US U.S. Wine Consumer / Category Trends January 19, 2011 Sonoma, CA Mik C li hi Cli B i P Mike Colicchio Client Business Partner Nielsen Beverage Alcohol Team
What we ll cover today U.S. Economic Backdrop Wine Consumer / Category Trends Total Table vs. Total California Wine, Sonoma Domestic vs. Imported Varietal Price Segments Channels Emerging Trends 2
Worlds #1 Market Research Firm Nielsen Measures audience in 30 countries 80% of Global internet users 85% of Global Advertisement Spending $$$Billions of retail sales transactions each month
Nielsen primary sources of data Scan Data Channels, markets, accounts, stores Grocery, Drug, Liquor, Club, Convenience, and Mass Merchandiser Category, segment, brand and item levell Consumer Data (Homescan/Spectra) Who is the consumer/shopper? Where do they live/shop? What are their lifestyles? Media habits? How many buy? How often? How much? What do they buy? What else is in their shopping baskets? Account coding for 560,000+ on and off-premise locations Account Coding (TDLinx) selling beer, wine, and/or spirits across the country Industry standard channel classification; up to 5 layers of hierarchies
Economic Backdrop 5
After six months of steady declines, consumer confidence bounced back for the holiday season 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 90 65 25 6 Source: The Conference Board - Nine census regions, 5,000 US households; 1985 = 100; conducted by Nielsen U.S. Retail Trends
Overwhelming majority of consumers think the country IS in a recession. Only 10% think we ll be out in a year. Nielsen Survey Q3 2011 Do you think your Do you think your country country is in a recession will be out of an economic at the moment? recession in the next 12 months? Yes: 84% No: 16% Yes: 10% No: 60% Don t know: 30% 7 Source: Nielsen Global Consumer Confidence Survey; Q3 2011 U.S. Results
Saving & paying off debt priority, but less important with increased discretionary spend Once you have covered your essential living expenses, what do you do with spend your spare cash? I spend it on 1 in 3 reporting no spare cash 8 Source: Nielsen Global Online Consumer Confidence & Opinion Survey 3Q 11 U.S. Retail Trends
Unemployment improving drops to a new 2 ½ year low 10.0 2 yr National Unemployment Rate 9.5 9.0 Dec 2009 9.9% 99% Nov 2010 9.8% Dec 2011 8.5% 8.5 8.0 Mar 2011 8.8% 9 Source: Bureau of Labor Statistics. Seasonally adjusted.
Economic impact uneven; consumer more polarized Unemployment impact is demographically uneven; wine impacted the least, Beer the most December 2011 Unemployment Rates Seasonally Adjusted Race/Ethnicity Asian 6.8% White 7.5% Hispanic 11.0% Afr-American 15.8% Age Group 20-24 14.4% 25-34 9.4% 35-44 6.8% 45-54 6.5% 55+ 6.2% Education Less than high school diploma 13.8% High school grad; no college 8.7% Some college, or assoc degree 7.7% Bachelor degree and higher 4.1% Gender (adults 20 +) Women 79% 7.9% Men 8.0% 10 Source: Seasonally Adjusted U.S. Total Non Farm Employment, Bureau of Labor Statistics U.S. Department of Labor
Wine Consumer 11
Wine consumers are affluent with highest Index at $100K and above 300 Household Income Index % of dollars vs % of population TTL Table Wine California Table Wine 200 100 0 <$20 $20 29K $30 39K $40 49K $50 69K $70 99K $100+ 12 Source: Nielsen Homescan Consumer Facts Wine 2010; All Outlets
