Private Label Wine: More Than Just Two Buck Chuck
Private label consumer goods are usually easy to spot on the shelf and on our favorite ecommerce sites. Whether its Kirkland Signature® toilet paper, Safeway Select® ice cream, or AmazonBasics® batteries, the retailer name is front and center on the package and products are sold at a discount to national brands. Private label has long been a lucrative component of retailers’ strategies, primarily due to the needs of value-driven consumers and higher profit margins for retailers generated by private label sales. In the beer, wine, and spirits categories, however, only a few retailers have been emboldened enough to use their private label or “house brand” on the label. Costco, the largest domestic wine retailer, is the clear outlier in all three categories. The leading club retailer relies on a network of well-known wineries, breweries, and distillers to produce premium beverages sold at competitive (yet not rock bottom) prices, and loyal Costco consumers don’t seem to care that each label proudly displays the Kirkland logo. Trader Joe’s takes a similar tact in beer and spirits, albeit with craftier, whimsical labels such as Trader Jose Mexican Style Lager. In the wine aisle, Trader Joe’s largely relies on a different strategy, whereby consumers shop dozens of brands across varietals and price segments that appear to be national brands but actually represent the 474-store chain’s “retail exclusive” wine assortment.
While it might seem over nuanced to some, the term “retail exclusive” represents an important distinction, because consumers rarely realize that these brands are available at only one retailer. Charles Shaw (AKA “Two Buck Chuck”), exclusively available at Trader Joe’s, is an obvious example. Target added to its Wine Club box wine brand in 2017 with the launch of California Roots, a collection of five blends retailing for $5.00. Above the $2.00-5.00 price point, however, wineries and wine buyers from retailers to restaurants are increasingly collaborating to launch premium/super premium/luxury price segment wines with artistic packaging closer in resemblance to a cult winery in Napa Valley than conventional private label products. Consumers often have no idea that a new $12.99 cabernet sauvignon does not have a website, tasting room, or wine club, and if they like the wine, they’ll have to return to that retail chain for repeat purchases. According to winecurmudgeon.com, retail exclusive products account for roughly 5% of U.S. sales today versus a 20% share in other food and beverage categories, but many of the larger, better-organized retail chains are centralizing wine buying decisions and targeting significantly higher levels of retail exclusive wines in the fastest growing price segments. With retail margins on private label wine 10-15% higher than national brands, we should all be on the lookout for a proliferation of retail exclusive wines at our favorite retail chains. Cheers!