Saturday, June 15, 2019

Wine Consumption Probably Won't Return to "Normal"


      I Seek The Finest Knights in the Land


We work in the most interesting and wonderful industry on earth. Two things I love about the industry are the infinite palate of interesting souls and the sheer volume of optimists within it. Ours is a happy place; a Camelot of sorts. It's an industry where losing an arm is viewed as just a scratch in some corners of the realm.

I love to be an optimist and predict safe and clear travels when the facts support it. But sometimes a foe might be blocking our path, and we need to take up arms. 

Several years ago when I authored the Annual SVB Wine report, I was quite optimistic and outlined all of the positive influences filling our sails. But this past year I was more gloomy; a Black Knight, and that bothered some of the optimists around me.

Optimism is good but blind optimism, the kind that denies the loss of both arms when they lie on the ground ... that isn't so good. Blind optimism is a poison that keeps us from taking a critical view of important trends and keeps us from committing to timely solutions. 

For my friends who just don't want to hear any of the gloomy facts below (along with some accompanying solutions), we'll call it a draw. You can stop reading and enjoy the next video instead. 




Now Back to reality...


Well then ... according to the BLS Consumer Expenditure Survey, Americans spend about 1% of income on alcohol, no matter the age. One could impute from that statement, we just need to wait until millennials are older and they will spend their 1%. In fact, just waiting is indeed the suggestion I often get from optimists. 

That's a rational view because the millennial generation's median age is 30, and boomers didn't really hit wine hard until their median age was 35. But that statement - spending one percent, is about total alcohol spending, not wine, and young consumers aren't treating wine as kindly as craft spirits and beer these days.

In the State of the Industry Report, we noted that millennials haven't increased their share of premium wine purchasing in four years. They just aren't engaging with wine yet, except on special occasions. But they are drinking craft beer and craft spirits more often.


As it relates to alcohol, there is another trend that bears watching. As the nearby slides show, again from BLS data, the under 25 age group in red is spending less and less of their hard earned income on any kind of alcohol! That means they are spending it elsewhere.

In the first slide, we can see the percentage of their total income that the group is spending as a declining percentage. In the second slide, we see that they are spending a declining amount of per capita income on alcohol as well. And again, that's an overall statement on alcohol, not just wine alone.


     No Amount of Wine is Good For You


The section title is now a line that's being repeated from politicians across the world and stems from a controversial study. It doesn't matter if it's true. That's what's in the narrative.

The young consumer is being frightened away from beverage alcohol by the hijacking of science and the continuing onslaught of negative press coming from anti-alcohol groups. We covered that in the State of the Industry Report as well and noted the increasing volume and outlandish claims coming from that group. 

Today there is a growing trend toward wellness and that includes abstinence from any form of alcohol. Without any kind of response from the wine community to reference science that shows moderate wine consumption is healthy, we will see the negative trends continue.


We know that the growth of premium wine sales is slowing and total volume growth of wine has turned negative; something else we pointed out in the Annual Wine Report. Off-premise growth is displayed in the graph near this text. Wine is being hurt by the combination of the boomer moving to retirement and the young consumer's current lack of engagement. That's changing wine demand from what we've grown accustomed during the past 20 years of premiumization.

So the question at hand is, with the negative trends we are watching, will wine consumption ever return to our view of "normal?"

You won't like my answer, but don't be surprised if young consumers drink less alcohol tomorrow, and those who do drink continue to embrace craft spirits and beer instead of wine. 


If that statement isn't too gloomy, then you are an open-minded realist and undoubtedly quite attractive as well, so I encourage you to read on.


