An interesting column by Jim Lefevere at Forbes on the forces changing or representing change in the wine market in the US these days. He lists 10 dynamics:
- Wine consumption growth
- Generation Y
- The global wine village
- Drink local
- Technology changes everything
- Brand vs. land
- Alternative packaging
- Residual sugar
- Wine and health
- Politics and the law
with two honorable mentions:
- natural/organic/biodynamic wine
- global warming
Although this is the first time I've read Lefevere, I find his aggregation quite astute. Every one of these issues has been discussed in the Snooth Forums, to greater or lesser degrees of detail, and several of them feed into or are supported by the entire existence of Snooth.
I was hoping to open the discussion to Snooth's readership, to see what the wisdom of this crowd is in regard to the points he makes. I think it is really a remarkable thing that the growth of wine consumption and drinking practices by Generation Y (including my daughters) mean that America has become a country of wine drinkers, rather than beer or spirits drinkers. A massive change that has occurred during my adult lifetime, and that is only on the increase. I'm also personally very concerned about the issues covered by 'brand vs. land', and find myself avoiding 'brands' whenever possible, though that is certainly not mainstream market behavior.
As a child, I recall asking my parents what it was like to come of age during the counterculture revolution of the late 60s. Their response was simple: “It didn’t seem like that big of a deal at the time.” Ditto their response regarding disco in the 70s.
As I wax philosophic with my own era of the early 90s and the revived nostalgia of grunge music, it’s evident that history has a way of placing cultural trends into a framework of relevance that is bigger in hindsight than when we lived through it the first time.
And, so it goes with wine, I believe. Today is a Golden Age for wine and the consumer. Twenty years from now we will look upon this period of time in the domestic wine world as the end of an era and the beginning of a new chapter.
With that in mind, in the first of two parts, here are the forces of change that are re-shaping our wine world before our eyes, no hindsight required.
Wine Market Forces 1 - 5
Wine Consumption Growth
It doesn’t matter whose numbers you look at, wine has and will continue to grow in the U.S. According to Impact Databank research, American wine-consumption recorded its 17th consecutive annual increase and domestic consumers spent more than $40 billion on wine last year, another all-time high.
In addition, Nielsen research presented in April 2011 indicates that wine was the number one product in unit growth at mass market outlets for the 52 weeks ending January 22, 2011.
The bottom line: Long an ancillary beverage behind beer and spirits, the U.S. is becoming, first and foremost, a wine consuming country.
A research term used by the Wine Market Council(WMC), an industry research group, identifies wine drinkers who drink wine at least once a week as a, “Core” drinker. Core drinkers represent 91% of all wine consumption.
Typically wine drinkers move along an interest and adoption curve before graduating into a “Core” wine drinker. It should come as no surprise then that when research shows that over 50% of Generation Y, a generation larger in size than Baby Boomers, are onboarding into wine as a “Core”drinker the wine business is palpably excited.
The bottom line: young adults in their twenties have vigorously taken to wine. Their interest in wine, their technological adeptness and their global sensibility is driving growth and impacting all levels of wine marketing.
The Global Wine Village
While Generation Y has shown an affinity for imported wines at higher prices, the still nascent aspect of globalization in wine is U.S. exporting. 2010 was a record year for US exports reported at $1.14 billion, but The Wine Institute, the California wine industry’s influential trade association, sees much more potential on the world stage and has initiated a global branding strategy.
With the European Union funding wine marketing in the states and wine regions emerging in far-flung places like the Eastern Bloc coupled with meteoric growth of wine interest in Asia, the borders of the global wine village are expanding … rapidly.
The bottom line: Just like a Honda Accord can be made in Alabama and Budweiser is owned by a Belgian-Brazilian conglomerate, wine is also bending our conventional understanding of where and with whom quality wine and affinity resides.
