The Changed Landscape of Promoting Wine in California

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On August 25th, 2016 the Governor of California signed a bill into law that eliminates Instant Rebate Coupons (IRC) funded by suppliers or wholesalers for the promotion of wine in California. This mirrors the regulations that currently apply to Malt Beverages, however Distilled Spirits can continue to use IRCs for the promotion of their products. The law takes effect as of January 1st, 2017 (click here for the full text of California Senate Bill 1032).

California accounts for 61 million of the 397 million 9LE cases of wine (excluding cider) sold in the US market for the 12 months ending August 2016.  Given the strength of multi-unit retailers in California it is reasonable to assume that at least one third of this volume may be sold with an IRC with a potential redemption value is excess of $200 million annually.

This law represents a significant change for how wine can be promoted in California going forward.  While it is impossible to predict the overall market impact, the following areas will need to be addressed:

  • Retailers are unlikely to continue promoting wines at the same prices without these promotional funds. As such, suppliers and wholesalers will need to identify other discounting methods to fund promotions moving forward.
  • Many retailers set their programming calendars six months in advance or more.  With the effective date of this bill, January 1st, 2017, less than three months away, retailers, suppliers, and wholesalers will need to revamp programs slated for early 2017.  
  • Programs run in California are often mirrored in adjacent states (most specifically in Arizona and Nevada). Suppliers and wholesalers will need to decide if they wish to continue similar IRCs in these markets.
  • The use of IRCs is inconsistent across channels with some channels more heavily utilizing them than others. Elimination of IRCs could shift wine volume between channels as retailers seek other means to be price competitive.
  • Should suppliers and wholesalers transition to volume discounts, they will find increased volatility in their monthly volumes as retailers purchase less frequently and at greater quantity.
  • Additional opportunities exist in spirits, which can still promote using IRCs. Spirits suppliers may increase investment in IRCs to shift consumers away from beer and wine.

While more issues will arise as this transition occurs, this listing highlights some key areas to consider in making business decisions going forward. Ultimately, this law represents a significant change to the promotional landscape in California.  There will be lasting effects across all three tiers wherein some industry members will find opportunity and others detriment.

At bw166, we provide multiple tools to enable you to understand the total beverage alcohol market. The bw166 Total Beverage Alcohol Overview Report tracks all tax paid shipments into the US market including domestic products, packaged imports, and bulk imports.  The report also tracks total consumer spending on beverage alcohol in both the on and off premise channels. Subscribe now to receive the most complete view of the total beverage alcohol market. Additionally, to be able to track Beverage Alcohol imports and exports on a monthly basis for volume, value in USD, and value in local currency for all major trading countries, please see the bw166 Import and Export reports for Beer, Spirits, and Wine.

Beer, Spirits, & Wine – Packaged Imports Continue Growth, But Recent Trends Decelerating

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On Friday, September 2nd, import and export data for beverage alcohol was made available through July 2016. Top line results are as follows:

Beer:

Imported beer increased +7.6% by volume and +10.0% by value over the last twelve months. Over the last three months imports are up +7.5% by volume and up +7.6% by value. 65.3% of imports by volume come from Mexico.

Exported beer increased +17.2% by volume and +10.4% by value over the last twelve months. The last three months have seen some softness with declines of -1.6% by volume and -6.0% by value. 39.4% of exported beer goes to Mexico.  

Overall beer imports by volume are 6.6 times the size of beer exports.

Spirits:

Imported packaged spirits for the last twelve months are up +4.0% by volume and +3.4% by value.  Volume trends have softened over the past three months, up only +0.3%, but value has strengthened +5.0%.  Imported bulk spirits are not as healthy.  Over the past twelve months, volume is down -3.5% and value is down -6.1%.  These trends have declined further over the past three months with volume down -9.8% and value down -19.8%.  Tequila represents 13.8% of all imported packaged spirits while whiskeys (from all sources) represent 31.1% of all imported bulk spirits.

Exported packaged spirits for the past twelve months are down -1.8% by volume and -6.1% by value.  Volume trends have worsened over the past three months with volume down -5.4% and value -13.3%.  Exported bulk spirits for the last twelve months are up +10.8% by volume but only +1.6% by value.  Over the past three months volume trends have accelerated, up +14.3%, but value has declined, down -10.8%.  The United Kingdom represents 11.1% of all exported packaged spirits while 24.0% of all exported bulk spirits is destined for Canada.

Wine:

Imported packaged wine is up +4.4% by volume and +2.9% by value over the past twelve months. This growth has decelerated over the past three months with volume down -3.0% and value -2.8%. Imported bulk wines for the last twelve months are down -1.4% by volume but up +0.4% by value.  This too has significantly decelerated over the past three months with volume down -9.5% and value -11.9%.  Imported packaged wine from Italy represents 35% of all packaged imports by volume while imported bulk wine from Chile represent 32.5% of all bulk imports by volume.

Exported packaged wine for the last twelve months is down -10.4% by volume and -3.3% by value.  Over the past three months trends have decelerated with volume down -27.6% but value only down -1.9%.  Exported bulk wine for the past twelve months is down -4.2% by volume and -7.4% by value.  These trends have also decelerated over the past three months with volume down -10.3% and value -11.2%.  Canada represents 31.5% of all exported packaged wine and the United Kingdom represents 38.1% of all exported bulk wine.

