A Look at the Past and What's in Store for 2010

Wine & Spirits Daily

A Look at the Past and What’s in Store for 2010

January 4, 2010

Dear Client:

2009 was a strange year for the industry. The recession introduced a lot of changes as the “less is more” mantra gained, it seemed, more steam with each passing day. Even more than in 2008, we saw consumers staying home instead of venturing to restaurants, bars and nightclubs. We also saw them trading down at retail and buying less of our products in a shopping trip than they had in the past. As a result, a number of value brands gained traction while seemingly unstoppable giants lost some of their mojo. This prompted a number of changes in our industry, such as company restructurings/lay-offs and cuts in marketing spend that have opened new avenues in brand promotion. Here’s a look back at some of the biggest stories in 2009, when erratic consumer behavior made it very difficult for companies to gauge the industry and plan for the future.

Constellation Brands sells its value spirits brands to Sazerac for $334 million

Many states across the country raise taxes on spirits, wine and beer

Foster’s announces results of strategic wine review. The company said it would keep its troubled wine business but announced a number of key appointments, including a new managing director at Foster’s Americas. Recall that Stephen Brauer, who was the general manager of Pernod Ricard USA, took over Scott Weiss’ former post as MD at Foster’s Americas. Foster’s also announced intentions to sell 36 non-core vineyards and close or reconfigure 3 wineries in CA and Australia. Lastly, Foster’s separated its beer and wine salesforce. The market continues to speculate whether or not Foster’s will sell its wine unit in the near future.

Beam Global Spirits & Wine appoints new ceo Matthew Shattock

Pernod-Ricard sells Wild Turkey to Gruppo Campari for $581 million

Brown-Forman names Mike Keyes as president of its North American region

AmazonWine.com pulls out of the wine business before launching its site to consumer

Beam Global acquires Effen Vodka from Sazerac, which it originally purchased from Constellation along with the company’s other value spirits brands. In exchange, Beam sold the Old Taylor whiskey brand and inventory to Sazerac.

Constellation consolidates its wholesaler network. It strikes a deal with Southern Wine & Spirits (SWS) in nine markets, most notably in California, Florida, Illinois and Pennsylvania. Republic National Distributing Company (RNDC) joins with Constellation in eight markets, including Colorado, Louisiana, Texas and Washington D.C. Constellation signs with Young’s Market in Alaska, Washington, and Oregon. Lastly, National Wine & Spirits won Indiana and Johnson Brothers was signed in Iowa.

Southern and Glazer’s call off their joint-venture

Jack Daniel’s and Jim Beam announce they will not renew their NASCAR sponsorships in 2010

The FDA sends a letters to 30 caffeinated alcohol producers asking them to prove that their product is safe within 30 days.

Diageo Chateau & Estate Wines (DC&E) decides it will not distribute Bordeaux wine for the first time in 35 years due to oversupply.

Constellation names Jay Wright as president of Constellation Wines North America

Indiana grants Southern a wholesaler permit to operate in the state

One of the biggest rumors that continuously popped up throughout 2009 was that Diageo would acquire its remaining 66% stake in Moet Hennessy. We’ve yet to see this happen.

2010 CRYSTAL BALL PREDICTIONS

After the year we just had, it’s hard to know what to expect in 2010. We don’t believe that the wine and spirits industry will see a big turnaround until unemployment vastly improves – and that could take years. In all, we think this year will be a little better than 2009 but don’t expect big changes until perhaps the end of 2010 and into 2011 and 2012. After much thought and help from readers, here’s our attempt at 2010 predictions:

Trading up will see some improvements in wine. We expect premium and super-premium wine sales to improve slightly in 2010 and even more in 2011.

We expect that discounting will continue in 2010. More suppliers will find it necessary to drop prices despite fears that it could damage brand value.

The on-premise will see improvements in the second half of 2010 as employment gets a little better and consumers gain more confidence. The resurgence at the on-premise will create renewed interest in specialty cocktails and higher-end wine.

We expect lower priced spirits brands, especially vodka, will continue to outpace high-end growth. Consumers may not be quite ready to fork over the cash for $40+ spirits brands, but we expect those that deliver a strong brand message will see a turnaround towards the end of the year.

Small and innovative spirits brands with a compelling story will continue to gain traction in 2010. Just look at Firefly’s success last year.

Word of Mouth marketing will become an increasingly important strategy for wine and spirits companies, especially as marketing budgets tighten and more people join social networking sites such as Twitter and Facebook. We expect some of the larger companies to take notice.

Imported wines, particularly those from Italy, Australia and France, will continue to face problems in 2010. Meanwhile, US wineries and other countries that have offered low-priced and well marketed wines, such as New Zealand, Chile and especially Argentina, will continue to take share.

The Australian wine industry will continue searching for a united voice and solutions to its oversupply problem.

With some improvements in the credit market we expect to see more consolidation on the wholesaler and supplier front in 2010. We don’t expect a major brand acquisition, especially in the coming months, but may see some grabs for smaller players and brands. This could spell opportunity for some successful entrepreneurs.

2010 will see less consumers seeking fruity and sweet cocktails and instead looking for herbs and other ingredients with perceived health benefits.

WINE & SPIRITS DAILY
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