      Four Reasons Millennials Are Not Good Wine Consumers 

  1. Wine is expensive compared to craft beer and spirits. One 750ml bottle of a well-known pinot noir costs $30 and has 5 servings that have to be consumed that evening or it will oxidize. The same size bottle of Makers Mark bourbon can be found for the same price, has 25 servings and will stay drinkable for months. Another way to look at it: Jon Moramarco computes that on average, wine is $2.15 per five-ounce glass serving, versus $1.28 for a bottle of beer and 0.93 cents per shot of spirits.  Premium spirits are a better value compared to wine - and bartenders know that they get better margins for spirits over premium wine too.  Our frugal millennial consumer knows wine is comparatively more expensive.
  2. Millennials are more health conscious than prior generations. The wine business is being out-marketed by spirits producers who tout health-related features of their products such as low calories, no added sugar, gluten-free, non-GMO, organic, sustainable, etc. Wine? We don't yet put calories on our labels, we stopped promoting the massive body of science showing the health benefits of moderate wine consumption and with the anti-alcohol movement gaining traction in the narrative, even alternative non-alcoholic and engineered alcoholic products are starting to gain favor. The industry reaction? Some wineries are trying to adapt by making non-alc products, and many are trying to find a way to move into cannabis. Our health conscious millennial consumer is moving away from alcohol as a category.
  3. Millennials might not collect wine as did their boomer parents. Millennials are renting more than past generations at a similar time in life, and by all indications aren't expected to have the same degree of home ownership in life. But when they do buy homes, they look for more compact spaces. A premium liquor bar takes up less room than a wine cellar but still supports a family who entertains. Our space-starved millennial consumers probably won't collect wine like their parents.
  4. When premium wine took off in 1994, there was no craft beer or craft spirit option. Wine became the choice for boomers because it was the only truly premium product, and I might add, it was a better value in 1994. Today, the typical beverage alcohol consumer drinks across categories - beer, wine, and spirits. Only 7% identify as pure wine consumers today. Our practical millennial consumers are weighing their premium bang for their buck and are finding wine wanting compared to spirits in particular.
Today the landscape is different from the 1990s when boomers drove wine consumption higher. Craft spirits and craft beer are pure substitutes for wine now and both are increasingly paired with meals as the millennials repurpose the use of spirits and craft beer to align with their tastes and budgets. Add to that "gullet-share" losses from non-alcoholic beverages and factor in a future with CBD infused wellness drinks, and there is less room for wine tomorrow - unless we change the game we're playing.

      Wine Drinking Grows with Age. Just be Patient ...


There is no question that beer and spirits have been the entry point into alcohol beverage as long as most of us remember. And the pattern we're comfortable reciting is that all consumers evolve to wine as they age. That's what the chart nearby is saying about the current state. But consumers haven't always moved from beer and spirits into wine due to age. 

The Mature Generation - the people coming back from WWII as portrayed in Mad Men were beer and spirits drinkers. 

Coming from Prohibition and the Great Recession, the Matures largely bought alcohol beverage with a practical approach of ethanol per dollar - bang for your buck. Wine didn't compete well in that equation because it was lower alcohol and traditionally sold in smaller formats. To compete with spirits, wine became fortified in the '50s or sold in gallon jugs that were mass-produced in order to drive the cost of production down so the price could be dropped and the producer still cover a profit margin.


That approach worked in the fringes of the adult population in the 50s and 60s, but never really got that generation engaged with wine as their first choice. 

The mature cohort remained more beer and spirits consumers throughout much of their consuming lives. Their rotation to wine started only when the wine industry gave compelling reasons to evolve from beer and spirits. It wasn't age. It was producing a product, marketing and then selling wine that produced that change. And those consumers were in their 60s and 70s at that point.

The popularization of wine and move from beer and spirits really happened in the 90s with boomers who broke away from their parent's traditions and moved to premium wine after starting in cheap spirits and beer. The lesson is that offspring don't always follow the path of their parents.

To be successful, we need to give the young consumer more compelling reasons to be wine consumers. Hoping they will grow into wine isn't a good choice. As I say often, "Hope is not a strategy."

If we don't evolve the way we sell and market wine, we very well might suffer the same result the Mature generation took, and see young consumers staying with spirits and beer as their preferred choice for beverage alcohol. But there are things we can do to avoid that outcome.


     What's are some Solutions to the Gloomy Trends?



For wine producers, I don't believe scurrying off to non-alcohol and cannabis-infused drinks as some are doing, or coming up with the next pink RTD wine cocktail are the right approaches. We should stay focused on our strengths. But we need an on-ramp for the new consumer which means we have to evolve our marketing. 

