SIZE MATTERS

We have all read it before. Starting in the early 1980s, the statisticians who chart the course of the wine industry in America said that jug wines would soon be surpassed by “premium wines,” and that would signal the maturation, the sophistication, of the American wine consumer. And those of us who cover the industry looked for and anticipated the demise of the 1.5-liter bottle and the crowning of the 750 ml bottle as king.

Yet strangely, over the last decade and a half, jug wine, that demeaned product, has hung on. Today it remains an important element of American wine culture. Despite numerous predictions of its imminent death, it’s still a vital force that fuels the joy around many dinner tables.

Indeed, faith in jug wine has been renewed. In various guises, it is growing.

You may be forgiven if you have a bit of a negative attitude toward jug wine because for decades it was looked down upon as a simple, uninteresting quaffing wine that people bought to sip with a meal and never discussed. Those who grew up with and were educated in the ways of varietal wines have a right to feel just the slightest bit of disgust for the generic 1.5-liter bottle of the past.

Yet, boasting a much-improved quality, the 1.5-liter bottle and its companion 5-liter box are turning out to be important contributors to the U.S. wine market.

Forty years ago, jug wine featured labels that said Roma, Italian Swiss Colony, Petri, and many more — names that are today defunct. But the marketplace of the 1990s ought to pay homage to the jug of the past, since despite its transformation into new images, it has shown surprising durability recently.

Where just 15 years ago, almost all jug wines — sizes 1.5 liters and larger — were generic, today’s newer wines in larger packages are varietals. And whereas much of the larger format bottles of the past were dull and uninteresting, technology has elevated today’s jug wines into reputable, wines with character that sell for so little money per glass that savvy consumers remain loyal.

CHANGING TERMS

The various categories of wine have often been segmented on the basis of price, not on the size of the bottles in which the wine is sold, said John Fredrikson, president of Gomberg, Fredrikson and Associates, a San Francisco-based statistical analysis and consulting company. Fredrikson, who charts a wide range of wine-related data, hopes the term “jug wine” will be replaced with “everyday beverage wine,” since the former name has historically carried a negative connotation.

“But today, I think it’s clear that the industry has made quality improvements — and that this wine is nothing that should be looked down upon. It’s a product no one should be ashamed of buying.” He pointed out the differences between the jug wines of the past and the “everyday beverage wine” of today. “Most whites were made from French colombard and chenin blanc, and there were blended reds, and now there are chardonnay and merlot.”

“The bag-in-box may be the best package out there,” said Fredrikson. “That box is looked down upon in certain circles, but there is a great convenience. The thinner box fits well in a refrigerator and the product stays fresh for weeks.”

Fredrikson said 5-liter bag-in-box and 1.5-liter packages are growing rapidly in market share, while 3- and 4-liter bottles are losing share slowly.

The 1.5 market “tends to be a little different market,” with varietals gaining in this size and generics losing market share.

GROWTH DUE TO SEVERAL FACTORS

The director of chain operations for one of the largest wholesale distributors in the nation, who asked for anonymity, said the dramatic growth in the 1.5-liter segment is due to a number of factors.

“Part of it is young people who are venturing to 1.5s by moving from the 3-liter tier,” he said. “Generics [in 3-liter packages] have less appeal to them, and I attribute that to the consumer becoming more educated to varietals, based on their restaurant experiences.

“When you go into a restaurant these days, you don’t hear waitstaffs ask, ‘Would you like a glass of red?’ or ‘a glass of white?’ anymore. They ask, ‘Would you like a glass of chardonnay or merlot?'”

He said the wine companies both created the varietal and adapted to the great demand for it starting almost exactly 15 years ago when Glen Ellen Winery first created the so-called “Pop-Premium” or “Fighting Varietal” Chardonnay.

“If you look at the 1.5-liter size, Glen Ellen and Fetzer both used to be 40% red and white generics,” he said. “They quickly phased out of those into a varietal, and the wines improved.”

He added that existing, traditional 1.5-liter buyers, “are customers who are more size-loyal than we historically thought; they will tend to stay with the size they are comfortable with.”

One key in the market came three years ago when Sutter Home, which until then had been entirely 750s, re-launched its line with a screw-capped 1.5 that took off.

The wholesale chain executive pointed out that Sutter Home hit the market at the perfect moment.

“They were already a hot brand, and the fact that they were priced very well placed them at the right place at the right time. It was a time when many of the large grocery chains were expanding [their wine space], and the major players were Glen Ellen, Sebastiani and Gallo. Nobody else really was there.

“Mondavi Woodbridge was there only with a sauvignon blanc at that point, and they made a move quickly. But really there were very few players at that moment, and Sutter Home hit the market perfectly.”