California Wine has broad appeal, though skews highest in 55-64 age group 200 Household Age Index % of dollars vs % of population TTL Table Wine California Table Wine 100 0 Under 35 35 44 45 54 55 64 65+ 13 Source: Nielsen Homescan Consumer Facts Wine 2010; Age of Female Heads of Household; All Outlets
CA wine is in approx 26% of all U.S. Households and Loyalty is high at 80% 80 70 60 50 40 30 20 10 0 32 TOTAL TABLE WINE 79.9 26.2 TTL CALIFORNIA TABLE WINE HH Penetration Loyalty 14 Source: Nielsen Homescan Channel Facts All Outlets 10-15-11
Chardonnay is in over 8% of all U.S. HH followed by White Zin and Pinot Grigio/Gris, Moscato high Loyalty 30 28 26.9 HH Penetration Loyalty 25 20 15 10 5 0 8.3 13.2 6.5 6.1 19.3 5.4 4.5 10 13.5 3.5 0.7 6.2 CHARDONNAY WHT ZINFANDEL PINOT GRIGIO/ O/GRIS MOSCATO/MUSCAT RIESLING SAUVIGNON BLANC GEWURZTRAMINER 15 Source: Nielsen Homescan Channel Facts All Outlets 10-15-11
Cabernet Sauvignon & Merlot in over 8% of U.S. HH and similar Loyalty, Pinot Noir in 4.5% of HH 25 23.1 22.9 HH Penetration Loyalty 20 15 10 8.8 8.2 10.4 10.4 12.4 7.7 5 0 4.5 4 2.3 2 0.5 36 3.6 CAB SAUVIGNON MERLOT PINOT NOIR SYRAH/SHIRAZ ZINFANDEL MALBEC PETITE SIRAH 16 Source: Nielsen Homescan Channel Facts All Outlets 10-15-11
Consumers are most loyal to $0-$2.99 price segment yet only 7% of HH, $3-$5.99 segment in 21.6% HH 80 70 60 50 40 30 20 10 0 68 45.1 21.6 20.5 16.5 13.5 10.4 10.3 7.2 8.3 4.9 6.8 2.6 1.4 $0 $2.99 $2.99 $3 $5.99 $5.99 $6 $8.99 $8.99 $9 $11.99 $11.99 $12 $14.99 $14.99 $15 $19.99 $19.99 >$20 HH Penetration Loyalty 17 Source: Nielsen Homescan Channel Facts All Outlets 10-15-11
Wine On / Off-Premise 18
Nielsen coverage is approximately 48% of Total and 60% of Off-Premise Total Wine Volume Estimate 2010 On Premise 19% Off Premise excl. Nielsen/DtC 32% DtC Shipments 1% Nielsen 48% 19 Sources: Beverage Information Group for Total Industry Size; Nielsen Food Drug Liquor Convenience Plus; Wines & Vines and Ship Compliant for Dtc Estimates not including carryout; thru Dec 2010
On-premise recovery will have a long way to go, dollar share only now on par with 10 years ago On Premise Share of Total Wine Dollar Sales 51% 45% 45% 2000 2007 2011* 20 Source: Beverage Information Group *2011 Estimates
491,000 U.S. Wine selling outlets; close to 63,000 more locations than in 2005 21 Source: Nielsen TDLinx Total U.S. December of each year 2005 2010, Nov for 2011
Across Total US, ~10,000 mores locations selling wine in on-premise and ~4,700 wine in off-premise. Total U.S. outlets Selling Wine 2011 vs 2010 Change Walgreen s 22 Source: Nielsen TDLinx Nov 2011 vs Dec 2010
In California State, 883 mores locations selling wine in on-premise and 393 wine in off-premise premise. California State - Outlets Selling Wine 2011 vs 2010 Change 23 Source: Nielsen TDLinx Nov 2011 vs Dec 2010
Wine becoming mainstream, reaches par with beer in recent Gallup polls Do you most often drink liquor, wine, or beer? (among those who drink alcohol); % of responses 24 Source: Gallup Poll (July 7-10, 2011)
Wine Category Report Card 25
Inflation driving stronger $ growth, while more non-edibles on fastest Units growing categories Top 10 Fastest Growing Categories (bolded categories on both lists) 26 Source: Nielsen Scantrack, (U.S. FDM w/ Walmart) 52 weeks end 12/24/11 118 major category groupings
