Let's talk about Millennials! How exciting is that conversation? Demographers and researchers are laser focused. It's a feeding frenzy at times because that's the growth opportunity of future retail. Boomers are old news, nothing to write home about and not hardly anywhere near as interesting as Millennials.
Oh ... there is GenX of course but why talk about them? They are a small cohort.... except they are the second largest consumer of fine wine in the U.S. today and the largest growth opportunity for most wineries, but that doesn't matter. Let's talk about Millennials!
Demographers and researchers are digging out facts, some of which are useful, some not really useful, and others I've never quite believed. It's an important discussion because at some point they will be dominant in the labor force as you can see in the above chart. Current Pew estimates show their spending growing 15% per year for the next decade while Boomers spending is expected to drop by 10% a year. That means at some point in the next decade as they grow in purchasing power, they will be the dominant consumer of wine - just not today as I've said many times. That's still years out in my opinion.
Emotional Intelligence
Each of the cohorts are shaped by some event that defines them. Personally, I believe the event has to be something emotional because that's what shapes behavior.The Greatest Generation for instance had to go through the Great Depression and WWII. Those two experiences played a major influence in their behaviors. They didn't spend ahead of their income on consumer credit, they saved and they didn't waste things. They lived more in the moment because good moments didn't always show up early in life. Family too played a far more important role. That was your emotional and economic safety net, versus the government in their day. They were a frugal generation because they had experienced life without resources.
Boomers on the other hand were raised in a time of plenty and were hedonists, shaped by Madison Avenue's constant appealing to our retail needs and desires. (See Timothy Francis Leary, and references to "The Summer of Love" for more color.). We were all about getting "stuff." Materialism and mass luxury came to the fore; Izod, Calvin Klein, BMW, Cartier, Gloria Vanderbilt ... names that we wore to show we were somebody. We didn't trust Governments who went to war for things we didn't believe but mostly, we consumed our way to prosperity.
Worthless GenX
Then there is GenX which wasn't about anything, and nobody cares about because they are small. They are really a worthless lot; an ignored demographic. They are the Sinefield of cohorts: a demographic about nothing and without any emotional experiences to define them. That's all we need to say about them - oh .... except GenX will experience the greatest growth in Net Worth in America moving from 14% to 31% by 2030 (chart to right) and they are the second largest consumer of fine wine in the U.S., but that doesn't matter. Let's talk about Millennials!
According to everyone, what really matters and unites Millennials is they are the first digital connected generation. They knew how to keyboard by third grade. Even if you were an Hispanic immigrant or a first generation Millennial citizen, you had the internet in high school. So there you have it. The emotional experience that shaped them was the Xbox, MySpace, and Social Media to which I say - MANURE!
GenX might be a shallow insecure cohort, but not Millennials!
I don't believe the youngest consuming generation is anymore defined by digital tools, than the car defined the Greatest Generation, or the color TV defined the Boomers. I don't know what defined GenX, really they are a shallow bunch with no redeeming experiences and they don't really matter - except they are the second largest consumer of fine wine in the U.S. (did I already say that?) and according to my calculations, will overtake Boomers and will become the largest consumer cohort of fine wine by 2021. What is starting to come out in the more forward thinking studies is a renewed emphasis on the emotional things that have impacted the Millennial generation, and how that's likely to shape their spending tomorrow. What have the Millennials had to emotionally deal with? More divorces than any prior generation. The advent of Terrorism (9/11), the Great Recession, less economic opportunity than at any time post WWII, and crippling student debt. Some articles reflect that here, here, and here.
Millennials = Frugal Hedonists
What I see, and other research is just starting to show is Millennials are hedonists, trained by their Boomer parents to understand what mass and real luxury is, and they desire "good," but they don't desire "stuff."
More like the Greatest Generation who suffered through the Depression, they are frugal. They aren't using consumer credit. They are better savers than their parents. They are green and less wasteful, albeit for different reasons. While material, they don't collect like their Boomer parents. Experiences like music and travel are more important than things, but when they get things, they want good things. Perhaps because of the split up of the family unit, they don't see family as critical to happiness. They do see friends as critical to happiness.
But as far as the digital world goes, is that really going to define their spending habits? Doesn't everyone have access to on-line retail? I shop a lot on-line and I'm a Boomer. Didn't we all end up with cars giving all of us mobility, not just the Greatest Generation. And what about color TVs? It helped sell stuff but didn't define anyone. Stuff doesn't define us. Experiences do, and when it comes to retail, let's not forget the role wealth and income play. You might desire good things, but you have to be able to afford them too.