Today, Sutter Home markets an estimated 6.6 million cases of wine in all sizes, and does well not only with 1.5s, but also with 187 ml bottles.

However, despite major inroads into the volume end of the market with 1.5s from numerous brands, the major growth has come in the boxes, fueled by the Franzia brand’s remarkable 13.9% increase in volume between 1996 and 1997 to a total of 18 million 9-liter-equivalent cases. Gallo sold a remarkable 34 million cases of all wine in 1997, much of it in larger formats, although Gallo’s overall sales were off marginally.

Meanwhile, one of the great success stores in the industry remains Bronco’s Fred Franzia, whose acquisition of literally a dozen labels (including Rutherford Vintners, Hacienda, Grand Cru, Estrella River and many more) continues to confound the larger brands.

The 1997 sales year saw some changes in the players. Gallo placed a great emphasis on 1.5 liters with its Gossamer Bay brand in that size; Sebastiani converted its Heritage line to Vendange in 1.5 liter size and saw the latter grow 72% on an annualized basis, to 3.8 million cases.

PACKAGING IS KEY

One supermarket executive, who also requested anonymity, suggested that a key reason for the 1.5-liter size continuing to gain — and why 750s are growing as well — is packaging. “It started with the flange top, which was a major innovation in packaging,” said the executive. “It’s a design the consumer really likes.”

One of the as-yet undetermined forces in the larger-format packages is Corbett Canyon, according to the market executive.

“Talk about a brand that is coming on strong. Look, they’ve done all the right things — radio and TV advertising, great placements, in-store promotions — and meanwhile, the wine is improving.”

He said he had no idea how far Corbett Canyon could grow, but from 1995 sales of 600,000 cases, the brand has grown in two years to 2.4 million cases. It seems to be favored by consumers who are attracted to its unique not-quite-square, not-really-round bottle.

Speaking of bottle designs, Gallo’s introduction of an “hour-glass” shaped bottle has enlivened the shelf appearance, and some analysts are predicting that the appearance alone may jump-start Gallo’s sales in the 1.5-liter area.

Meanwhile, Gallo’s 5-liter Peter Vella brand, which for a time was using Italian-produced chardonnay, has converted back to California as a grape source, and the improvement in quality has immediately been noted by some retail store personnel.

Statistics from Nielsen Winescan, which charts supermarket sales of wine (about 30% of all wine sales), showed that for the first quarter of 1998, sales of 1.5-liter bottles of wine rose 5% over the same period in 1997, and now holds a 34% share of all supermarket wine volume.

The largest growth category was in traditional 750s, which were up 11% in the quarter over 1997, and it’s a category that now represents 31% of supermarket volume.

Third in market share were 5-liter packages (almost all of it boxes), with 18% of all supermarket wine sales, and a rise in the period of 10%. The 3- and 4-liter sizes were off some 5% in the quarter, and cumulatively represent only 16% of the total of supermarket sales.

Overall, the larger format packages are solid in the market. They may be called “everyday beverage wine,” and they may carry names like cabernet sauvignon and merlot, but in reality they are simply the younger siblings of what once were the black sheep of the wine family. The lowly jug wine lives.


Dan Berger’s wine column is carried by the Los Angeles Times Syndicate, and he also publishes a weekly newsletter on wine, “Vintage Experiences” (e-mail:RLLS92A@PRODIGY.COM).


MORE LARGE SIZES DEBUT

Palm Bay Imports, of Boca Raton, FL, is just the latest company to introduce a wine in several large sizes, with the debut of Villa Verde Rosso and Villa Verde Bianco, from the Abruzzi region of east-central Italy. The Rosso is made from 100% montelpulciano grapes, while the Bianco is produced entirely from trebbiano grapes. The wines come in 1.5-liter glass bottles (approximate retail $6.29), 3- and 5-liter bag-in-boxes ($9.89 and $14.89, respectively).


TALKING VALUE

John Fredrikson, of Gomberg, Fredrikson and Associates, pointed out the astounding value in these large-format wines. At the 5-liter size, at prices that are $3 per equivalent 750 ml size, there are 6.7 bottles in a 5-liter package (generally, a bag-in-box wine). These can be had for well under $20.

“This means you could have a four-ounce glass of wine for between 25 and 50 cents — and it’s sound, tasty wine,” he said.

In the same price range are 1.5-liter bottles that sell for $6 — “and if you look at the ads you’ll see them for $4.49. Because of the large [California] harvest in 1997, prices are coming down. We’ve been short in this category and the popular premiums have been especially short. Now we have a huge increase in inventories, people are stepping on the gas, and there are all sorts of values around.

“This is a lot like buying a computer — every year you get more and more for the same money.”

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