GRAPES OF WORTH: HOW SUPERMARKETS ARE BECOMING LOCAL WINE SHOPS

http://www.nielsen.com/us/en/insights/news/2015/grapes-of-worth-how-supermarkets-are-becoming-local-wine-shops.html

There’s a wine retailing revolution taking place across America, and it’s happening in the supermarket. No longer confined to specialty shops and liquor marts, wine is carving out its own territory on the grocery floor, which is giving savvy retailers an opportunity to offer convenience and boost their profits in the process.

While it may have once been a destination to pick up a bottle from one or two lower-end options, many supermarkets today now offers a cornucopia of vino varieties. As consumers have ramped up their desires for distinctive and varied options, grocery retailers have ratcheted up their efforts with three primary goals in mind: offer convenience of a one-stop shop, participate in a big and growing category, and ring up bigger basket sales. And based on recent trends, consumers and retailers are both reaping the benefits.

Growth in wine-selling stores has come from all directions—from limited-assortment types of stores to high-end/natural and gourmet outlets, and from smaller formats to outlets with massive floor plans. The number of grocery stores that sell wine is growing, hitting almost 30,000 as of mid-December 2014, up from 27,850 in 2010. Despite the increasing saturation, sales are keeping pace.

During 2014, supermarkets across the U.S. (including mass-merchant superstores) rang up $8.6 billion in wine sales, which represents about 42% of the country’s “off-premise”—i.e., store bought—wine consumption for the year. What’s more impressive is the growth within these outlets compared with overall wine sales: consumer spending on wine in these outlets rose just over 4% compared from 2013.


CONSUMERS SPEND MORE OVERALL WHEN THEY BUY WINE

Not only are supermarkets thriving as wine vendors, they’re enticing bigger basket sales in the process. For example, the average consumer spends $47 per trip to the supermarket when they don’t make a wine purchase. That amount, however, jumps to $75 when the shopper buys wine. Interestingly, the additional $28 isn’t just for vino. In fact, the wine accounts for only about $15. The consumer spends the rest on items that typically pair well with wine, suggesting that selling wine not only diversifies supermarket offerings but goes hand-in-hand with additional sales in the process.

Unlike opportunities in other food and beverage categories, wine isn’t something that all supermarkets can capitalize on. In fact, several states in the U.S. don’t allow supermarkets to sell wine. And some states that do allow supermarkets to have liquor licenses are relatively restrictive in how brands can use them. In New Jersey, for example, one store chain can only have two liquor licenses, which means that only two stores in that chain can sell wine in the Garden State—regardless of how big a footprint the supermarket brand has there.

And supermarkets aren’t just selling a few scattered varieties of wine. Nielsen research shows that the average grocery store sells about 360 different wines in a week—and that number continues to grow. California is the stand-out leader in supermarket wine sales, ringing up about $1.6 billion in annual sales. That’s almost two times the amount sold in Florida, which sells the second-most wine in supermarkets.

THE WINE THAT BINDS

While wine is a discretionary purchase, it’s one that consumers rarely forgo—even when times are tight, overall consumption of wine has continued to grow. But the story isn’t really about just how much wine was purchased—it’s also about price tags. While it’s true that Americans purchased more wine in 2014 than in the previous year in Nielsen measured channels, the uptick was only about 1%. However, across all those channels, dollar sales grew to almost $14.5 billion, 3.6% ahead of last year. Nielsen estimates that almost all of that difference in dollar vs volume growth was due to consumers “drinking better” by buying more expensive wine.


So the opportunity and growth potential for supermarkets is undeniable. And by capitalizing on the trend, they not only boost their sales, they offer something their customers will cherish: the benefit of one-stop shopping. From the consumer’s perspective, having access to their preferred vintages while they’re shopping for food is a major time saver. From the retailer’s perspective, wine is an opportunity. Retail stores like categories that grow, and even during the recent recession, wine sales grew. And when retailers see that grocery is pretty flat, they’re bound to covet big categories that are turning in notable profits. Retail stores also like categories that boost overall basket sales. Wine does both. So, it’s a win for consumers and retailers. Cheers to that.