What does It Mean for Selling Wine Today?
Like the slide from Nielsen to the right and above, I believe Millennials have to be factored into marketing plans today because they are starting to be an important component in wine consumption as we discussed in the Annual State of the Wine Industry Report. They are frugal hedonists and show up most in the $8-$14 price points today but they are the future. Contrary to current discussion in wine circles, they aren't yet the present but by 2026 we believe they will be the dominant consumer of fine wine. Let's hope they don't skip by domestics in favor of great value foreign wine.... but that's a different discussion.
Boomers have to be respected because while declining in consumption and spending power as retirees, they will still dominate net wealth in the US for decades to come, and today are the still the largest consumer of wine in America. That's one fact that after last week that everyone agrees on again.
GenX? Who cares. They are worthless..... except they are the second largest consumer of fine wine in the U.S. today - now I am repeating myself - and are the largest growth opportunity for the next 5 years. They will soon be the top consumer of fine wine, and are forecast they will have the largest increase in net worth out to the year 2030 by Deloitte, but that doesn't matter. Let's just talk about Millennials!
(Apologies to all my GenX friends. You were used as fodder to bring out a point. I know you forgive me. I'm just a hedonistic self-centered boomer.)
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What do you think?
- Are you selling to Millennials today? What strategy and price point?
- Does anyone care about GenX. Should we care?
- What do you do with Boomers who can't drink like they used to, and are hitting retirement?
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Rob - Disclosure: I am a Gen X (smack in the middle of the chart above). Perhaps there is a way to reconcile the debate by focusing on price points. If you are marketing below $15 you better think about millennials. If you are $15 to $30 Gen X should be your target. Above $50 think boomers.
ReplyDeleteNicolas
Nicholas
DeleteThanks for logging in. I appreciate your comments.
Personally I'm far closer to you in belief. In my thinking it doesn't really matter if you're Millennial or GenX. It gets down to 35-55 year age groups. That's the top spending years. If you are below 35 (Millennials) you are drinking less expensive because that's what your wallet dictates.
Hi Nicolas,
DeleteI actually disagree with you a bit there. I was the wine buyer for a large chain based in a big 10 town, and was getting calls from MAJOR wine/liquor company marketing czars trying to figure out why millennials were spending 20-40 on bottles of wine, and what if anything influenced those purchases. It was true that they were also strong sub 15, but don't make the mistake thinking they don't have the buying power in higher price points.
Rob, I very much agree with you, especially "It gets down to 35-55 year age groups." (Disclaimer, I am an "Older Millennial" so I don't identify with the generalizations and truly loathe the hype.) It's really about the spend trajectory at the different points of one's life cycle/stage. I think emotions absolutely dictate how spending is viewed by those generations, but ultimately the capacity to spend is a bell curve with young and old on either side. So in the current climate, Millennials are rising, Gen X should be at the top, and Boomers are declining. Nicolas, this generally aligns with your price ranges, too. As a marketer of $50+ bottles to largely the 35-55 age consumer base, I have seen the true effects of life stage relative to joining and cancelling of the wine club. Brands like this need only to start building the conversation with Millennials in hopes that they will think of us when they can afford to be a more regular purchaser. Of course, Millennials aren't loyal, so maybe "regular" is moot...
DeleteStephanie -
DeleteThanks so much for the comments and reading the blog. Truly appreciate that you drop in to offer thoughts.
Your description of who is buying is very much in line with my beliefs (www.svb.com/wine-report).
I loved your last sentence ... damn disloyal millennials - not that we are throwing out generalizations or loathe-worthy hype. Good one!
While I loved the subtle humor and know you were just tossing me a softball, my view is we were all millennials at one point. We were experimental and tried a bunch of different alcohol until we settled on what we liked. How else should someone who hasn't had experience with a product determine what they want?
Millennials will be great consumers at some point if they can overcome the economic headwinds they have to handle the Boomers and GenX didn't.
To your point, today Boomers are at the top headed down, and GenX is still trending up with the capacity and willingness to buy fine wine.
Rob:
ReplyDeleteJust a few words on this subject today.
Generation X might be small and purchasing power less than us boomers BUT they too have culturally contributed to our industry like no other. And yes, human behavior is driven by emotional events in ones life. They were the first generation to think beyond themselves, to actually see the big picture ENVIRONMENTAL, GREEN. A war on the environment became their hot issue. They might be small but have had a huge IMPACT. Which leads to the next question, what is the next hot issue? What is the next "war" that will play out in the wine industry? It's not social media.