We have to find the price, product, packaging, promotion, experience, quality and any other "P" we can think of, and begin engaging with the young consumer now. We can't "wait until they can afford wine" because the rest of the beverage alcohol industry is already changing their games to take advantage of the current trends. We are being out-flanked and the game is time sensitive.


The first and easiest thing to do is to beg our Marketing, AVA, and Industry Associations to keep the valid moderate-consumption research at their fingertips and/or fund positions that give credible journalists and law-makers the other side of the anti-alcohol stories that are flooding the press. 

The Wine Institute used to have a full-time technical position that did just that, but the position within has been vacant for more than a decade. It ended when wine consumption started to soar and the message of health was embedded into the narrative. I've asked several in the Board of Directors to consider that and I know I've been heard, but we should all ask that the position be reinstituted and be willing to pay for it. And we should all look to other industry associations to do the same.

The second thing we need to do is evolve the way we talk about wine. This is the first time in American retail history that there are two very large cohorts at opposite ends of their buying lives - and each has different values and financial capacity. The categories doing the best in retail today are those who figure out how to increase demand from both cohorts.

I appreciate the spirit of those who say "we need to stop making wine so complex," but I disagree because the dominant buyers of wine are still people who have appreciated the way wine has been marketed. We have to keep the older consumers and market the way they prefer BUT AT THE SAME TIME, adapt to the new consumer, giving them products and the positioning that appeals to them. That's not easy, but we aren't really trying. The spirits industry is trying, and they have the best growth rates in all of beverage alcohol. 

While wellness is a trend, inauthentic wellness claims will, in the end, backfire as snake oil. We're starting to see some of that with the recent LeCroix litigation which has cut their stock value in half.  But of all the alc. beverage categories, wine is unique. It's about as simple as it could be. It has the best science around health. It is often grown from sustainable or biodynamic farming. If we put the ingredients on the back of a bottle it would say something like, 'this wine is made from sustainably grown winegrapes with small amounts of naturally occurring and added sulfites. Nothing else.' 

Optimistically speaking, I believe the wine industry always has responded to a challenge when it's made clear. I believe we have the opportunity to recast the way we sell and market wine and see double-digit growth rates again. We may indeed see wine sales return to what we are used to if we take action ... Or did you stop at the Sesame Street Video?


What's Your Opinion?

  • Should we just wait another five years and hope the millennial will move to wine? 
  • What are you doing to evolve your marketing (all the "Ps")?
  • How are you retaining the best of your message for the existing customers, and still engaging with the newer consumer?
  • Will you do your part and ask your Industry Associations to please get technical people in place who can respond to journalists and legislators seeking the other side of the story?


Please join this site on the top right-hand side of the page, and offer your thoughts below. I respond to everyone.

Please share this post on your favorite social media platform. We need to heighten the discussion of this topic.

Sincerely,
Rob "Doom & Gloom" McMillan


39 comments:

  1. I'm a millennial wine professional, and I know several people in my generation who don't drink and even more in the i-gen generation who don't drink. The worst thing you could do is wait. Lower ABV, streamlining the jargon, and single serve packaging would go along way. Also, I love wine and splurge occasionally, but my average bottle is about $15-20 USD, when I buy for everyday (and some people view that as expensive). I don't see that changing much beyond $25-30 because student loans and [insert millennials are broke joke here]. I don't own a house, my cellar's about 12 bottles big, and, as a reminder, I've been in the industry for 6+ years. So yes, you need to do *something* if you're going to try to convert non-wine-drinkers and get the i-gens to drink something other than tea. I've sat on panels about this before, and it really does seem, as you've said, that the industry thinks we'll "grow out of" these trends. Maybe? But like you said, hope isn't a strategy. Better to plan for all scenarios in my opinion.

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    1. Thanks for the comments Diana. I do believe we can return to double-digit growth, but it won't happen by accident. It will take effort.

