In a new SipSource product, the Price Tier Performance Scorecard, Wine & Spirits Wholesalers of America finds that for spirits, the two lowest price tiers ($9.99 or less and $10-$16.99 per equivalent 750 ml bottle) account for 56% of volume and are relatively stable in terms of growth versus a year ago. For table wine, the three lower price tiers (collectively less than $11 per equivalent 750 ml bottle) account for almost 75% of the category’s volume, while all three price tiers are currently declining at double-digit levels.
“Twelve-month comparisons through February 2022 versus the year prior still include the extreme pantry loading that started when COVID shelter-in-place directives had a significant impact on consumer behaviors,” notes SipSource Analyst Danny Brager. “The pantry loading was highly focused on the lower end of table wines, and as the comps start to now move beyond that period, it’s likely that volume decreases will begin to moderate. On the other hand, higher-end table wine price tiers declined through most of 2020, creating relatively easier comps for the current 12-month period, so we expect some moderation of the very large growth rates we’re seeing currently. Yet, we expect that the higher end will still be the center of industry growth.
Sparkling Wine Pops over $18
“The sparkling wine PTP Scorecard is a strong one with growth right across the board from the low end to the high end,” said Brager. “However, we anticipate that the current large growth rates at the higher ends we’re seeing will moderate somewhat.” The Sparkling Wine PTP Scorecard shows impressive growth in all categories, but growth above 20% in the top three price-tiers over the past year (February 2021- 2022): Tier 3 ($18 – $34.99): +20.2%, Tier 4 ($35 – $74.99): +21.9%, and Tier 5 ($75+): +29.4%.
Bracing for Impact
Inflationary pressures, as well as expanded spending opportunities for consumers beyond alcohol that were significantly restricted during COVID (e.g., travel, entertainment, recreation, etc.), may have some impact on the level of premiumization seen over the past year.
“Depending on the portfolio of any individual supplier or importer, this represents either a very positive or negative story,” explains Brager. “If you’re operating in a segment and price tier with strong growth, the wind is at your back, and you can assess if you’re keeping pace with the gains, but if you’re operating in a segment and price tier with negative trends, the headwinds could be significant. Yet if you’re growing in that latter case, you have a “winning/positive” exception that you can leverage to ensure you’re not painted universally in a negative light. It’s critical for brands to determine both the size of the prize and the trend associated with the segments and price tiers they operate within, so that they can assess their relative performance.”