Sunday, August 25, 2013

Are You Adjusting Your Marketing To Boomers?

Never Bet Against A Dog That Tells You They Can't Play Pool 
 
"If you aren't starting to make some adjustments in your current marketing strategy to Boomers, you will lose your most important current wine buyers sooner than you think, and another winery will pick that consumer up who will adapt to their changing preferences."
 
 
 
My mother plays pool, has an occasional nip, likes pink and is a dog. She's actually a wonderful person, but I've been trying to break her from nipping for years. Now it seems the years themselves are actually slowing down her nipping, which isn't good for the wine industry when considering her in terms of her Mature Cohort. A non-nipper wouldn't be the person a winery should try and attract. (Don't play pool with her either.) 

My mom can nurse a large bottle of moscato for a month. Obviously if she is representative of her generation, when it comes to developing a strategy to attack the geriatric set there are probably better places to invest your precious resources. But if you listen to many in the wine press, they will say its the Millennials. I believe if you sell fine wine and that's what you are going to do, I suggest you would be better off investing in my mom's cohort today because they can at least afford your wine, if you can convince them to buy it.

Millennial Myths


We've been writing for years on the Millennial Myths, the most prevalent one being Millennials are driving fine wine sales. That's absolutely false. They aren't driving sales and there shouldn't even be a debate. I found -this article- from 2009 which is a good example of the kind of confusion that's been layered onto the discussion. Take for instance this quote:
"the U.S. ranks third in total wine consumption, and is gaining rapidly on the leaders. Much of the (3.3% ~ 850,000 case) increase can be attributed to the Millennial generation"
Market Share of Wine Sales Sorted by Cohort
It wasn't true in 2009 and isn't true today. What is true is the Millennials have the highest growth rate, but like all segments with low numbers of consumers, the high growth is because of the small base versus the growth in the nominal consumption of the segment. 

The chart directly above is one I used for a speech in Sonoma in May. It's from a survey we do of West Coast Wineries and shows that Millennials represent less than 15% of total wine sales. That's pretty consistent with Nielsen information as well.

Don't Market to People Who Can't Afford Your Product


The way I make practical sense out of the avalanche of miss-communication and demographic-goguery, is to break it down into component parts. Buyers of anything have to have the willingness and the capacity to buy. For example, my 20 year old Millennial daughter wants a new Range Rover - she has the willingness. But as a sophomore away at college, she doesn't have the capacity in her budget. I've heard some people argue that you need to market your wine to the Millennials now because they are the future. In the same breath, I've seen market research on Millennials where they feel they aren't being catered to because they want less expensive and better wines. The truth is DOMESTIC wine should be marketed to Millennials as a category, but its the lower priced wines that attract those consumers today. For now though, lets just stipulate to the belief the Millennials have a greater willingness to drink wine than any previous generation ( .... its not a proven fact either because the data aren't available from previous generations, but lets just go with it.) Do Millennials have the capacity or disposable income to buy fine wine?

I looked to the most recent information provided by the U.S. Census Bureau on both wealth and income levels. The data reveal that the older boomers have the most wealth followed closely by the Matures, with Millennials having amassed only about 2 percent of the Boomer wealth still early in their careers. 

I also reviewed the top 20 percent of all wage earners sorted by age. Again its the Boomers leading the pack as the highest paid, followed by the Gen-Xers, the still working Greatest Generation, and last again are the Millennials. So if it was only the capacity to buy, that information might suggest a winery should have a plan to go after the geriatric set since they have the capacity. The problem is, the older generation doesn't have the willingness - or maybe the kidneys to be a dominant cohort in wine sales. Back to the question, where do you invest your precious marketing budget?


Boston Consulting Group Matrix



The answer isn't binary. Your marketing budget needs to be spread out a bit but focused largely between high growth segments, and those segments where you have a high market share. 

