1 Wine Dude

Congrats, US Wine Industry – You Blew It! (Thoughts On Fine Wine And Millennial Consumers)

Posted on by 1WineDude
vader failure

January saw the advent of another version of the annual State of the Wine Industry report by Silicon Valley Bank. I’ve covered several years of this report here on 1WD, and usually that coverage is of a slightly (ok, full-on) negative tone, warning the US wine biz that sea changes in consumer behavior are afoot, about which the industry seems to be doing little.

Now, according to the 2019 incarnation of the SVB analysis, the US wine industry might be too late; or, at least, too late to avoid negative impacts to fine wine sales now that most of the millennial generation are old enough to legally drink, and making just enough money to spend some of it on drinking.

Congrats, folks! You officially stuck your head so far into your butts that, if you squint through your belly-button hole, you’ll be able to see that you blew your chance at capturing the hearts (and dollars) of the next generation of drinkers! Go, you!…

Here’s how the carnage looks, folks:

If you’re taken by surprise that younger drinkers are eschewing fine wine for cannabis, beer, cocktails, and even spiked seltzer (which is doing well enough to afford its own Superbowl commercial), then bluntly stated, you are a fool. So many saw this coming that even I have been shouting about it for at least a decade.

But even in our current US culture of rampant blame-deflection, trying to pin the gloomy outlook for US wine sales on weed, beer, millennials themselves, or anything else, serves only to complete the failure.

It is not time to cater to millennial generational tastes – it is past time to do the preventive work. The wound is already open, the blood is already spilling; it’s time for the US wine biz to staunch the bleeding, and maybe – just maybe – start the healing.

Cheers!

23 thoughts on “Congrats, US Wine Industry – You Blew It! (Thoughts On Fine Wine And Millennial Consumers)”

  1. The young people who are referred to as Millennials do not have the cash to spend on experimenting with wines. They are also not buying houses. Perhaps they are not interested in
    the side of wine drinking that includes the traditional wine education that goes with it.

  2. All the facts you state are correct. I work for a winery and I’m exhausted listening to plans to market to millennials. I think the industry has been paying attention to the demographic for many years, but like any new generation, people are unpredictable. As you mentioned, beer, cocktails, etc are taking a huge chunk of the business – but, I feel like we are seeing that across age groups.

    The many missteps that various wine regions have made, in my mind, are less about whether they are marketing or not to millennials, but generally bad business.

  3. The argument that Millenials don’t have the money to spend on fine wine is partially inaccurate. Millenials have no issue buying expensive craft spirits. Millenials have no issue buying expensive craft beers. I’ve been in the industry for over 30 years, and on a daily basis, I see millenials buy $50-$100 bottles of whiskey and tequila. I see them buying cases of Barrel-Aged Stouts and Cork Finished Belgian Style Ales. To them, these are categories of innovation. These are categories that began marketing to millenial values 8 years ago. By comparison, wine appears old, stodgy and unexciting to the millenial generation. And as noted in this article, it’s the industry’s fault.

    SVB, published several articles between 2013 and 2016 saying that the wine industry shouldn’t spend marketing dollars on attracting millenials because they would eventually come to the category. Their recommendation was that wineries should remain focused on the Boomer generation, as they had more disposable income. Their argument was that historically, as people age, they tend to be more drawn to wine. The problem was that historically, more than 98% of beer sales were from cheap American Lager, and spirits were made up from the behemoth brands. At no time in the past was wine competing against a craft movement from either category.

    So while SVB was promoting a “put your head in the sand and wait ’til they come to you” approach to marketing wine, craft beer and craft spirits were celebrating the fact that they were unique, hand-crafted, and offered a diverse range of flavors and options. They marketed directly to the values of the millenial generation and captured their loyalty…and what the wine industry and SVB thought were non-existent dollars.

    The longer the wine industry waits to adjust to the wants and desires of the largest generation in history, the less chance they have of capturing a share of the market. It’s time to dispose of the old ways of thinking, and get back in the game!

    2. A 750 ML bottle of spirits comprises 25 ounces.

      Equal to seventeen 1.5-ounce shot glass cocktails.

      Restated, that’s seventeen drinks.

      By contrast, a 750 ML bottle of wine is five 5-ounce pour glasses.

      A bottle of spirits lasts longer in the household than a bottle of wine. Weeks longer.

      Spirits give you more “bang for the buck” when converted into discrete drinks.

  4. I agree with a previous comment that Millenials do not have a lot of extra money to spend on experimental wine purchases. There are plenty of great, affordable wines available to young consumers. Unfortunately, a lot of Millenial consumers have been offered a false dichotomy: choose between mass-produced wines and ‘natural,’ faulty, hopelessly unsatisfying wines. The wine industry has offered up the worst to the most interested, and younger consumers are running for the hills. I fully believe they will circle back and experience wine in a better way the next time around. There is so much in-between. I have seen so many positive changes in the more centrist, pragmatic wine industry in recent years. I’m bullish on the future. Just stop feeding newbies faulty, funky, gross wines and the market for wine will be just fine.

