Phil Markert, Key Buyer for Safeway, on Retail Trends in Wine: WiVi Central Coast

WiVi Central Coast

Phil Markert speaking at WiVi Central Coast 2017

Wine Business Monthly hosted a day long conference yesterday on winemaking and viticulture WiVi here in Paso Robles. The day included a series of sessions on all aspects of the wine industry. In vineyard care there were sessions on canopy management or vine diseases. In the cellar they looked at managing phenolics and then later focused in on winemaking choices in Pinot noir. For hospitality side there were sessions on creating a unique customer experience and then later tips on managing the tasting room. Krush radio, 92.5 fm, was even on site all day doing live on-air interviews with some of the speakers. Mixed throughout the day were also tasting trials focused in on winemaker experiments with side-by-side tastings looking at the effect of particular techniques in contrast to others.

One of the seminars that was particularly exciting to hear was a presentation by Phil Markert who spoke on trends in wine sales through the retail sector. Phil oversees wine and liquor sales for the retail grocery conglomerate Albertsons/Vons/Pavillions overseeing all of Southern California. Prior to the sale of Safeway to the larger group he was a Vice President for that company overseeing merchandising for non-perishables (that is, wine sales here too). He has been in wine buying for these stores for over 30 years, 22 of which he has been buying in Southern California, and 8 years buying nationally. As Phil explained, the wine sections of these grocery stores are managed essentially as a wine store that happens to be within a grocery store. Phil has taken a brilliant approach at building connections between these Southern California locations and wineries, as well as with winemakers and restaurants. He shared a wealth of insight on both actual sales trends happening regionally and nationally, and on tips for promoting sales that benefit all sectors.

Phil Markert at WiVi

As Phil explained, the health of the wine business in Southern California is strong. There has been an $85 million increase in wine sales, an 18% 2 year bump (dude. That’s huge.). The stores within the Albertsons/Vons/Pavillions group are organized individually, while still interconnected nationally, in order to promote connections to the local community both through events and offers specific to the local community, and also through the promotion of local products. For this approach to work effectively, he said, stores need to be managed by local districts in which stores share general trends and locale. In the case of wine this strongly benefits regional wineries. In the Paso Robles store, for example, of the 50 top selling items 42 are from Paso Robles. He has seen a huge trend towards local products in stores across the country. The interest in local wine purchases in Sonoma, for example, even outpaces that of Paso.

In designing the buying strategy for wine, Phil described the core guiding principles. As part of these guiding principles, they had to define what it means for a product to be local. First of all, the product must come from within a relevant radius of distance to the store. But, in this sense there are two different senses of local – the broad definition is simply within the state, so in our case, California. Second is what they call hyper-local, referring to products ultra close to the actual store – within 5 miles, 20 miles, 30 miles, etc. Secondly, for the product to count as local it has to illicit an emotional response where the customer feels as though the product is part of their identity, or part of the regional identity, or almost as if the product belongs to them somehow. He further commented that for the millennial customer there is a strong interest in knowing where the product comes from, who makes it, and if it has a unique history or legacy. Most of all, the customers’ sense of bond or connection with the product or company drives sales. In selecting brands to feature, then, the wine sections of the grocery store like to look for wineries that have an intimate connection with the community through community activities, donations, partnership, etc.

In current retail trends, the focus on localization has been the most effective strategy for promoting retail sales. While there are overarching trends across the country, markets more strongly show micro-trends that demand local management and planning. Phil clarified that in tracking these in wine sales he actually turns to the sommelier community as a predictor for forming trends. By looking at wine lists from restaurants within the neighborhood or town (depending on size of the area) surrounding the store he has been able to predict appropriate buying strategies. Later in the Q&A we also discussed the role sommeliers have as table side educators and guides for customers who are already known to have the expendable income to spend on wine and how this drives sales outside the restaurant as well. (Restaurant goers are already a self-selected group of people willing to spend money on food and beverages.) What this means for wineries too, then, is that if they can penetrate the restaurant market of their extended community they can naturally increase their customer-interest base for retail or DTC sales as well.

In looking at specific trends happening more broadly – there has been a huge increase on sales for premium splits, 375 ml bottles. He believes this is primarily driven by two buying sectors. Millennial are more experimental in their buying habits wanting to try both premium and oddball wines. The 375 ml bottle allows experimentation more readily than a full-size bottle. The Boomer population has also been buying more premium splits. Currently around 60% of the Boomer population is single, so they are buying more premium splits to drink on their own. He said there is also an increase in sales for 375s in picnic communities.

At the same time, there is an increase in sales for premium magnums. To make this economically feasible the wine sections of the grocery stores are focusing primarily on magnums that are $75 or less. They have also seen an increase in wine sales sold in tetra packs, or cans.

At the same time that local sales are increasing, there is also an increased interest in international wines. For the Millennial population this supports the interest in experimentation. For the Boomer population, international wines are still associated with premium branding.

In terms of overall styles, rather than regionality, there has been a massive increase in interest in crisp, clean whites, higher acid rosés, and to some degree also fresher reds (though more especially high acid whites and rosés). The increase in retail trends in these styles of wine, Phil explains, was predicted in the restaurant sector first by tracking the increasing interest in these categories from the sommelier community. Importantly rosé sales have become a year round phenomenon. There were significant rosé sales for Thanksgiving, as well as Valentine’s Day, for example. In the last 52 weeks alone there has been a 292% sales increase in rosé alone. (DID YOU SEE THAT MAKE SURE YOU SAW THAT BECAUSE WHOA.) The greatest increase has been in French rosé but there has been a proportional increase in local rosé sales as well.

(As an interesting side note: the increase in retail sales of rosé happily correlates with production trends happening in California as well. There has been a steady increase on wineries making rosé, though I don’t have those numbers – this point came up from conversations later in the day. It is a happy coincidence this turns out to be true as there is also need for this increased interest. The increase in red blotch in vineyards through the state has led to more producers picking for rosé, for example, as well. Red blotch impacts leaves more severely later in the season making it more difficult to ripen red varieties. By picking early before the leaves are as impacted growers can guarantee they are able to use the grapes and simply make another style of wine from it instead, rosé instead of red. This is not insignificant, however. Rosé is usually not sold for the same price as red so there is still economic loss in this solution though not as severe as simply being unable to harvest.)

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