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Uncorking Potential

With value-seeking consumers becoming increasingly receptive to store brands, c-store retailers on the hunt for increased sales in their wine category have identified private label lines as a powerful arrow in their retailing quiver.

While private label wine is a sliver of the total U.S. wine category -- it holds just under 1 percent of the total wine market in food, drug and mass channels (including Walmart) -- the potential of such products in the U.S. is growing by double digits. Private label wine dollar sales totaled $4.35 million for the four weeks ended Oct. 3, 2009, a more than 10-percent increase over last year. Total wine dollar sales for that period were $497 million, up 5.3 percent, according to The Nielsen Co. data.

On a unit basis, private label again saw a double-digit year-over-year jump of 11.8 percent, totaling more than 662,000 units for the four weeks ended Oct. 3. Meanwhile, branded wine increased 4.1 percent to 59.8 million units in that timeframe.

Meeting customer demand for value-oriented wine was one of the reasons behind 7-Eleven Inc.'s release of Yosemite Road, a global wine brand developed cooperatively with Seven Eleven Japan, and sold in parent company Seven & i Holdings Co.'s 15,000 convenience, department and grocery stores in the U.S. and Japan.

Wine priced at less than $5 has seen double-digit growth at 7-Eleven stores, and the new line is priced at $3.99 in the majority of the U.S., and 598 yen in Japan, the retailer noted when the product was released last month.

"By developing a global brand, 7-Eleven can better leverage our brand strength and scale with customers all over the world," Mark Herron, 7-Eleven senior product director of vault for 7-Eleven, told Convenience Store News.

The retailers conducted research into consumer taste preferences in both the U.S. and Japan; determined top-selling wine varietals in both countries; and sampled wines from around the world -- all of which was part of a global customer Current Situation Analysis (CSA).

The two varietals chosen -- a chardonnay and cabernet sauvignon -- are top sellers in both the U.S. and Japan, Herron said.

"Creating the wine was fairly easy because the taste profiles were already somewhat similar in Japan and the U.S.," he said. "California wine is dominant in the U.S. and growing in Japan, especially at this entry-level price point."

Yosemite Road is hardly the c-store retailer's first foray into private label wine. 7-Eleven also offers three other private label wine options in its U.S. stores -- Thousand Oaks, at a price-point higher than Yosemite Road; the award-winning, premium Sonoma Crest varietals; and a boxed wine brand that was yet to be released as of press time.

Private label wines make up 5 percent of 7-Eleven's total wine category sales. Private label wine customers typically "want a value and are open to experimenting, usually a younger customer," said Herron. Other items purchased with private label wine run the gamut, from beer and non-alcohol beverages to snacks and immediate-consumable foods, he added.

Similar to 7-Eleven, West Des Moines, Iowa-based Kum & Go LC wanted to develop a quality wine offered at a value, and rolled out two control label varieties in January 2008 -- Napa Creek Cabernet Sauvignon, a 100-percent Napa Valley California product sold for $12.99, and Sea Ridge Merlot, which uses a California grape.

"We were looking for high quality, a specific flavor profile and the best value for our customers," said Richard Ginther, category manager. "Once we tasted wines, we picked a vineyard and then chose the names from a list of control label options."

Today, Sea Ridge Merlot is the No. 10 unit seller by bottle in Kum & Go stores that can legally sell wine, while Napa Creek recently won top honors for its class in the 2009 San Francisco International Wine Competition, according to Ginther. Overall, control label wine brands make up 8 percent of the total wine category's sales, and Ginther attributed the control label lines to boosting the category's sales, thanks to their "great taste at a great value," he said.

Wine customers are most likely to purchase Kum & Go's proprietary wine labels in stores located in suburban areas with household incomes of $75,000 or more, according to Ginther. These customers typically also purchase beer or spirits, he noted. Kum & go provides a minimum of six feet of space to wine in its stores, with at least 18 SKUs.

And Carmi, Ill.-based Martin & Bayley, operator of the more than 100-unit Huck's c-store chain, wanted to offer its customers a good quality California red wine at a great value. With the assistance of a local winery, the retailer developed its Five Buck Huck private label wine, which company officials attribute to bringing increased sales and interest into the wine category.

Wine makes up 2 percent of Huck's in-store sales, higher than the industry's average of 1.22 percent for both wine and liquor, according to the 2009 CSNews Industry Report. Within the wine segment, Five Buck Huck makes up approximately 25 percent of total wine sales, according to Todd Jenney, vice president of operations.

"We are moving a lot more units and [Five Buck Huck] has given additional interest to other wines, especially other novelty wines," he said.

Through the development of their private label lines, these c-store retailers have learned several lessons in both private label and wine retailing.

"Offer a quality product at an attractive price point, good packaging and a label that draws customer attention," advised Herron of 7-Eleven. "Consumers are willing to experiment with wine. The value equation must go beyond simply price; you need to provide quality."

Similarly, "It's important to make sure each vintage stays consistent in quality, as it is with any kind of wine," Jenney noted. "I think having a wine that is good quality, a key value and getting your people behind it" are keys to a successful private label wine brand.
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