No large trend is complete unless there’s a head-scratching counter trend. The antithesis of the global wine trend is the localized wine trend. American’s understanding of the domestic wine world through the lens of west coast hegemony is seriously being threatened by regions that are pacing in years what has taken California, Oregon and Washington decades.
Nielsen research presented in conjunction with the WMC in January of this year showed a 27% growth in sales volume for Michigan wines, for example.
The bottom line: Michigan Pinot Noir, Finger Lakes Riesling, Virginia Viognier, Niagara ice wine – these are all world class examples that a ready audience is viewing wine with an open gullet and an open wallet.
Technology Changes Everything
Wine is an inherently social drink and apparently there’s something going on in the internet space called “Social Media.” These two factors coupled with Gen. Y’s digital adeptness are creating one of most dynamic online ecosystems in any niche. Need proof? Limited time only sales are the Internet buzz du jour, but that’s a business model that’s been in place with wine since at least 2006. More proof? If you have an iPhone search for“wine app” and wade through your options. Oh, and a brash wine retailerin Jersey is using social media on his way towards becoming a household name, too.
The bottom line: Not only is wine connecting wine lovers into a nationally cross-stitched network, the end doesn’t appear to be in sight for the dynamic ways that technologically driven communication and the good grape can and will remake the wine marketing landscape.
In Part II:
- Wine legal tussles
- Alternative packaging
- Wine and health
- More …
The Big Picture: 10 Dynamic Forces Impacting the Consumer Wine World Pt. 2 of 2 May. 22 2011 - 3:29 pm | 669 views | 0 recommendations | 0 comments
We are living in a “Golden Age” of wine. Twenty years from now we will look upon this period of time in the domestic wine world as the end of a simpler era and the beginning of a new chapter of complexity for the most global of drinks.
In part two of this two-part series (part one can be found here), we pick up where we left off and examine the seismic forces #6 – 10 that are re-shaping how we celebrate the good grape.
1) Wine consumption growth
2) Generation Y
3) The global wine village
4) Drink local
5) Technology changes everything
Brand versus Land
While the wine industry is notoriously bereft of hard data analysis, it is accepted wisdom that 90% of wine consumed in the U.S. comes from a handful of large, corporate wine companies who – principally — emphasize branding, stylistically consistent winemaking and distribution ubiquity.
The remaining 10% of consumption is divided amongst thousands of small, domestic wineries and imports who emphasize wine as an agricultural product evocative of where it comes from, with finite production and subject to vintage variation.
If you examine this “Brand versus Land” reality, coupled with the challenges in distribution that befall small wineries, you begin to see the financial and opportunistic delta between the big and the small that equates to an uneven playing field similar to a BCS college football program competing against a slate of outmanned Division III opponents.
The bottom line: In the wine world, David doesn’t slay Goliath. In order to meet increasing consumption growth (and the common denominator), large wine companies will fuel industry growth and continue to default to agricultural mechanization, wine manipulation and stylistic homogeneity instead of creating wine that is evocative of the dirt it was grown in. In the battle between brand versus the land, brand wins. Purists lose.
10 Dynamic Forces Impacting the Consumer Wine World 6 - 10
Wine is one of the most hidebound consumer packaged goods. High-quality wine comes in a 750 ml glass bottle, in a few shapes (depending on the wine varietal), is finished with a cork, and has a label that is traditionally styled, right?
Rapidly, wine packaging is undergoing a revolution in form and function.
Just several years into a trend that shows no sign of slowing down before a complete perception makeover is complete, wine can now be purchased in kegs on tap at restaurants, in canteens, in a pouch with a spigot, and a myriad of bag-in-a-box styles that challenge the long-held belief that boxed wine deservedly belongs on the bottom shelf of the wine aisle.
The bottom line: Fueled by the fragility, expense and carbon footprint of shipping wine in glass, along with a prevailing consumer-oriented environmental awareness, now is a good time to forsake your perceptions of how wine packaging relates to wine quality because the future of wine packaging looks like alternative styles will become the norm.
