Jon Fredrikson, owner of the oldest professional consulting firm dealing exclusively in the wine industry, is always the cleanup hitter at the annual state of the industry session at the Unified Wine and Grape Symposium.
Fredrikson and his wife Eileen own Gomberg, Fredrikson and Associates, and when he speaks, everyone listens. He didn't disappoint a packed ballroom in 2008.
Ever the optimist, Fredrikson once again painted an overall rosy picture of the U.S wine industry. U.S. total wine sales were up 4 percent in 2007; California, however, was up just 2 percent. Imports, up 9 percent last year, continue to capture an increasingly larger share of the U.S. 314-million-case/$30 billion market. Imports — bottled and bulk — own almost one-third of the U.S. market. In 1990 imports accounted for less than 15 percent of the U.S. market.
White wine and red wine case volumes continue to rise in U.S. food stores. Whites were up 3.5 percent last year; reds up 6.9 percent. Blush wine case volume continues to tumble, 2.7 percent last year.
Ultra premium ($14 and over) and super premium wines ($7-$14) continue to grow at a faster rate than overall wine sales. Fighting varietals ($3-$7) are up slightly. Economy wines of $3 or less continue to fall, although he did acknowledge the latest Two Buck Chuck imitator, Oak Leaf Vineyards, a brand of The Wine Group in San Francisco. Oak Leaf Varietals are sold for $1.97 per bottle at Wal-Mart and already 500,000 cases have been sold.
Bronco's Two-Buck Chuck/Charles Shaw wines and other imitators are still a factor in the market with more than 7 million cases shipped in 2007.
The wine business is not for the faint of heart, according to Fredrikson since three companies, Gallo, Wine Group and Constellation, ship 60 percent of the wine produced in the U.S. Toss in the next seven, and the 10 top companies in the U.S. control 82 percent of all shipments.
That leaves the other 5,590 wineries to fend for themselves in a fiercely competitive market that saw 12,000 new wine labels registered last year alone. This is clogging distribution channels.
Fredrikson said the bigger get bigger with more consolidation, creating turmoil in the trade and among growers. This causes sales difficulties with all but the largest wineries.
About the only way smaller wineries are making any headway against the wine behemoths is creating greater interest in local brands on local shelves using environmental awareness as a marketing gimmick. Small wineries are selling directly to local chains, and this looks promising, said Fredrikson.
New marketing companies are springing up to take portfolios of small producers to interstate markets. Clogged distribution channels are creating consumer direct marketing, like the explosion of wine clubs and wine bars. For a while it was the catchy wine names like Red Truck, Gnarly Head, Barefoot and Fish Eye that were hot and many still are among the hot brands Fredrikson named this year at Unified.
Now emerging are new mass-market recognition wines including Martha Stewart wines, wine for women, Paul Newman wines for the “eco-friendly”, Mike Ditka's Da Coach wine, and Wayne Gretzky Estate wines.
While everyone is trying to nudge themselves into the world's largest wine market, the U.S., Fredrikson warned that problems in the economy could have an impact on these marketing efforts. He cited dismal holiday retail sales and the economists' warning of a looming recession. Stock market drops have lessened consumers buying of high end wines. Business expense cutbacks due to the slowing economy also will impact wine sales in fine restaurants.