The basics of the now legendary Boston Consulting Group's Growth Share Matrix is pictured to the left.  My mother the dog as the chart shows, falls into a segment in the lower right quadrant that has a low market share and low growth rate. In the BCG Model, she is termed a dog and that is the cohort you want to put little if any of your marketing resources. The above chart on Market Share shows the Mature Cohort has a 14% share of fine wine sales now. That's about the same as the Millennials, but you should be investing more in the Millennial Generation versus the Matures because Millennials do have growth upside while Matures will be turning up daisies making them ineligible for wine purchases relative to Millennials. Plainly, there is no growth opportunity with my mom's generation.

Between the remaining cohorts - the Boomers and Gen X, where should you invest more of your attention and marketing dollars today? The Boomers are far larger than Gen X and they have more capacity to buy, but you really should be investing a fair amount of your time and effort now attracting new Gen X consumers instead of new Boomers. Gen X are - or should be, the current stars of the portfolio looking at the matrix. They are the consumers that are going to drive your sales growth higher as the Boomers kidneys hit retirement age.


It's True: My Mom Gave Birth to a Cow



To keep it fair, while my mom might be a dog, as a median aged Boomer, I am a cow; a "cash cow" to utilize the BCG model. I may not be able to beat my "Dog" mother in a game of pool, but I can swim better than her. I just need a little help lifting all that dead weight out of the pool these days. 

Anyways ...fine wine producers have to be relevant to Boomers because they have the highest market share in wine purchases still, and they will for some time yet. You need to "milk" the Boomers by spending less vigerously versus Gen X. You need to utilize this cohort to fund investments in product development and marketing to other growth cohorts. But if there is something you can do with the Boomers today in terms of investment, its looking for product changes that might elongate the length of time they remain your wine buyer. That is a very important consideration and worth contemplation and further investment. That will return a solid current ROI.


Why Will Boomers (and Matures) Slow in Wine Spending?


You may think that you are doing the right things to market to Boomers today - just like you always have, but that's no guarantee of their future behavior relative to your wine and purchase preferences. The Boomers are evolving and without adaptation of your brand strategy, you might find them growing away from you before the Millennials come to rescue your sales growth. I wouldn't expect the Matures to adopt Millennial behaviors that would keep them as a viable sales cohort .... generally speaking that is, but even they might benefit from answering the following question - Why will people slow their spending after age 60? Answer that and you will find a correct path to market to Boomers and even Matures as they age in the next 10-20 years. 

While part of the reason they spend less is retirement, the reason they will decline in market share is really because they can't continue to drink like they did when they were Millennials (sic). So the simple solution is, consider making some wines that are lower in alcohol but maintain the other attributes the older set prefers. That's easier said than done in the warmer AVA's, but there are available technologies to make a wine that has a traditional flavor profile and has less alcohol, and might fit their pocket book as well.

To that end, last week I came across an article advertising some new marketing research about the size of the Low Alcohol category. link. One statement in particular stood out to me:
"Once considered a niche outsider product category, lower alcohol wines are now growing in stature in many markets around the world. Across the 8 markets looked at in this report, buyers of sub 10.5% ABV wines now account for 38% of consumers, or in other terms, over 80 million regular wine drinkers -making a rather compelling case that this is a market sector which can no longer be ignored. From the 8 markets analysed in this report lower alcohol wines are currently performing best in the USA, Germany, Canada and UK where the number of lower alcohol buyers and consumption of sub 10.5% ABV wine is the highest."

I think that's where we should leave it for today. Hopefully that gives you some food for thought.

What do you think? Should you be spending all of your time marketing to Millennials? Are you investing in the best growth opportunity for today (Gen X)? Are you seeing declines in purchasing from Boomers and falsely attributing that to lower income from the recession? Are the Matures worth marketing to still? Where should you invest your precious marketing dollars and time selling your wine?


Please log in and offer your thoughts to the community.

23 comments:

  1. Sound advice Rob. The same balanced approach has worked in other lifestyle categories. However, I'm not sure how your mother is going to react to being called a dog!

