Sunday, June 12, 2016

Selling Millennials Through Myths & Lies (Final Part 3)

Millennials Are Normal People?

This is the third of a three part series: Part 1Part 2

If millennials are narcissistic, lazy, and entitled as described in our last post, you will need to quickly come up with some new marketing tactics. So instead of giving them a toaster for joining the wine club (a boomer era tactic), maybe you could give away a free mirror with every new account? Oh I know! What about giving away a tiara for the self-absorbed, and some Red Bull for the lazy ones?

How Are We Going to Sell Lux Wine to Millennials?

As the above video describes, this is not one big generational blob, so more effective segmentation of consumers is in order versus overly focusing on the theoretical amorphous cohort as a whole - that is if you really want to go after the entire cohort. 

For instance, doing a little work and segmenting by spending power is probably a good start. Perhaps looking at ethnicity is also a good thing to consider. How about understanding data in a larger context and defining profiles of wine drinkers, from which you could then target market groups and individuals? 

For all the heat and smoke that surrounds this discussion, as a luxury wine producer how are you going to use the generic cohort information to sell to this group? Should you run to social media, create an edgy label appealing to their current likes, develop a brand with fruit juice or caffeine, or maybe just lower your price to meet their income? Just how do you sell to millennials? Answer: You don't.

Should You Change Everything You Are Doing?

You all remember the early 2000's where every single wine conference included a discussion of social media? With this new generation soon to be arriving in our tasting rooms, we were all being encouraged to change everything we were doing and get on the social media bandwagon. 

I'd say in retrospect, it was good advice if properly directed, but not because of millennials. It was good advice because communication for GenX and boomers also was evolving. So today if you aren't listening to the conversations about your brand using available tools such as those from Vintank/W2O, you are way behind the queue.

On the other hand, if you've chased every social platform since that time starting with MySpace extending through app-mania, you have experienced the fragmentation that has since ensued and you've wasted both time and money. Sometime, it's better to be a settler instead of a pioneer.

Presuming you have evolved in marketing and communication and are at least current with today's best practices, I don't think you have to change everything you are doing to attract millennial consumers. I'd even go one step further: 
I believe for most small luxury wine producers the way you market to millennials is you accept the reality that millennials are not unicorns and are in fact pretty normal in their development as wine consumers. You recognize they are evolving toward your brand, so doing nothing different from what you are successfully doing today is a perfectly viable strategy.
Do Nothing

For millennials who are a small but growing part of a luxury producer's customer base as the chart above to the right shows, I suggest you simply ignore the topic altogether and wait until millennials have the desire and financial capacity to purchase your wine. That will be about the time they turn 35 which is the early edge of the cohort today and explains why they are only 16% of the average luxury wine producers customer base. They haven't arrived just yet in any force.

That said, the cohort is growing in their appreciation for wine and is moving up most notably in the $8-$15 red blend category as you can see in the purple segment on the left chart from IRI (click on the chart for a larger version).

I know this is going to sound so tired and perhaps still unbelievable to many, but today for the luxury and premium producer, your largest buyer is still <yawn> the boomer and the largest current growth segment is <no way!> Gen X.

So now let me temper just slightly the 'do nothing' strategy because iterative and patient evolution also takes a plan.

Listening and Understanding is Doing Something

With the generation just starting to become a meaningful component of an average winery's sales, this is a good time to begin to listen and learn about this future important consumer. This is a good time to talk to them and even survey your young customers. They will answer. Understand how they want to be contacted as individuals and as a group, hear what is important to them, grasp which experiences matter to them.

Use that information to influence your overall brand and marketing decisions. Start to develop a plan to open your brand and strategy to evolution with the young consumer in mind.

My guess is by using a planned purposeful approach to evolution that starts with listening, as the young consumers grow to middle age you will be right where you want to be. As you evolve in the next decade and over time, you will know when or if it's the right time to do something significantly different from your current successful approach.

Between now and that day when the millennials become the boomers and are the dominant consumer of wine (2026 by my forecasts), continue to invest in your infrastructure to sell direct more effectively.... which of course is the same thing you should already be doing.

I know the "do nothing" comment is controversial and I have been told waiting to spend money to attract the millennial might mean we never see the young consumer convert to wine. My response is small family wineries can't market to consumers who can't afford their product. And while there is no guarantee the millennial will evolve in the same way boomers evolved as wine drinkers, we are seeing similarities between boomers and millennial alc. bev. evolution already.

Will Millennials Be Boomers Some Day?

Boomers started with domestic beer and moved to premium imports (driving down per capita beer consumption). They started their wine consuming with Bartles and Jaymes, which was a marketing phenomenon fruit-infused sparkling wine cooler. They then moved to white zinfandel which was 100% wine, then chardonnay as a premium product often as an apéritif, and then to merlot before moving solidly into the full spectrum of premium wine in the early 90's coinciding with the explosion in U.S. consumption.

Following much the same evolution, we've seen millennials moving through craft beer (driving continuing declines in per capita beer consumption). They evolved to meet wine with moscato and sparkling moscato, Prosecco, and now millennials are engaging with premium wine in the $8-$14 red blend category.

The chart above to the left courtesy of Scarborough Research is one that shows current consumption patterns of generations relative to beer and wine. Unsurprisingly millennials are drinking more beer than wine today <I'm guessing you knew that>. Tracking the dotted red beer trend, over a person's life, the chart shows people drink less beer. Tracking the dotted green line you can see they also drink more wine over their lifetimes. 

