Sample Report

Glass remains the undisputed leader in wine packaging but off-premise scan data collected by market research firm NIQ (formerly NielsenIQ) indicates gathering momentum in the post-pandemic wine market for alternative packaging materials.

Glass held an 88% share by value of the $19.8 million in off-premise sales NIQ tracked in the 52 weeks ended March 25, and 76% by volume. The traditional material for wine, thanks to its relative stability and elegance, glass dignifies both the most affordable and most expensive wines. However, its hold of the upper end of the market is stronger than at the lower end. While glass saw its share of the total volume of wine sold through NIQ outlets drop by a percentage point, the value share held steady. The most expensive price tier of $25-plus table wines led average bottle price growth, rising nearly 4% even as the tier’s sales in the period posted the sharpest decline of any price band. Glass is the packaging material of choice for upper-end wines, which are buoying the material’s share of sales by value.

But with the volume of top-end table wine sales dropping, what’s picking up the slack?

The answer may be found in alternative packaging, which have traditionally held cheaper wines. Tetra Pak packaging saw the greatest gain through NIQ off-premise outlets in the 52 weeks ended Mar. 25, with volumes gaining nearly 15%. Sales in plastic gained more than 3% while boxes saw volumes hold steady. This has helped boost tetra packaging to more than 2% of the channel by volume while plastic is approaching 3%. Boxes, despite lackluster volume growth, also gained a percentage point to more than 20% of channel volume as glass lost ground.

But the average price per 750ml shows a relative stability in the kinds of wine most alternative packaging materials are holding. Wines in tetra saw pricing of $6.65 per 750ml, up less than 1% in the latest 52 weeks, while those in plastic gained 6% to $8 per 750ml. These gains outpaced the table wine category as a whole but they paled next to cans. Despite slowing growth in dollar sales in recent periods, a sharp drop in sales volumes has given a boost to the average price per 750ml. This rose 12.5% in the latest 52 weeks and 27% versus two years ago. Cans now hold the most expensive wines by volume, at $10.96 per 750ml versus glass at $10.44 per 750ml.

Plenty of factors affect retail prices, however, making strong growth in the price of canned wines tough to pin down. But with cans establishing themselves as a viable and convenient packaging type among consumers, there is both a shakeout occurring among producers even as new brands debut in cans that are helping raise the bar.

“We are finding the can category to be a bit reminiscent of the box category during its early years,” said Brad Mayer, marketing and communications director with Union Wine Co. of Tualatin, Ore., whose Underwood brand has been a flag-bearer for canned wines in Oregon. “Many suppliers got into the category but after a while this shook out, [and] there were two to three players dominating the category. We continue to see Underwood as a premium player in the can category going forward.”

A four-pack of 375ml cans sells for $28 through the Union Wine Co. site, on par with the same product in bottles. Mayer says the company has not taken a price increase on its cans despite an increase in supply costs.

The up-and-coming can brand West + Wilder, which came under the C. Mondavi Family umbrella last year, points to the value to be claimed by alternative packaging. With a suggested retail price of $17 for a pack of three 250ml cans, the brand is positioned as a premium offering — and sales are growing. NIQ data indicate a 22% increase in dollar sales during the latest 52 weeks, accelerating to 40% in the latest 13 weeks.

“We expect similar growth as we head into the warmer months due to factors such as convenience, sustainability, and the appeal to younger consumers,” C. Mondavi president and CEO David Brown said.

While overall sales of canned wines have seen slower growth and lower volumes as pandemic-era restrictions eased and traditional socializing resumed, the shifts have revealed cans as a viable alternative to glass thanks to their convenience and smaller format. “Single-serve 250ml is predicted to lead the growth,” Brown noted.

The embrace of alternative packaging formats also has a practical element for wineries. Several public wine companies have recently flagged shipping costs as a significant expense, one that must be covered either by higher shipping charges or shifts in material. Duckhorn Portfolio collected $2.3 million in shipping and handling charges in its last fiscal year, down from $2.6 million in 2021 but even with $2.4 million in 2020. While its DtC business has grown, Duckhorn notes in its public reports the company has been shifting to the use of lighter-weight glass bottles; this has likely resulted in savings on shipping.

However, Vintage Wine Estates, which touts itself as having “an industry leading direct-to-customer platform,” recently reported that it has increased DtC shipping fees by an average of more than 50% as well as reworked shipping contracts to reduce freight costs. The move parallels Constellation Brands’ early and aggressive move to raise prices to cover higher logistics and material costs. This led to positive performance in its year-end financials released April 6, and an optimistic outlook for the year ahead.