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    1. Martin - Thanks so much for logging in and contributing your thoughts. Fortunately my mom has little time for reading my Blog because she's always hustling a game in the pool hall.

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  2. Rob, your info is consistent with ours. Our data gathered from October of 2009 through today shows that the vast majority (80%+) of $25 and over wines are purchased by folks in the 50-60 age group. Go to $45/btl wines and it's over 90% in the 50-60 bracket. Millennials hardly register in either of these categories.

    Buyers in this bracket don't use Facebook except to look at pics of their kids/grandkids. They don't use Twitter or Pinterest. Their response rate to email blasts is much less than 1%. Yet time after time I see large brands targeting these buyers over and over using all the wrong marketing vehicles. In the end they are actually alienating many of these buyers. The real message here is to know who your buyers are and use appropriate marketing methods to reach them and keep them in your camp. Actually talking to them live works wonders.

    Jeff Stevenson
    CEO/VinoPRO

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    1. Thanks for logging in and for the information Jeff.

      I've seen a data base of credit card transactions for over 100,000 wine consumers who bought their wines on line. The interesting twist was the Millennials had the highest average bottle priced purchased, but they were single bottle buyers and had a specific use for that bottle - either as a gift or a special occasion. They also had the lowest ring of all the cohorts by quite a margin.

      Your last point I think is an awesome one; "Know your buyers ... talking to them live works wonders." Great advice!

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  3. I age that age based consumer segmentation can be helpful - as you've outlined below they have a higher net worth on average so make a more alluring target for premium wine brands. But averages can be misleading when thinking about marketing. Misleading in that a large percentage of Boomers have little money at all (e.g. they work at Walmart).

    Or in the case of Gen X, many professionals (lawyers, merchant bankers, architects, dentists) are single with no mortgage. This latter group have huge amounts of disposable income and want to impress others that they are, er, worthy breeding stock. Most of Gen X may be as boring as myself and settle down and choose the happiness of family and necessity of a mortgage, but for a while there they are a key wealthy target market.

    I think a more helpful way is to look at groups of wine drinkers is to use psychographic segmentation. Constellation Brands has released their research and is a good example of this (search for "project genome wine"). It references age and gender, but more importantly what drives their brand decisions: status, knowledge, deal hunting, tradition, beverage, and confusion to paraphrase the segments. By focusing on one of these rather than age a winery's marketing is going to more appealing.

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  4. Thanks Bruce for weighing in.

    I agree with your point on averages. You can't really market to the average, because that person doesn't exist. The important sub-components might be entirely different from the "median consumer." Averages and cohorts are only relevant to frame the discussion.

    I know the folks that did the original work for Constellation and it’s pretty good. Its pretty stale now and they are updating it as we speak - or so I was told last year.

    Using personas is an approach to which I ascribe when looking at DtC marketing in particular. If a winery is going to really market one person at a time, they will fail because overhead will eat up sales. What is key is to customize a client base into groups (personas) so a winery can then market broadly to the groups efficiently, but still make the consumer feel unique in that marketing outreach.

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  5. “REPURPOSING” MY BELATED COMMENTS TO YOUR MAY 31ST BLOG TITLED “WHY SELL WINE BASED ON AROMA AND TASTE” . . .

    ON MARKETING TO "MILLENNIALS" ("GENERATION Y") . . .

    PressDemocrat
    (January 19, 2010):

    "Marketing Wine to Gen Y No Easy Task"

    [Link: http://www.pressdemocrat.com/article/20100119/BUSINESS/100119413/1036/BUSINESS?template=printart]

    By Kevin McCallum
    Staff Writer

    -- AND --

    Bloomberg
    (March 19, 2013, 2013):

    "Authenticity Key to Wooing Younger Wine Consumers, Price Says"

    [Link: http://www.bloomberg.com/news/print/2013-03-19/authenticity-key-to-wooing-younger-wine-consumers-price-says.html]

    By Ryan Flinn
    Staff Reporter

    -- AND --

    Los Angeles Times "Business" Section
    (March 1, 2013):

