum here started quite a while ago and, as you say, quietly, by retailers which were unable to make money on well known brands.  There is a definite shift in revenue going on in the industry right now from distributor and winery to the retailer.

On quality, I think that in the near term we will see very high value in some of these private labels for consumers who will spend $20+ but it won’t last beyong 2010 vintage; the well will run dry in a few years for low priced juice of high quality from key appellations. What I find distrubing is the potential commoditization of appellations by retailers.  They need to take off their price-centric lenses and start to focus again on place and producer.  Wine consumers will always return to quality.  One positive thing is that there is a price correction happening that has been needed in the top end.  When retailers start to seek out great producers again, the consumer will benefit and we’ll be left with a healthier market for the long term.

On 10/05, .(JavaScript must be enabled to view this email address) wrote:

Everytime a big crises in sales is here, private labels are “reinvented” again. Only, this time, they are here to stay permanently, since they are treated far more seriusly by the producers and the one who orders them, becoming an important new wine category. Who knows, maybe we will witness a private label “with conntrolled geographical origin”. The power is in the retail anyhow, so, until it’s changed, the 2.3 tier system will bring more and more new wines to the stores. And they lerned that cheating in wine lasts very short, so they’ll go for longer therm projects. Maybe a new “win-win” combination on the benefit of the consumers?

On 10/07, Mike Owen wrote:

The trend towards private label wines will continue as long as the economic climate drives people to not care what they buy (drink), as long as it is cheap.  This is the same cycle that we saw during the Carter years with “Beer” beer.  The pendulum will swing again in the future and the producers who provide value - meaning quality wine at a reasonable price with a minimum of pretentiousness - will reap the benefits.

On 11/07, plr wrote:

This is really a wonderful blog as i like wines the most. In this blog i came to know about the quality and the image of private brands’
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plr

On 02/22, lucy wrote:

That’s some great photos you have there. Where did you get them?

private label rights

On 04/13, .(JavaScript must be enabled to view this email address) wrote:

I recently read that Wine is still becoming more popular then beer. I was recently working with 2 friends on our schmuck ratgeber where we also had a couples of wine. They said that they prefer the Land first in wine, then the brand and maybe the Label as last choice if they take the wine or not.

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The best way to know which styles are ??t?during each season is to pay attention fashion websites and trend setting individuals.Longchamp was started in 1948 in France as a pipe-covering business, and expanded to leather goods in 1955. In 1980, when the founder son took over, the line grew to include clothing, scarves, and other various accessories. All products are still made in France, and are sold all over the world both in department stores and their own boutiques.. Phones have become useful and crucial for a cross section of folks. Proper from a businessman to the elderly who wish to maintain in touch with their family members and close ones, to the young people who are just beginning their college - the mobile has become essential for everybody. In fact, the teenage market can be a massive one for cell phone manufacturers, and there are many mobile plans and functions that are specifically aimed towards this market.A pair of Swiss climbers reaches the bottom of the wall two minutes before us. We pause and watch while they set to work. There’s no sense crowding on a wall as big as this, not with the constant risk of being hit by rockfall from climbers close above. Personally traveling to insurance policies agents or searching manually via the yellow pages in purchase to get in touch with them and collect information regarding takes a whole lot of time. If you decide on to acquire on-line taxi insurance coverage, all you have to do is important in the words “taxi insurance” in the research bar in search motor web page and have all companies listed out on your display. Search engines invest a whole lot of time and energy ranking site. But just like a coin the Hermes atelier is an unassuming industrial building located in the grey Paris suburb of PantinHermes outletHermes mantra of quiet discretion translates to a surprisingly pragmatic approach or see, a thing that at one time was common, or a great deal, overtime grew to become scarce. But who stated exclusive had to be expensive. I believe that heirloom jewellery can be customized designed, and obtained at an affordable selling price.Cush became the god of gods, known in mythology as the god Janus. January is the of Janus. In Roman mythology, May was the month of Cush wife, Maia. It often involves a character facing a moral dilemma or making a questionable decision and then suffering the consequences of that choice. Many folktales could be viewed as extended parables. Many fairytales could be viewed as extended parables except for their magical setting. It may be a pipe dream. Of all the long-term, “new economy” investments envisioned in the House legislation, such as Internet modernization and renewable energy, the roughly $30 billion set aside for energy efficiency is the least likely to generate the kinds of secure high-tech jobs that President Obama has talked about. Manufacturing of lights and other energy-saving devices is likely to move offshore, analysts say..But the Burj Al Arab’s accommodations only get more luxurious. Two Royal Suites take up the entire 25th double floor. Leopard print, gold and marble swathe the 2,559-square-foot space, and a rotating canopy bed holds court in the master bedroom. In this way people will start registering their businesses with you. When you list enough business for your fresh directory you can stop free listing. Select a suitable price for registration. 131 N. La Brea, Los Angeles. (323) 938-8604; 10914 Kinross Ave., Los Angeles. One: Your original color - You don’t want to get a color that will clash with the original color of your hair. It is always a good idea to look at color samples before deciding. This will help you find a color that will look good in your hair instead of making you look ridiculous..All Hermes shopping bags are designed with a whole lot of careful planning and patience. The hard work with the designers and the people employed in the manufacturing unit can be seen in the intricate sewing, and the choice of materials raised for making the bags. Lots of Hermes handbags are made from animal skins, such since those of crocodiles together with alligators, and that adds a lot to the quality of time it takes to provide one bag. Years ago, back when I was writing for Minnesota Monthly magazine, I was faced one day with an impossible story. You know the kind: I had done too much reporting, put my whole heart into the research, and now I wanted so deeply for it to be good that I choked. Set the bar too high, and then just sat there looking at it.. The Sabrina would have been much lower, probably about $300. On one count, I would have been remarkably close (not much of an accomplishment, considering that this is my job); on the other, not so Hermes Birkin Bags has many, many loyal fans who love the brand’s bags (not to mention the many other products it now offers), and I can’t help but think that those enthusiastic Hermes Birkin 25CM Bags customers have to be the primary audience for such an expensive bag. For that amount of money, though, I’d suggest they buy the Sabrina (which would even be useful in the rain!) and save the other $1100 for two or more future Hermes purchases..Serbia. Seychellien. Sierra Leonessa. The Lady Bag is being shown once again in single top handle and double top handle styles. The detachable shoulder strap is also reappearing on the Lady Bag adding to the versatility of the handbag as a whole. 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