With wine consumption declining, smaller, lighter packaging formats may be the answer to a multitude of challenges the sector faces. Whether it’s appealing to new consumers or boosting environmental and social credentials, alternative packaging is finding its place as a vessel for both cheap, cheerful, and premium wines. While there are few good replacements for glass as a cellaring vessel, the alternatives are finding their place in the market and creating fresh opportunities for producers and consumers.

— Peter Mitham

Many of those in the wine trade who see an opportunity for premium wine in alternative packaging say it will help wine compete with spirits for drinking occasions and appeal to a younger and wider audience.

Wine-based cocktails, many of which are packaged in cans, are also a source of sales growth with NIQ reporting the category gained 13.3% in the past 52 weeks to $516 million.

At Tablas Creek Vineyard in Paso Robles, Calif., General Manager and Partner Jason Haas launched a successful boxed wine product that he discusses in detail in this issue of the report. Haas is certain that alternative packaging is part of the solution to help the wine industry become more sustainable and approach being a zero-waste product. He’s much less certain about its ability to convert new wine drinkers. “I would love to know the answer to that question, but I don’t feel like I know it yet,” he said, acknowledging that packaging that is easy to open and doesn’t require a special tool like a corkscrew literally does make wine more accessible. Yet a $100 box of wine is not a product likely to attract new wine drinkers.

The Tablas Creek boxes came up during a panel discussion on trends within the three-tier market at the recent Central Coast Insights conference in Paso Robles, Calif. “I’m excited about boxes and even cans,” said Katie Wallace Gallagher, a principal category merchant of wine for Whole Foods Market, who would have loved to stock the Tablas Creek boxes if they hadn’t sold out so quickly. “I think it shows there’s some consumer demand, absolutely, but I just think it’s the quality versus value ratio. (Wineries) need to be super clear about how many bottles of wine, how many glasses of wine, are in a box.”

She said Whole Foods is stocking a few premium boxes and she’s excited for their potential, but the storytelling element of the packaging and value is even more important. The extended, at-home shelf life of boxes, compared to wine in glass sealed with cork, is another major selling point that should be included in the story, Gallagher said.

“When I was the buyer at (restaurant chain) P.F. Chang’s in about 2018 we did a red and a white box wine and we just put it in the cooler and served it by the glass and the consumer loved it,” said Mary Melton, who has since joined the Trellis Wine Group where she heads up on-premise sales and consulting. “It was more of an issue, I hate to say it, but distribution wise, I mean the boxes would come in smashed or popped. We didn’t have a good way of transporting them from California to Connecticut or wherever. But the consumer loved it; we loved it because of the price point and the fact we just put it in the recycling bin.”

Gallagher, however, said she expects wine in can sales to ebb after the format’s explosive growth in recent years. “We’re just seeing that mature … I think the cans that are really resonating with our consumers we’ll continue to carry, but the category is shrinking and kind of leveling out which I think is probably healthy to be honest,” she said. “It’s pretty challenging to make canned wine and do it the right way.”

Winebow Regional Vice President of Chain Retail Amoreena Anker said cans can be challenging for retailers. “There’s a whole rotation issue that is different when you have wine in a can because of their shelf life and we have some retailers that won’t take them into their warehouse because of that,” she said. “There’s a more direct sales delivery so there’s an extra layer of salesmanship that is more difficult with can wine.”

The distribution challenges also came up during a session at the Unified Wine & Grape Symposium, which brought together several vintners producing and selling premium wines in alternative packaging. William Allen, founder of Two Shepherds Wine in Windsor, Calif., called out the cost of last-mile fulfillment services. “Our last mile fulfillment company, which I won’t name, charges the same price to pull the sample can as a full 750. We have to give three times the sample allowance to our distributor and then just ship cans out to sales reps because it’s too expensive to pull,” he said. “We kept the winery full of cans as long as we could because storage costs are too much.”

Allen said he is giving kegs another look this year as the on-premise trade appears to have accepted the higher prices for better quality BTG programs but is also considering boxes as cans have not done as well in restaurants as he had expected. “We’re going to hold off on boxes until hopefully there’s some better automation and I’m going to focus on kegs this year and make that program really successful.”

