How Supermarkets Sway Wine Spending

© Wikimedia | Supermarkets are changing customers’ wine-buying habits.

Liza B. Zimmerman examines how US wine selection is affected by grocery-store sales

Posted Tuesday, 16-Feb-2016

But when I moved to the West Coast a decade ago – first to Seattle and then San Francisco – I started to question what benefits supermarket wine sales actually brought to the local, independent wine market. The major California labels may all be on the shelf, along with a smattering of major imports, but not much else at most leading supermarkets.

Growing up New York City, wine sales were never – and still aren’t – legally permitted in grocery stores; we had to seek out new discoveries at the local wine store. However, as a wine writer I had always been pro free-market trends and had viewed West Coast supermarket wine sales as a step in the right direction.

Data and limitationsThe volume of specific wine brands that national grocery stores sell well exceeds what most mid- to small-sized producers can satisfy. Smaller distributors don’t have enough staff to stock and, sometimes, work the wine aisles of major grocery chains. This I learned the hard way when I worked for a small importer of mostly Portuguese wines called Vinum Wine Importing & Distributing in Seattle a decade ago. We couldn’t get our wines picked up in more than one grocery outlet as we didn’t have enough volume or sufficient sales force to support sales in all locations.

According to the Washington DC-based Food Marketing Institute (FMI), 33 states and the District of Columbia permit “food stores” to sell wine. Almost all of these states, not including New York and New Jersey, allow multiple-wine licenses for retailers. This makes them much more appealing retail targets for grocery stores and national chains such as Total Wine & More or BevMo! who are respectively based in Maryland and the Bay Area.

According to a 2012 FMI study, grocery stores have a key sales advantage for core consumers. “Nationally, more than 50 percent of wine is purchased by women, who traditionally are uncomfortable in conventional package stores. Women thus tend to buy wine in food stores, or not buy it at all.”

Many of the states that restrict multi-unit wine licenses are also control states, where the government ostensibly regulates the sale of alcohol for the public’s benefit, as is the case in Canada and much of Scandinavia. The largest, and most notable, current US control states include Pennsylvania, Michigan and Oregon. As a result, according to the FMI report, there are 155,327 outlets for retail wine sales in open states, versus 16,387 for closed states.

“There are certain markets, like Colorado, where our licenses are limited legally by the state and require separate [store] entrances”, said Doug Bell, Whole Foods’ 416-location senior global coordinator of beverage. Such regulations may limit grocery stores’ ability to sell wine, but might make for an independent wine retailer’s dream location.

“It would be so great to have a store in Colorado or New York where supermarkets don’t compete”, added Clyde Beffa, owner of the three-location, California-based fine wine retailer K&L Wine Merchants. That equation for him would mean: “Only one Costco and one Trader Joe’s. We would love it.”

How selection differs

While Beffa said that his stores are so specialized that they are not greatly affected by chain supermarket sales, he did express concern about Costco’s potentially competitive fine wine operations. K&L’s point of distinction, for him, is that: “We have a different and a more eclectic inventory and a more-knowledable clientele.”

Few major supermarkets in California are currently giving Beffa a run for his money in terms of selection and service. However, both in California, and other major markets, there are key grocery chains who also position themselves as fine wine retailers. HEB in Texas and Whole Foods, with a presence in multiple states, would be two of the best examples.

Bell said that at Whole Foods, the chain thinks of itself as a “fine wine chain of wine stores that just happen to be in a grocery store format”. He added:”We stock our shelves with as broad a selection as our store sets allow, trying to cover all categories, countries, flavor profiles and price points”.

© Wikimedia | Consumers still prefer specialist stores for “occasion” wine purchases.David Trone, president of the 130-location chain Total Wine & More said that more competition just fuels the fire as it offers consumers more options and keeps the retailer focused. Total has been opening locations in both Southern and Northern California at a brisk pace and is slated to open two Bay Area stores this year.

“Most supermarkets focus on a limited number of items and a limited spectrum of wines”, added Trone. He noted that many of the wine purchases at local supermarkets are convenience driven with a focus on major brands, which tend to be in the higher-volume and lower-price category. He shared his belief that, because of Total’s selection, repeat customers will come back to shop again.

There is generally, with a handful of exceptions, little assistance in the aisles or with wine purchases at most grocery stores. Savvy buyers also know that some of their favorite mass-produced brands may cost less at a fine wine shop.

On a recent trip to Total Wine’s store in McLean, Virginia I saw customers stocking up on discounted Clos du Bois Chardonnay. It’s not a purchase you would expect consumers to drive out of their way for but the benefits clearly pay off. Beyond buyers looking for steep discounts, consumers looking for occasion-based wines, said Trone, are more likely to shop at fine wine shops even when supermarket sales are permitted in their markets.

He noted that, years ago, many grocery stores used to focus on the $10-and-under selection but those times are long over. This is particularly true with fine wine retailers such as Andronico’s in California, HEB in Texas and Whole Foods’ various locations across the country.

The bottom line

At this point, US consumers will continue to be the judge and jury as to where they would like to buy wine. According to the FMI study, market expansion of wine licenses at food stores would only “reduce total package store sales by only 2.52 percent”. The bigger, lingering question is how much such a move might affect the availability and sales of esoteric and smaller-production wines.

Whole Foods’ Bell believes both types of wine sales markets can peacefully exist in today’s markets. “I am unsure that the independent wine merchants or fine wine chain merchant are really affected by wine in grocery; each [of them] has their customer and each customer has specific needs relating to all retailers”, he said.

He added that, “All channels share the same wine customer these days. You can’t define them as a one-channel wine shopper anymore.”