So while there is no guarantee millennials will evolve the same way boomers did, they already are evolving their palates in a similar pattern with wine. It's much easier to predict at this point with the early trends that they will begin to consume more wine and less beer over time. Over the next decade that is a good thing because boomers already are, and will continue to decelerate their consumption of wine over the next decade as they retire.

A Counter Argument to Doing Nothing: Create A New SKU.

Several people have suggested since millennials can't afford expensive wine quite yet, producers should, 1) lower their price and/or 2) create a different brand the millennials can afford. <see picture to the right> The argument posed is that the act of creating an affordable luxury wine for the emerging consumer will create loyalty and return a good consumer in the future for the higher priced wine. I don't agree.
Lowering price on your existing luxury brand to meet an emerging consumer segment isn't even a conversation starter. To me that's an uninformed and wishful comment. It doesn't work financially to start, and beyond current sales, lowering price can damage a luxury brand. Luxury wine has to be aspirational for a consumer.

Then what about producing a new lower priced sku - a brand extension, as an on-ramp to your luxury brand for the new consumer?
  1. Creating an affordable low-price sku that is disconnected from your existing brand as an on ramp doesn't make sense because it would create cross currents in your branding strategy, and isn't effective in connecting consumers to your current brand. It's basically a separate brand. You have to stay true to who you are as a luxury goods manufacturer.
  2. Creating an affordable low-price sku that is connected to your existing brand in look and feel doesn't make sense either because by definition a cheap product connected to luxury will only diminish the perception of a true luxury good.
  3. Having an entry level rose or white wine has always been a good consideration. It can still be done in a manner that blends positive existing brand attributes with a naturally lower priced varietal.
  4. Very expensive luxury brands selling north of $100 a bottle retail have enough of a gap up in pricing, that they can create a second luxury wine with a lower price tier. That might attract affluent entry level consumers of your brand of all ages.
There are examples of wine companies who have been very effective in making mass produced wines and luxury wines. Beringer was a good example in the day when they made a lot of white zinfandel, and still made great luxury wines. Generally speaking, those activities require separate wine making and separate sales efforts so aren't advisable for the average family winery.

Where a Lower Price SKU Does Make Sense

Producing lower priced wine to meet demand from emerging consumers makes sense from an industry marketing perspective. That will gain new wine converts, and that is precisely what is happening today with large producers who can scale and make financial sense out of that approach. But let's be clear: That's a strategy aiming at current profitability. Those producers aren't taking that tack to garner loyalty. That's a production strategy for scale producers who want to earn a profit today.

Beyond the Horizon
Moving the view out a decade or more, if you really want to start to look at the future and recognize what we are going to do in world with a low growth economy as far as the eye can see, an effective strategy is to buy or partner with a European producer as a hedge against a future consumer who won't have the means to buy domestic luxury wine to the same extent we've experienced in the past 20 years. That's a healthy discussion that will have to be left for another post.
Your Turn to Comment: 
In the last three blogs I've tried to re-calibrate the news releases which were over-hyping the impact of the millennial consumers on wine (link). I extended the argument to discuss the recurring garbled messages in research and various reports (link). I've discussed why the narrative is wrong, suggesting the millennial is more aligned in their wants and desires to other cohorts (link) and finally with this post I am suggesting that for a luxury wine producer, you largely remain patient and wait for the young wine consumer to develop the financial capacity and naturally aspire to your brand.
I suspect there are many with a different view and would encourage your comments below.
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  1. There are a number of “headwinds” facing the wine industry in terms of selling higher priced wines to the millennial generation.

    Nielsen’s recent report on minorities is telling for the future of the wine business

    The number that struck me the most was the number of respondents: 199,303

    Wine Market Council’s data sets are always far too small to get statistically reliable or valid data in the .01 level of confidence that Nielsen’s data provides and business needs to make good strategic investment decisions.

    • The demographics of minorities drive the millennial generation in many ways. For wine preferences majority minority means more genetics from Asia, and Africa, which means a genetically determined tendency towards far greater taste bud density, which means more sweet wine drinkers.
    • The rise of China, India and the EU (for now) means our economy is linked in ways that will most likely lower not raise incomes. The middle class hasn't had a raise since the 70's and the world is even more competitive. Wages are not keeping pace with inflation and premium and ultra premium wines are becoming less affordable luxuries.
    • Automation and technology are replacing more white-collar jobs.
    • Our k-12 public education system is at best mediocre and compared to China, Japan, India and the EU a joke. The entrenched interests (teachers unions) and the US constitution (a states right to ruin a child's future by providing no education to poor and minority children is permanent for the foreseeable future.) So the need for trained effective employees will lead to more visas for immigrants from places that don't drink wine.

    1. APREMAT - thanks for logging in and for the comments. I agree with everything you said. I would add the issue of selling to a younger consumer without the financial prospects as the boomers they are replacing is a perplexing issue. Can we hold the prices we've earned over the years with that kind of change, and with good foreign wine available and the young consumer willing to experiment.

      We aren't without hurdles, but we are starting from a solid base of great quality and still upside in better defining growing regions - making wine even better.

  2. A reader sent the following article which I thought I would add to the discussion for others:


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