Retail Sales Analysis
Retail Sales Data: Pricing and Value Drives Growth for Zinfandel
Mary-Colleen Tinney
January 2006 Wine Business Monthly

For the past several years, sales of red Zinfandel have followed a steady growth pattern, up 12 percent in dollar sales in ACNielsen*-tracked food stores over the 12 months ending October 22, 2005. Since November 2002, Zinfandel has grown 6.4 percent in case volume. For those closely involved in the Zinfandel marketplace, the growth of the varietal is unsurprising. Zinfandel consumers are traditionally loyal, are attracted to the “all-American” nature of the wine, and the simple fact that more Zinfandel is available on supermarket shelves, most of which is placed at a very attractive price-to-quality ration, all indicated a positive future for the wine.

Zinfandel is the fifth-largest red varietal, behind firmly entrenched behemoths Merlot and Cabernet Sauvignon, as well as the very hot Pinot Noir and Syrah/Shiraz varietals. However, the pattern of Zinfandel growth does not mirror any of those ahead of them in sales. The variety is non-traditional and is absent of a strong Old World connection, like that of Merlot or Cabernet Sauvignon. Unlike Pinot Noir or Syrah/Shiraz, Zinfandel has not hit an extremely hot sales spike or been deemed “the next hot wine.” What Zinfandel does have, though, is an extremely strong network of producers and advocates that are encouraging wine consumers to try the extremely versatile wine.

“Our customers might not drink it every day--although we do wish they would--but we have a very loyal consumer base,” said Jeff Lubin, marketing manager at Ravenswood Winery in Sonoma, California. “That's definitely the consistent growth from year to year, those loyal customers just buying more Zinfandel. But also, there have been a lot of new entries into the segment, a lot of new brands and new labels. There has also been a lot of growth in the premium to luxury tier.”

Brian Sypher of the East Coast distributor Michael Skurnik Wines feels that Zinfandel's status as being produced almost exclusively in the United States is a popular selling point. “Zinfandel is the only truly all-American wine that we have as a wine drinking culture,” he said. Although Sypher acknowledges that the grape is produced in under various names in Europe, such as Crljenak in Croatia or Primativo in Italy, “the fact is that nowhere else in the world is Zinfandel grown on the scale and with the quality that we do here in America. As a result there is a natural interest, and a consistent interest, in the one all-American wine.”

For the consumer, the price-to-quality ratio is also one of the most attractive aspects of Zinfandel. Producers often tout that a good quality Zinfandel does not necessarily mean a luxury price tag. “This is the key reason for its current success and growth rate, its price-quality ratio is the best of any red varietal today,” said Joel Peterson, winemaker at Ravenswood Winery. “We've done a pretty good job, meaning the Zinfandel producers, as positioning Zinfandel as being a friendly and affordable alternative to, say Cabernet Sauvignon. The prices have not accelerated in the same way as they have with Cabernet Sauvignon, Pinot Noir or other varietals.

“Zinfandel is just one of those really core wines that gets trial and people appreciate it and gets value in the marketplace,” continued Peterson. “Even when consumers go into the higher-priced Zinfandel, those always are a great value, because they are the equivalent of Cabernet Sauvignons that are twice the price.” Zinfandel tends to have a much heavier crop load than other red varietals, and twice as heavy as Cabernet Sauvignon, so it costs less to grow and produce in comparison to those varieties.

Consumers are responding in the marketplace by trading up into higher-priced segments that offer more quality for their dollar. The combined under-$8.99 category is down 33 percent since November 2002, while wines over-$9 are up 23 percent in the same time period. The largest volume of Zinfandel sales occur in the under-$6 category, which is down 27.9 percent, and the $9 to $11.99 category, which is up 14.7 percent. The strongest growth is seen in the over-$15 category, which is up 69.3 percent on a much smaller base, followed by wines priced in the $12 to $14.99 category, which is up 39.3 percent.

“It's a combination between more people drinking the wine and more people willing to spend the money for higher quality wine,” said Lubin. “You are always going to have the $6 wines for every day, and people are still going to go for that $6.99 to $9.99 category. But what we have seen is that people are definitely willing to spend more than $10, and they will go up to $15-20 when the situation fits.”

Sypher also feels that wineries are having some difficulties in obtaining grapes to craft lower-priced Zinfandels, leading to a decline in that price point. “The main reason is that there is less wine available at those prices, especially below $6. With the price of fruit, wineries just can't do it anymore. When you can't make a $5.99 wine, you can make one more in the mid-range.” While this may be true, there is a strong gravitation toward the highest price ranges of the segment, which is driving growth in the overall segment. Consumers are obviously trading up within the varietal.