Best regards,
Ed
Ed
DeleteThanks for logging in and for the comments. I of course totally agree. My post was tongue-in-cheek. It's the outflow of a discussion I have with my GenX fiends who laugh and how they've been skipped over. In reality - they are the second largest consumer of fine wine in America. (Am I still repeating myself?)
Rob,
ReplyDeleteAs I pointed out on Linkedin, this group seems to be way underrepresented with respect to U.S. wine consumer discussions. We've been targeting GenX for some time with our imported brands, as they have been woefully ignored for all the wrong reasons. Without even looking through the stats, logic would dictate they would be a primary target for the very valuable price segment at $20+. They are heavy on Social Media, have discretionary income, as well as a more defined/refined palate that simply requires better wine. They are willing and able to pay. I'll drink to that. Monika (GenX member!)
Monika- Thanks for weighing in.
DeleteLove the comments and love given the Gen. I'd underscore "have discretionary income" part of your post. In order to buy you have to have the willingness/desire, and the financial capacity. GenX have both, are under-represented in marketing, and over-represented versus boomers in per capita consumption of fine wine. That is the immediate growth opportunity for fine wine producers as boomers slowly trail off.
That's what I'd add to the Nielsen slide above. Cultivate Millennials. Target GenX. Cherish Boomers.
"...according to my calculations, will overtake Boomers and will become the largest consumer cohort of fine wine by 2021"
ReplyDeletePerhaps however only be by default and for 5 minutes as Boomers get older and Millennials earning power increases.
The "emotional events" GenX had to deal with make it unlikely that they will be at the top long.
"What have the Millennials had to emotionally deal with? More divorces than any prior generation. The advent of Terrorism (9/11), the Great Recession, less economic opportunity than at any time post WWII, and crippling student debt."
It's difficult to see how any of this would support the prediction that GenX will become "the largest cohort of fine wine".
Divorce - while share of household income will be higher, divorce increases the number of households and decreases the per capita HHI
Recession - GenX (and part of the Baby Boomers) had the most at stake. During the recession eight million Americans lost their jobs, nearly four million homes were foreclosed each year and 2.5 million businesses were closed
Student loan debt - not likely that debt would encourage lavish spending
GenX has been overlooked because their purchasing power and habits will not mirror those of the baby boomers.
Anon 11:01 - Thanks for the comments. You could be right that we move straight from Boomers to Millennials in fine wine. I doubt it only because of the information from the surveys that I've run annually and the patterns that emerge, the spending history of consumers age 35-55, the wealth GenX holds that will grow and Millennials will never likely have, and because of the other economic headwinds I spoke of vis-à-vis Millennials.
DeleteCheck back in 5 years and see who was right.
As a Gen X'er I want to see wines with Tarrantino movie labels on them. Pulp Fiction Cab, Jackie Brown Chardonnay etc.
ReplyDeleteIn reality, any generation post WW2 Generation, mostly dead now, is pretty much the same with updated technology. I mean, boomers went through EST Therapy, which really screwed them up. But we're all a train wrecks these days. Every generation is a walking mood ring with technology. So I think future wine consumption will be more uniform across generations, with gimmicky marketing being the key. Think Skinny Girl!
No one knows the value of a dollar, so why shouldn't some millennial who makes $15.00 an hour pull out his credit card and buy a $30.00 bottle of wine. Its only debt right?
Anon 4:55
Delete1) You need to join the blog in the upper right of the page. 2) You are a very good writer 3) I love your sense of humor.
(that was humor wasn't it?)
I think the Boomers have some staying power still... and I know you are not saying they will decline tomorrow. One thing to watch for as they get to 70.5 years old is the mandatory withdrawals from 401k, IRA, etc. There are all sorts of implications when this begins in earnest: selling pressure in stocks / bonds is one thing coming to mind. But also spending on other things and experiences - wine, travel, food. I assume boomers are no longer looking to acquire stuff but experience and memories. Maybe they also will transfer (gift) to others. Regardless, there will be things to watch.
ReplyDeleteChris
DeleteThanks for logging in and the comments.
Retirement isn't homogenous for the Boomers. Many spent as if social security wouldn't be taken and spent by the Government. The rest pretended they never were going to retire. So they won't retire. They will be spending time at Wall Mart and Home Depot.
We agree the Boomers will be around for a while yet and should be a major factor in sales. Where we might differ is the price of wine they will be able to afford. I feeling a lot of $15 buck Chuck.