SipSource: Wine Volume Trends Show Early Warning Signs

Spirits volumes have been growing pretty steadily over the last five quarters between 2.3%-2.6%, while wine volumes have been on a downward trend hitting -1.4% in Q2 2019, according to SipSource’s latest quarterly report.

You may recall, SipSource was launched earlier this year by Wine & Spirits Wholesalers of America. It includes real depletion data from distributor partners, including Southern Glazer’s Wine & Spirits, Republic National Distributing Co., Breakthru Beverage Group, Young’s Market, and Lipman Brothers. They also partnered with Nielsen, NABCA, Sovos, Wines Vines Analytics, Headset, and A.T. Kearney to conduct surveys and provide contextual data.

WINE CATEGORY IN TROUBLE? We asked SipSource analyst Dale Stratton to give a bit more color on the wine category, and he said we “need to keep an eye” on it.

“I do think there are some potential headwinds for the wine category, especially from a volumetric standpoint that may stick with it for a longer term,” Dale tells WSD, adding, “I don’t see anything on the horizon that’s really going to snap it back into really good volume growth.”

For one thing, the larger varietals aren’t growing, according to SipSource data. In the dataset, chardonnay accounts for 16.7% of all depletions and was down 2.4% for the 12 months through June. “So it’s really difficult to grow your business when your large categories aren’t growing,” says Dale.

Another issue for the category is its growth (or lack thereof) in the dining channel. For wine, the dining channel accounts for nearly 60% of all volumes on-premise. In the 12 months through June, wine was down 2.4% in the channel. Interestingly, spirits volume growth actually increased 2.4% in the dining channel. “That’s one of those trends that is an early warning to me,” says Dale.

Though Dale notes that premiumization will continue, so the category will still see dollar growth. But, that too, is slowing compared to a year ago.

MEANWHILE, SPIRITS CHUGGING ALONG NICELY. On the other hand, the spirits category is showing “good, reliable, steady growth,” says Dale.

Unlike wine, the two biggest spirits categories, unflavored vodka and US whiskey, are growing, up 2.4% and 4.8%, respectively. Growth in the largest categories “generates momentum” for the overall spirits category, he says.

In Q2, brandy/Cognac (8.9%), tequila (8.8%), Irish whiskey (6.8%) and spirits-based ready-to-drink cocktails (5.6%) were the top-growing segments by volume.

Not to mention, the spirits category is “also getting additional revenue growth on top of that volume growth as the spirits category is also premiumizing.”

CANS A TREND TO WATCH. Canned wine is a bright spot in the wine category and has just passed 1% market share, growing at 70% year over year, according to Nielsen’s Danny Brager. Dale adds that canned wines are “going to see primarily incremental volume based on occasions.”

Spirits-based RTDs are similarly situated. “In the coming reports–over next 4-5 cycles– we’re going to see good steady growth in that category as well,” says Dale.

Looking ahead, Dale says he expects to see similar trends in Q3 dataset.

Wine & Spirits Daily