Posted on | March 5, 2012
Written by | W.R. Tish
Few industries have enjoyed the robust growth that wine has experienced over the past two decades. According to Wine Market Council (WMC), the forecast is still mostly sunny, albeit with a few clouds gathering.
Representatives of the council brought their annual presentation to New York City in late January, and gave a packed house plenty of statistics to chew on. Their report provided plenty of reasons to be optimistic; however as the market continues to grow—and age—we may all need to start being more mindful of conceiving of the U.S. consumer market as distinct segments, rather than one entity.
First, some basics. Overall table wine consumption rose again in 2011, to 291 million cases, up 4.7% from 2010. Core consumers (who enjoy wine at least once a week) represent 58% of the wine-drinking population vs. 42% marginal consumers (who say they drink wine, but not every week). This ratio is very promising—in 1994 core drinkers accounted for only 34% of all wine drinkers. Moreover, of the core drinkers, two-thirds drink wine daily or several times per week; clearly it is this segment that is driving the burgeoning market, and WMC estimates that this core segment—which represents only 21% of the U.S. population overall—accounts for 80% of wine consumed in the country.
The real rub is: Who are the core drinkers, and how does the industry reach them? The good news is that a lot of them are young. WMC President John Gillespie noted that the majority of Millennials enter the market as core drinkers; he called this youth factor a “leading indicator of great potential.” On the other hand, their research suggests a split in this generation, with older Millennials (currently aged 26-34) outpacing their younger (21-25) peers. Only half of the younger Millennials drink wine daily or several times a week—compared to the 65 percent of the older Millennial group.
He went on to surmise that the distinction here was not merely a matter of age, but also economic. For the the younger half, which he dubbed “Mini-Millennials,” he added, “life circumstances and expectations may well be reduced in comparison to their older brothers and sisters.” The national unemployment rate for Americans aged 21-25 was at 14.4% in December, vs. 8.5% for all ages. The younger group is also skewing somehwat higher in spirits consumption; plus, the younger group is tending to think of wine as more of a special-occasion drink than their older peers. The combination of these factors leads to the question: Will we get an entire generation of highly involved wine drinkers?
Meanwhile, Gillespie characterized the older Millennials as being the most experimental generation of wine drinkers, which in practice also translates to them being the least brand-loyal. Nearly 90% report that they “frequently/occasionally” purchase a brand of wine they have not seen or heard of before (the highest of all age-group segments); they also skew higher in terms of wine-label attraction; 60% of older Millennials found “fun and contemporary looking” wine labels of great importance when purchasing wine to drink at home—nearly twice the percentatge of Baby Boomers (aged 47-65).
So, What’s Selling?
After John Gillispie outlined consumer trends and Danny Brager of Nielsen discussed trends involving product categories. The top ten varietal wines currently in the U.S are, in order: Chardonnay, Cabernet Sauvignon, Merlot, Pinot Grigio, Pinot Noir, Sauvignon Blanc, White Zinfandel, Moscato, Riesling, Syrah, Zinfandel, Malbec. Moscato is by far the hottest ticket, posting a 2 million case increase in 2011 over 2010.
Other rising stars include New World red blands, unoaked Chardonnay and sweet reds. Highest import growth in value and volume in 2011 was seen in wines from Argentina and New Zealand. In terms of packaging, Brager reported strong growth in the 187ml and alternative packaging formats.
Red wine continues to outpace white, 50.3% of the Nielsen market tracks compared to 42.1% white; and while blush wines overall were down 1.3%, premium rosés are up strongly. Brager also indicated strong growth in organic wines sales (up 29% in value), albeit on a small base.
The Think Behind the Drink
The final speaker was Gregory Carpenter, a marketing professor at Northwestern’s Kellogg School of Management. His focus was not hard numbers, but rather the psychological of consumers. Using examples such as Harley Davidson and Pilippe Patek watches, he reminded the audience that consumers don’t always reveal why they buy what they buy, and that successful products provide value that is not only functional, but also emotional and economic. Raising the question of “What does wine mean to consumers, and how to they choose?”, he spoke of “themes” that motivate wine drinkers, namely:
He also spoke of consumers’ ongoing desire to simplify wine, and reduce fear when purchasing, as well as the perpetual ability of wine to play a welcome role in celebrations. Interestingly, Carpenter’s discussion of the consumer wine-buying behavior tilted decidedly toward emotion and mindset—not taste, which has long been the staple of wine marketers. Perhaps this disconnect will lead to an adjustment of brand marketing strategies in the future. In the meantime, retailers dealing with conusmers face-to-face on a daily basis can apply this anecdotal wisdom to their business, knowing that while American wine drinkers are certainly looking for specific products that taste good, in general they are looking to wine to help them feel good.
MORE DATA TO CONSIDER
Wine Market Council, founded in 1994, is a non-profit trade association representing all tiers of the industry. For more on membership, visit winemarketcouncil.com. Here are some more quick takes from the January presentation:
Strong but Flat.
WMC researchers expect continued downward pressure on pricing. First, there is the economy itself; most Americans believe the economy will get worse before it gets better. Then there is discounting, which has been responsible both for a surge in $20-or-more wine sales and the proliferation of “flash sale” websites. Consumer perception is another force keeping prices in check. Among core wine drinkers, 73% agree with the statement “I am finding good quality wines available at lower prices.” Unlike other food/beverage categories, where value of goods bought is rising, wine is falling slightly. “We can’t seem to move the needle on price,” Gillespie observed.
Just less than a quarter of core wine drinkers are High End wine buyers, but they account for more than 90% of all wine purchases over $20. Direct to Consumer, while still a relatively small part of the overall pie, is growing faster than the rest of the market, with a definite upscale accent: purchasing represents 1% of the market by volume, but 8% of the value, driven by and average per-bottle purchase price of $38.
Social Media March.
High End consumers led the way, with 60 percent indicating that they had gone online in search of wine information over the past three months. Generationally, this figure was only 26% for Baby Boomers, 34% for Generation X (35-46), 40% for Younger Millennials and 52% for Older Millennials. Boomers lag behind in Facebook and Twitter usage as well; but interestingly, High End consumers across generations are quite active in social media—84% reported having Facebook accounts and 44% are tweeting.