Cruising to Better Wine Sales

Cruise ships have a unique system of sourcing and selling wine Liza B. Zimmerman and Edward Lewis report.

Reading time: 4m 15s

Cruise liner made out of wine bottles (Image: Midjourney AI)
Cruise liner made out of wine bottles (Image: Midjourney AI)

Vessels at sea are not subject to many of the rules that apply to alcohol on shore. Nowhere is this more relevant than the US, the country that account for a significant share of an industry valued at an estimated $66.2 billion.

American cruise lines are free of the US three-tier-system and can source their wines and spirits in international, duty-free, waters. This gives their beverage directors advantages such as buying directly from wine producers without having to pay the multi-tier markup that can lead to a bottle selling in a US retail outlet for nearly four times the ex-cellars price in Europe.

Despite the downturn it suffered during the pandemic, the cruise industry is an increasingly important tourism sector. According to the Cruise Lines International Association (CLIA), this year will have seen approximately 35.7m passengers, 6% more than in 2019. JP Morgan Research expects that the industry will continue to grow over the next four years, capturing nearly 4% of the $2 trillion global vacation market.
 

Bigger ships, younger passengers

JP Morgan offers several explanations for this trend. These include new ‘mega-ships’ with improved facilities and private destinations which, it is believed, are helping to attract more younger and first-time passengers, as well as the ageing baby boomers who were previously seen as the mainstay of the market.

The all-inclusive packages offered by the cruise lines are also appealing to holidaymakers on a budget. Some of these include basic wine options, but all of the cruise lines seek to obtain substantial revenue from their wine lists, and daily beverage packages such as the Holland America Line ‘Signature Beverage Package’ for around $55 per person, per day. This entitles passengers to 15 “beers, spirits, cocktails and wines by the glass priced at $11 and under, as well as Coca-Cola™ products, premium coffee, such as espresso and cappuccino, juices, mocktails and bottled water (sparkling and still).”

Another $5 per day, buys the ‘Elite Beverage Package’ include ‘premium spirits, cocktails - including Dale DeGroff’s Original Cocktails - and wines $15 or under’.
 

'Sommelier suite'

For passengers who specifically want wine, Holland America also offers three differently priced Sommelier Suite’ options: Cellars 1, 2 and 3. Wines, which have included Toro de Piedra Cabernet Sauvignon and Caliterra Chardonnay from Chile, come at a fixed price depending on the tier, and discounts are available for those who sign up before setting sail. Non-imbibers might prefer the ‘The Water Beverage Package’  which, for $24, includes six litre bottles of Evian.

If the margin on the Evian looks good, the cruise lines are also doing well with the sales of the other drinks. According to some estimates, beverages are now Holland America’s biggest profit centre – ahead of casino games, spa experiences, shops and shore excursions.
 

Trust the brokers

So, what are the cruise lines serving and where and how do they buy it? While they may purchase in significant volumes directly from producers, most rely, at least in part, on established brokers and sales agents like Napa-based Intervine Inc., which for the last 33 years has been supplying the global travel industry with “adult beverages, zero-alcoholic beverages, waters and canned drinks, coffee, teas, snacks, pre-cooked proteins,  meals and tabeleware.”

Bridget Schmidt, the company’s manager of sales for cruise lines says that Intervine currently works with more than 2,000 brands which makes it a go-to for price negotiations with producers. “This frees up cruise line buyers to focus on other aspects of their jobs, as they no longer need to spend time on wine sourcing and supply-chain management.”

The company “offers a single point of contact for sourcing a wide variety of wines from around the world and can handle the complex supply-chain logistics involved in getting wine onboard at competitive prices,” she says.
 

Familiar names

Schmidt also reveals that, while ships may also purchase select wines while in port, in order to highlight countries visited on a journey, these generally compose a minor part of the list, as “many guests prefer to enjoy wine they are familiar with.” So, while the adventurous may want to explore new wine experiences, “the preponderance of wine is sourced from renowned wine regions globally.”

Whatever the wine, the prices at sea are not much lower than those in the typical US off- and on-trade tiers. Schmidt says that “Markup typically ranges from 150-300%, depending on the brand, region and exclusivity. It is generally higher than the markup on wine sold in restaurants and retail stores because of the additional costs associated with storing, transporting and serving wine on a cruise ship,”

While Intervine is one of the larger and better-known brokers, many smaller ones exist. Laura Whitfield, the owner of Wine By Volume, based in Healdsburg, California, sells more than 500 different brands to cruise ships. She says that when she started her business, almost a decade ago, she was cold-calling, but now she works almost exclusively by referral.
 

Discreet sales

She notes that she, “receives offers from wineries who want to move excess inventory discreetly.” Any number of reasons can contribute to a backup in wine supplies, from making too many bottles of a recent vintage to having a deal not go through, she adds. Another typical scenario is small wineries that—with just an owner and a winemaker—may not have time to focus on sales.

Another important aspect Whitfield notes is that wine sales to cruise ships—as well as airlines—are considered discreet. That is because they won’t be subject to online marketing and price discounts, as frequently happens at retail stores. Their sales pricing also won’t be made public on the internet via sources as WineSearcher.com. As a result, she notes, wineries are often ready to offer discount pricing to cruise lines that they might not offer publicly in the U.S. on- and off-trade arena.

The types of wines offered to cruise lines are also changing, according to Whitfield and some wine industry analysts. Whereas many producers used to sell off older vintages, that perhaps outside of the super-premium category of California Cabernet Sauvignon, might be viewed as not having much shelf life, current vintages are now available “By offering their most current vintage to cruise lines they are “trying to stay ahead of current inventory” Whitfield says.

As wine sales on dry land slow, the notion of supplying shipbound holidaymakers who have little better to do than work their way through a daily package of 15 drinks, may become increasingly appealing.


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