Sauvignon Blanc in a sweet spot

The company’s ecommerce sales are “hundreds of percent up” in the US, retail sales are buoyant, and the past 12 weeks has seen a 10c to 12c lift, year on year, to an average price of $US13.91 per bottle. New Zealand’s market is experiencing some trading down, as is the Australian market, to a lesser extent, Simon says.

“But in the US you are still seeing premiumisation in this time… the higher price points are growing more rapidly than the lower price points.”

Simon says the company was confident early on that exports should meet or exceed their original plans, as long as the supply chain remained stable. “The US had already been in some form of lock down in different parts of the country, but it was very clear that the off premise channel was open for business and the ecommerce rate of penetration for beverage alcohol was increasing rapidly.” 

They had also seen evidence from the United Kingdom and Europe that large and strong brands were faring well, offering consumers “a sense of comfort and loyalty in brands they know and trust”. Constellation Brands New Zealand harvested over 48,300 tonnes of grapes in the 2020 harvest and proceeded as usual, with Kim Crawford wines bottled in New Zealand, and Nobilo and Monkey Bay shipped out in bulk, to be bottled by the company in the US.

Meanwhile, Constellation Brands as a whole upped the ante on its ecommerce, which was already a focus, but has been “accelerated” by Covid-19. 

Simon says the global company’s ecommerce sales have gone up “hundreds of percent” during the pandemic, via three tier ecommerce (producer to distributor to retailer) and the digital platforms of bricks and mortar operations. 

The third ecommerce arm is direct-to-consumer (DTC), and in July Constellation Brands increased its stake in that game by buying Empathy Wines, a digital wine brand and DTC platform, powered by consumer insights and content-driven digital marketing.

Ecommerce has always been strong in the US, but beverage alcohol didn’t have much penetration – until now, Simon says. 

As an example of the massive opportunity in digital in the US, one ecommerce player Constellation works with experienced increases in trading, day on day, through April and May, with all of them better than their previous best days, which were New Year’s Eve and the Superbowl.

Simon notes that the US wine market will likely change when the recession bites, but believes the “sweet spot” of the New Zealand Sauvignon Blanc category - “which gives consumers exceptional quality at an affordable price” - will ensure continued growth.

“We very much see our role as the biggest exporter of New Zealand wine to the US to be maintaining those price points.” 

But he fears the favourable exchange rate will make it tempting for some New Zealand players to push through more volume at a lower price. “I really hope we don’t see people putting prices down.”