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  2. Rob - only you can make salient and data-based conclusions while including both the Black Knight and Elmo - well-done! Methinks you're still being soft on Marketing - both beer and spirits marketers are far ahead of vino in terms of knowing their customers, knowing where/how to appeal and connect, etc. Wine has traditionally been (and still is) Sales-driven...time to ramp it or start losing limbs ("No one shall pass"...evolves into "I'll bite your knees off"...look at any recent marketing plan, and you'll see the lack of progress).

    Joel

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    1. Thanks for weighing in Joel.

      The dominant competitive issue today is sales - path to market. It's not grape growing or wine making. It's been that way for almost 20 years now but the business has been able to ride the boomer bubble.

      I keep getting asked the question when I speak, "If millennials aren't buying, then why should we sell to them?" It's a good but misunderstood question. The reason you have to MARKET to them is they are the only hope for sales tomorrow. That's what marketing is for: To bring in new buyers to the category. Marketing to the new consumer is creating a product and all the other Ps that work for them. Its not an easy thing, but we better find ways to do it.

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    2. Right on Joel......marketing is EVERYTHING

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  3. Sorry, I meant "Right on Rob"...........

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  4. "Without any kind of response from the wine community to reference science that shows moderate wine consumption is healthy, we will see the negative trends continue."

    The wine industry might consider this approach if it were socially responsible and legal.

    The TTB prohibits advertising of health-related statements that are false or misleading. Stating that moderate wine consumption is healthy likely falls in this category.

    Craft spirit companies are better at promoting health-related features because the category is no different than its CPG counterparts like coffee and sport drinks. The minute premium wineries start promoting "New and Improved" or “Low Calories" is the day the premium wine industry loses its authenticity. At that point you only sell your product on common attributes and price.

    According to IRI authenticity still appeals to someone somewhere. Total table wine sales are up over the last 52 weeks as of June 2nd with everything above $11+ up 8%+ or more.

    Perhaps we're just blindly optimistic that millennials will want an experience that is new and different with every single vintage and every bottle of premium wine from every corner of the world.

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    1. Thanks for the comments Unknown 11:12.

      Your point is correct in that permit-holders can't promote health benefits. That said, the TTB doesn't extend its reach to non-permit holders such as AVA and Marketing Associations.

      There is plenty of existing science proving moderate wine consumption leads to improved health outcomes. We need funded positions to discuss the technical and pro-wine research that's been done and combat the hijacked and junk science that is coming out weekly.

      Remember there was a day when the position did exist in the Wine Institute, and there was a day when moderate consumption was viewed as healthy in the narrative.

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  5. Well, with all this focus on marketing to millenials, etc., we must remember that the wine business is still just a farming enterprise, and farmers are eternal optimists, little dismayed by the many reversals they suffer at the hands of Mother Nature, financial markets,or absurd trade tariffs, as they are certain next year will be better. You know the old story of the farmer who just up and died one day, an no-one knew why, so they ordered an autopsy and when they opened him up found he was just plumb full of "next years".

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    1. That's why I love the wine industry. Good one!! :o)

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  6. Pithy and on-point as always, Rob.

    The share-shifting battleground of wine-as-CPG is littered with the corpses of meaningless "brands" forged to try to speak to the [fill in market segment here] group, with what strikes me as disturbingly little attention paid to the quality of the actual product.

    Given that Millenials++ have far more highly-honed BS detectors than their parents, and easily see through bogus "authenticity" messages, this strikes me as a self-inflicted wound on the part of "the industry."

    Unfortunately, the whole industry is getting tarred with that brush.

    But sooner or later, this phase too will pass, leaving in its wake a much-altered landscape.

    My gut is that brands with genuine (authentic?) authenticity will make it through this dark time primarily unscathed -- especially those that can speak to the growing demand for biodynamic and organic ("sustainable" won't make the cut).

    The bulk-based fad brands, meanwhile, will become permanent roadkill.

    Your mileage may vary...

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    1. Unknown 2:11 - thanks for your views.

      I agree with the brand and SKU proliferation. I don't have the current data but a few years ago the "average" new grocery SKU had sales under $1,000 in total ... added together, with all of the retail outlets - combined. That's all.