Not only is brand-oriented winemaking and wine packaging changing so too is the traditional definition of what constitutes premium-priced wine. For years, local wineries everywhere but California, Oregon and Washington have been making wines with residual sugar for a wine-interested audience that find dry wines a bit daunting for the palate.
And, these wines have sold … and sold … and sold. Evidenced by recent Nielsen data from 2010 that shows Indiana wines had a year-over-year 13.1% increase in sales value and 11.2% growth in volume while North Carolina had 9.7% growth in sales value and a 12.6% increase in volume, you can draw a direct deduction of what kind of wines are driving this growth.
However, on the national stage, wines with residual sugar have always been a quiet secret or relegated to the rot gut section of the wine aisle with a social stigma attached. No longer.
The bottom line: With Bronco Wine Company producing a sweet red with their Crane Lake label, Gallo doing the same with their Barefoot label, and Constellation indicating they are getting into the segment, varietal wines are finding their inner sweet tooth. This should expand the comfort level of the wine-interested, but it will ultimately change the spectrum of understanding for the domestic wine world, as well.
Wine and Health
20-years ago, a 60 Minutes segment on, “The French Paradox” kicked off the, “Wine and health” conversation when they suggested that red wine, as a part of a healthy diet, could positively impact cardiac health.
Since then, medical researchers have preliminarily linked Resveratrol, a phenolic antioxidant found in the skin of red wine grapes, to a laundry list of health benefits – everything from cancer to diabetes, fat fighting and longevity.
The benefits of Resveratrol is still very much in the research phase of medicine, yet that hasn’t stopped nutrition companies from coming to market with Resveratrol supplements, a necessity because daily massive consumption of red wine would be necessary to gain the otherwise healthy benefits.
The bottom line: Still nascent in the medical community, Resveratrol has shown positivity in a wide enough number of human health areas that the next decade is likely to produce a medical breakthrough linked to the compound found principally in red wine grapes, further fueling far-ranging research into the compound as a miracle health aid.
Politics and the Law
Wine shipping might not normally make this top 10 list, but it must be discussed within the same conversation as the ongoing consolidation in wine distribution.
With large distributors aligning with large wine companies and becoming more sophisticated with large retailers, distribution is increasingly losing viability for small to medium-sized wineries, leaving them to their tasting room, wine club and ecommerce for sustainability and growth.
However, because of ongoing legal battles over wine shipping rights, the stakes are raised in importance because enhanced restrictions in winery shipping coupled with an unwieldy and unfriendly distribution channel could mean the death knell for an entire classification of wineries.
The bottom line: In 2010, a bill (H.R. 5034) was introduced in the House of Representatives that was a thinly veiled piece of lobbyist action from distributors that intended to give states full control over wine and interstate commerce. Quickly scuttled, this bill reappeared earlier this year as H.R. 1161 with the same potential stifling effect for wineries and their ability to ship wine out of state. If you’re the sort that likes wines a little more precious than what you can find in your grocery store, then you should pay heed to this development and consider putting your consumer advocate hat on because the ramifications could be long-lived and consequential.
Honorable mention (if there was a number 11 and 12):
- Natural / Organic / Biodynamic wine
- Global warming
Are these the 10 locomotive forces driving change in the US wine market?
- Reply by JonDerry, May 24, 2011.
Looking forward to reading this in full, but just by looking at the points discussed this does look very much on point.
Brand v. Land also stood out to me as an interesting point. Typically when shopping at a grocery store for your wine, you're supporting about 3 different companies who own all the "grocery store" brands. Obviously, it's a great step for wine consumption to be rising, though it will take some time for consumers to become more astute and learn which brands rely more on marketing fluff and others that provide good value and consistency.
- Reply by Stephen Harvey, May 25, 2011.
