Grocery store to Boutique shop: Wine Selection Differs in Open States

Original article here.Screen Shot 2016-03-21 at 3.53.52 PM

We have long known that statistically the bulk of wine purchases are last minute and spontaneous. It’s an easy decision when it is one-stop shopping along with the evening groceries. While supermarket sales provide a convenience to consumers, they may also be depriving them of a great deal of choice when it comes to esoteric and small-volume wine brands at are not represented on their local store shelves.

Drought can’t stop California wine, click here to see why!

Most small wine producers don’t have the volume or budget to stock the shelves of multi-unit chain stores. “Entry into major chains or supermarkets often requires a substantial initial investment in some kind of promotion that will convince the chain buyers that consumers will pull the wine off the shelves,” said Christian Miller, proprietor of the Berkeley-based Full Glass Research.

He added that, “Effective chain sales presentations often require analysis and usage of information like scan data from Nielsen or IRI, or market research, which also costs money.” Very small, and new, producers may not even know where or how to get this kind of data.

Screen Shot 2016-03-21 at 3.53.31 PMHowever, despite the potential that chain store wine sales have dumbed down the overall wine market selection, many in the business are still—justifiably—pro open market. Competition breeds selection and some think that markets in which chain stores can sell wine are truly more competitive. “For the retailer competition ensures that everyone is on their ‘A’ game,” said David Trone, co-owner—he just passed the baton to a new CEO to run for Congress—of the approximately 130-location Bethesda Maryland-based Total Wine & More! Chain. “For the customer that means that they win.”

The drive for independents to offer a unique selection of wine is often also greater in markets where supermarkets are present, said Craig Perman, owner of the one Chicago-based Perman Wine Selections. “If wine isn’t sold in supermarkets/chains then many independents will often take the easy money and sell more widely known names,” he added.

According to the Washington DC-based Food Marketing Institute (FMI), 33 states and the District of Columbia permit “food stores” to sell wine. Almost all of these states, not including New York and New Jersey, allow multiple-wine licenses for retailers.

According to FMI’s 2012 study The Economic Impact of Allowing Shoppers to Purchase Wine in Food Stores, the number of total retail outlets for wine in open states totals 155,327 whereas for closed states it was 16,387. Those numbers result in an adult population per retail outlet for wine of 1,003 in open states and 4,091 in closed states. That means four times greater access to stores and venues that sell wine.

The study also found that the projected impact on U.S. employment of allowing “shoppers to purchase wine in food stores,” results in 37,352 jobs created. Given the additional job opportunities chain store operators are not alone in lobbying to open up the wine sales market.

In a December 2015 blog Elizabeth Tansing, FMI’s director of state government relations, noted that a revised 2012 law in Massachusetts allowed the number of off-premise licenses owned by a single entity to increase from three to five. Similar changes may be on the drawing board for New Jersey as well in 2016, she noted.

 For more reading for your inner wino click here!  To see more DAILY OVATION LIFESTYLE articles click here

Getting on the Shelf

While an open wine market may be good for the overall economy, it undoubtedly poses serious challenges for boutique producers. When I worked in Seattle a decade ago for a small distributor and importer, Vinum Wine Importing and Distributing, we didn’t have the volume to supply seven locations of the local organic supermarket with wine. What’s more we certainly didn’t have the manpower to stock their shelves and work the floor as some of the larger distributors did.

“Independent producers and limited-production wines often times don’t have a voice in a world that is based on relationships and volume deals,” concurred Perman. He added that the high-quality, smaller production wines that do get shelf play almost always have had good press without which they wouldn’t have made the placement. Supermarket chains, he said, aren’t usually brand builders unless money is the motivation.

For small wine producers, “It’s the same problem they have with supplying big chain restaurants. Do they make enough to maintain stock in every store? Do they have a wholesale representation in every market/location where the chain has a store?” asked Miller. Although he added that, fortunately, many chains have select locations with larger local selections, which can be an effective way for smaller producers to open the sales door.

Certain types of wine also statistically, according to Miller, sell better in chain environments. He noted that if Nielsen sales volume, in grocery or multi-channel chains, is divided into shipments “ ‘Chain dependency’ varies considerably by the type of wine. Australian and Argentine wine, Merlot and White Zinfandel do a large proportion of their sales in the chain environment whereas Rhône, high-end Zinfandels and South Africa sell a much smaller percentage through chains.”

However some of the major brands that represent those regions and varietals that have been successful in chains are, not surprisingly, linked to major suppliers. Many affordable Merlots and White Zinfandels are produced by large corporate entities and a handful of less-expensive Australian and Argentine brands—such as [yellow tail]—have long been in the stable of major marketing companies.

The Difference in Shoppers

Whereas supermarkets offer convenience, the best smaller shops focus on customer service. “The fine wine chain exists in a very small bubble,” said Perman. “Our clients come to us for our knowledge and often times the personal relationship.” He added that they are also interested in the store’s broad wine selection as “supermarket chains don’t sell independent producers with the same passion.”

Trone seconded Perman’s opinion noting that his chain banks on offering a wide selection and a highly focused customer service program.

However there are supermarket chains that are breaking the mould in terms of both selection and service. Both Whole Foods and HEB, who declined to participate in this story, are changing the chain-store model by offering a wide selection and a highly curated level of customer service.

In Chicago, Perman says that both Whole Foods and a local, six-location Midwestern chain called Plum Market “are beginning to affect sales in independent and fine wine stores.” He added that, “They will continue to grow as consumers become busier and busier in their personal lives and value the type of one-stop shopping you can do at these stores.” He has also recently directly seen the affect that these chains have on the independent wine market when a Whole Food opening across the street led to a reduction in his business.

Some independent retailers are so specialized within their markets that regular chain sales don’t seem to worry them. Clyde Beffa, co-owner of Redwood City-based three unit chain K&L said that he “never looks at supermarket wine inventory but I think most only carry name brands. Trader Joe’s and Costco are different.” He added that as a result he would be overjoyed to operate in a market such as Colorado or New York where supermarkets don’t compete.

There are strong cases to be made for both perspectives in terms of the positive and negative factors about how the wine market is evolving. Despite evidence of a stronger independent wine market in partially closed states, the U.S. consumer base continues to want greater access to wine purchases. Hence limitations on the number of retail licenses are likely to fade away just as the control state structure has in many markets.

do-logo-emailsub

Weekly Newsletter

Thanks for visiting the website! Add your details to receive our weekly personalized newsletter.

You have successfully subscribed! Don't forget to confirm your email from Daily Ovation.