Issue link: http://winesandvines.uberflip.com/i/591609
November 2015 WINES&VINES 113 PRACTICAL WINERY & VINEYARD BUSINESS folio by looking at the $10-plus category." " It is not just in the wine business, but also in the spirits business. People are trading up for more premiums and people want better, whatever that means. They continue to ex- plore merchandise that may be more expen- sive because they are more knowledgeable." " In 2007 we looked at the landscape, and Gallo, Constellation and The Wine Group owned that space. There is nobody that can come into that market and take those guys' volume. We could not be in that space any- way. We built our entire infrastructure around the $10-$15 range. Fortunately the bites we are taking are relatively small, but they are significant for us. The margins are much more enhanced above $10 than they are below $10." " All of the action has been above $12, and some of the fastest growing categories are up around $20. We see the consumer shift- ing in some direction there. A lot of it relates to baby boomers and who is consuming wine. It really is on us to try to diversify the portfolio to make sure we offer what con- sumers want." " I see the trend continuing, and we feel it very strongly. We have been trying to raise prices and to push into the $15 and $30 price seg- ments, and we play it fairly strong there. We are trying to get out of any $10 and under branding for wine labels. For us, given where our grapes are grown, we just cannot compete down there at the margins that we like to enjoy. It caused us to really evaluate our portfolio and where the op- portunities are at $15 and above." " It will continue to impact the wines below $10 because a lot of that market is dying out. Most people are focusing on the $15 price point, which seems to be the new version of the $12 point. The issue there is that the cost of goods is very high for wines over $15. That it is going to be difficult for people to scale a brand of that size and buy the grapes. You really have to own the vineyards in order to scale a brand in that range." " The fact that other guys want to go into our business, it just shows you that the Ameri- can consumer is willing to trade up. It shows they are an aspirational consumer. Yes, it concerns me a little bit when Gallo is now in my back yard." " Many people are talking about premiumiza- tion in this industry. This is still not played out properly, because all that is occurring now is people trying to shift the same prod- uct up the ladder. The consumer is not going to be fooled by that, and ultimately you have to premiumize through pure investment." " I firmly believe that the wine industry is as well-posed as any in the world to play the trade-up game. Most happy consumers love SUMMARY Nearly all polled see this "premiumization" trend continuing, though not all are affected by this trend. Aspirational U.S. consumers are more and more willing to trade up and in- vest in quality brands. Consumers are more knowledgeable and discerning as they increase in- vestment in their consumption. Thus, competing wineries must invest in their quality and branding more than ever. Yet grapes and land have never been more expensive. Bifurcation of wine market for brands above and below $10 GF Piping Systems 9271 Jeronimo Road, Irvine, CA 92618 • Phone (714) 731-8800, Toll Free (800) 854-4090 e-mail: us.ps@georgfischer.com • www.gfps.com www.cool-fit.georgfischer.com Unlike metal pipe and fittings, our COOL-FIT Plus will not rust or corrode inside or out. The specially formulated ABS is designed to handle temperatures as low as -40ºF which also make it very different from plastics such as PVC that often become brittle and fail at these low temperatures. Installation is a breeze and procedures can be learned in a couple hours. COOL-FIT ® Plus Systems! Your pre-insulated piping solution for GLYCOL installations.