      I'll debate on the quality comment though. To my thinking, all wine - no matter the price, has improved in quality in the last 25 years. It used to be that I could find many wines with flaws. Not as many now - though I acknowledge it's rare I drink a $4.99 wine unless it's going in linguine and clams.

      To the survivor comments, I honestly believe we can see double digit growth if we can tackle the millennial rubric and return to marketing the product attributes that make wine so unique as a beverage. Absent that ... we'll have a difficult time because they will be our customer, or we won't have enough customers.

      Even with more difficult conditions, there will be opportunities and good business. It's not binary.

      The pyramid has the large wine companies at the top of the list because they have good brands, management, intel and dry-powder to make changes. They aren't without their own risks with investments in the wrong fixed assets for the new consumer, but that's where I'd put my money first.

      Second - it's the brands we all know that can pull through wholesale. They are established and that strength gives them the most strength and added time to evolve.

      Then somewhere at the top, I'll add in all the higher-end luxury brands that have strong demand and or waiting lists. We will always have the wealthy who want the best brands. After that - there are lots of questions.

      I believe the best companies are those who are already making adaptive change to their business. They aren't waiting. They are taking the 'experience' on the road and breaking the current favored approach that requires a consumer walk into a tasting room to be a customer. They are looking at their consumer data and coming to conclusions about the right place to invest their marketing dollars. They are evolving their marketing, messaging, and branding to include both the existing wine lovers, and emerging consumers. They are looking at increasing digital communication and engagement options.

      For those companies I described, there is plenty of good business and growth opportunities even if we don't crack the code. But I can say unequivocally, for those who continue to do the same things as they have the last decade, they will struggle in a changing consumer environment.

      The consumer we are looking at in the next decade won't be the same consumer we've sold to for the past 25 years.

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  7. It would be interesting to look at wine prices adjusted for inflation and compare that to each cohort's purchasing power. As a boomer, my exposure to fine wine started in the 1970s and grew dramatically in the 1980s. But fine wine was very cheap for me at the time. Bordeaux prices were very very low. As my wages increased I was able to afford the increase in Bordeaux and Burgundy (and California fine wine). Now with many fine wines at much higher prices, I suspect that generations younger than mine do not have the purchasing power that I had when I was 30 or 40. Fine wine prices have gone up much faster than wages or inflation. I already see in my store that younger purchasers are not interested in Burgundy or Bordeaux because they cannot afford the steep entry cost.

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    1. Unknown 2:42 - Thanks for get perspectives. It sounds like you're a retailer?

      I've had the same experience as you. My first premium Cabernet was at the Refectory Restaurant in Lafayette in 1975. It was my senior ball, and you would crack up at the story of how I pretended to be 21 with a velour and red tuxedo - during May when everyone was out for their senior balls. It was a different era though.

      By the 1980's I had a lot of exposure to nice North Coast wines and liked them though many were harvested not fully ripe and carried more tannin. They were all pretty cheap, but I wasn't settled yet on any category and even drank white zinfandel and 7up in the late 80's, until I started this business and started to really drink good wine. The rest is history.

      In the late '80s and early 1990s most tasting rooms were still free and almost all Napa cabernet was less than $25. In 1991 if memory serves, a bottle of Heitz Martha's Vineyard was $65 and that represented the top of the market. That was the year Harlan came out with their first release and they were below Heitz. By the middle 1990's premium wine was a "thing" and Napa cabernets were all over $25. That was still reasonable though. Many good wines were made below $10 and that made it an easy on-ramp for new boomer consumers. Also realize, our competition was bad spirits and cheap mass-produced beer. Even foreign beer sucked. So wine was a natural for our generation.

      I stopped buying burgundies in the early 2000's and by the end of the '00's I stopped buying the expensive Bordeaux wines. My cellar today is heavy with West Coast, Rhone, and Italian wines with a sprinkling of other wines from places in the world where I've spoken.

      Bottom line though - wine is more expensive today in real terms than it was in my discovery years - certainly compared to craft beer and spirits which as I note are almost perfect substitutes for wine now.

      We have a lot of work ahead of us, but I think wine is naturally suited to this new consumer from a values and features perspective. We have work to do on price and paths to market.

