America’s minuscule high-end wine market

By Felix Salmon
September 4, 2012
Dan Levy at Bloomberg has a big story today under the headline "America Drinking Top-End Wine Fuels Napa Deals". It's mostly about land and winery transactions, but this jumped out at me:

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Dan Levy at Bloomberg has a big story today under the headline “America Drinking Top-End Wine Fuels Napa Deals”. It’s mostly about land and winery transactions, but this jumped out at me:

High-end California wine accounts for more than two-thirds of U.S. bottle sales above $20, according to data compiled by Nielsen Holdings NV… Purchases of California premium wine totaled $410 million in the 12 months through July 21, up 14 percent year-over-year, store-scan data from New York-based Nielsen show.

To which my reaction was simple: “That’s it?”

$410 million a year might be some kind of wonderful record high, but it’s still a minuscule figure on an absolute basis: it works out at about $3.50 per US household per year. I don’t know what the average bottle of wine costing more than $20 actually costs — let’s say it’s $25. Then the average US household buys one such bottle of wine every 7 years. Once you account for my wino friends, the median US household buys wine costing more than $20 a bottle exactly never.

Let’s look at this another way. Grey Goose imports about 3.5 million nine-liter cases of vodka into the US every year. Those cases are sold by suppliers for about $200 a pop; the suppliers sell to wholesalers, and the wholesalers sell to retailers and to clubs, bars, and restaurants. But a good rule of thumb is that the retail price is three times the supplier revenues: that’s $600 a case, or $50 a bottle. Which is about right for Grey Goose.

Now 3.5 million cases of vodka, at $600 per case, works out at $2.1 billion of vodka sold annually — and that’s just Grey Goose. Overall, the US vodka market had supplier revenues of $4.8 billion in 2010, according to the Distilled Spirits Council of the United States, which means that we as a country get through about $14.5 billion of vodka per year. If you take only the “high end premium” and “super premium” end of that, you’re still talking $7.4 billion per year.

Meanwhile, the entire national wine market, for wine costing more than $20 per bottle, is $410 million for Californian wines and about $600 million in total.

According to the NYT’s Eric Asimov, $20 is the “sweet spot” for wine — and although he concedes that $20 “is not cheap”, he also says that you won’t find a decent California cabernet for that price. Yet the fact is that most of the over-$20 wine we drink does come from California, and frankly a huge amount of it isn’t very good. (Go on a wine-tasting tour of Napa one day: the vineyards there will all pour you $25 wine all day at a quality worthy of wine costing maybe $5 or $7.)

All of which is to say that if you drink wine costing more than $20 a bottle remotely regularly — every couple of months, say — then you’re an extreme outlier in this country. And if it’s French, or Italian, or even from Washington — if it comes from anywhere at all other than California — then you’re truly a member of the abstruse-and-recondite set.

Because the entire high-end wine market in this country — the amount of money you get if you add up every bottle of wine sold in America for more than $20 over the course of a whole year — is less than one third of the size of the market in Grey Goose vodka alone. Which doesn’t taste of anything at all.

So the next time you walk into a wine store and feel intimidated by the number of bottles costing $40 or $70 or more, don’t be. If you’re merely spending a Jackson on a bottle of wine, you’re part of a tiny elite minority. Everybody else, if they’re not drinking beer, is drinking vodka — a drink designed to be as bland and tasteless as possible.


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Felix, check your stats. At tatistics/article639, they say California shipped about $20 billion of wine to the US market last year, in 212 Million cases. That’s an average of about $8/bottle, so if you figure 80% (2 billion bottles) of those cases averaged $5/bottle, then the remaining 20% averaged $20/bottle. If 80% of those 500M bottles averaged $15 each, then the 20% (100M bottles) above $15 averaged $60 each.

Don’t worry, there are lots of winos here with expensive (if not good) taste.

Posted by KenG_CA | Report as abusive

A huge amount of it isn’t very good?
I thought the results of all those taste tests were that nearly all did taste very good. You know, those that showed people could not even tell a red from a white blindfolded.