Soe very interesting and thought provoking points, all of which have been debated in the Australian context, below is my perspective of how the debate sits here and with me
1. Wine consumption growth
The US is still lagging the Rest of the world in per capita consumption. 2009 figures were: litres/pa/per person
The US has been identified as a major export opportunity by all major wine producing countries. To put it in context if the US doubled its per capita consumption that would equate to an increase of 300m 9LE Cases [12x750ml] of wine per annum!! That would rank US with Holland and Czech Republic approximately.
This clearly demonstrates that there is plenty of opportunity for both the domestic US market to grow and exports to have a genuine business opportunity.
2. Generation Y
Whilst I have a level of scepticism over the whole Gen X,Y,Z debate, I do believe and statistics seem to suggest that younger people are developing an earlier interest in wine as opposed to previous generations. I suspect that has a lot more to do with far more exposure to wine through all media channels and far more focus on wine in the media.
Certainly what I see in my children and their friends and other young people I am exposed to is that they have far more wine awareness than my generation. I would also add my exposure had a lot to do with working in retail wine shops during the mid/late 70’s.
3. The global wine village
This is an interesting one as Australia went down the “Brand Australia” route in the 90’s and it clearly kick started our export boom with exports growing from ~$120m in 1990 to ~$3.0b today which is a 25 fold increase in 20 years.
Australia’s success had a lot to do with the distribution expertise of Pernod Ricard who acquired Orlando and its major brand Jacobs Creek in the late 80’s. JC boomed in the UK in the 90’s and many commercial Australian brands followed in its footsteps. It’s rather ironic that France’s largest beverage company was primarily responsible for Australia overtaking France as the major wine supplying country to the UK.
Another major contributor to our export success was Lindeman’s Bin Range and Casella Yellowtail in the US. Whilst Yellowtail generally is greeted with great derision on the Snooth boards, the US wine drinking public is the SOLE reason for its spectacular commercial success.
Personally I think the US wine industry would be much better served marketing regions and sub regions. With no personal criticism of my many US friends and colleagues intended, brand USA is not exactly a marketers dream when it comes to any consumer product.
4. Drink local
Consume local is a trend that ebbs and flows everywhere around the globe. Ultimately consumers with tight family expenditure budgets will be seduced by price. The US and Australia only need to look at textiles and cars to see the impact of imports on buy local campaigns. I also think that with wine our curiosity will have a large impact.
5. Technology changes everything
This is really about the expansion of consumer media channels, TV, Internet, Social media, etc etc
We now have so many facts and information, not to mention non facts and misinformation circulating the globe at a rate that has become exponential in the last 5 years.
Snooth is a great example, none of us could have shared these thoughts with such ease 10 years ago and our appetites have increased, as the exchange of information has become Googlised
6. Brand vs. land
I think this is a misleading headline, I think the real debate is around wine marketing in general. Brand v land is far too simplistic. Champagne is a clear example where brand and land converge. LVMH dominate the champagne landscaped and they are one of the leading brand owners and managers in the world, yet they clearly know how to use land eg AY, les Mesnil, etc as a key part of their Brand [DomPerignon, Moet, Krug etc] marketing strategy.
In Australia we have regional wines and multi regional blends – Penfolds Grange is a multi regional blend. The Penfolds Bin 60A which was rated by either WA or WS as one of the 10 wines to drink before you die is a blend of Barossa Shiraz and Coonawarra Cabernet.
The commercial reality is that large scale volume wines will always come from irrigated wine regions and from high yielding crops. These wine which sell at less than say USD10 per bottle are targeted at everyday “non serious” wine consumption. Brand and land are pretty well irrelevant.
The point I make is that it is what is important to each individual consumer that counts. As Lefty reminded us all very succinctly in his recent post, wine is as much the experience as what is in the bottle.
7. Alternative packaging
IMHO, packaging is packaging. Trends will come and go.
8. Residual sugar
This is an interesting US dominant concept, the residual sugar issue is certainly nowhere as nearly pronounced in Australia as it is in the US. However there does exist a trend to producing wines with “fruit brightness” and less overt tannin. These wine styles are attempting to allow consumers with less wine drinking experience to find a plausible entry level product.