    "Wineries Pour Efforts Into Targeting Younger Drinkers”

    [Link: http://articles.latimes.com/print/2013/mar/01/business/la-fi-young-wine-drinkers-20130228]

    By Tiffany Hsu
    Staff Writer

    -- AND --

    WineBusiness.com
    (May 12, 2010, 2012):

    “The Market for Fine Wine in the United States”

    [on the Fine Wine 2010 Conference in Ribera del Duero (Spain)]

    [Link: http://www.winebusiness.com/news/?go=getArticle&dataid=73903]

    By Graham Holter
    Graham Holter
    Associate Director – Publishing
    Wine Intelligence market research firm (United Kingdom)

    [BOB’S ASIDE: THE ARTICLE GOES ON TO DISCUSS “EXPERIENCED EXPLORERS,” WHICH AS A DEMOGRAPHIC GROUP ACCOUNTS FOR 17% OF THE WINE DRINKING POPULATION AND 33% OF THE MARKET VALUE.]

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    1. Thanks for the links to relevent articles Bob.

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  6. The current crop of wine industry marketers do not have the skill set to market wine to boomers. The majority of marketers in the wine business have little or no experience with the tool set used by beer and spirits who demonstrate their know how all the time.(TV, radio, print, direct mail, and new media.).

    ROI for new media is an interesting dilemma. A "like" is not a dollar spent. Followers do sometimes turn into customers but not all that often.

    Last time I checked Baby Boomer women's primary media usage is still TV by a wide marge (80-90%).

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    1. Thanks for the comments Anon 12:51. I believe the wine business is increasing the pace of growth in marketing, but I agree its behind other industries.

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  7. One of the things I do in Los Angeles is organize private collectors' wine cellars.

    I've noted that as older wine enthusiasts cross that "great divide" into retirement, their alcoholic beverage consumption changes.

    They start drawing down stocks of stored wines; purchase less expensive "everyday drinking" table wines; and increase their purchase and consumption of hard liquor (e.g., Bourbon and Whiskey).

    (Aside: As Noel Coward wrote and sang: "Candy is dandy but liquor is quicker.")

    Demographers and marketers, take note: Baby Boomers reached retirement age (65) in 2011.

    [Link: http://www.nia.nih.gov/health/americas-first-baby-boomers-reach-age-65]

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    1. I hope the business is taking note Bob. While The French Paradox gets a lot of the credit for the growth in wine sales over the 90's, there was this little cohort called the Boomers who's median aged member hit 35 right in the middle of the 90's. That is the beginning of the high spending years of 35-55 years statistically. Not mentioned anywhere is consumption has slowed in its growth rate the past several years and the Boomers median age hit 55 about 3 years ago. Recession or demographics. Either ansewer requires a marketing response.

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  8. Hi Rob - Great blog post! Question: when you say "fine wine" what price range are you referring to? Is this anything above $20?

    - Mike

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    1. Mike -
      Like several terms in the wine business, there is no accepted definition for “fine wine,” nor are there any current definitions for premium wine, luxury wine, and the old super-premium wine. What I do is take the available internal and external sources of sales information and go from there. While I have one data source that is above $20USD, all the others are at least $20, so that’s what I stick with.

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  9. Rob,

    A narrow response to a much larger question:

    "So the simple solution is, consider making some wines that are lower in alcohol but maintain the other attributes the older set prefers. That's easier said than done in the warmer AVA's, but there are available technologies to make a wine that has a traditional flavor profile and has less alcohol, and might fit their pocket book as well."

    When I was enrolled in Santa Clara University's undergrad business program, southeast of the campus was the San Martin Winery. They "pioneered" so-called "soft wines" with alcohol levels around 9 to 10%.

    As you can imagine, they tasted "grape-y," with "cloying" residual sugar levels that didn't slake one's thirst.

    I have noted in Wine Business Monthly's near-daily e-mail news blast that "low[-er] alcohol wines" are being "pioneered" once again.