    1. Thanks, Tim, great insights there. I think that rather than getting swill for their money, younger drinkers are getting boring wine for their money. Not in all cases, but in many. Not only that, but where the wine biz has really dropped the ball with those consumers is in not promoting enough of its constant diversity, which younger consumers have shown to enjoy – I mean, you can literally drink a different bottle of wine made from different grapes from different regions pretty much every week for years and years and never repeat a bottle.

      1. Joe, when you say the “wine biz” has blown it… who exactly is the “wine biz?” Which entity has the most responsibility for engaging consumers? It doesn’t really feel like it’s a little winery in the hills of Friuli. Importers and distributors don’t really have a public face. So it must be retailers? There are only a couple of large(ish) retailers who could invest in that and I just don’t think they could move the needle.

        That only leaves us with… wine writers! ;-)

        Who else presents the face of the wine biz as much as wine writers? Is it possible that writing long-form (and often formulaic) content about some place that makes wine just isn’t grabbing people who can’t spend more than 45 seconds reading anything? Or lists of wines with scores which are forgotten as soon as they leave the page… and certainly not top of mind when they’re deciding what type of booze to buy? Maybe there are different ways writers can help make the wine world more exciting?

        In all fairness, I’d also say that technologists have also generally failed to make a meaningful dent in the problem so far.

        I *love* this quote:

        “I mean, you can literally drink a different bottle of wine made from different grapes from different regions pretty much every week for years and years and never repeat a bottle.”

        How could this come to be? I see solutions in wine writing and technology, not so much what you are calling the wine biz. But your comment is such a great visual for me.

        Side note: WTF happened to Gen X in this discussion? You know, the generation that’s bigger than either Boomers or Millennials and are driving the bulk of profit in wine?

        And who’s to say that wine is even doing poorly with Millennials? Overall, wine is trouncing beer and, depending which report you read, is growing only a bit slower than spirits. Millennials know that booze is bad for you, so I’m surprised it’s doing so well actually.

        Finally, I’m sure the data isn’t available, but it would be great to see Boomers, Gen X and Millennials together on the same chart, looking at consumption curves over time. Is it possible that Millennials are drinking *more* wine than Boomers and Gen X at the same age? I see lots of amateur hour biased studies and personal anecdotes, but it’s hard to assess if there’s even a problem.

        1. Michael – The short version: the issue is systemic throughout all aspects of the wine business. The wine biz in this context is any consumer touch-point.

          For a long time (at least a decade) I have been railing on these virtual pages (and elsewhere) that wine brands should not be passing the buck to tell their stories – usually, this happens in the form of wanting wine writers and other influencers to tell their brand stories for them, but it’s not (and never has been) exclusively so, and for several years it hasn’t been nearly as necessary (since those who own and represent brands can reach out to consumers more directly now then they have ever been able to before in the history of the product).

          1. Let me quote a great man who once said:

            “…where the wine biz has really dropped the ball with those consumers is in not promoting enough of its constant diversity….”

            There is no “wine biz” that has the hands to drop a ball. There are just a million companies. Individual wineries are not capable of promoting diversity in a way that consumers can absorb. Even if every one of them could tell a great story, people can’t absorb that. You need to earn the right for me to invest my time to hear your story.

            The power and responsibility to promote “constant diversity” lie in the hands of both content creators and technologists – not brands.

            1. “Wine biz” is shorthand; otherwise, we’d be naming several different entity types in every other sentence and it’d be unreadable.

              “The power and responsibility to promote “constant diversity” lie in the hands of both content creators and technologists – not brands.” – This is patently and demonstrably incorrect. Well, unless we can lump those who oversee brands as also being content creators. The fact is that wine brands (whoever fills that role – which can differ dramatically base don company size, etc.) have for many years now had the power to steer/control their brand messaging online directly with consumers. They do **not** always or exclusively need technologists or content creators. I have discussed this so many times in print, in speaking gigs, in panels, in video, that frankly I am so sick and tired of stating it that I have given up trying to convert anyone who cannot see it as obvious. It’s the wine world’s equivalent of global warming/climate change to me at this point. The fact is that consumers have shown time and again that they can absorb the right stories that connect with them organically and that brands are able to do this one-on-one with consumers in meaningful ways. The bottom line is that if you are involved in the image of a wine brand – at any level – and are relying on content creators to do the majority of work in reaching your end consumers about your brand story, then you are passing the buck and abdicating power, control, and responsibility to others. In that respect, the “wine biz” at all levels has indeed failed at attracting younger consumers.

