Sales of Riesling, the fourth-largest white wine sold in the ACNielsen*-tracked marketplace, are booming. Between November 2003 and August 2006, sales of the varietal have grown by 72 percent while case volume has increased 58 percent. Of all top varietals, only Pinot Grigio/Gris and Pinot Noir have stronger growth rates.

Sales of Riesling are so strong that some believe the varietal may eventually challenge Sauvignon Blanc's place as the third-largest white varietal sold in food stores. While Sauvignon Blanc sales are currently double that of Riesling, the growth rate is only about two-thirds that of Riesling. If these growth rates were to continue, Riesling sales would, indeed, eventually surpass Sauvignon Blanc.

"The American consumer has become more educated on wine and understands wine for what's in the bottle-that's why Riesling is having a renaissance," said Andrew Browne, CEO of Precept Brands, which has several Rieslings in its portfolio, including the Bloom and Sruktur brands, both from Germany. "I could definitely see Riesling surpass Sauvignon Blanc. The challenge with Sauvignon Blanc is, at times, there is very little difference between Sauvignon Blanc and Pinot Grigio. You can homogenize those groups, but Riesling is very distinct."

Mark Giordano, director of sales for Pacific Rim Wines, also believes that Riesling can continue its strong growth rates, primarily because of the flavor profile of the wines. "Because the relationship between food and wine continues to develop, Riesling has a great opportunity to not only challenge Sauvignon Blanc, but perhaps surpass it," said Giordano. "I don't know if that's tomorrow or five years from now, but I really believe that wines that pair with food will grow. Riesling is a noble white grape; it's a matter of whether restaurateurs and consumers acknowledge this."

Pacific Rim, a new offshoot of Bonny Doon Vineyards, believes so strongly in Riesling that it is building the company around the varietal. "That's what we're putting our chips on with the Pacific Rim company," said Giordano. "This company is going to be a Riesling-focused brand."

However, there are some barriers that could limit Riesling growth. "Domestically, there's only so much Riesling planted in the northwest and California, and it's being controlled by a few people," said Giordano. "I imagine you will see vineyards being transferred over to Riesling as the category grows."

Browne, though, worries about growers and wineries pushing Riesling too far. "What scares me about when varietals get really hot is if the wine industry is properly managing that growth. You get trial with the name Pinot Noir or Riesling; but if what they drink turns them off, they will go elsewhere," said Browne. "I think Riesling is the darling of white wine right now. The cool thing about it is that it's not just getting on a trend, it's legitimately a world-class wine. But it has to be planted in the right place, managed by the right people and made by winemakers who knows what they are doing. If all that happens, the growth will continue. The quality quotient is critical."

Imported Riesling has definitely fueled the growth of the varietal. Imported Riesling sales have grown by 155 percent since November 2003, while case volume has risen 144 percent. By contrast, domestic Riesling sales have grown by 40 percent and case volume by 23 percent. Domestic Riesling, though, has a higher market share, 1.3 percent, than imported Riesling, which claims 0.9 percent.

"We'll continue to see substantial growth for Riesling, both domestic and imported, but supply will potentially limit its growth potential to surpass Sauvignon Blanc," said John Tichenor, group brand director at Brown-Forman, which includes the Fetzer brand in its portfolio of wines. "There are specific areas where you can grow this varietal. Outside of these areas, the quality is not going to be what the consumers expect. So, I think a lot of people are going to go outside of the United States for supply."

Tichenor said that Fetzer's own issues with finding Riesling supply compelled the winery to source fruit from abroad. "Fetzer's always had a good reputation with Riesling, and over the last few years, our access to supply has dwindled; but the demand has shot up. For us to capitalize on the popularity of Riesling, we decided to go to the best source we could find in Germany," said Tichenor.

In September, Fetzer released a new Valley Oaks Riesling using German fruit. The new line is offered exclusively in 13 states, mostly in the Midwest and South, while the California-grown Riesling brand fills in demand in other states. "The way Fetzer and a lot of Rieslings are allocated throughout the U.S., you are constantly balancing supply and demand," said Tichenor. "We had eliminated any discounting with our Riesling, so with the new German Riesling we are able to promote the wine and to reinstate promotional activity."

Several winemakers have turned to Germany to create or bolster their Riesling presence. For example, the Pacific Rim Riesling is a blend of 75 percent domestic and 25 percent German fruit from partner Johannes Selbach. "We think our German component differentiates us from other brands," said Giordano. "It's not to say Washington state can't stand on its own. It's a unique twist to increase our quality."

Riesling Sales More Price-Sensitive Than Other Varietals

According to Browne, Riesling has "much less elasticity than other categories" in terms of bottle price. "The majority of the bottles sold are definitely under $10," he said. "There are some incredible Rieslings that are going to sell for $15 or more, but overall it's definitely a $10 bill or less-and there are still areas where you can find Riesling for a $5 bill. That $5.99-$9.99 range is the sweet spot, at least for volume."