Economics are certainly at the heart of the increased pricing structure of Zinfandel. “It's a collusion of forces,” said Peterson. “There are more wineries making wine in that $9 to $12 price category that are high quality, and more production is being shifted from inexpensive Zinfandel into this category where wineries can make more money. As a consequence, they are widely available in chains and grocery stores. There's a lot of competition in that zone, from Australian Shiraz and cheaper European imports, especially, but Zinfandel is a good value and a wine that people have a good response to when they drink it. It's a happy collusion of consumer and production.”

Approachability of the wine style is another factor for Zinfandel's growth. “I think people are more willing to explore Zinfandel, especially considering the popularity of Australian wines,” said Lubin. “Those consumers are looking for new wines to try and the end up exploring new varietals and they are attracted to Zinfandel because it is a fun varietal. A lot of the newer brands have funky labels, and ours is recognizable as fun and irreverent.”

The main challenge in selling Zinfandel is overcoming the long-held stereotypes that surround the wine. Consumers, as well as critics, writers and on-premise purveyors, can erroneously assume that Zinfandel is too big, too brash and too precocious to be seriously considered as a fine wine. Zinfandel producers and fans, however, strenuously dispute that image.

“ In the late 1970s, Zinfandel got tagged with a bad rep for high alcohol, too much extraction and increasing incompatibility with food. There are some similar rumbles in the press right now. I'd hate to let that happen again because it's really not true given the entire world of wine out there,” said Julie Johnson, owner of Tres Sabores, a Zinfandel-specific producer in the Napa Valley. Johnson is also president of Zinfandel Advocates and Producers (ZAP), a nonprofit variety-specific promotional organization “In that era, the American palate was so very cloistered, naïve--and fewer Americans were drinking wine than just about any other country in the world,” continued Johnson. “Now, the incredible range of Zinfandel styles as well as the increasing range of settings where people enjoy it makes for a great opportunity. Inevitably, people take their personal wine discovery routes around the world--and always come back to Zinfandel as a favorite wine, an individualist's varietal. Our lack of pretense and educational mission is at the core of this trend. ” 

According to Sypher, consumers are looking for balanced, Claret-style Zinfandels and are moving away from the “big, brawny, extracted wines” that were popular in the past. “Five years ago, m any Zinfandel makers were pushing the limits, partly because that's what the wine writers and critics wanted. They were out of balance. In the past two years, though, a lot of producers have gotten sensitive to the criticism and they are making wines that are better balanced and are much better with food.”

Donn Reisen, president of Ridge Vineyards in Cupertino, California and a former president of ZAP, feels the stereotyping of Zinfandel is “absurd” because of the adaptability of the flavors. “ Zinfandel is one of the only varietals that can produce a highly credible wine from blush to port in style. Much of Zinfandel's attraction is the fruit's ability to achieve balance and richness of body and flavor when made in either the softer Claret style or as a bigger bolder wine. Zinfandel is obviously very adaptive, and it can show both the uniqueness of regionality and/or winemaking preference. Unlike most other varietals, with Zinfandel one can pursue the many styles within the same varietal.”

However, Zinfandel is still fighting to get the respect the producers feel it deserves. “ It continues to be one of the most popular in the consumer category, but on-premise, Zinfandel seems to be thought of as the poster child for high alcohol,” said Reisen. “I am incredibly surprised at how over-simplified people are when they are looking at Zinfandel. What's happening is there is a preoccupation with one style of Zinfandel, when it is the one varietal that can produce wine in any style.”

Sypher finds that traditionalists fail to see the positive aspects of the varietal. “ Zinfandel has had a hard luck case trying to get respect from serious wine connoisseurs who tout tradition, he said. “Zinfandel is continually evolving to become a fine wine, but it's still competing with the Old World established varietals. They think of it as kind of brash and fruit forward and that it typically doesn't age as well as the traditional varietals. That's a completely outdated stereotype that's going to be overturned in the next few years.”

Zinfandel winemakers have had to rely on getting the message of their varietal out with sometimes-limited exposure in on-premise situations. “ Unfortunately, many restaurants still limit their Zinfandel selections compared to Cabernet Sauvignon or Merlot listings--but I'm optimistic for the future,” said Johnson.

