Premium wine sales on the rise

SACRAMENTO - Wine sales increased in the United States last year as California premium wineries continued to display strength even though everyday wine struggled amid growing competition from craft beer, cider and distilled spirits, a key analyst said Tuesday.

Overall, wine shipments into the United States, including imports, rose 1 percent to 375 million cases in 2014, said Jon Fredrikson, president of the Gomberg, Fredrikson & Associates, which conducted the survey. But California wineries outperformed the market, increasing shipments 4 percent to 224 million cases, he said.

Fredrickson said the industry is facing “a tale of two markets.” While sales of wines priced at $10 a bottle and above are continuing to grow, wines priced at $9 a bottle or less have been declining since late 2011.

“We have lost some pizzazz relative to some of the other beverages,” said Fredrickson, who noted he was somewhat gloomy after previous years of robust sales growth.

But all the news was not bad. Premium wines saw big volume gains, especially at the $10 to $14 per bottle range, which jumped 12 percent, according to his survey. Super-premium ($14 to $20) volume increased by 10 percent.

That is welcome news in California - which makes more than 90 percent of U.S. wine - and particularly on the North Coast, where Sonoma and Napa vintners are the main producers of more expensive American wines.

“The outlook is fantastic,” Fredrickson said of the North Coast industry.

Among the reasons for continued optimism for the local wine industry: the 2012 vintage, a large yield with a reputation for good quality, is coming onto retail shelves. The 2011 vintage was uneven with a lower yield.

In addition, California premium wineries have more wine available to sell than their counterparts in Europe. Italy and France are the largest importers, making up 59 percent of the overall foreign market into the United States.

“The relative quality levels that we have in inventory now are far better than relative quality levels in Europe for those same vintages,” Fredrickson said.

Fredrickson released his year-end figures at the annual Unified Wine & Grape Symposium, the largest wine industry show in North America. The three-day event draws 14,000 attendees and 675 exhibitors from around the world.

His survey confirmed anecdotal evidence and polling that shows the wine market faces increased competitive pressure from the exploding craft beer and cider markets.

Commercial beer from the large breweries still dominates the $174 billion U.S. adult beverage market with a 41 percent share. But it has been losing ground in recent years to craft brewers, who have carved out a 7 percent stake. Fredrickson said he believes the wine market, with an 18 percent overall stake, has also been affected, noting that craft beer shipments surpassed sales of California wine costing $10 or less around 2012.

“Younger people, especially young men, are drinking (craft beer) to a certain extent instead of wine. A lot of it’s coming out of commercial beer,” he said.

He also noted the pressure coming from cider companies, which shipped an estimated 24 million cases in 2014, up from only 3 million cases a decade ago. In addition, craft spirits also are gaining inroads into the beverage market.

“Now we’ve got a zillion different flavors of all these kind of spirits and all these cocktails. Mixologists are rock stars,” Fredrickson said. “It’s amazing to me that you equate a mixologist with a winemaker.”

The immediate affect can be seen in the Central Valley, where some farmers are deciding whether it is economically feasible to continue growing grapes. In the San Joaquin Valley, farmers are starting to pull their vines out, said Jeff Bitter, vice president of Allied Grape Growers, a Fresno marketing cooperative representing nearly 600 growers across the state.

Since the last harvest, 15,000 acres of grapes used to make wine have already been pulled as growers tend to plant alternative crops that can make a profit, Bitter said.

“You cannot hardly travel five miles without (seeing) a vineyard pulled out,” he said of the San Joaquin Valley.

Even with the pullback in the Central Valley, grape acreage increased last year by 10,000 acres across the state to a total of 555,000 acres. That amount only includes vineyards currently bearing grapes. Total acreage is expected to grow to 562,000 acres this year, Bitter said.

Overall, 4 million tons of grapes were crushed in California to make wine, down 6 percent from 2013’s massive crop, according to Bitter. In the North Coast, Bitter estimated that 540,000 tons were crushed last year, an 8 percent decline from 2013 but 4 percent larger than the region’s average crop.

In terms of varietals, pinot noir and cabernet sauvignon remained popular in 2014, according to Fredrickson, who analyzed data from market researcher Nielsen. Pinot noir sales rose 6 percent by volume in U.S. food stores, with a 15 percent increase in the premium category ($10 to $14) and a 23 percent increase in the super-premium category ($14 to $20).

Cabernet sauvignon sales rose 4 percent overall, with an 18 percent increase in the premium category. Red blends were up 7 percent, while chardonnay declined 0.1 percent, though it rose 6 percent in the premium category and increased 11 percent in the luxury category ($20 and above).

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.