Cooler Sales Take a Tumble : ’88 Analysis Shows a Greater Demand for Premium American Wines

Wine sales dropped 5% in the United States in 1988 led by a collapse of the wine cooler market, and for the first time ever, premium American wine accounted for more than half of the dollar volume of all wine sold.

Jon Fredrickson, president of Gomberg, Fredrickson and Associates, a San Francisco-based wine industry consulting firm, unveiled the facts as a sneak preview of his 1988 analysis. He was a speaker at the Wine Industry Technical Symposium last weekend in this Sonoma County city.

Fredrickson, whose complete report will be released in four weeks, said overall wine sales include a wide range of products.

“The gross figures (on all wine sold) really don’t mean much any more (because) they include premium wines, dessert wines, jug wines, sparkling wine--everything from Opus One to Thunderbird.”

Increasing Prices

But increasing prices for all premium wine (priced $3 and above for a 750-milliliter bottle) made the premium segment the largest in terms of dollar volume. Although only 23% of all wine sold by volume in 1988 was in the premium segment, premium wine took in 51% of all dollars spent for wine, he said.

In 1987, 20% of all gallonage was worth 45% of all dollars spent.

There were 550 million gallons of wine sold in the United States last year, down from 581 million gallons in 1987, he said, and a drop in the wine cooler market of 15 million gallons was a major reason.

But he added, “It was great year for hundreds of wineries” in the premium end of the market.

Premium wine sales, which rose 22% in 1987, leaped another 16% in 1988, said Fredrickson. “This strong market emanates from the strong demand for White Zinfandel, Chardonnay and Cabernet Sauvignon. White Zinfandel volume alone in 1988 grew to about 9.5 million cases, up from 7.8 million cases in 1987, and made up about 35% of the premium segment.

“This demand drove prices for Zinfandel grapes to the moon, in many cases more than $1,000 a ton. This was more than four times the 1984 level, which makes Zinfandel the highest legal cash crop in the state of California.”

He said that such high grape prices “are likely to wash out some of the lower-priced brands in the market,” and he noted that all major producers posted price increases recently.

Growth for Pop Premiums

Fredrickson said that despite the shortage of grapes and resulting high prices, the so-called Pop-Premium segment of the industry (varietal wines selling for between $3 and $6 a bottle) continued to grow.

“In 1988 we saw introduction into the market by Heublein of the Sylvan Springs brand, and the repositioning of Charles Lefranc. The Wine Group introduced new varietal wines called Willow Glen and William Bates and acquired Corbett Canyon from Glenmore Distilleries.

“Vintners International is repositioning Paul Masson and posted aggressive price increases on its entire line as of Feb. 1, 1989. Guild introduced a new super-premium brand called Dunnewood Vineyards, which is produced at its Cresta Blanca facility in Mendocino County, where it also produces Mendocino Vineyards. And Guild is moving its prices up dramatically on its jug wines.”

The overall pop-premium market leader, Sutter Home, had total shipments of 3.2 million cases, up 750,000 cases (31%) over 1987. But the fastest-growing of the pop-premium producers, he said, was Glen Ellen.

Glen Ellen, which grew by 876,000 cases, 58%, over 1987, produced 2.4 million cases in 1988. Said Fredrickson: “That’s a remarkable achievement just from a production standpoint--finding the grapes and wines and being able to put that together to pump it out.” Glen Ellen wasn’t founded until 1980.

Fredrickson said there were three sub-categories at the upper end of the price spectrum: the popularly priced premium segment, wines priced $3 to $7; the super-premium segment ($7 to $14 a bottle) and the ultra-premium segment, $14 and above. He said 19.2 million cases of wine were sold in the Pop-Premium segment and 25.8 million cases in all three segments combined.

He said one reason that all wine sales were off last year was the drop in wine cooler sales, which were 122 million gallons in 1987 but only 107 million gallons in 1988.

The two leading cooler brands, Seagram’s and Gallo’s Bartles and Jaymes, “eked out a small gain,” he said, and now combine to capture about a 70% share of the market. California Cooler now has a 12% share of the market and Sun Country about 7%.

Though cooler sales were off, Fredrickson said there may still be life in the category, noting that coolers “still represent one out of every five gallons of wine consumed in this country.”

A Dip for Sparkling Wines

Sparkling wine sales dipped by about 3% in 1988. The only growth companies in the methode Champenoise category came from Domaine Mumm, Deutz, Gloria Ferrer and Culbertson. The growth leader, he said, “which was swimming upstream in a tough market,” was Domaine Mumm, which grew to about 44,000 cases, up 110%.

Fredrickson also praised Franciscan Vineyards for its marketing acumen. The Napa Valley winery grew 53% to 157,000 cases due to the tremendous success of its Estancia line.

And for the fourth year in a row, Gomberg, Fredrickson gave its award for the winery with the most consistent sales growth to Fetzer Vineyards in Mendocino County, which had an increase in sales of 34% last year, to more than 1.5 million cases. Family-owned Fetzer had sales growth of 33% in 1987, 30% in 1986 and 26% in 1985.