Tichenor agreed, saying that the $5.99 to $9.99 range is comfortable for consumers and invites them to adopt the varietal. "I think there is price sensitivity once you reach above the $12 threshold. Consumers aren't always willing to trade up to that level."

According to ACNielsen, 59 percent of food store Riesling sales are in the $7 to $11 range while only 3 percent is sold above $11. The remainder, of course, is sold under $7, which is also the fastest-growing segment of the market.

Since November 2003, sales of Riesling under $7 have grown by 81 percent while case volume has risen 75 percent. Sales of Riesling between $7 and $11 have grown 73 percent while volume has increased 51 percent in the same timeframe. Over $11, sales have grown 42 percent, and volume has increased 22 percent off a very small base.

Where Riesling over $11 has been very successful is in restaurants. "Riesling first caught attention in the on-premise market," said Giordano, who explained that consumers are buying different flavor profiles in the on- and off-premise environments. "There's the lower-priced sweeter style Riesling, and there's more of a German, high-end drier style, which is what we're focused on. As far as the off-premise is concerned, the retailers have been focused on the sweeter Riesling."

Giordano said the Pacific Rim brand is focusing primarily on by-the-glass programs in on-premise environments. He feels that Riesling is ideally suited to wine and food pairing, and success in the on-premise market will lead to success in retail environments as well. "I think it's not often someone will walk into a restaurant looking for a Riesling to drink, but a server or owner will recommend one to drink with the food," said Giordano. "There's been a consumer under-appreciation for Riesling, but it has always been a balanced varietal that allows for the consumers to have a dining experience with wines."

Overall Wine Sales Up 9 Percent in August

Wine sales are still continuing to rise in the ACNielsen-tracked supermarket channel. In the 13 weeks ending August 26, 2006, overall wine sales rose by 9 percent and case volume sales again gained 4 percent, identical to sales figures from July.

Year-on-year sales have risen 11 percent in the 52 weeks ending August 26 while case volume has also grown by 4 percent, once again identical to last month. Dollar sales are continuing to outpace case sales, currently by an almost three-to-one margin, meaning consumers are buying more wine at higher prices than in 2005.

As always, the "big three" varietals still dominate the retail arena, though all three are down from last month. Chardonnay sales rose 9 percent in the 13 weeks ending August 26. By case volume, Chardonnay was up 7 percent in the August data. Chardonnay is the top-selling varietal in the ACNielsen-tracked marketplace, claiming 26 percent of the market in terms of dollars and 23 percent in terms of case sales.

Cabernet Sauvignon increased sales by 13 percent in the 13 weeks ending in late August. By case volume, Cabernet Sauvignon gained 10 percent in the 13 weeks ending August 26, 2006 over the same period in 2005. Cabernet Sauvignon has a 12 percent share in dollar sales and a 10 percent share in case volume.

Merlot sales are continuing to bounce back after stumbling in late 2005. Merlot sales rose again, by 3 percent, in the 13 weeks ending August 26, 2006. In terms of case volume, the varietal also grew 3 percent in the July data. Merlot is the second-largest selling varietal, with 12 percent of market share in dollars and 11 percent in case sales.

The fourth-largest selling varietal, White Zinfandel, is still experiencing a slight warm-weather boost, though growth has fallen in the last two months. The varietal rose less than 1 percent in dollar sales for the 13 weeks ending in late August. However, the varietal dropped 3 percent in case volume in the 13 weeks ending August 26, 2006. White Zinfandel still holds a market share of 6 percent in dollar sales and 9 percent in case volume.

Domestic wine sales gained 10 percent in the 13 weeks ending August 26, 2006 over the same period in 2005 while imports rose 7 percent in the same time period. In terms of case volume, imports gained 6 percent in July while domestic wine rose 4 percent.

Argentinean, German, New Zealand and Spanish wine sales are all showing strong growth, though growth is coming off a very small base. Collectively, these countries represent 3 percent of the market, with Germany responsible for just over 1 percent of that figure.

Sales of wines from Argentina grew 39 percent while case volume grew 28 percent in the 13 weeks ending in late August. German wine sales, perhaps spurred by Riesling, grew 27 percent, while volume sales gained 22 percent. New Zealand gained 45 percent in sales in the 13 weeks ending August 26, 2006 over the same time period in 2005. By case volume, New Zealand grew 40 percent. Spanish wine sales grew 31 percent in the 13 weeks ending in late August, and case volume rose 25 percent.

Australian wine sales, which represent 10 percent of the overall wine market, grew by just 2 percent in the 13 weeks ending August 26, 2006. By case volume, sales rose by 4 percent. Clearly, Australian wine prices are not keeping pace with volume increases.

Italian wine sales grew 8 percent in the 13 weeks ending in late August while case volume increased by 7 percent. Italy accounts for 8 percent of the overall wine market. wbm