Ray Brych says he would put his supermarket’s $50 private label Cabernet Sauvignon up against Napa wines costing twice as much.
“I know they’re that well made, and that they offer that much value,” says Byrch, the category manager for wine, beer and spirits for Gelson’s, the 29-store southern California specialty grocer. Gelson’s private labels include wines from some of California’s top winemakers, including Wine Enthusiast 2022 Winemaker of the Year nominee Doug Margerum and Julien Fayard. Meanwhile, its new Winemaker Series features bottles from the legendary Heidi Barrett of Screaming Eagle fame.
“And they scream Gelson’s,” says Brych. “We’re not looking for a margin play: we’re looking to give our customers something extra, something they can only get at Gelson’s.”
No, $50 private label wines are not common, and most supermarkets don’t go to quite as much trouble as Gelson’s. But, $50 or not, a growing number of grocers are moving away from those $3 bottles of—to be polite—undistinguished plonk. Instead, they’re offering more expensive and higher quality products.
The Growth of Private Label
Private label wines, also called store label wines, are exclusive to the retailer that sells them. Made from a wide array of varietals and grown in diverse appellations across the globe, these bottles are made specially for store brands. Like Kirkland at Costco and Charles Shaw at Trader Joe’s, you can’t buy them anywhere else.
The rise of private label wine started more or less just before the pandemic. Walmart and its Sam’s Club subsidiary debuted a couple of brands, including Member’s Mark in 2017, costing as much as $20. Midwest grocery chain SpartanNash added several California wines to its Finest Reserve by Our Family premium line. And Albertsons’ Vinafioré Collection, with wines from France, California and New Zealand, is priced from $15 to $22.
Stores have been eager to add these wines to their shelves for a long time, but the conditions in the market over the last few years have made this expansion possible.
“The desire to expand private label wine has always been there on the retailer side,” says Dale Stratton, managing director for the Azur Associates wine consultancy in Napa Valley. “The big change is really with the supplier side, in which there are more grapes available and more producers who can make the more expensive wines.”
And the margins for retailers are much better—40% to 50% on a $15 private label wine compared to 25% to 30% percent for the national brand, says Darryl Brooker, the CEO of LWX, a California company that makes private label wine.
These higher margins give retailers added incentive to offer better quality private label wines at the same price as national brands—a win for consumers, too.
In fact, private label wine is quite common in Europe, where retailers like Aldi and Lidl sell millions and millions of cases of the stuff. By one estimate, more than 40% of the wine sold in supermarkets in the United Kingdom, Germany, the Netherlands and Switzerland is private label.
But it has never been that popular in the U.S., even though shoppers who buy wine tend to spend more on other items, and especially if they buy a bottle to drink with dinner.
For one thing, supermarkets haven’t traditionally been the place most people would buy wine. Grocery store wine sales didn’t really start to take off until just over a decade ago, but today supermarkets account for nearly half of the wine sold in this country. For another, supermarkets in key markets, like New York and Pennsylvania, mostly aren’t allowed to sell wine.
Third, the three-tier system works against the process, adding cost, bureaucracy and paperwork to the equation. If Kroger, for example, wants to sell a private label wine, it has to meet the laws for every state where it has stores. Why mess with that unless there is a very good reason?
These days, retailers have more and more reasons to jump on the store label bandwagon.
High-Quality Supply and Low Demand
One big factor to the rise of private label wine is the California grape glut, which has seen bulk wine levels reach record highs—and prices drop—over the last 18 months. Jeff Bitter, the president of the Allied Grape Growers trade association, said earlier this year that some 50,000 acres of grapevines needed to be pulled in California to help reduce the glut.
And California isn’t the only wine region with an oversupply of grapes. France, Australia, Washington State and other areas also have more wine grapes than producers need. All told, this means retailers who want to make private labels have more grapes to choose from that cost less from throughout the world.
The other major factor is premiumization. Consumers are buying less wine but spend more money per bottle, according to the annual Silicon Valley Bank state of the wine industry report.
“There is both premiumization and SKU expansion going on now,” says Mark Garaventa, the general manager for California private label sparkling producer Rack & Riddle. “Inflation has led to higher pricing and at the same time consumers are looking for better experiences, so they’re willing to spend more. And the grape glut may help lower costs overall, so the retailer may take advantage of this in the short to mid-term to get better margins.”
According to data from the Private Label Manufacturers Association and Circana, these moves seem to be paying off. Retail private label wine sales in the U.S. increased 9.1% in the 52 weeks ending in June 2023. By comparison, Nielsen reported that all retail wine sales fell by 1% for about the same period.
“We really think wine is the next frontier for private label products,” says PLMA Corporate Vice President Anthony Aloia. “As private label goes more mainstream, wine makes perfect sense and it has a bright future.”
This raises the final question: There’s lots of talk about quality, but are private label wines actually of better quality than comparable national brands?
“Market oversupply and leveling demand have created an opportunity for creative merchants to buy good quality wine and sell it at an affordable price,” says Dave McIntyre, the wine columnist for the Washington Post. “Climate change and improvement in viticulture also make previously marginal regions for better quality wine ripe for exploration.”
And shoppers might not even have to spend $50 to find that out.
More Wine Label Coverage
- In our podcast episode, “What Makes a Private-Label Wine?,” Wine Enthusiast Magazine Managing Editor Stacy Briscoe gets the inside scoop.
- Here are the dos and don’ts of wine labels.
- What makes a good wine label?
- How to understand (almost) everything on a wine label.
- The E.U. is adding nutrition info to wine labels. Is the U.S. next?
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Published: August 14, 2024