Two Shepherds produces around 5,000 cases of wine a year, but Allen and his partner and spouse Karen Daenen still have other full-time jobs. He works in tech, and she works in wine consumer research for one of the largest U.S. wine companies. Their backgrounds and nimble business plan have enabled them to innovate such as using QR codes in 2011, small glass bottles and a foray into kegs when that format was seeing the first signs of a revival.

About three years ago, Daenen saw the market potential in cans, but Allen was on the fence because the wines in can he had tried were all rather uninspiring. With the onset of COVID-19 and the ensuing lockdowns, Allen said he canceled all bottling and began tinkering with cans as part of an idea to launch a new product. “We used that as a kind of blind trial that led us into our first can, which was a sparkling red. This was highly unusual in the United States,” he said.

But everything the winery, which sold most of wines DtC, had previously done was unusual, like producing varietal Picpoul de Pinet and Pinot Meunier. The cans hit the market at just the right moment, and Allen said they remain popular in major metro areas and among younger consumers who enjoy the different varietals and creative marketing that uses the founding couple’s farm animals. “In LA we can’t get wine down there fast enough in most years as well as New York and Seattle. We use the labels to do very creative things that are all part of our lives,” he said. “This is our donkey kicking evil villains across the planet and this is our cat Max. This is an important part of if you want to sell to millennials and gen Z’ers. Authenticity is huge. They see through the bullshit.”

Some of those wine-in-can drinkers also wander over to the Two Shepherds website where they’ll find 15 to 20 different SKUs, many of which are small-lot production wines packaged in traditional glass.

After nearly a decade of winemaking around the world, Martha Stoumen founded her eponymous natural wine company to highlight interesting varietals from unique corners of California. She produces around 7,500 cases a year of a range of wines and wine-based spritzers that are packaged in traditional 750ml glass and 355ml bottles.

During the Unified session, Stoumen said she would love to see packaging suppliers provide detailed information on weights, dimensions and material inputs so she could in turn let her customers know more about the wines and packaging they’re buying. She added that using alternative packaging can be a challenge if you can’t count on the support of your distributors.

Stoumen said thanks to bottle price inflation her lower-tier wines that had previously been at the high end for BTG programs have since been priced out. “In the three-tier system, it’s difficult to make the leap into alternative packaging if you don’t know that everybody in the chain is going to be on board,” she said. “Not only is it more sustainable to put a bag-in-box on the back bar, and we would love to be able to, but it’s hard to put something in (bag-in-box) if you don’t have some sort of idea as to commitments.”

Stoumen said she sells her spritzers in cases of 12 but would have preferred to use 24-pack cases to compete directly with beer in terms of logistics. “There’s a pricing challenge when you’re making a low-price point product in glass,” she said. “We put these in 12-pack cases and I would’ve put them in 24-pack cases, just to cut down on some of those transportation, storage and shipping costs that ended up inflating the cost a little bit too much.”

— Andrew Adams

Value of Domestic Wine Sales for 12 months ended March 2023

• -5%  U.S. wine sales including bulk imports, bw166 (preliminary data)

When Jason Haas sat down to speak with the Wine Analytics Report via a teleconference call in mid March he was a bit distracted by a couple of Mastiff dogs that had managed to slip into the home office after helping to move the estate’s sheep to a barn to stay dry during an approaching storm. An adult Mastiff can weigh more than 200 pounds, and Haas described a few of them running through the house as “amusing and chaotic.” He was very grateful for the abundant rainfall of 2023, and said the wet winter hadn’t delayed pruning of the estate vines at Tablas Creek Vineyard in Paso Robles, Calif. The sheep have long been part of the winery’s organic, biodynamic and first-in-the-United States certified Regenerative Organic Certified vineyard operations. That long-time commitment to sustainability is part of what motivated Haas — who is partner and general manager in the 30,000-case winery his family founded with the Perrins of the Rhone Valley in 1989 — to consider alternative packaging. Haas spoke about the winery’s fledgling yet popular box wine project and the potential for boxes to build connections with a new generation of drinkers.

Q: Can you describe the reaction to just the idea of Tablas Creek using boxes and then the actual consumer response to the finished product?

Jason Haas: I was hoping based on the reaction to when we first published our intent to do this on the blog, which blew up, it got a huge number of reactions and it got articles written in a bunch of different places. It received more comments than I’d ever received on a blog post. It got a hundred thousand impressions on Twitter, and it was shared super widely on all of our other social media channels. It led to an article in Wine Enthusiast, an article in the Robb Report — I mean, that’s a crazy place for somebody to be writing about box wine, but the post made an impression. Then we released the boxes two weeks later and I was thinking this might go fast, like we might sell out of this in a week. We sold out in four hours, and I got to spend the next two weeks responding to disappointed emails and phone calls from people who were like: ‘Oh man! I just wasn’t at my computer that afternoon.’