Is suspect that the only way you can convert beer and Bourbon/Whiskey and coke drinkers into wine is to have some elevated level of residual sugar in the entry level wines. Going from a Beam & Coke to a full bodied Napa Cabernet or Tannic Oregon Pinot or Paso Robles Zinfandel is one hell of a taste and mouth feel journey!
9. Wine and health
In Australia we have seen a trend towards drinking alcohol as being seen as the greatest social problem existing in this country. The anti drinking lobby has been provided with an incredible amount of Oxygen from left leaning social control adherents found in the Bureaucracy and supported by a dominance in the last 10 years of Socialist Left leaning Labour Governments at both State and Federal level.
We are seeing a drift to the conservative right which brings its own brand of conservative Christian moralistic based social control, but alcohol seems to be much lower on the conservative politicians’ hit list than it is on the socialist agenda.
10. Politics and the law
The convergence of self interest, political lobbying and hypocrisy will influence outdated liquor licensing laws in Australia as much as in the US. Whilst the US promotes itself as the Icon of free enterprise, it does a pretty good job of retaining many clearly non market, restrictive laws and practices. The laws around the supply and sale of alcohol are but one very definitive example of this. The landscape is only marginally better than this in Australia.
IMHO, wine will continue to provide many of us with a lot great times and fun with family and friends. Whether it is birthday celebrations like Outtheres recently, GDD’s new arrival, Lefty’s poignant moment, GDP’s online tastings or my wine dinners or in fact any of the great events we read about on Snooth or see in other forms of the media, wine provides a truly great supplement to our daily grind.
- Reply by Stephen Harvey, May 25, 2011.
Just in case you are interested here is a link to global per capita consumption numbers
- Reply by JonDerry, May 25, 2011.
Thanks SH, I found the Per Capita numbers quite interesting. It's also interesting to hear your perspective on the U.S. Did the Bush years really screw us up or have we just been trending downward in global opinion for a while now?
& I very much agree with your tagline, "wine provides a truly great supplement to our daily grind." It seems any time I try to put to much emphasis on wine, it takes away from this concept, which I believe is a sweet spot of sorts for getting the most out of it. That is, unless you have "the bug" to advance in the wine industry.
- Reply by Stephen Harvey, May 26, 2011.
Bush years clearly did not help with the perception of Americans outside of America. George W certainly created the impression of the US wanting to be the World Policeman - but more like the Sheriff of Planet Earth with his Texan Deputies.
I think that the fairly or unfairly TV shows, TV stars, Bigger than Life US personalities eg Trump, Sports Stars, Oprah, Republican politcians [eg Newt Gingrich], the Gun Lobby [NRA], Big Corporate Executive Bullies do not paint a picture that represents the diverse and interesting culture that makes up the US.
For that reason I think each US wine region should develop its own persona.
If you were even more brutal on facts, there is still plenty of opportunity for the US wine industry to get its own domestic population drinking wine. In fact I would argue on relative size if Napa and Sonoma focussed totally on California it still has a really strong business opportunity.
- Reply by dmcker, May 26, 2011.
I don't think people outside North America have chased much after US autos in recent decades, other than the occasional Jeep and the odd grotesquery like a stretch limo or Hummer.
Stephen, your last paragraph above was the rationale used by a number of vineyards I talked to back in the '80s in CA and WA about exporting to Asia. They weren't interested then, and missed an opportunity or two. Still plenty of latent opportunity both within the US and outside....
- Reply by Stephen Harvey, May 26, 2011.
D - I think that at an individual business level export to Asia should be explored and where appropriate the local and state Business Chambers should provide guidance on say export to China, but at an overall regional level, I think that a concerted push directed at the US consumer makes a lot of sense given the stats I have seen on the US market potential. Particularly given the focus by other wine countries on the US market
- Reply by Richard Foxall, May 27, 2011.