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  8. Rob, you make many solid points in your post as do your commenters. I am constantly amazed at how often I have to defend high end, premium wine from their viewpoint that since wineries don't list ingredients, calories, carbs, added sugar, etc. they MUST be hiding something. This also leads to disenchantment when, as a relative of mine recently did, bought a case of a 'fit wine', drank one bottle, thought it was terrible, and now is trying to figure out how to get rid of the rest.

    Why is the industry so dead set against listing the ingredients in a bottle of good wine? I truly do not understand that.

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    1. Unknown 4:46 - Thanks for the comments.

      I suspect there are a couple reasons people don't want to list ingredients. The first is an aversion to regulations and since we have a special carve out and we don't have to, why should we? Its a bridge to cross if we start needing to include iron, magnesium, potassium, calcium, zinc, phosphorus and manganese levels.

      The second is probably more obvious. Not all wine is made in a clean manner. In fact, not only is water or mega purple in some good wines, but you might find acid, grape concentrate (sugar), fish bladders, egg whites, bentonite clay, mammal proteins and even plastics. And that's the tip of the discussion. Larger producers can at times use more chemicals to concoct, stabilize, and create a level of consistency. It becomes a slippery slope, but we should be able to say "made with 100% winegrapes grown in [xxxx] AVA. No added sugars. Just wine." Something like that so the consumer begins to grasp how truly 'natural' good wine can be made.

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  9. “veritas odium parit” truth begets hatred. Well done Arrow Catcher. If wine appealed to the masses price would not matter.

    Wine to the People!

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    1. Thanks Black Bart ... say, didnt you get a Cameo in "A Christmas Story" when Ralphie got his Red Ryder ... just before he poked his eye out?

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  10. Interesting article. Thank you. Also, based on the graphs it is clear that price vs disposable income might be significantly impacting the data. According to numerous income growth studies, there hasn't been any significant growth over the last few decades, which you reflect well in your data. It would be interesting to see the same set of data of age vs price per bottle of wine. Very striking data that of the graph of dollars spent vs cases sold. Such may suggest that the wineries bottom line continues to improve, since it costs less to produce less wine to generate the same, or greater revenues. Additionally, there is a great deal of DtC going on currently, which greatly reduces brick-and-mortar case sales. This may also impact volume sales, since wineries will likely produce less to meet their financial needs. Another stream of revenues for DtC is the overly exploited added shipping costs. I wonder how did the DtC data impacted some of the volume and price data relations expressed in the set of data. Clearly, a winery heavily engaged in DtC will produce significantly less volume than otherwise, i.e.: a bottle of wine may cost the winery $3 to produce, and sells it online at $30 + $6-$15 per bottle for their $3-$4 per bottle shipping cost. I wonder if the data set presented took into account DtC volume and pricing, or if it is straight, brick-and-mortar-based retail revenues, or both? Again, great article!

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    1. Thanks Dreamrider for the comments.

      Lots of good points made. Some of them are covered in the SVB State of the Industry Report which you can find at www.svb.com/wine-report.

      Wineries bottom lines are hanging in there, the result of being better at DtC. Wineries aren't producing less though to your one point. The grapes are harvested and wine is made. Bulk wine is currently in an over-supplied position. But either way, you can't really shrink your way to profitability because wineries carry a fixed investment in buildings and land. The overhead has to be covered no matter which channel you take. And while selling DtC is marginally better than wholesale, there is a heavy investment in the tasting room and salaries that make the two main paths to market - DtC versus wholesale, much closer in profitability than most believe.

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    2. I agree, Rob. The thing is that the production level required to satisfy DtC is only a minute fraction of the volume required to meet wholesale/distribution needs. DtC doesn't carry the costs of supporting, and competing for attention in a distributor's book with 10,000-15,15,000 products. Tasting rooms have a cost, of course. Yet, such cost is there regardless of distribution, or DtC. I guess wineries could put added revenues from reduced distribution costs and DtC added revenue differences into direct marketing.