“More upscale merchants and restaurants are more flexible now, and many are equipped to or even thrive on getting in smaller lots of wines--thereby dealing with more producers and broadening the exposure. At least in California, merchants have really been doing us a favor: the increase of in-store tasting bars as well as special focused tasting events gives people a relatively cheap and risk free way to approach a new producer or varietal. Zinfandel is perfect for this. Zinfandel can be everywhere, now. It's not always in the best spot in the store, and not always the best implementation of cross-marketing creative options, but it's still there at a reasonable price.”

@Subhead:Overall Wine Sales Up 10.8 Percent

@Text:Wine sales continue to build upon themselves in the ACNielsen-tracked supermarket channel. Overall wine sales rose by 10.8 percent in the 13 weeks ending August 27, 2005 over the same period in 2004, while the case volume of wine sold during this period rose 3.1 percent. The relatively slow growth rate of case sales in comparison to dollar sales indicates that consumers are not only buying more wine, they are buying higher-priced wines in 2005 than in 2004.

As always, the “big three” varietals still dominate the retail arena. Chardonnay sales rose 7.8 percent in the 13 weeks ending August 27, 2005, while Cabernet Sauvignon increased sales by 14.9 percent. Merlot sales decreased 0.4 percent, continuing what is looking to be a sustained decline. By case volume, Chardonnay was up 5 percent and Cabernet Sauvignon gained 7.7 percent. Again, Merlot failed to register any growth, falling 0.7 percent.

The hottest varietals outside of these three are Pinot Grigio/Gris, Pinot Noir and Syrah/Shiraz. In the 13 weeks ending August 27, Pinot Grigio/Gris gained 27.7 percent in dollar sales and a nearly identical 27.5 in case sales. Pinot Noir continues its meteoric sales pace, gaining 87.4 percent in dollar sales and 79.8 percent in case sales in the 13 weeks ending August 27, 2005 over the same time period in 2004. Sales of Syrah/Shiraz rose 13.9 percent in the 13-week period, while the varietal rose 12.5 percent by case volume.

Domestic wine sales gained 11.1 percent in the 13 weeks ending August 27, 2005 over the same period in 2004, while imports rose by 10 percent. In terms of case volume, imports gained 5.8 percent, while domestic wine rose 2.4 percent. wbm

@Bio:Mary-Colleen Tinney is the associate editor for Wine Business Monthly.

** Note that ACNielsen data is collected from in-store sales scanners in grocery, liquor and mass merchandise stores in 34 U.S. markets.

Sidebar: Zinfandel Advocates & Producers

The Zinfandel Advocates & Producers (ZAP) are an extremely well-organized and active organization with a rare varietal-specific educational message. “What ZAP offers is absolutely unique among the many wine organizations that are out there: a grass roots educational ‘cause' that thrives on the personal relationships that can be developed between consumer-customer and vintner. We fuel each other,” said Julie Johnson, current ZAP president and proprietor of Tres Sabores winery.

The organization has certainly worked hard to make an impression on consumers in marketplace. The aim, of course, is keeping Zinfandel visible to consumers, and making it attractive enough to prompt them to buy a bottle or two. “Since the whole world of wine is particularly inviting for people to explore right now; it's important for our producers to keep up the energy and remember that tons and tons of people are still out there, exquisitely poised to jump into a glass of Zinfandel--for the first time--and emerge with the same passion we already share,” said Johnson.

ZAP organizes several events throughout the year, ranging from large tasting events, trade education seminars and Mediterranian cruises exploring the grapes Croatian homeland. Their most popular event is a four-day education and tasting festival, including an annual tasting that attracts over 10,000 consumers and 300 wineries to San Francisco at the end of every January. The 2006 event is scheduled for January 25-28. Other components of the festival include an afternoon of panel discussions and tastings lead by Zinfandel experts, a walk-around food and wine tasting event and an “evening with the winemakers” dinner.

However, the organization is also on a mission to understand their base, from grape growers to consumers. “We want to get closer to where our producers are at, as well as to key into what experiences our consumers desire through a series of innovative surveys currently underway. Also, the list of associate members and strategic partners seems to deepen every month and some relationships are a little unconventional.” Part of this mission is the “Zimposium” education event, scheduled for July at the Meritage Hotel in Napa.

“The point is, we're actively looking for new pathways to put Zinfandel into the pleasurable parts of people's lives. The more producers and customers (both trade and consumer) we can get creatively engaged in this quest, the better. Indeed, with Zinfandel I think there is more potential for the engagement to be independent, emotive and long-lasting, rather than directed, by a writer, for example, who pushes points or historical eminence, or celebrates the latest greatest varietal or regional ‘discovery.'”