Most CPG categories NOT growing (118 categories) Total Unit Sales ( 1.6%) 19% Growing Declining Total Dollar Sales (+1.5%) 48% 52% 81% 27 Source: Scantrack, a service of The Nielsen Company; (FDM w/ Walmart) 52 weeks ending 12-24-2011
Prices rising in all departments except alcoholic beverages and health & beauty Percent Change in Unit Prices 28 Source: Nielsen Scantrack, (U.S. FDM w/ Walmart) 13 weeks increments (vs. prior year); UPC-coded
Category growth rates at 2008 levels for Wine Spirits on upward trend while Beer on downward trend 3.2% 3.0% Annual Value % Change vs Year Ago 2007 2008 2009 2010 L 52 wks end 12/10/11 6.1% 5.0% 4.2% 4.0% 4.4% 4.4% 3.7% 2.9% 2.3% 2.6% 2.0% 1.4% 0.5% 05% 0.5% 0.1% Beer Wine Spirits 0.1% Annual Volume % Change vs Year Ago 2.9% 1.5% 1.2% 3.5% 2.6% 2.2% 2.5% 1.2% 0.6% Beer Wine Spirits 1.8% 2.6% 3.7% 29 Source: Scantrack, a service of The Nielsen Company; (Off-Premise: Food/Drug/Conv/Liquor Plus//Selected Other Channels); 52 w/e 12-10-2011
Domestic Table Wine continues to dominate and drive category growth. Wine Segments 30
California Table Wine shows strong growth and owns 66% of Table Wine sales. Lat 52 Value % Chg Volume % Chg Table Wine State $ Share Lat 52 Lat 13 Lat 13 100% TOTAL TABLE WINE 4.1 2.8 1.3 66% TTL CALIFORNIA TABLE WINE 5.8 4.6 2.7 6% TTL WASHINGTON TABLE WINE 4.6 6.0 4.1 3% TTL OREGON TABLE WINE 11.8 42 4.2 21 2.1 Source Nielsen Latest 52 weeks end DEC1011.4 F/D/Conv/Liq Plus 31
Sonoma 1 Wine sales about on par with California but lagging Napa 1 & CentralCoast/SB 1 growth rates Lat 52 Value % Chg Volume % Chg Table Wine Major AVA $ Share Lat 52 Lat 13 Lat 13 100% TTL DM TABLE WINE 5.7 4.4 2.5 66% TTL CALIFORNIA TABLE WINE 5.8 4.6 2.7 7% SONOMA TABLE WINE 5.1 3.9 1.5 5% NAPA TABLE WINE 12.3 9.8 5.8 4% CENTRAL COAST/SANTA BRB 9.0 9.9 11.5 84% ALL OTHER DM TABLE WINE 52 5.2 39 3.9 23 2.3 Source Nielsen Latest 52 weeks end DEC1011.4 F/D/Conv/Liq Plus 32 1 estimates based on current coding
Argentina and New Zealand visibly set themselves apart with positive trends, and in double digits. Lat 52 Value % Chg Vol % Chg Top 10 Imports $ Shr Lat 52 Lat 13 Lat 13 100% TTL Table Wine 4.3 3.4 2.0 8.6% Italy 2.9 0.8 (1.1) 7.7% Australia (6.7) (5.8) (2.8) 2.4% Chile (3.8) (8.3) (10.7) 2.3% Argentina 18.8 15.2 13.6 2.3% France (3.5) (2.3) (3.7) 1.7% New Zealand 22.7 19.2 20.1 1.1% German 0.1 (8.9) (9.4) 1.1% Spain (2.7) (7.2) (7.8) 0.3% South Africa (14.2) (11.8) (13.7) 0.2% Portugal (13.9) (10.9) (12.4) 33 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 12-10-11
Argentina has jumped ahead of France and Chile, while Australia shares significantly reduced. PRIOR 13wk Dollar Share CURRENT 13wk Dollar Share 34 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 12-10-11
Growth for Argentina and New Zealand is driven by a single dominant varietal 35 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 12-10-11
Malbec and Moscato leading, P Noir, P Grigio, S Blanc also trending well. Merlot & Wht Zin struggling. g Lat 52 Value % Chg Volume % Chg Table Wine Varietal $ Share Lat 52 Lat 13 Lat 13 100% TOTAL TABLEWINE 4.1 2.8 1.3 21.1 TTL CHARDONNAY 1.3 0.5 0.1 15.1 TTL CAB SAUVIGNON 6.1 5.2 3.6 8.9 TTL MERLOT 4.8 5.1 4.3 8.3 TTL PINOT GRIGIO/GRIS 7.4 6.0 9.0 6.2 TTL PINOT NOIR 10.5 8.7 10.1 4.6 TTL SAUVIGNON BLANC 7.9 6.1 3.4 4.1 TTL WHT ZINFANDEL 7.2 9.2 7.7 3.3 TTL MOSCATO/MUSCAT 77.9 63.9 62.3 2.5 TTL RIESLING 1.8 4.8 4.2 18 1.8 TTL MALBEC 30.1 23.5 26.3 24.2 TTL ALL OTHER VARIETALS 0.6 0.8 3.4 Source Nielsen Latest 52 weeks end DEC1011.4 F/D/Conv/Liq Plus 36 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 12-10-11