      Regardless, I have to agree with some posters that pricing is, at least in part, impacting Millennial appeal for wine. Starting with the wineries, but also because of the on-premise pricing policy changes that took place around 2001. I remember that before that, a damned good glass of wine would cost you $10. Two years later one will never ever see that wine by-the-glass. Why? Because restaurants went from charging 1/2-price of the bottle plus maybe $1 for that glass, to charging the wholesale price of the bottle for the glass. So, one could enjoy a $18-$20 wholesale price bottle for $10 a glass back then. Under the pricing policy implemented around 2001 by on-premise, that became overnight an unsellable at $20/glass. Your spoilage rate went through the roof, and you doctored your wine list back to $10/bt wholesale product. Quality way down, price the same. Such practice has played a key role in some of the downturns appeal-wise with Millennials, as wel as with society in general. The important perception of value has disappeared. Who can blame just Millennials?

      Now consumers are paying $10/glass for something they see at the supermarket for $10-$12/bt. And where is the intrigue in exploring that kind of wine at fine dinning establishment? In that the young server girl smiled big, wore a short skirt, and a set of fishnet stockings? A ripoff is a ripoff, no matter how it is dressed.

      It is sort of like going to the strip joint, and pay to watch one's wife of 30 years do a pole dance... for the 100th time... Maybe the first time...

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    3. Dreamrider - you are of course right about price. It's one of the 4 reasons above millennials aren't drinking wine. In the end, we need great quality wines at entry level pricing to attract new consumers. That probably is going to come from foreign wine companies who have an exchange rate differential, better labor costs, and lower land costs. US wine companies will need to adjust and figure out how to play in that environment. You are lucky if your wife of 30 years can still bend her knees and stand back up. You need to appreciate your blessings more.

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    4. She couldn't. So, I fired her...

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  11. Great article, it has given me much to consider in the market research project I'm working on for my internship.
    I am an "igen" right at the border of being a millennial. From my perspective [being right on the cusp of this group of emerging consumers], I have noticed that my broke, still-in-college peers are purchasing the same alcohol as my post-grad friends who are earning full salaries (except for the select few who have the same appreciation for wine as I do). Whether that caused by student loans or "lack of purchasing power" as someone mentioned above, I find the conversation on wine to be just as important. If it weren't for my family always being vocal about wine, and encouraging me to know what I'm drinking and why, I would fall under the category of the younger generations buying cases of white-claws, cheap beer and boxed wine.
    Thanks for the article!

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    1. Thanks for the perspective IGen Anon.

      The conversation - the narrative, is critical. Wine can't be viewed as unhealthy or uncool. If wine falls into "your parents beverage - but that's not our generation ..." that's as large of a problem as the negative health propaganda regarding moderate consumption that's getting tossed around.

      The industry has to respond to the challenge. Everyone will respond differently depending on their own business, but clearly some issues are better addressed at the industry level through marketing and trade associations.

      As I say about out of favor things ... "nobody wants to drive their parents used car to high-school."

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  12. When was the last time the American wine industry engaged in a collaborative advertising campaign...a generic advertising campaign that promoted wine? I honestly can't remember. We see regional campaigns, but nothing national and nothing promoting wine as a drink. Perhaps it is time.

    If you want, I can give you all the reasons such a campaign would be beneficial, why it would attract more people to wine, and what percent of those people would eventually trade up to purchase more expensive wines.

    The pushback against a generic campaign is that it would immediately result in benefiting the huge, low cost wine producers. And this is true. But who of us began drinking wine $40 Sonoma Valley Cabernet?

    Who takes the lead in organizing such a campaign? It's the national and prominent wine associations, wineries, retail associations, etc.

    Now, who wants to round up those cats?

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    1. Tom - The last federal marketing order for wine I remember was in the 1980's IIRC (https://www.ams.usda.gov/rules-regulations/moa). Marketing Orders have over time proven successful such as the California Almonds and California Raisins. That said, they often end in politics and that was the case of the California Order which wasn't renewed in the 1990's. The large wine producers had all the clout in the voting, and that issue is what ended up creating the Family Winemakers Association.

      I'd suggest raising the issue with Family Winemakers. Someone at some point has to think that through. (FWIW - I started talking about a Marketing Order in 2012 on this blog.)

