Oct 5 2016
Though this change had been sneaking up on us ever since the U.S. economy got back on its feet, 2015 marked the official start of the wine industry’s “trading up” trend, which I optimistically viewed as a sign that the ever-maturing American palate had no turning back. Finally!
What the wine trade calls “premiumization” (or, in jargon-free terms, increased sales of more expensive, less entry-level wine) is now the new normal in the U.S., and that means we can no longer be viewed as the uncouth drinkers of the world. Sorry, Two Buck Chuck!
Americans are drinking better wine than ever and brands have certainly taken notice. Sure, case stacks of character-free $6.99 Pinot Grigio still fly off the floor at a supermarket near you, but the sweet spot that hovers around $15 is one of the most consistent growth segments in the wine business. What does this mean for the those of us who spend most of our time telling everyone what they should be drinking and why?
First, encourage your wine clients to rise to the occasion.
The global wine industry is not known for being swift and changeable. Changes to the font size on an appellation’s back label can be argued about for years. Consider this in the context of our position as the most competitive wine market in the world. We have more wines, on more shelves, than any place on Earth. This fierce fight for shelf space favors higher prestige wines that are modestly priced. They are by nature more likely to be reviewed positively or receive higher scores. Much as the scoring system is grumbled about, it moves cases. This means wine brands have to grab any opportunity to make cost-effective changes that produce better-quality wines and don’t take years to implement. Some of the biggest jumbo-volume producers in Italy’s Alto Adige have recently taken measures to get their wines classified as Trento DOC, a step up from the basic IGT level. This is even more appealing because the wines jump up considerably in quality, but are still under $15. More of these wines will be available as soon as the next vintage. While a change like this does require consistent resource allocation, it’s well worth the investment
Second, keep your trade push simple.
It’s your job to help your winery client succeed with their new higher-end juice. Back up these better wines with a customized and specific brand positioning plan. After all, your clients have to trust that you’ll know exactly what to do with these bottles once they get off the cargo ship. For a resounding domino effect, you’ll need to enlist the help of the tastemakers in the distribution, retail and restaurant channels. Figure out how to explain why this wine is worth an extra $3 in terms a novice drinker can understand. When negotiating promotions with a fancy on-premise concept, be sure they look beyond by-the-glass margins and actually call out the good stuff from the stuff you make sangria with. Likewise, don’t clutter your trade messaging with every single varietal and blend your client might make. If you don’t commit, neither will the trade. At their core, these wines are affordable luxuries and that in itself is enough.
Third, despite their notorious brand hopping, catering to Millennials should not go out of style.
Some brands are becoming dismissive of this segment, simply because there’s an ongoing perception that Millennials are not loyal, repeat customers. The fact is, the explosive growth of pricier wine is mainly driven by Millennials and they still have decades of buying and drinking ahead of them. And anyway, when was the last time you met a “rising star” sommelier who was over 30? Exactly!
The fact of the matter is we are post, post-recession. Trading up in wine, food and booze in general is now standard for consumers. As far as trade, the margins of a $15-$20 wine are better for all three tiers. On the producer side, the low-costs grapes used to make wine under $10 are becoming more expensive to work with — they incur irrigation and harvesting expenses that make them less sustainable both environmentally and financially. Eventually, they just won’t be worth it when the winemaker is making less than $1 off a bottle. My attempt at fortune telling tells me that because there are all these supply- and demand-side factors pushing consumers to better priced wines, reshuffling our wine marketing strategies to hone in on this evolved price point should be a priority. American wine drinkers have the good fortune of a wine environment so large, that we could buy a different bottle every night for the next several years and still not get through all the wines our retailers have to offer. While that can be unnerving when it comes to standing out in crowded wine programs and mega-stores with thousands of bottles, keeping these tips in mind can help chart the course.