    One technique used in France to produce lower alcohol wines hasn't been embraced on this side of the Great Pond: multiple harvests from the same vineyard.

    A limited amount of fruit is purposely picked "early" for elevated total acidity/lower sugar levels -- akin to verjuice? -- and the majority of the fruit is picked later for "normal" total acidity/sugar levels.

    The expectation is that the cuvee results in a more "balanced" wine.

    [ Sorry, the night is late and I can't pull out of my memory the French winegrower's glossary term for this approach. Where's food and wine maven Darrell Corti when you need him? ]

    ~~ Bob

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  10. Great exchanges all. A quick fact check: Bob H., I am sorry to have to point out the wonderful couplet you quote is by the New Yorker's Ogden Nash (1902-1971). He later added "Pot is not". This is not to take anything away from Noel Coward.

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  11. Dear "Pinotgraves,"

    I am occasionally as guilty as anyone when "punting" to the Web for selective fact-checking.

    The top Google search result that came up (at a bleary-eyed 2 in the morning):

    N.J. “Sky” Cooper
    www.pasenategop.com/committees/law/2013/051413/cooper.pdf‎
    May 8, 2013 - Alcohol. As Noel Coward indicated "candy is dandy but liquor is quicker". Every state in the nation has control over the sale of alcohol. One can ...

    Hey . . . since my head was desperate to be reunited with my pillow, I was willing to go with it !

    So what does a more expansive Google search reveal?

    Odgen Nash.

    Glad to give credit where credit is due.

    I'll be lighting my own petard momentarily . . .

    [Link: http://www.straightdope.com/columns/read/260/whats-a-petard-as-in-hoist-by-his-own]

    I can already envision Rob invoking Sir John Gielgud's character Hobson in the movie "Arthur":

    " I'll alert the media. "

    ~~ Bob

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  12. Rob,

    On the subject of "key influencers" on wine buying decisions -- be they wine writers or "the wisdom of crowds" -- from today's Wine Business Monthly e-mail news blast . . .

    "Friends Most Influential in Wine Buying Decision"

    Wine drinkers still relied mainly on recommendations from family and friends when selecting the wine brand and variety they are likely to buy.

    [ Link: http://www.afr.com/p/national/friends_most_influential_in_wine_a8WuErUwMk6eM57VuGfFlN ]

    ~~ Bob

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  13. I'm not so sure its the alcohol level. I think its the volume.

    Wine and Food lifestyle can only mean added weight. Boomers do not want to be old and thin is one of the few ways to (seemingly) avoid it. Enter skinny jeans and two-fingers neat. Spirits require neither food nor volume. No bloating nor heartburn. No magazines or complications. Bottle stays fresh in cupboard, easy to buy, no fuss or kowtowing to self-appointed arbiters of vintage or appellation. Add ice or soda or mixer? Mon Dieu! - the sacrilege!

    Add to that those who are also increasingly put-off by the oft tiresome, repetitive, and blog-fragmented "paraphernalia of it all" surrounding wine today, spirits seem fresh and new.

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  14. From today's Wine Business Monthly e-mail news blast:

    "Goodbye, Wine Snobs: How E. & J. Gallo Winery Courts Millennials"

    Wine Over Ice? Younger Consumers Not Tied to Drinking Traditions

    [Link: http://adage.com/print/244559 ]

    -- and --

    "How Millennials are Changing the Wine Industry"

    The Millennial generation, which includes the youngest legal drinkers, is consuming more wine than previous generations when they turned 21, and the industry is taking note.

    [Link: http://www.foxbusiness.com/personal-finance/2013/10/08/how-millennials-are-changing-wine-industry/print]

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    1. More manure in over-reporting unsupported facts. Even the Wine Market Council has finally come to the conclusion Millennials aren't core consumers. I'm still waiting for someone to prove that Millennials are drinking more than prior generations? As far as I am aware, the information about drinking volumes of wine in prior generations doesn't exist. It may be true, it may not. The Boomers and Matures drank a lot of jug wine when they were Millennials.

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