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Tag Archives: wine trends

Are Americans going to drink more wine?

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wine market councilOver the past decade, U.S. wine consumption has set all sorts of records, and most observers expect that to continue. This year’s Silicon Valley Bank report called for a 14 percent increase in high-end wine sales, while a study commissioned by the VinExpo trade show said U.S.wine drinkers will power world growth.

But not everyone is convinced.

It’s not that I’m not optimistic, it’s that the reality of the market when you look at the hard data of total table wine sales over the past three years following the recession,” says John Gillespie, the president of the Wine Market Council, which tracks U.S. wine drinking habits. The group released its 2014 report last week, and it seemed to be at odds with what the others have been reporting.

Gillespie’s point: After more than a decade of substantial growth, in which per capita wine consumption in the U.S. finally passed that of the early 1980s, sales coming out of the recession were nothing like the previous 15 years. Perhaps, says Gillespie, this more or less flat growth is the new normal, the sign of what economists call a mature market.

Which raises two questions: Why is this happening, and what does it mean for wine drinkers? Gillespie says it’s difficult to know why consumers do what they do, but that the Wine Market Council figures suggest some of us are drinking less wine and more craft beer.

My theory isn’t as nuanced (and doesn’t have Gillespie’s experience or data to support it) and should not be surprising to regular visitors. It’s about price; consumers don’t want to pay the higher prices the industry is trying to impose, and aren’t happy with the quality they’re getting at lower prices. Hence, they’re looking for something else to drink. The Silicon Valley Bank report said producers are focusing on premiumisation, the idea that better quality wine should cost more money. In this, they want consumers to trade up from their $10 and $12 bottles to $18 and $20 bottles.

Could the flat growth that Gillespie sees be consumers rejecting premiumisation? Will we start to look elsewhere, like craft beer, for value? If so, the wine business could face problems over the next decade, since producers expect pre-recession growth. If growth is flat, we’ll have more wine, and especially more high-priced wine, than there is demand for, and prices could collapse again, just like they did during the recession.

Which may be welcome news for consumers, but hardly anything the wine business wants to hear.

More about the Wine Market Council reports:
The 2013 Wine Market Council report
The 2012 Wine Market Council report

The end of the three-tier system?

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three-tier systemPaul Mabray, who knows this stuff better than almost anyone, says the end of the three-tier system is coming. It will probably be later rather than sooner, but Mabray is convinced that technology, combined with three-tier’s built-in inefficiency, will make the system obsolete.

The Wine Curmudgeon mentions this because my views on three-tier are well known. The system, which mandates how wine is sold in every state, says consumers can’t buy wine from the producer (with some exceptions), but must buy it from a retailer, who must buy it from a distributor. Buying wine from an Internet retailer, the way we buy clothes from Overstock.com or computers from New Egg, is almost always illegal. In this, three-tier is constitutionally protected, so we’re stuck with it until the end of time or until we reform campaign finance laws, which is about the same thing.

But Mabray, the chief executive officer for VinTank, which helps wineries use the Internet and social media to market their products, sees the situation from a completely different perspective.

Market access should not be constricted by antiquated regulations, but by market choice,” he says. “Yes, there needs to be regulation to enforce a regulated product but forcing it to go through a mandated tier structure is outdated.”

Mabray said this during last month’s Silicon Valley Bank State of the Wine Industry presentation, and I was so intrigued by what he said that we talked about the subject this week. He reiterated it during our chat: Trying to stop the advance of technology with artificial barriers is almost always futile, and three-tier will eventually break itself.

How that will happen involves lots of supply chain geekiness, but Mabray is convinced that Internet technology — the same thing that has allowed Amazon to make money by selling diapers for next day delivery, unheard of a decade ago — will come to wine. Three-tier as we know it will break down because it will be too expensive and too complicated to work the way it does now. Even the distributors, who have the most to lose, will want to change it to make it more consumer-friendly.

Perhaps. One reason our views are so different (besides my crankiness) is that Mabray sees an economic model ruled by efficiency. I see an economic model ruled by state legislatures with vested interests, whose idea of a supply chain is something you tow your car with. I hope he’s right about this, but I won’t be surprised if he isn’t.

More about three-tier and direct shipping:
Could the Internet screw up direct shipping?
Amazon.com, Prohibition, and the three-tier system
The Supreme Court and retail direct shipping

Welch’s grape juice hops on the wine bandwagon

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welchs grape jucie wine

“Gorgeous and totally juicy. Jam and sweet spices burst from the glass in this deeply resonant, expressive bottling.”

Grape juice is good, wine is bad — accepted wisdom for generations. After all, there’s a reason there isn’t a minimum drinking age for grape juice.

Which is makes this TV commercial for Welch’s grape juice so damned odd. It compares grape juice to red wine, noting that the juice has some of wine’s health benefits: “We’re not so different after all.” This is mind-boggling, and not just because it runs counter to the current wave of anti-drinking propaganda. Rather, it positions wine in the mainstream (and it’s a juice company doing it, for good measure): Comparing wine, which no kid is supposed to drink, to something every kid in the U.S. has had.

“Considering that roughly half the adults in this country don’t drink alcohol, it makes a certain sense,” says Michael Wangbickler, CEO & Partner, Balzac Communications & Marketing. “Since it’s become common knowledge that drinking red wine is good for your heart, they’re making a play for those consumers who don’t drink wine but want its health benefits.”

This ties in with Welch’s 2014 goal to promote a health and nutrition, says Wangbickler. That anything to do with wine is part of that message should make all of us who drink it smile. Just like a little kid at breakfast with a glass of grape juice.

Video courtesy of iSpotTV.

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