      Delete
  13. Wine prices are long overdue for a price correction. Perhaps if we return to the premium wine proposition of the 1990s, millennials like me will start buying more.

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    1. It's a good suggestion, but impractical to just drop price for everyone. It might increase demand, but it would also put many wineries out of business reducing supply. But price is one of the issues we have to cross.

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  14. It's a reach to think the industry should promote the health-related features of wine.

    For every article noting the health benefits of wine, there's a counter article that reminds you that you have to drink two cases of wine a day to get the actual benefit.

    At that point you'll have a healthy heart for a short life.

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    1. Unknown 3:13. I do appreciate the view. But the galvanizing point that drove wine consumption higher in the 1990's were the studies done on the health benefits of wine: French Paradox, Mediterranean Diet, Arthur Klatzky's work on the J curve implicit in abstainers, moderate consumption, and abusers.

      While promoting health as a single point might not prove effective, providing good science backed rebuttals to the preposterous claims from biased studies is indeed important to give more clarity to the narrative.

      Delete
  15. Not one mention of hard cider? Hard cider is on fire and it is one of my wineries hottest selling product. Wine in kegs and growlers is one approach that is catching like wildfire. It starts with sangria in growlers and soon it will be fine wines. Change your marketing approach to wine. Many brewpubs and taprooms have scores of people who don't like beer.

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    1. Thanks for the salient comments Unknown 9:39. Cider has had a couple of fits and starts and is another of the many distractions away from traditional alcohol beverage. The simplicity of the product, messaging around millennial values, and lower price has it making some small progress at this point. It (and sangria) is not going away, but it's not taking over categories either.

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  16. Great article and additional comments. Millenial here, I also work in the wine industry. The financial burden of student loans is real, causing for every purchase made to be weighed against value and necessity. The barrier of entry for a young wine consumer is huge and costly. The lack of interest in fine wine is not truly a lack of interest, it is just literally so out of reach due to all of the reasons cited in your post.

    Along the lines of negative messaging around alcohol consumption in general – In my lifetime I have witnessed the drinking and driving issue become amplified. In the state of Oregon there is legislature being proposed in Senate Bill 7 to drop the DUII limit from .08 to .05. This no tolerance messaging further complicates attracting winery visitors and if we’re speaking of Millenial visitors, visiting wine country now means hiring a driving service at $75+ an hour, tasting experiences per winery stop ranging in price; perhaps we’re interested in the “experience” as we’re always accused; however, the “experience” is all we can reasonably afford. The expense of an ongoing loyalty to fine wine leaves it mostly out of reach for us Millenials from a variety of scenarios.

    My peer group will be in our 40’s by the time we’re out from underneath our student loan debt. The wine industry should stay engaged with us because we’re interested, we’re just spending our resources being fiscally responsible and frugal out of necessity.

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    1. Anon 4:17 - thanks for taking the time to post. I sincerely appreciate it.

      You're view is aligned with mine conclusions. Oregon is in a better spot from a value perspective with wine, and the experiences at the winery have been improving consistently over the past 20 years as the industry moves away from a "release party" mentality, to one of daily hospitality.

      Your comments on Oregon's consideration to reducing the BAC for a DUI is something I cover in the Annual Report and elsewhere. It's coming out of a DOT message encouraging that. Utah has already adopted, and Texas, Oregon and CA are now considering it.

      Interestingly, Scottland tried the same thing, and unsurprisingly discovered that reducing the BAC% didn't impact death and injury from drunk drivers, because those engaged in accidents are well above that limit anyway. It's counter-intuitive but factual. Eliminating drunk driving won't happen unless you eliminate alcohol of all types. We tried that and it was a failure. But the anti-alcohol groups hope they can scare down consumption and in some way - do the same thing Prohibition doesn't.

      From my perspective, we are trying to legislate away drug and alcohol abuse, by removing personal choice of the masses of consumes who appreciate a nice cocktail or glass of wine, and who want to have the health benefits of moderate consumption.

      Sorry to go a long way down the health path - but to your point, it's part of the issue.

      Delete
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