Posted by MyLord | Report as abusive


what’s happened to the erudite comments? they’re not visible upon clicking on the blog title to this piece…….

Posted by crocodilechuck | Report as abusive

Just how does a “wine that is not very good” taste, Felix? Can you give us some objective criterion other than your subjective opinion? I have drunk (red) wines in Europe (Spain and Portugal mainly but also France) and the US and imports from Australia and Chile, etc., and concluded that almost all tasted perfectly okay if they cost over about $6 a bottle. (Below that one could tell something was amiss). Above $6 it was all subjective.

Posted by Chris08 | Report as abusive

Given the median household income, how can you be surprised that the median household doesn’t buy $20 wine?

The added value of high-priced wine is an acquired taste anyway. Most people won’t drink enough of it to learn to value the difference.

Posted by JDow2 | Report as abusive

From a viewpoint back here in the UK, Californian wine is at the moment grossly overpriced, compared to say French wine. I know we pay more, and you pay less over there, but I am not sure it makes up for it. This has changed over the last 10-20 years, and I don’t think it is all currency movements. I don’t think the economics of wine in say Burgundy or Bordeaux (or Germany for that matter, one of my favourites) are much better, and I think they are cross subsidised.

(Note I dont include the high end stuff that is non price sensitive I mean the quality stuff at $20-$50)

Posted by JustinCormack | Report as abusive

By comparison, American craft beer, which is certainly NOT designed to be as bland and tasteless as possible, represents 15% of US beer sales, with $8.7 billion in retail sales. business-tools/craft-brewing-statistics/ facts

Posted by PatrickS | Report as abusive

The figure of $410 million seems very low. This 2010 paper from two UCSF professors seems to have very different data on high-end wine. Figure 11 (on page 17) shows overall revenue from wines over $20 in the range of ~$5 billion. ent/uploads/2010/05/AnalyzingUSRetail.pd f

And this 2001 story from SF Gate notes the difficult in getting reliable data on high-end wine sales:
( Top-End-Wines-Resist-Recession-Premium-W ine-2962139.php)

“The problem with government data that is the source of many wine industry reports is that it lists how many gallons of wine from wineries and bonded warehouses are shipped and taxed, without revealing how much the wine costs per bottle.
Although grocery store scan data are useful, they primarily report wine sales below $12 per bottle and do not cover all geographic regions.
Other industries generally have more reliable data because they have fewer companies and more publicly held companies. In contrast, the wine industry is highly fragmented and generally run by families.”

Posted by Sam09 | Report as abusive

Srsly, Felix? We’ve got 40 million people on food stamps and you’re complaining we’re not buying enough expensive wine? Geez, and I thought the Romney was out of touch. I mean, really, WTF is the point of this post?

Posted by Moopheus | Report as abusive

What is the point of this post? The US is still largely a beer-drinking country. I’d also make a guess that most of the more expensive wine in the US is sold in restaurants, and not for home consumption, which obviously won’t be included in Nielson figures. I’d also hazard a guess that most of the vodka ends up in mixed drinks. Or used to get drunk fast.

Personally, I only buy wine for cooking, which means that it is pointless to spend more than $10 for a bottle that’s going into a sauce or a risotto.

And in a country where 40 million people are on food stamps, few things say “pretentious a-hole” like wine snobbery.

Posted by Moopheus | Report as abusive

A) You’re completely leaving out the restaurant sales, which is probably significant.

B) Who cares? Your complaint basically comes down to “Americans don’t spend their money on the stuff I spend my money on!”

C) I’d rather have a chocolate egg cream any day.

Posted by Moopheus | Report as abusive

First of all, those of us who really understand this portion of the wine market knows that $20+ price category is disappearing from scan data…almost all of this is going DtC…over the 52 week period thatWine & Vines and ShipComplaint reported mid 2012 DtC sales were at $1.4 Billion…yes…that is with “b” amounting to 8.6% of all domestic wine sales.

Posted by MarkTNorman | Report as abusive

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