Wow, this deserves a lot of discussion, so I know I will come back here. But I think there is not just one market, but at least two. Volume is the 90% controlled by "brand" wineries, but the other 10% is sensitive to very different concerns. People who have newly received money ought to think twice before they decide to go into the business because they "love wine and are really interested in it." Buying a vineyard is risky enough, investing the bucks in a winery and sales force and.... Well, look what happened to Phelan. They were selling the grapes to Silver Oak, decided to take some of their precious land and build a winery, and now it's all for sale. the 10% is not big enough for all the people getting into the business. And the growth is not going to be as big there. But if you are the Mauritsons and already own Rockpile and it's not really good for much else, growing grapes is the way to go. Fact is, no big producer will pay you for it because it isn't susceptible to mechanization. So that will always exist, but it's not where the game is played. Like rugby vs. football in the US.
Now, as to the per capita consumption figures: I'm doing my best, but my fellow citizens need to pick up the slack. Let's see: two adults in my house, we drink about 3 bottles a week conservatively, maybe 4... let's say 160 bottles a year at 750ml, that's 120 liters divided by two... Really, that's the best I can do. Well over the average of any country. Any more and there's no room for whisk(e)y without turning into a drunk.
I do take exception with the notion of wine 1x a week as "core" consumers. No wonder we lag other countries: That's for pikers! I had wine 1x a week with Sunday dinner as a kid, as any European kid would.
- Reply by zufrieden, May 29, 2011.
Many thanks to D. for putting up the article.
Speaking for myself only, I don't really care (and never have cared) a jot about the LCD of taste which, if you are into that sort of thing, might translate into sales volume but rarely quality. I don't even see a connection - not even a tenuous one - between mass produced plonk directed at the next most unsuspecting generation of tiplers and the creation of more interesting product. Kind of like a trickle down effect without the drip.
Perhaps this line of reasoning may be compared to the purchase of an automobile in that the Chevrolet Cruze can somehow over time engender an enthusiasm for engineering quality for a meaningful subset of motorists. As the gneration ages and (hopefully) accumulates more wealth in some sectors, a cohort of buyers might emerge in middle age that aspire to owning something of quality...
However, I am not at all sure this analogy applies to wine (It may apply to automobiles, but I'm not even entirely convinced of that). The market for wines described in the article are simply not the same as those for wine consumed by aesthete; that's the wonder of capitalism. If we lived under Soviet economic planning, we'd get one without the other.
In short, promote quality, educate palates and develop cadres consisting of persons who know what to look for in art.
For, wine appreciation is art.
- Reply by Stephen Harvey, May 29, 2011.
Whilst I have a lot of sympathy and general alignment of your views, you do need to consider the need for entry level wine products.
Not all cheap wine is necessarily a good entry level indicator but to the studies I have seen suggest there is reasonably good flow through from entry level wine to more educated wine drinker.
I am actually surprised that we have not seen the wine equivalents of the Food shows on the TV. In fact it surprises and dissappoints me that wine does not get a mention at all on a plethora of food shows that now invade the box. Which is in someway my comment to your proposition on educating palates, but how do you educate the unaware?
- Reply by lingprof, May 30, 2011.
Great thread, DMc! I think 'wine and health' is an interesting one. Americans are always trying to jump on the next "healthy" food fad, and when it's something like wine or chocolate that doubles the effect.
On the other hand, alcohol is often seen as bad for you from a traditional medical viewpoint. They ask questions about how much you drink at medical intake interviews, etc... but with minimal consensus about quantity. One doctor told me I should not have one glass of wine every night because I'm a woman and our livers are "more sensitive". Another said on the contrary that was fine, and then asked, "I mean, you're not like passing out or anything are you?" When I assured her that I wasn't she basically said go on ahead and drink a couple of glasses a night.
As people grow up with different ideas about this, it may change our habits..... dovetailing with the greater availability that was also discussed....