Wine market up 2% in 1994

Wines & Vines, Jan, 1995

1994 will likely be looked upon with favor by the wine industry as shipments of California table wine surpassed the previous level set in 1982. What's more, last year's total U.S. wine market, including foreign wines, should reach 455 million gallons, a gain of 2% over the 1993 total.

That's the view of Jon Fredrikson of Gomberg, Fredrikson & Associates, leading economics reporters for the wine industry.

1994 turned out to be a very good year after a decline in 1993, when all table wine volume dropped 3% and total wine shipments were down 6%. In comparison, Fredrikson said that all table wine shipments will have increased by about 5% in 1994, to 356 million gallons, a 19 million gallon improvement over 1993.

Fredrikson said he estimates the favorable gains in 1994 will continue into this year, but at a lesser pace. He forecast table wine to grow by a little under 4% to 369 million gallons. He [TABULAR DATA OMITTED] estimates that most of the remaining wine categories will decline, so total wine shipments (into U.S. distribution channels) will gain about 1% this year.

Fredrikson's forecasts for 1994 and 1995 assume relatively stable economic conditions and no changes in federal tax policy.

Fredrikson pointed out seven major industry developments that occurred in 1994:

(1) Canandaigua of New York State purchased the Almaden and Inglenook brands from Heublein, making Canandaigua a strong number two behind E.&J. Gallo; (2) the bag-in-box business has boomed, particularly following the introduction of Gallo's new Peter Vella package; (3) wine coolers are nearly extinct, with shipments now less than 20% of shipments in peak year 1987. While this category - wine coolers - makes the industry look bad, the new malt-based coolers continue to make progress. (Gallo's Bartles & Jaymes malt-based coolers grew nearly 20% through last October.); (4) sparkling wines again were soft with competition stiff at all levels; (5) strong demand has eaten into what were grape surpluses, so that now many cultivars are in balance or even a bit short. Many wineries raised FOB prices late last year; (6) many premium labels, such as Ferrari-Carano, Estancia and Kendall-Jackson, were and are hot in the marketplace; and (7) the hot 1.5 liter business in supermarkets is driving varietal totals out of the park.

Fredrikson noted that this year, California and other wine producing states will be releasing wines from highly-praised vintages. Consequently, he expects the action in super-premium and ultra-premium wine to remain strong. However, strong competition from Argentina, Chile and southern France will keep price pressure on the popular-priced premiums.

CALIFORNIA TABLE WINE SALES ROSE 5% IN 1994 AS MANY WINERIES GREW SOLIDLY

As the American economy continued to improve, so did shipments of California table wine, which rose about 5% last year.

The Nielsen's Winescan data indicated varietals grew about 16% in supers. Red varietals and Chardonnay continued to grow rapidly with the most growth in 1.5 liter packs. While growth of commercial wines in 5 liter bag-in-box packages rose 50%, there was an offsetting decline in other large sizes packaged in glass, such as 3 and 4 liter bottles.

TRADITIONAL VARIETIES IN THE SUPERS

1994 reflected the ongoing value of the French Paradox, aired in 1991. Nielson's Winescan showed all red wine sales gained 18% in supermarkets, as the red wine market share rose to 24%. Among the major gainers in varietals were Merlot (+47%), Pinot noir (+47%), Red Zinfandel (+24%) and Cabernet Sauvignon (+21%).

Queen Chardonnay continued her reign, as supermarket sales boomed out by 28%. The 1.5 liter size, up 47%, outgained the more profitable 750 ml, which grew 13%.

Sauvignon blanc and Riesling sales picked up about 3% in supers, while. generic white wines continued to drop, by 3% in 1994. Colombard was down 12%.

White Zinfandel, up 13%, continued to gain, with the growth concentrated in the 1.5 liter and 3.0 liter packages.

THE NEW "BIG THREE" CALIFORNIA WINERIES

The "Who's Who" in the wine business changed dramatically last August when Canandaigua acquired the Almaden and Inglenook brands from Heublein, Inc. Canandaigua added the brands to its earlier acquisitions: Taylor California Cellars, Paul Masson and Guild Wineries & Distilleries. As a result, Canandaigua's market share of all California wine shipments approaches 17%.

Between the "big three" of Gallo, Canandaigua and The Wine Group, the total market share is about 63% of all California wine shipments.

SPARKLING WINES - DOWN ANOTHER YEAR

Fredrikson expects total champagne/sparkling wine shipments to be down by about 6% for 1994, but noted results could be better if November and December shipments turn out better than estimated.

He said 1994 shipments of 31 million gallons represented a 35% drop from the peak year of 1984. Again, as a cause he cited continuing concern about drunken driving laws inasmuch as champagne normally is consumed at celebrations away from home.

Most hard-hit in the sparkling category were Chant producers, who saw shipments drop some 10% in 1994. Producers of methode champenoise, however, were about even compared to 1993, as were foreign sparklers.