We ended up doing a second batch. We diverted some of what we had planned for kegs and did a second batch of rosé. Then we followed that up with batches of Patelin de Tablas Blanc in May and Patelin red in August. We did a little better at balancing demand and the amount that we made. Those both sold out in like three weeks, which was kind of perfect. That was what we were hoping for.

Fast forward to this year, and we made 850 boxes of our rosé this year and sold 600 boxes in the first four hours. Then it slowed down as it always does when you release something new. We ended up selling out in about a week. It seems like there’s still demand out there. The biggest challenge for us is that a lot of the infrastructure that would allow a relatively small winery like us to do things with reasonable efficiencies just haven’t been put in place yet. You can’t order a mobile line that will come to your winery and box up 1,000 boxes for you the way that you can with bottles.

Our goal is never to have to work to sell this. I want it to be something that sells fast so that it’s not sitting around anywhere waiting to get to the customer.

Q: How are you able to ship these boxes direct to your customers?

Haas: That is a bit of a moving target, but something that I learned about at the DTC Wine Symposium could make this a lot easier. The folks at Really Good Boxed Wine came up with a new shipper that is like those citrus fruit boxes in which each individual orange rests in its own little compartment with a grid of cardboard dividers inside a larger box. We used to get those when I was a kid because my mom had family in Florida, and they would send us oranges that would come in this single tray and each orange would be in its own little compartment in a grid inside the box. That keeps them from moving around and causing problems. What they came up with was something similar with either one, two or three box-sized compartments inside this grid of cardboard dividers so that the weight of the boxes on top doesn’t press on the boxes further down. It’s all supported by cross-braced interior cardboard dividers.

Q: Did you use those new shippers for the latest release of boxes?

Haas: No, we just limited the number of boxes that people could order to two. At that point you can do it with just the normal, crumpled paper cushioning inside an outer box and have pretty good confidence that it’s going to get there in good shape. Our goal is never to have to work to sell this. I want it to be something that sells fast so that it’s not sitting around anywhere waiting to get to the customer.

At the moment, the boxes are exclusively for DtC. I would like to scale it up just because we’ve gotten so many requests from some of the independent retailers who would like to have it, but right now the main challenge is that the filling is slow and super labor-intensive. We basically have to take our whole cellar team and dedicate three to five days of them just filling boxes, building boxes, filling bags, putting the bags into the box, sealing up the box, sticking the labels on, packing them in the outer package. It’s just slow because there’s not a lot of automation. We have a machine that does an automatic measured fill of three liters, but still, you’ve got to take each bag and attach it to the machine and pull the lever and it fills it. Then you have to remove it, put the bag in the box, tape the box up, put the label on and it’s all by hand.

Q: Given all that manual labor, do you still see the same margins on boxes that you would with glass?

Haas: No, no, we’re making less. We knew that there would be extra costs in the first year or two as we figured all of that out. It is less input cost, but it’s also just more labor cost. We figured in the long run we’d be able to figure out the labor piece of it. We were frustrated that we couldn’t find any mobile box-filling lines. We eventually found one in Oregon but for them to drive the line down to California our minimum needed to be 20,000 boxes at least. There is a big facility in the Central Valley where we could send our wine to them and have it boxed up but they were talking a similar minimum run for it to make sense to reconfigure their line for the specifics of what we were doing. That’s just a function of the fact that everybody who has done boxes up to this point has been enormous. It’s been mass-produced wines that were intended for broad distribution essentially in a grocery store kind of environment.

For all the same reasons that keg wine makes a lot of sense for restaurants, boxes would as well. It’s less packaging waste. It’s less oxidized wine that they have to pour out at the end of night. There’s no chance of corked bottles.

Q: And you have no real interest to move to that level of production or putting that much wine into boxes?