Red Blends ahead of White Zin, Moscato ahead of Syrah & Riesling & Zin, Merlot lost most share. Chardonnay Cab Sauv Merlot Pinot Grigio Pinot Noir Wht Zinfandel Sauv Blanc Red Blends Syrah/Shiraz Riesling Zinfandel Moscato/Muscat Malbec PRIOR 13wk Dollar Share 9.5 7.7 6.2 4.3 4.2 3.9 2.8 2.6 2.4 2.2 1.7 21.0 15.3 CURRENT 13 wk Dollar Share Chardonnay Cab Sauv Merlot Pinot Grigio Pinot Noir Sauv Blanc Red Blends Wht Zinfandel Moscato/Muscat Riesling Zinfandel Syrah/Shiraz Malbec 8.8 7.9 6.6 4.3 4.1 3.8 3.6 2.4 2.3 2.3 2.0 20.5 15.7 37 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 12-10-11
Moscato continues steep growth curve Millions $400 $350 $300 $250 $200 $150 $100 $50 $0 Rap Lyrics +65% +79% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Moscato 38 Source: Nielsen U.S. Food 2002 2011 ending 12-10-11
Sideways movie drove huge increase in Pinot Noir sales and double digit growth ever since.. Millions $400 $350 $300 $250 $200 $150 $100 $50 $0 SIDEWAYS +76% Rap Lyrics +11% +65% +79% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Pinot Noir Moscato 39 Source: Nielsen U.S. Food 2002 2011 ending 12-10-11
Strongest growth at $9 and above, price decline greatest for the $15 + segment Lat 52 Table Wine Price Tier Value % Chg Volume % Chg Avg Price Chg $ Share Lt52 Lat Lt13 Lat Lt13 Lat Lt13 Lat 100% TOTAL TABLE WINE 4.1 2.8 1.3 ($0.02) 8.5 0 $2.99 3.6 4.3 3.8 $0.09 32.6 $3 $5.99 4.2 2.2 2.4 ($0.10) 16.6 $6 $8.99 4.3 6.2 5.1 ($0.08) 20.9 $9 $11.99 $ 10.1 8.6 9.7 ($0.09) 10.2 $12 $14.99 7.4 6.9 6.8 ($0.03) 6.1 $15 $19.99 8.6 7.7 9.5 ($0.30) 51 5.1 $20 + 11.11 85 8.5 94 9.4 ($0.20) Source Nielsen Latest 52 weeks end DEC1011.4 F/D/Conv/Liq Plus 40
35 30 25 20 15 10 5 0 Discounting since end of Q1 has correlated with strong uptick in Sales for $20+ segment $0.40 $0.30 $0.20 $0.10 $0.00 ($0.10) ($0.20) ($0.30) ($0.40) ($0.50) ($0.60) 13 w/e 01/09/10 13 w/e 02/06/10 13 w/e 03/06/10 13 w/e 04/03/10 13 w/e 05/01/10 13 w/e 05/29/10 13 w/e 06/26/10 13 w/e 07/24/10 13 w/e 08/21/10 13 w/e 09/18/10 13 w/e 10/16/10 13 w/e 11/13/10 13 w/e 12/11/10 13 w/e 01/08/11 13 w/e 02/05/11 13 w/e 03/05/11 13 w/e 04/02/11 13 w/e 04/30/11 13 w/e 05/28/11 13 w/e 06/25/11 13 w/e 07/23/11 13 w/e 08/20/11 13 w/e 09/17/11 13 w/e 10/15/11 13 w/e 11/12/11 13 w/e 12/10/11 $ Vol % Chg vs YA Avg Eq 750ml Price Chg vs YA 41
Trend is strong & growing for $15 + Dom Table Wine with < $15 growing g but weakening 14.0% 12.0% 12.1% 10.0% 8.6% 8.0% 6.0% 4.0% 2.0% 5.4% 4.7% 0.0% 52 wks YAG Latest 52 wks Dom Tbl Wine < $15.00 Dom Tbl Wine $15.00 + 42 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 12-10-11
Growth across all segments within $15+ 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 5.0% 50% Share 6.5% 3.3% 0.9% 2.7% 25.9% 9.7% 5.8% 5.6% 16.0% 15.6% 6.6% 1.4% $15.00 $19.99 $20.00 $24.99 $25.00 $29.99 $30.00 + 52 wks YAG Latest 52 wks 43 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 12-10-11 Shared against Domestic Table Wine
Nearly 75% of Sonoma Table Wine sales are under $20 whereas almost 40% of Napa come in over $25 44 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 12-10-11
