Trends for Australian wine in the United States

Market bulletin | Issue 66

04 Jul 2017
Previous  | Next News

As the people of the United States (US) celebrate Independence Day, we examine some trends in one of Australia’s most important wine export markets.

Australia Up Close

In June, more than 1000 members of the North American wine trade attended Wine Australia’s Australia Up Close roadshow to learn more about wines from the 74 wineries represented and to meet the 31 winemakers who participated. Australia Up Close featured eight educational seminars on subjects including old vines, the evolution of Australian winemaking, white wines and Grenache. Over three weeks, the Roadshow toured nine cities:  – Los Angeles, Dallas, Chicago, New York and Boston in the US, before heading north to Canada and visiting Montreal, Toronto, Ottawa, and Vancouver.

Increasing interest in premium Australian wine

Australia Up Close came at a time of increasing interest in the premium Australian category in the US. The value of Australian wine exports to the US in the over A$10 per litre FOB segment (approximately US$15+ retail) reached a 7-year high in 2016, and has increased overall by 58 per cent since 2012.

‘This is the most exciting time for Australian wine in the US since we began exporting, and to get a great response from the trade is fantastic’, said Wine Australia’s Head of Market Americas Aaron Ridgway. ‘A more abundant selection is key to a strong category and the market continues to demand more Australian wines at premium price points.’

According to IRI, 90 per cent of Australian wine sales in the US off-trade are in the big volume US$4–7.99 per bottle price segment and Australia holds a 12.7 per cent share of the segment. In contrast, Australian wine holds just a 0.7 per cent share of the market at US$15 to $US25. Australia sold 51,000 cases in a market segment of 6.7 million cases. The good news is that Australian sales grew by 24 per cent in this segment in the year ended March 2017.

This upward trend in sales of higher quality wines is reflected in the most recent Australian wine export figures. Australian exports to the US at above A$10 per case FOB grew by 33 per cent to A$43 million in the 12 months ended March 2017.

Millennials driving premiumisation

Millennials (people aged 21–36) are arguably the most important group among regular US wine drinkers.  According to Wine Intelligence, they represent a third of the US wine drinking population and are growing in size. They account for 40 per cent of the volume of wine purchased but, importantly, 50 per cent of the dollars spent on wine in the US. They are frequent and high-spending wine consumers and are driving the premiumisation trend in wine sales in the US. However, they lack awareness of Australian wine, particularly those in the 25–34 age bracket.

Source: Wine Intelligence

Which varieties offer the best growth potential?

Recent trade and consumer research conducted by Wine Opinions on behalf of Wine Australia suggested that red blends, Cabernet Sauvignon and Shiraz offer the best growth potential for red varieties. Riesling and Chardonnay are the pick of the whites.

Australia holds a 90 per cent share of the Shiraz market at US$4–8 per bottle and 37 per cent of the market at US$15–25 per bottle – this represents potential upside.

Cabernet Sauvignon sales between $US15–25 are growing for Australia, while Chardonnay is doing well at US$20–25, off a small base.

Exports at A$7.50 and above for the three major varieties are growing.

 

Australian wine growth potential on US Market

(Base = sells Australian wines)

 

Great growth potential

Good growth potential

Not much growth potential

No growth potential

Don’t know or no opinion

Red blends

34%

53%

9%

2%

2%

Cabernet Sauvignon

22%

51%

22%

1%

3%

Shiraz

21%

48%

25%

3%

3%

Grenache

18%

48%

26%

3%

5%

Riesling

15%

39%

32%

8%

5%

Sauvignon Blanc

12%

37%

39%

8%

4%

Chardonnay

11%

43%

36%

5%

4%

Viognier

9%

35%

37%

12%

7%

Moscato

9%

31%

34%

18%

9%

Pinot Grigio/Pinot Gris

8%

27%

40%

17%

8%

Merlot

4%

23%

54%

12%

6%

Source: Wine Opinions

Off-trade – the biggest segment in the market

The off-trade is the biggest segment of the US market with an 84 per cent share of the market. In the 12 months ended March 2017, the off-trade market grew 3 per cent in value but Australian sales declined by 4 per cent. Australia is ranked fourth behind the US, Italy and France with a 4 per cent market share by value.

 For US$15–25 segment, Australian sales are growing in the two key sub-channels:

  • Grocery channel (3.6 million cases, growing 15 per cent; Australia holds 0.5 per cent share, growing 88 per cent) and
  • Liquor channel (2.9 million cases, growing 8 per cent; Australia holds 1 per cent share, growing 1 per cent).

On-trade – casual and fine dining account for the major share

The on-trade accounts for a 16 per cent share of the market. According to Nielsen CGA Strategy, in the 12 months ended April 2017, wine sales in the US on-trade increased by 3 per cent but Australian sales declined by 4 per cent. Australia is ranked 7th in the on-trade with a 2 per cent share, behind the US, Italy, France, Argentina, New Zealand and Spain, and only marginally ahead of Chile.

Within the on-trade, eating establishments (casual dining and fine dining) account for 83 per cent of on-trade sales and drinking outlets account for 17 per cent of sales.

Casual dining outlets are driving openings while neighbourhood bars are in decline. The drinking segment is supported by increases in sports and premium bars. Between 2004 and 2014, the number of restaurants increased by 40 per cent while 1 in 6 neighbourhood bars closed.

Number of restaurants, bars and nightclubs in the US, June 2016 vs a year ago

Source: Nielsen CGA Strategy

 

Where are the consumers of Australian wine?

The seven biggest wine-consuming states account for over half of all US wine consumption. They are California, Florida, New York, Texas, New Jersey, Illinois and Massachusetts.

They have been the top 7 for over a decade, but all posted consumption increases of between 0.4 per cent and 0.8 per cent in 2015, according to the 2016 Impact Databank.

In 2015, the five markets with the biggest growth (in percentage terms) were Wyoming (+9.7 per cent), Utah (+7 per cent), Mississippi (+3.1 per cent), West Virginia (+1.8 per cent) and Pennsylvania (+1.4 per cent). All but Pennsylvania are relatively small markets, with yearly consumption at or below 1.5 million cases.

The seven biggest wine-consuming states are also the biggest consumers of Australian table wine.

Other markets that stand-out for Australia are Pennsylvania and Georgia – both are in Australia’s top 10 most valuable markets and have a relatively high imported wine share.

Bulk wine category continuing to grow

Australian bulk wine exports to the US increased by 44 per cent to A$78 million in the 12 months ended March 2017. The growth was driven by a handful of companies shipping branded product to be bottled in-market. Three quarters of the bulk wine has been designated with its intended brand. This segment increased by 62 per cent to $60 million, while the unbranded bulk exports increased by 6 per cent to $19 million.

The International Bulk Wine and Spirits Show (IBWSS) is an annual trade show and conference, open to trade professionals only, which takes place in San Francisco on July 26–27. IBWSS visitors are buyers looking to meet up their demand of bulk wines, bulk spirits, private label programs, grape buying or contract manufacturing. IBWSS provides supermarkets, retailers, restaurants, wineries, and other buyers with an international platform to source bulk wine and meet private label suppliers.

The event will be attended by Wine Australia’s Head of Market Americas Aaron Ridgway and US Market Entry Manager Damon Musha. Australian producers attending the IBWSS are encouraged to contact Wine Australia’s North American team at usa@wineaustralia.com.