To be able to track Beverage Alcohol imports and exports on a monthly basis for volume, value in USD, and value in local currency for all major trading countries, please see the bw166 Import and Export reports for Beer, Spirits, and Wine.

Total Beverage Alcohol Spending Continues Growth: +4.0% through July 2016

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For twelve months ending July, the bw166 Total Beverage Alcohol Overview shows total consumer spending on beverage alcohol at $229.8 billion, an increase of 4.0% and an acceleration of the growth from June. The bw166 Total Beverage Alcohol Index, the standard in measuring overall consumption, stands at 119.8, a 1.9% increase over the prior twelve months.

Beer volumes entering the market are up 1.50% over twelve months and are up 1.4% over three months.  This is a material improvement compared to the twelve month results through June.

Wine volumes (including Cider which is not materially impacting trends) entering the market are up 4.6% over twelve months and up 4.4% over three months. This is consistent with results through June.

Spirits volumes entering the market are up 2.3% over twelve months and 2.5% over three months. This is consistent with results through June.

The bw166 Total Beverage Alcohol Overview Report tracks all tax paid shipments into the US market including domestic products, packaged imports and bulk imports.  The reports also track total consumer spending on beverage alcohol in both the on and off premise channels. Subscribe now to receive the most complete view of the total beverage alcohol market.

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Beer, Spirits, & Wine – Packaged Imports Growing, Bulk Declining

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On Friday, August 5th import and export data for beverage alcohol was made available through June 2016. Top line results are as follows:

Beer:
Imported beer increased +6.3% by volume and +9.3% by value over the last twelve months and has accelerated over the last three month to up +8.7% by volume and up +9.9% by value. 63% of imports by volume come from Mexico.

Exported beer increased +20.8% by volume and up +13.0% by value over the last twelve months; while the last three months have experienced slight deceleration with +13.5% by volume and +5.9% by value. 40% of exported beer goes to Mexico.

Overall beer imports by volume are 6 times the size of beer exports.

Spirits:
Imported packaged spirits for the last twelve months are up +6.0% by volume and up +2.9% by value.  This is consistent with trends over the past three months where volume is up +6.2% and value up +5.5%.  Imported bulk spirits are not as healthy.  Over the past twelve months, volume is down -4.6% and value is down -3.2%.  These trends have declined further over the past three months with volume down -14.6% and value down -9.7%.  Tequila represents 13.6% of all imported packaged spirits while whiskeys (from all sources) represent 31.9% of all imported bulk spirits.

Exported packaged spirits for the past twelve months are down -1.2% by volume and down -5.7% by value.  Volume trends are similar over the past three months with volume down -1.2% but value  down -13.8%.  Exported bulk spirits for the last twelve months are up +12.6% by volume and up +3.5% by value.  Over the past three months, volume trends have accelerated, up +14.7%, but value has declined, down -9.1%.  The United Kingdom represents 12.2% of all exported packaged spirits while Canada is the destination for 28.4% of all exported bulk spirits.

Wine:
Imported packaged wine is up +6.3% by volume and up +3.8% by value over the past twelve months.  However, this growth has decelerated over the past three months with volume up +1.3% and value up +1.1%. Imported bulk wines for the last twelve months are down -2.0% by volume but up +0.7% by value.  This too has significantly decelerated over the past three months with volume down -32.5% and value down -25.5%.  Imported packaged wine from Italy represents 35% of all packaged imports by volume while Imported bulk wine from Chile represent 31% of all bulk imports by volume.

Exported packaged wine for the last twelve months are down -4.8% by volume but up +2.8% by value.  Over the past three months trends have decelerated with volume down -28.7% and value down -3.7%.  Exported bulk wine for the past twelve months are down -3.9% by volume and down -7.5% by value.  These trends have also decelerated over the past three months with volume down -23.6% and value down -22.5%.  Canada represents 31% of all exported packaged wine and the United Kingdom represents 37% of all exported bulk wine.

Interesting Facts:
For 12 months ending June 2016.  Imported beer from Denmark is up 57% by volume though represent only 0.2% of all imported beer.  Imported packaged wine from Canada is up 83% by volume to 2.2 million cases, entirely driven by Sangria, Coolers and other similar wine types at relatively low prices.  Imported packaged spirits from Japan are up 116% by volume, but still only represent 0.2% of all imported packaged spirits.

To be able to track Beverage Alcohol imports and exports on a monthly basis for volume, value in USD, and value in local currency for all major trading countries, please see the bw166 Import and Export reports for Beer, Spirits, and Wine.

Beverage Alcohol Spending Up 3.4%

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For 12 months ending June 30th 2016 the bw166 Total Beverage Alcohol Overview shows total consumer spending on Beverage Alcohol at just over $222 Billion, an increase of 3.4% versus the prior 12 months. The bw166 Total Beverage Alcohol Index stands at 119.04, a 1.5% increase over the prior 12 months.

Overall Beer volumes entering the market are up .23% over twelve months and are up .24% over three months.

Wine volumes entering the market are up 4.4% over twelve months and are up 4.5% over three months.  Note Wine trends include Cider but it is not materially impacting the trends.

Spirits volumes entering the market are up 2.0% over twelve months and 2.7% over three months.

bw166 reports track all tax paid shipments into the US market including Domestic Products, Packaged Imports and Bulk Imports.  The reports also track total consumer spending on Beverage Alcohol in both the on and off premise channels.  This is the most complete view of the Total Beverage Alcohol market on a consistent basis.

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