              1. Please demonstrate how it is “demonstrably incorrect.” As convinced as you are that (1) small wineries have the skills, content and budget tell a compelling, differentiated story and (2) that consumers broadly will listen, I’m equally convinced that consumers don’t care unless there’s a reason for them to care – even if every winery had their story nailed. There just isn’t enough bandwidth to go around.

                What is demonstrably incorrect is the idea that any single brand can sell the diversity story that you find so compelling (as do I). And the idea that somehow a symphony of disparate winery voices will come together (as the “wine biz” writ large) to communicate diversity is pretty unrealistic. If anything, coordinated activity only serves to neuter diversity (see Australia’s disastrous attempt as an example). This can only be layered on top of the producers by something that makes it coherent for consumers.

                I don’t see producers in any long tail industry absorbing the bulk of demand creation responsibility. Craft brewers? Craft spirits? Musicians? Restaurants? All of these rely on third party influencers and consumers themselves to drive demand. And in the case of music and restaurants, they’ve also been able to benefit from new technology platforms.

                I’m happy to be wrong, but I just can’t wrap my head around the producer responsibility idea.

              2. Musicians actually do this all of the time, Michael. Hell, tons of them even crowd-fund new album costs; which demonstrates a) an ability to find and engage the consumers who are most interested, b) engage those target consumers’ interest in what is clearly a high level of appetite for the brand story, c) that the skills required can be acquired/learned/hired/etc.

              3. For 99% of musicians, all of the power lies in distribution – Spotify, Apple, etc. Discovery is through these platforms and word of mouth, not by musician’s fan pages and the occasional $5K crowdfunding project. Global music crowdfunding is a rounding error to, say, Bordeaux futures.

                Recorded music has been decimated and now recreated by technology. Interestingly, the role of music writers is drastically reduced. However, this is different from wine because the cost of sampling music is essentially $0, compared to ~ $20 for a bottle of wine. So wine writers will continue to have a role to reduce the risk.

                When’s the last time you discovered music that you love on Indiegogo or a google search? If the answer is anything other than never, then you lead a very different online life from me.

              4. Michael, I mean no offense by this but like I said, I’m tired of trying to convince people of what seems obvious to me from the data. Could be that I do a shitty job of making the argument, but I’m firing myself from the job of persuasion on this. From where I sit, the majority of people within all tiers of the wine business either think that what works in selling wine to one generation (baby boomers) works for all subsequent generations, or simply don’t care, or don’t want to use any time/tools/effort to change. In any of those cases, they are predictably wrong. It sucks, because I love the wine industry and don’t want to see it flail, and in my view the sales retraction that we’re starting to see was avoidable.

              5. Totally appreciate it Joe. What you chalk up to producer disinterest, I chalk up to incapability. These two perspectives obviously have two different solutions. Thanks for providing this forum!!

  5. I can’t argue with the overall stats but, I am a wine steward in a Vons grocery store in an upscale San Diego suburb, yes, we carry mostly the large corp. brands, but, I see we are already into 2017 vintage in many red wines, in the under $20 range. And we sell NZ Sauv blanc as fast as they can bottle and ship it. If our warehouse is shipping so many wines that are aged about 2 weeks, where is the sales drop, and the grape glut? Can somebody explain?

    1. Donn – the grape glut is for certain regions of California. The rest I think it’s explainable as the expected aberrations of a limited data set.

  6. Thank you for this conversation. I love the passion from whatever side you occupy. I am a wine professional/educator for a large box retailer. So I get to see it all. In some ways we need to follow the money. I will list some examples below:
    1. The top 50 wine companies control approximately 90% os the sales.
    2. The top 5 distributors control that distribution.
    3. Restaurants use to employ a wine specialist. Today it is the GM and a local distributor making up the list based on what they carry and do not educate the staff to a large degree.
    4. Those who have the money, they buy the premium wine because they can, because of the brand and some time because they actually know what they are drinking.
    5. We have an increase amount of law suits between retailers and states for2 main reasons. One, the laws are archaic and are based on sales tax rather than consumer protection. Second, the legislatures are funded by the liquor/distributor lobby.

    6. Labeling is abysmal. The fact that you can pick up a bottle of wine or whiskey and not know the contents is poor marketing for the wineries that are producing quality products and great sales techniques by the cooked grape producer. How do we know that their is Riesling added to the pinot noir to make it sweeter. What is the sugar content?

    7. Finally, I do wine and spirits classes. My classes are booked up months ahead of time. So their are people who want to learn and taste different grapes, styles and from different regions and countries. How can we do more?

    I think we have a very complex problem but the wineries have to find more people to tell their story and reach people with passion.

    Dann

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