Imported Table Wine $15 and above not performing well over latest 52 week period 10 7.0 5 0 5 (0.6) 3.1 2.4 0.9 0.3 (1.5) 10 15 (13.9) $15.00 $19.99 $20.00 $24.99 $25.00 $29.99 $30.00 + 52 wks YAG Latest 52 wks 45 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 12-10-11
California Wine By Channel and State 46
The Food Channel is dominant with California showing strong ggrowth across each, Liquor Channel soft. 47
In the Grocery Channel, California Wine share has held steady over the past 7 years 5,000 California Wine Dollars ($Millions) Sales in US Food 3,000 2,585.4 2,801.1 1 3,001.5 3,191.0 3,348.4 3,548.1 3,708.2 1,000 2005 2006 2007 2008 2009 2010 Lat 52 wks Shr of TTL Table 67.6% 66.7% 66.2% 66.7% 67.2% 67.7% 67.7% 48 Source: Nielsen U.S. Food 52wk 12/16/06 thru 52wk 12/11/10; YTD thru 11-12-11
5.1% 4.8% 4.5% 4.3% 4.0% 3.7% 2.5% 2.3% 1.7% 1.5% 1.3% 1.0% 0% Within Grocery, the states of California & Florida comprise over one-third of California Wine Sales. 25.5% California Table Wine Dollar Share of US Food by State 10.1% 7.6% 51% 48%45% less than 3% share CA FL TX NC OH VA IL WA MI OR SC MO LA IN IA NM 49 Source: Nielsen 52 wk thru 11-12-11
California Table Wine sales growing strong across most key states with only FL and IL < 5% growth Food Channel by State Value % Chg Volume % Chg Lat 52 Lat 13 Lat 13 TTL CALIFORNIA TABLE WINE TOTAL U.S. GROCERY 5.8 5.7 3.2 CALIFORNIA 83 8.3 11.2 68 6.8 FLORIDA 2.1 1.0 3.0 TEXAS 5.2 7.0 7.2 NORTH CAROLINA 79 7.9 93 9.3 61 6.1 OHIO 9.6 10.6 7.2 VIRGINIA 8.2 6.1 3.6 ILLINOIS 30 3.0 13 1.3 06 0.6 Source Nielsen Latest 52 weeks end DEC1011.4 F/D/Conv/Liq Plus 50 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 11-12-11
Emerging Varietals and Other Trends 51
Sweet...is HOT!!! and not just limited to Moscato Sweet Red labels, wine w/chocolate, wine with eggnog $ Shr Table Value % Volume % Segment Lat 13 Chg Lat 13 Chg Lat 13 0.5 SWEET TABLE WINE 206.9 213.4 52 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 12-10-11
New World blends, especially REDS, are hot Lat 13 $ Shr Tbl Segment Value % Chg Vol % Chg Lat 13 Lat 13 40% 4.0% Red Blended d Table Wine 88 8.8 5.1 53 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 11-12-11
Unoaked chardonnay also on the Rise. $ Shr Table Tbl Value % Volume % Segment Lat 13 Chg Lat 13 Chg Lat 13 0.5 UNOAKED CHARDONNAY 80.7 70.6 54 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 12-10-11
Other Emerging Table Wine Segments Lat 13 $ Shr Tbl Segment Value % Chg Vol % Chg Lat 13 Lat 13 97% 9.7% Screw Cap 14.6 13.9 3.2% Private Label 2.5 2.5 21% 2.1% Premium 3L Box > $10 14.0 12.22 0.5% Tetra Pak 29.6 29.1 55 Source: Nielsen U.S. Food Drug Liquor Convenience Plus thru 11-12-11
Closing thoughts 56
Closing Thoughts. Economy likely to remain difficult / uneasy.consumers will continue to seek Value Pricing will continue to play key role Wine is a growing category and skews to Demographic less impacted dby Economic Factors Wine is important to Retailers It s a BIG and growing Category Consumer access to Wine continues to grow More Outlets selling Wine +63K in 6 yrs 1,276 more locations in California alone over the last year 57
Closing Thoughts. Largest segment for Sonoma is $9 $14.99. How can you get Consumers to Trade Up Cabernet, Chardonnay & Merlot have broadest reach acrossu U.S. HH..good news forsonoma Red Blends, Sweet, Malbec & Unoaked Chardonnay are all growing trends What & Where can you capitalize on this. 58
THANK YOU and CHEERS michael.colicchio@nielsen.com 714-272-5241 59