IN THE SPIRIT

During the heady prosperity of recent years, fine wines and spirits have played a significant role in consumers' giddy triumph. As the economic hangover sets in, sales are slowing and many consumers feel that a $100 bottle of wine is no longer worth the headache. However, retailers remain optimistic. While people may not be looking to stock their cellars, they are still willing to pay for modest indulgence.The

During the heady prosperity of recent years, fine wines and spirits have played a significant role in consumers' giddy triumph. As the economic hangover sets in, sales are slowing and many consumers feel that a $100 bottle of wine is no longer worth the headache. However, retailers remain optimistic. While people may not be looking to stock their cellars, they are still willing to pay for modest indulgence.

The recent downturn is evident in the latest statistics from ACNielsen, Schaumburg, Ill. For the 52-week period ended Aug. 11, 2001, total liquor sales across channels posted a 7% increase in dollar volume, totaling $2.8 billion in sales. This is down from a 10.7% growth rate for the same 52-week period in 2000. Wine exhibits a similar declining growth pattern, with a 5.3% dollar increase for the 52 weeks ended 2001 -- $4.1 billion in sales -- compared to 12.4% growth for the previous year.

Indeed, retailers SN spoke with are seeing these numbers reflected in their wine and liquor sales, and are reporting a marked slowdown across the board.

"Our stores experienced a dent in sales right after the first of the year [2001]," said Darrell Dyer, direct-store-delivery category manager for John C. Groub Co., Seymour, Ind. "Even more so in recent months."

While that appears to be the general consensus, retailers do see an opportunity for less expensive bottles of wine -- in the $9 to $12 range -- purchased as a casual addendum to dinner.

Bill Brunetti, owner of Brunos Foods, an independent operator in Lakeport, Calif., said that even if people are not buying $20 bottles of wine, they will continue to buy wine nonetheless. The wine and spirits categories at Brunos have been doing very well for quite some time, proving that fine food and wine can be an everyman's hobby. This is a rural store serving a lower socio-economic demographic. Even so, Brunetti has been selling a fair amount of the more expensive wines.

"We've been educating our customers," he said. "We use display and write ads discounting some of the more expensive wines. Once they taste it, it keeps them coming back. I run a half page of wines every week, maybe knock a dollar off some of the higher ticket items."

According to Brunetti, the ads are very effective. He may sell 12 or 15 bottles -- even as much as a couple of cases -- of a particular wine during a sale week that generally doesn't move more than one or two bottles. And if people like it, they are willing to pay the extra dollar in the future.

"Sales can definitely maintain that higher level," he said. "Instead of one or two, maybe you'll sell five a week."

In addition to promotion, Brunetti considers his hands-on approach a key part of consumer education.

"I'm in the aisle," he said. "I have the ability to hand sell and answer questions. I'll try to find out what they've been drinking and very specifically try to up-sell them."

Some retailers have had a hard time establishing their stores as wine and spirit destinations in the face of specialty retail outlets; however, Brunos' rural setting has given the independent a competitive edge. The absence of a Liquor Barn or Costco means the supermarket is also the discount operator, Brunetti told SN. He is able to offer a comparatively low 12% markup on liquors and 20% on wines.

"Everybody else has to compete with us," he said. "And we reflect everything back to the shelves so it always looks like we've got a lot of activity going on."

Brunetti sees wine as a destination in his stores, even though wine and spirits do not have their own department.

"I don't think it makes much of a difference," he said. "We have always kept the wine and spirits in-line and we have been very successful. Of course, we use endcap displays with recognizable values to draw the attention of the customer."

At Draeger's Markets, Palo Alto, Calif., the big picture is very similar, despite the disparate demographic. Serving upscale communities in southern California, the chain has an image to maintain. Yet according to Kevin Forsaith, wine director at Draeger's, the "bread and butter" of his business are the everyday bottles at $10 to $15 a bottle.

"Nobody's buying a $30 Chardonnay for everyday drinking," he said.

While he would not call the decline in sales at his stores significant at this point, he said there is a notable difference in the numbers from this year to last. Yet despite the shaky economic forecast, there are a lot of wine-conscious consumers in his area, he said, and they continue to drink wine on a daily basis.

"People are not spending as freely. Last year, it didn't make much difference. People seemed to be shopping for convenience rather than price. Now people are more price conscious and we are trying to offer as many everyday wines as possible."

Forsaith expressed particular concern over the market for fine California wines, given the exorbitant price hikes over the past several years. A $30 Cabernet three years ago has become a $75 investment today. If the economy doesn't pick up, he fears those bottles may sit on shelves for some time.

According to an anonymous source from another California-based chain, the inflated California prices have opened the door for a renewed import market.

"They have not taken the kinds of hikes that California wines have," the source told SN. "They had a couple of off years and that was when the California market grew considerably. Now imports are coming back as a relatively inexpensive option."

The source said that Australian wines have been especially popular over the past couple of years. While some of the interest may be due to increased exposure during the 2000 Olympics, he said, much of it may be attributed to the labels' simplicity.

"Customers can identify the names, they recognize the labels. French wines are much more complex; there may be six or seven things on the label of a French wine you need to understand in order to determine the quality of the wine in that one bottle."

Whatever the future may hold for higher-end wines, retailers continue to dedicate the appropriate resources. At Draeger's, a wine tasting -- open to any interested passerby -- is held every Thursday and Friday evening and Saturday and Sunday afternoon. Recently, Forsaith showcased VeuveCliquot champagne, and anticipated a subsequent boost in sales.

Retailers stress the importance of point-of-sale material in the success of any wine department. Many consumers look for informed help when buying wine, considered by some an esoteric pursuit.

"POS is really important," said Forsaith. "Provide some information in front of the bottle -- maybe how you feel about the wine or how the winery feels about the wine. The more information the better."

At John C. Groub Co., POS materials play a large role in the chain's efforts to revitalize the category, according to Dyer.

"We have spent some time revisiting the category and resetting the category to improve variety and make it more appealing to the customer," he said. "We are using a lot of POP material and information."

According to Dyer, the chain may use index cards placed in front of a wine highlighting what the wine is made for. A cooking wine may include a recipe, while a dinner wine will include information on the appropriate types of meals to be served alongside it.

Here, too, the emphasis is being placed on more moderate wines, in the $8 to $15 range, Dyer said.

Most of Dyer's stores are located in rural areas, and in those stores, the beer and wine can be found in the aisles. Yet the chain does serve a few higher-rent districts. There are separate wine departments in these larger stores. Most of the chains' more elaborate efforts in the wine category are focused here, including cross merchandising.

"In the larger stores, they do quite a bit of tying in," Dyer said. "They may tie the wine in with meal items or snack items. Or perhaps take the wine out of the department and place it in the meat department or the deli department."

Indeed, wine is well-suited for solution selling techniques, and many retailers take advantage of the association between fine wine and fine dining.

At Brunos, cross merchandising is not the general rule. However, Brunetti makes an exception when it comes to wine, also using the deli as a showcase spot for wine. Customers will also find ideas in the circular, perhaps an idea for an appropriate pairing of wine and fish, he added.

Publix Super Markets, Lakeland, Fla., offers consumers a small, fold-out brochure of wine and food pairings. According to a store associate in Apopka, Fla., the brochures are generally available at the end of the wine aisle. Inside the brochure, the curious connoisseur will find brief definitions of terms such as "bouquet" and "fruity," as well as rules of thumb for serving wine regarding temperature and the like.

In addition, the brochure offers an extensive chart detailing wine and food pairings. For instance, a Chablis is great with dips and appetizers, but if you want a white wine for beef or barbecue, go with a Riesling.