Issue link: http://winesandvines.uberflip.com/i/1044116
MARKET RESEARCHER INTERVIEW November 2018 WINES&VINES 37 wine. They're taking excitement from wine, and probably if they weren't there, wine would be doing better. I also think, competitively, consum- ers want different things. As you go through the generations they become less brand loyal. And this is not just about beverage alcohol, it's across all categories. But I also call the consumer more promiscuous. They want to try new things. They want to try different things. And it's not good or bad, that's just the reality. Q How does wine's performance in the marketplace compare to beer's? Moramarco: Everybody's been concerned about craft beer. And is that going to take wine's place. I think that's actually moderated. What you're seeing in the beer category today is that total beer is actually down over 10 years, 20 years, and wine and spirits have been taking share from beer. I think wine fills a niche, but wine compared to craft beer has kind of lost the allure for younger consumers that it had for baby boomers in the past. And what I mean by that is I walk into restaurants and sit at the bar and ask what kind of wine do you have by the glass, and they have Cabernet, Chardonnay and maybe Pinot Noir. You ask what kind of craft beer do they have, and they start talking about the hops and the this and the that. I think that comparing volumes, wine is doing better than beer, but comparing probably trade inter- est, I think wine is losing to craft beer. Q How about compared to spirits? Moramarco: I think spirits have kind of regained ground they lost 30 years ago. There is a cocktail culture out there. It's not domi- nant, but more people are interested in cock- tails, and more people are interested in brown goods today. Right now, if anything I'd say spirits are actually growing and getting slightly more attention than wine is, even though both categories are growing. But spirits just seem to have a little bit more excitement. Q A few wineries are taking a page from the craft brewers or the craft distillers and using flavorings or aging their wines in bourbon barrels. Do you have any sense that those innovative attempts are working? Moramarco: I think in some cases they're working, like the bourbon barrels. The problem with a number of these products are they don't really drive premium pricing. It seems in the wine category, you have to be looking at terroir and truly traditional winemaking to drive true premium pricing. Most bourbon-barrel aged Cabernets are $8 to $12, so it's not a premium item. The other interesting thing is that if you look at good craft beer, a really exciting one may be $12 a six-pack. That translates to $2 a drink. That $10 bottle of wine is $2 a drink. But a $100 bottle of wine is $20 a glass and premium craft beer is $2. Q Are imports gaining on domestic wines? Moramarco: I think you have to look at the import market in two pieces. You have packaged imports, and you have bulk im- ports. When you put the two together they have been gaining on the domestic business. But in a lot of cases bulk imports are just an alternative for lower-priced wines under tra- ditional California or domestic labels. So, if you look at Franzia box wine, 15 years ago, it had all California wine in it. Now it's prob- ably 60% or 70% California and 30% import. It's all about cost of products, and problems in the Central Valley, and what can you grow overseas. I look at that as a mishmash of import and domestic. You look at packaged imports, the differential in growth has not been as dramatic. Italian table wines have been flat for three or four or five years. The big drivers in imports today are French rosé primarily from Provence and Italian pro- secco. You take those two out and imports aren't very exciting. Q Is the rosé trend broadening beyond French wine? Moramarco: When you look at buying French rosé, people want Provence, and that's still driving it. Look at imports of rosé, and 70% of imported rosé is from France. Italy and Spain and everybody else is trying to jump on the rosé bandwagon, and it's really not growing that much for them. Domestically, a lot of people have jumped in on rosé, and it's a harder market to track. You'll look at the Nielsen markets (of major supermarkets and liquor stores), it seems the French rosés are still growing faster than the domestic rosés. Q On-premise has been a challenging channel for which to find good data. How is wine doing on-premise? Moramarco: Generally everything I look at and everybody I talk to, they're doing compa- rable in volume to what's going on in off-prem- ise. Let's just say 1.5% to 2.5% growth. People talk about the on-premise being soft, but a lot of that talk is driven by the analysts who cover the on-premise chain restaurant business. They mainly focus on public companies, and a lot of them are more multi-unit operators. Whether it's Olive Garden, Ruth's Chris, Morton's. At the higher end those seem to be doing OK, but the mass-market casual dining establishments are soft. I think if you look at the total restaurant business it's healthier, but the chains are not as healthy. And I think it's consumers saying I'd rather go to the local guy that's a little more attuned to what I want than the chain restau- rant that I grew up with. Q To sum up, is the wine business good today? Moramarco: The wine business is good, it's not great. My own assumption is that if you go back over time and we've been growing 3% to 4% a year on average, we may be looking at a future of growing 1.5% to 2% a year. It's not quite as much the case that a rising tide lifts all ships, as we used to talk about in the '90s. The only way I can explain this is to say that Bill Clinton had the line, "It's the economy, stupid," about what to focus on, and I think for wineries it's going to be "It's market share, stupid." You've got to focus on market share in the category you compete in. Focus on how you are going to win. HOW TO COUNTER ANTI-ALCOHOL NEWS W ith more than 30 years in the wine business, Jon Moramarco has seen many trends come and go. When asked if there is a looming issue that wineries should be paying attention to but they're not, his first concern was that marketers need to better understand demographics. That is covered in the Q&A article here. But another issue troubling him is an apparent return to anti-alcohol sentiment in the news media. "In the last few years I am seeing more anti-alcohol reports," he said. "The World Health Organization is out there with a statement that one out of 20 deaths is caused by alcohol across the globe. As an industry 25 years ago — after MADD (Mothers Against Drunk Driving), warning labels and everything else — how did we recover from anti-alcohol sentiment? We kind of came to a steady state where there wasn't as much anti-alcohol verbiage out there. I am seeing anti-alcohol verbiage coming back. I'm not sure as an industry our organizations are prepared to think about how we actually combat it." The challenge of how to respond to negative publicity is on his mind. "Another recent report said that any level of alcohol consumption is harmful. Articles were written that explained why that study was flawed, but the problem is that if you go on Google and search 'alcohol use' or whatever that study will come up, and all the stuff that explained why it was flawed will be two or three pages down in the Google results. "I am not sure we're ready to tackle it. Anybody in business could say the same thing. How do you deal with negative stories when they're the things that pop up first in Google searches?"