Haas: We just don’t make enough wine to do that. I mean, I would love to go from the 850 boxes to maybe 1,200 or 1,500 and then pick three or four distributors that we have good relationships with and give them specific direction for the kinds of accounts that I want them to target for the boxes. That would be independent retail who would maybe not be a huge outlet right now for wine boxes but may have done well with cans. It tends to be a lot of the more progressive, independent retailers who just are talking to their audience about alternative packaging. And the other market would be restaurants that would want to use the boxes for by the glass but don’t have a tap system installed. Sort of like a low-budget tap system, for restaurants and for all the same reasons that keg wine makes a lot of sense for restaurants, boxes would as well. It’s less packaging waste. It’s less oxidized wine that they have to pour out at the end of night. There’s no chance of corked bottles. All these things that make keg wine appealing should, in a smaller scale, make wine boxes appealing to the right kind of restaurants if they can get over the stigma of serving wine out of a box.

Q: Do boxes and other alternative packaging formats have the potential to expand wine’s consumer base or are they limited to just experienced consumers choosing them because they are more sustainable?

Haas: I would love to know the answer to that question. There’s a statistic that something like 60% or 70% of American households don’t have a corkscrew. Does having a package that people can access more easily expand the reach of wine? Yeah, it probably does. Are those sorts of expansions likely to happen with a wine like ours and a winery like Tablas Creek at this higher price point? Probably not. That’s something where it’s probably super price-sensitive, but if we can play a role in destigmatizing the package then I think that can have kind of cascading effects down the price range that will allow more wineries to put wines into lower-carbon packages and maybe it’s those wineries that are more aimed at the newest wine drinkers. I think cans have done that to an extent. They’ve brought wine into a world that might be more focused on craft beer and kombucha. I think you might have the similar option with boxes, but it’s going to require a longer process.

Q: Where else have you embraced alternative packaging?

Haas: We decided this year that we were going to pour our tasting room samples for our guests out of keg. I pulled the numbers, and we used 13,000 bottles last year in our tasting room just to pour samples for the 30,000 people who came to see us. I can’t think of a bottle that’s more useless than one that never actually leaves the building. Now what we’re doing is every time we bottle, we have an estimate of how long we’re going to be pouring that wine in the tasting room and we fill the equivalent number of kegs. We also installed a tap system in our tasting room and our estimate is that we’re going to use 30% less wine because we’re not going to have to deal with ends of bottles and oxidation and corked bottles and all of that. We’ll eliminate something like 10,000 bottles from ever being needed to be filled and then disposed of. There’s always going to be some wines in bottle because we’ll want to be able to pour older vintages or wines that we know we’re not going to release for a year or two. My guess is that kegs will end up being something like 70% to 75% of the samples that we use.

Q: What’s been the reaction by your tasting room visitors?

Haas: Great. People want to come in and see the keg system. They say: ‘Oh, I’ve never seen one of those before.’ They want to see how it works. We have three eight-tap systems and we can move them from one room to another or outside depending on where we’re pouring. By my math, they will pay for themselves within the first year just by the bottles that we don’t have to buy. After that it’s just gravy. I mean, it’s saving money, saving wine and we’re making sure that the wine that’s being poured for people is in pristine shape. There is also that much less waste and smaller carbon footprint.

— Andrew Adams

Sovos ShipCompliant Wine Summit: April 19-20

The premier conference for winery compliance, hospitality and sales executives at the Napa Valley Marriott in Napa, Calif. sovos.com/events/ship/shipcompliant-wine-summit

ASEV National Conference: June 26-29

Taking place this year in Napa, Calif., and open to all industry and academic representatives, the American Society for Enology and Viticulture (ASEV) National Conference provides an in-depth look at new and ongoing research into winemaking and grape growing. asev.org

UC Davis – OIV Online Wine Marketing Program: July 17 – 21

The OIV Wine Marketing Program incorporates all the elements for negotiating the US wine market. Explore practical aspects of labeling, distribution, legal issues and pricing, as well as extensive data on consumer and wine trade trends. cpe.ucdavis.edu

International Bulk Wine & Spirits Show: July 25-26

Organized by the Beverage Trade Network and held in San Francisco, Calif., the International Bulk Wine & Spirits Show is intended for those working, or interested in, the private label, bulk market and contract manufacturing industries. ibwsshow.com

PACK 2023 Awards: Aug. 2

Wine Business will announce the winners of its annual wine packaging design contest in a webinar at 11 a.m. PT. winebusiness.com

Winejobs.com Summit: Nov. 14

A one-of-a-kind gathering in Napa, Calif., for HR managers to connect with their peers to discuss current HR topics and learn from industry experts. Seating is limited and registration is by invitation only. eventscloud.com

Wine Industry Financial Symposium: Nov. 14-15

Held in Napa, Calif., the Wine Industry Financial Symposium covers the financial, business and strategic issues of the wine industry. eventscloud.com