-By Danny Brager

Does a troubling economy mean declining wine sales? Not necessarily, and especially not if grocers and other retail wine sellers do their best to take advantage of wine's natural appeal during the holidays.

As grocers start planning their full breadth of holiday offerings, the impacts of the economic downturn and price pressures are doubtless on everyone's minds. The sobering signs include gas prices that rose 35 percent from March 2007 to March 2008, and egg prices up by 27 percent in that same time frame. Milk, bread, meats, and other staples have also seen significant price increases in the past year. Meanwhile competition for consumer dollars has become dramatically more intense in recent months.

With the cost of living on the rise, Nielsen research shows that almost 50 percent of consumers have already reduced their spending to some degree.

What does the double whammy of sharply higher costs and food prices, along with lower consumer spending, mean for sales of wine at the grocery store as we move into the crucial holiday sales window? The cheerful news is that it's unlikely that wine will be dramatically affected.

Why do we think that wine sales won't rot on the vine? At this point, the economic downturn seems to have had a minimal impact on what consumers spend on wine in stores. While Nielsen research shows moderation in the growth of premium brands, the category remains strong overall. Consumers tend to view wine as an affordable luxury. If current trends continue, wine could be a "recession-resistant" category, one that could still see growth despite a prolonged struggling economy.

There is, however, clear evidence that economic pressures are creating changes in consumer behavior. Of particular interest to the grocery sector is the fact that people are eating out less frequently than before.

On-premise visits have decreased significantly, according to Nielsen Homescan Panel research. Fine dining and nightclubs saw the biggest reductions, given that trends were weak overall, with the "going out more often" response never larger than 5 percent in any off-premise channel.

Meals that once were served by restaurants are now being prepared at home. That's bad news for restaurants, but good news for supermarkets and other off-premise retail wine sellers.

The grocers that make it easier for consumers to pair wine with groceries can capitalize on the consumer's economic motivation to dine in more often, resulting in bigger baskets at the checkout.

High gas prices have also created an incentive for consumers to combine multiple errands into one trip. Grocers that offer the convenience of one-stop shopping for both groceries and wine certainly benefit from this as well.

Consumers choose where to buy based on many factors: value, convenience, product selection, store services, and type of drinking occasion. With a multitude of retail options available today and consumers showing preference for one-stop shopping, what can a grocer do to become the preferred destination?

Variety, but with help

The infinite range of choice offered by the wine category can satisfy consumers of many types. Consider:

Red/blush/white Bottle/bag in the box Domestic/import An array of state and country-of-origin choices All kinds of grape varieties with all kinds of price points
Nielsen data shows alternative wine varieties are increasing in popularity. Stocking the shelves only with Cabernets, Merlots, and Chardonnays could mean missed opportunities for sales. Wine consumers are intrigued by different flavors, and to capture their interest, supermarket operators should consider going beyond those most recognized varietals. Pinot Grigio, Pinot Noir, Sauvignon Blanc, Zinfandels, and Rieslings are varietals growing at double-digit rates. What's more, lesser-knowns such as Malbecs, Muscatos, Tempranillos, and premium Rosé wines also offer substantial growth opportunities.

But with variety must come a measure of direction. Wine is popular, but it confuses many consumers. A substantial percentage of wine-buying consumers are simply overwhelmed when they get to the shelves in many larger wine sections.

According to Nielsen data, having knowledgeable staff on site to answer questions about wine is a big draw. This is where specialty grocery and liquor stores excel. But for any retailer, having an expert in the wine aisle around the key holidays could pay dividends with those frustrated consumers. Grocery stores that provide knowledgeable staff to help consumers shop the category can enhance sales.

Explicitly pairing wines with menu suggestions is another way to help consumers navigate the nuances of wine selection. Cross-merchandising can help, as prominently displaying wines close to the foods with which they can be paired can induce consumers to consider buying wine that they might otherwise have overlooked.

And wine goes hand-in-hand with other gifts -- flowers, for instance, are another cross-merchandising opportunity.

Grocers should take note of another indication from Nielsen data that people planning a party are less inclined to purchase wine at a grocery store in comparison with other channels such as club stores, liquor chains, specialty grocery stores, or home goods stores. This is probably because shoppers today value convenience, so combining wine with party goods, menu suggestions, and attractive pricing could drive sales.

In a time of economic turmoil, retailers must use all of the tools at their disposal to enhance sales. Besides the convenience of a one-stop shop, Nielsen research indicates that a primary reason that consumers shop for wine in a grocery store is "better prices and/or promotions." Cross-promotional discounts between wine and other departments within the store can provide incentives for consumers to buy wine.

And, as always, retailers need to understand who shops the store. Baby boomers and seniors (45+) tend to buy more wine than Gen Xers (31-44 years old). However, the millennials (21-30 years old) are also showing strong interest in wine -- and they tend to buy at higher price points. Creating an assortment of wine that answers the needs and desires of the store's customers can draw in a more affluent customer base and increase sales.

Think now about winter

The dog days of August aren't too soon to plan winter and the upcoming holiday season -- in fact it's just the right time.

Even given the current economic climate, winter still represents the biggest opportunities for wine retailers, with significant spikes in total wine sales during the holiday months. As the latest available data shows, many consumers celebrate the holidays with wine.

In the grocery sector, wine also helps ring in higher dollar sales at the register -- and this applies not only during the peak holiday season, but also throughout the year.

In the states where it's legal to sell wine widely, the combination of the grape and groceries provides a boost of approximately $30 to the size of the basket, boosting the average to $68.52 from $38.13, and substantially more than just the value of the wines accounts for that surge.

Clearly, wine is a product that offers profitable opportunities for grocers. However, executing the right strategy is critical to maximizing sales during the all-important window of opportunity extending from November through December.

Red's hot as temps drop

Retailers take note: As the temperature begins to fall in late fall and early winter, the popularity of red wine grows, the data shows.

Overall, more than 45 percent of all table wine dollars are spent on red wine. However, starting in November, that figure increases to more than 50 percent. As we move into the cooler months, red wines grow in importance, and this is something retailers should incorporate into planning their wine selections.

This trend is bound to accelerate as news reports about the anti-aging properties of red wine likely prompt some consumers to seek out more reds than they might have in the past.
For strategic planning purposes, the crucial holiday season is swiftly approaching. With the right selection and promotions in place, wine can provide a valuable boost in sales and profit for grocery retailers. In today's uncertain economy, the best way to ensure success this holiday season is to start planning for it now.

Danny Brager is v.p. and group client director, beverage alcohol, at The Nielsen Company. He can be reached at danny.brager@nielsen.com.