This article appeared
in
Wine Business Daily News
Daily News Links, 11/14/2006
Private
Label Brands Grow by 30% in Last Year
Sales of private label wine brands are growing,
and the category looks to be a significant portion of the market in the future.
In the ACNielsen-tracked sales channel*, private label brand sales have grown
30 percent in the 52 weeks ending September 23, 2006, on top of 18 percent
growth over the same period in 2005. By contrast, branded wines have grown
10 percent in the 52 weeks ending in 2006, and 9 percent in the preceding
year.
Still, it's important to understand how private label wines actually fit into
the overall marketplace. Currently, private label sales account for about
1.4 percent of the grocery store wine market, roughly the same size of the
Chilean wine or Chianti segments. Off of such a small base, high growth rates
are much more easily achieved.
"Private label wine sales continue to grow well in excess of non-private
label wine sales, which in themselves are healthy," said Danny Brager,
vice president client service at ACNielsen. "This is on a relatively
small base, certainly when compared to the private label share in many other
categories outside of the beverage alcohol department. That fact alone, together
with the higher margins offered by these products, likely signals opportunity
to many retailers."
However, there is much more to the private label story than what can be seen
in the grocery store channel. As accurate as the ACNielsen data is for the
food store channel, it has some limitations. First, it does not track the
on-premise category, which is a major outlet for private label brands. Secondly,
sales at stores outside of the food store channel are excluded, including
Trader Joe's, Wal-Mart, Target and Costco Wholesale.
John Crean, CFO and vice president of business development at WineryExchange,
a global supplier of private label wine brands, estimates that the U.S. market
is far larger than the ACNielsen figures suggest. "When we got into the
[private label] market here seven years ago, we thought the market was about
.3 [of the total wine category]," said Crean. "Now it's somewhere
between 3 percent and 5 percent, which includes the house, merchant and control
brands. We think the growth will continue to outperform the branded segment
for some time."
Given that private label wines will become a much larger part of the American
wine landscape, traditional, branded winemakers are going to have to decide
how to private labeling fits into their business model.
"Private labeling will probably end up between 20 to 50 percent of the
business," predicted Crean. "It may be something [traditional wine
companies] do not focus on, but this is going to be a part of the business."
Private label brands create the opportunity for a retailer to build trust
and loyalty with a consumer. The goal for a retailer is to create a private
label brand that consumers feel over-delivers on quality for its price point,
who would then seek out that brand when making later wine purchases. The retailer
then benefits because of the positive association consumers have with the
brand and, by association, the retailer itself.
Although private label wines are already competing at several different price
points, many in the wine industry feel that private labels will be most successful
at the lower end of the market. It is anticipated that within the next five
to ten years, private label brands will have a significant impact on the wine
category, especially at the value and fighting varietal price points. However,
premium, super-premium and higher price points will continue to be driven
by branded wines.
According to the ACNielsen data, private label brands sell at an average price
point of $4.64, 15 percent lower than the average branded wine price of $5.47.
"However, more than half of the exclusive label brands examined had an
average price exceeding that $5.47 category price," said Brager.
Annette Alvarez-Peters, assistant general merchandise manager corporate wine,
spirits, beer at Costco Wholesale, indicated the company's house wine portfolio
ranges in both price and geographic origin. The Kirkland Signature brand uses
small lots of fruit, creating the opportunity for an ever-changing mix of
wine for consumers. Kirkland Signature has carried price points from $9.99
to $37.99.
"It seems many companies are doing private label; from what we know,
we are one of the very few doing super- to ultra-premium wine," said
Alvarez-Peters. Costco is also not afraid to go even higher on their price
points. "We [might even] look at super-ultra premium. If the right opportunity
from a high-end winery came up, to make a $75 bottle of wine under Kirkland
Signature, we most certainly would take a look at it."
Geographically, Costco sources fruit from all over the globe. They have sold
wines ranging from Australia's Barossa Valley Shiraz, Oregon Pinot Noir, Napa
Valley Cabernet Sauvignon, Super Tuscans from Italy and a range of wines from
Bordeaux in France. "When we seek out a private label, we are looking
for quality juice. There is a lot of juice on the market from low end to super-premium,"
said Alvarez-Peters.
The increasing globalization of the wine industry will have an impact on private
label wines. Even when one wine region is short on supply, there are other
regions in the world that are experiencing a grape glut. "If we ever
come into a tight pricing cycle again in the California wine industry, I think
that the affordability and quality of imported wines is going to put a damper
on that," said Crean.
"The theory is, the greater the supply the more inclined producers will
be to consider private labeling," Crean continued. "On the retail
side, if the retailers are demanding it, regardless of where we are in the
market cycle, you will see growth because that's what the marketplace wants
to do."
<<BACK
|
|
|
|
|
|