FOR THE LOVE OF WINE

The best wine retailers have a true passion for wine. That passion, however, can sometimes result in blinders when it comes to following category management principles.

Frank Pagliaro, owner of Frank’€™s Union Wine Mart, Wilmington, DE, is quick to admit that wine category management is always a potential problem at his store. ‘€œWith wine reps constantly coming in with wine tastings for us, we tend to fall in love with a lot of them,’€ he said. ‘€œAt one point we had 14 Gruner Veltliners. The staff loved them and loved to recommend them, but when the cooler weather hit, we were stuck with too many facings of wines that tend to sell better in the spring and summer.’€

Other retailers share that passion for ordering what they love. At Frugal MacDoogal, an 18,000- sq.-ft. warehouse-style store in Nashville, TN, the wine department’€™s Jack Mantle said the approach is to ‘€œsimply taste through the wines ‘€¦ the ones we like, we buy.’€

So, how can retailers keep their passion in check? One approach that has worked to control Pagliario’€™s teams’€™ enthusiasm for great wines is religiously counting facings before ordering. Another solution that has helped avoid overstock issues at Frank’€™s Union Wine Mart is to request samples in different price ranges. ‘€œWe try to see how many we have in the same price range and then mix it up a bit,’€ Pagliario said. ‘€œThere’€™s no point in having eight Argentine Malbecs all in the $12 price range.’€

E-Promotions Prove Popular

While in-store category management efforts are making a difference, Pagliario’€™s out-of-store efforts are seeing even bigger results. A key differentiator is the store’€™s e-newsletter, ‘€œFrank’€™s eWine of the Week,’€ which includes Pagliario’€™s take on different wines, a winemaker’€™s note and specials.

One common promotion is sampler packs, something Pagliario has noticed consumers like. The ‘€œFrank’€™s Obama 12-Pack Sampler’€ was created during the inauguration, which included the same champagne that Obama drank on election night, plus two wines featured at the Inauguration Luncheon. Even though the $349.99 price point was on the high end, people did take Pagliario up on the Obama Sampler. ‘€œThe gold mine was the Goldeneye 2005 Anderson Valley Pinot Noir. There was a limited production on that, so that was a good inclusion,’€ he said.

Pagliario has found that people like the personalized feel of the newsletter. ‘€œIt creates a good rapport with customers,’€ he said. ‘€œThey reply to it.’€ He’€™s been sending out the newsletter for five years now and just recently redesigned it to ‘€œclean it up a bit.’€

E-promotions are also something Jack Mantle relies on at Frugal MacDoogal. February’€™s newsletter included a full list of recommendations on romantic movies for Valentine’€™s Day along with a list of a dozen of the most romantic wines.

Because in-store tastings are not allowed in Nashville, the e-newsletter serves a vital role in drawing people back into the store. The newsletter communicates what different wines taste like, what’€™s new and what’€™s on sale. ‘€œIf we’€™ve made a good buy and something’€™s at a reduced price, we put that in our newsletter,’€ said Mantle.

Setting for Less Expensive Wines

Since the economy took a plunge, Mantle has noticed shoppers buying down. That’€™s meant a change in store merchandising. ‘€œWe have certainly noticed people are interested in less expensive wines. I think people are still drinking the same amount, but instead of spending $20 on one bottle of wine, they are buying two $10 bottles,’€ he said.

‘€œSince people are buying down, that affects how we set the store,’€ said Mantle. ‘€œWe now have more $10 bottles up front.’€

Pagliaro reports less of a change in sales since the economy. He said sales were up over the holiday period and up for the 2008 overall; he does agree there is some trading down happening in the market. Where Pagliaro is noticing a change in behavior is with the store’€™s annual marquee tasting event, where tickets go for $150 each. ‘€œIt’€™s a huge event for us and that’€™s the one place where I have seen a bit of hesitation from people,’€ he said. ‘€œTicket sales are down 40% right now and I’€™m having to advertise it a lot more.’€

Slow ticket sales may be the result of another economic trend: consumers staying home more. That trend may prove a plus for wine retailers, as shoppers spend more for home consumption than in restaurants.

Convenience Channel Sales

While consumers may be drinking more wine at home, wine is also continuing to become more mainstream. That’€™s one reason more convenience stores are starting to pay attention to their wine sets, according to Tony Gaines, director of the convenience channel for E&J Gallo Winery.

‘€œPeople are drinking more and more wine,’€ Gaines said. He adds that many convenience stores are now doing more with wine; The Hess Express chain of 13,000 stores recently began adding both cold and warm wine sets. Warm sets are the big trend with wine in the convenience channel. ‘€œMajor chains ‘€˜get it’€™ and are expanding their warm section. There is plenty of opportunity out there. Stores are starting to merchandise outside of the cold vault.’€

‘€œIt goes back to expanding the warm section,’€ Gaines said. ‘€œThat’€™s the key in the wine business for convenience stores. The biggest thing I always want to get across for 2009 is that wine is growing.’€

Among the more upscale wine sets in the convenience channel is a Circle K store in Newport Beach, CA, which includes its own mini wine cellar. ‘€œTwo years ago you’€™d more likely see convenience stores putting in beer caves, not wine cellars,’€ said Gaines. ‘€œThis store’€™s wine cellar gives the store a very upscale feel.’€ The chain recently installed another wine cellar at a store in Alabama.

A more typical warm set at a c-store consists of a 3- to 4-foot set in a high-traffic area, Gaines said, with a mix of reds and whites at different price points. At Plaid Pantry convenience stores, based in Portland, OR, warm displays range from four 4-foot sections to 2-foot sections, depending on the store size. Retail prices range from $2.99 to $15.99 Tim Cody, vice president of merchandising for the 100-store chain, said that right now high-end locally produced product and lower-end products are selling better.

‘€œPeople do seem to be trading down a bit,’€ he said. ‘€œThe trend seems to be less toward going out to eat and more toward having friends over at home. There is a bigger value for the consumer in purchasing product for home consumption.’€

Value Big Growth Driver

That shift toward more value-based purchases is also being seen in the supermarket channel. Supermarket chain Hannaford Supermarkets reports seeing a shift toward value buying, with boxed wines gaining greater accept among its customers.

Sales of boxed wines are up, confirmed Mike Norton, director of communications for Hannaford Supermarkets, in an article in the local newspaper, The Times Argus. People are entertaining at home, he said, and when they entertain at home, they’€™re looking for really good value. The chain has also seen growth in sales of value-priced limited reserve wines, again credited to consumers more focused on value shopping.

As household budgets continue to be squeezed, variable price points will likely be something retailers will continue to focus on in wine sets.

Trend Watch: Sake

Sake is one product that Frank Pagliaro, owner of Frank’€™s Union Wine Mart, Wilmington, DE, has noticed growing over the past year. People seem to be gravitating toward better sake, he said. ‘€œWe used to have maybe five different kinds of sake, with the most expensive one retailing for $19.99. Now we have maybe 40 different styles of sake, all different producers, ranging from $20 to $60 a bottle. ‘€¦ And they’€™re selling.’€

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