Wine shipments increased 1.3 percent in the United States last year, continuing a more than 20-year expansion for the sector even as it undergoes tremendous changes in the way wine is distributed and sold.
U.S. and foreign wineries sold approximately 403 million cases in the United States last year, according to preliminary data released Wednesday by bw 166, a Santa Rosa consulting firm, at the Unified Wine and Grape Symposium, the largest wine industry trade show in North America.
Consumers spent $41.4 billion on wine at U.S. retail outlets last year, an increase of almost 3 percent from the previous year, according to Danny Barger, senior vice president at Nielsen.
The data underscores the strength of the U.S. wine industry, although competition is increasing, said Mike Veseth, an economist and wine blogger.
“The state of the industry is strong,” Veseth said.
“The wine market is going to get more and more competitive.”
Imports into the U.S. wine market rose 3.5 percent last year, posing an increasing threat to American producers. Sales of rosé wines from France soared 43 percent, while sales of foreign sparkling wines jumped 11 percent from 2016.
The growth of domestic wine shipments continues a trend of annual increases that began in 1993, initially triggered by the news reports of the French Paradox, research that showed moderate drinking helped in curbing heart disease.
However, the wine industry is growing increasingly concerned about consolidation within wholesalers and national retail chains, which makes it much harder for small and medium-sized wineries to secure shelf space in supermarkets and wine shops.
For example, the two largest wine distributors will control 56 percent of the market following the merger of Republic National Distribution Co. with Breakthru Beverage Group, which is under review by federal regulators, said Mario Zepponi, founder of Zepponi & Co., a Santa Rosa-based mergers-and acquisition firm.
At the same time, more national supermarket chains are merging as well.
The top five grocery chains in the United States now account for almost 50 percent of wine sales within those stores.
“It creates a narrower passageway to the marketplace,” Zepponi said.
Smaller wineries have two options, he said: either focus on selling their wine directly to consumers or concentrate their distribution within a regional footprint.
Some local wineries have provided an example of how to succeed. For instance, Kosta Browne Winery of Sebastopol has been the “gold standard” in selling the majority of its wine directly to consumers by focusing on its highly rated wines at a price point of $60 to $90 a bottle, Zepponi said.
Meanwhile, Napa-based Bread & Butter Wines settled on a strategy of targeting states in the northeastern United States, which ultimately resulted in almost two-thirds of its sales volume. Novato-based WX Brands bought the company last year because of its success in that region.
“Don’t try to roll out a national footprint,” he said.
“You are going to exhaust sales and marketing resources. You are going to exhaust your capital. You are going to be frustrated.”
The consolidation within the wholesale business has distributors taking steps to ensure they don’t lose prized accounts, said Barry Herbst, the wine director at Bottle Barn in Santa Rosa.
Some have offered discounts to retailers on select accounts to guarantee their winery clients are stocked on the shelf, resulting in bargains for wine shoppers.