When I arrived at drinking age (lets say circa early 1980’s) there was a natural rite of passage through the wine styles. One usually started on something non confrontational (to the palate and the wallet) like Liebfrauwine, progressed through Houghton’s White Burgundy and then eventually braved the world of red wine. Red wine tended to be initially hard to love by taste buds that had been abused by sweeter whites. But as serious wine drinkers only drank red (and one wanted to be considered such) one had to persevere with great intent. In my group of friends our red of choice became Taylors “Cab Sav” and it wasn’t unusual for six of us to go out for Chinese and take two bottles of Houghtons (for the spring rolls) and four bottles of the Taylors for the serious part of the meal.
In fact we all had enormous brand loyalty/recognition back then. If I went into any bottle shop fifteen years ago I could recognise on sight 50% of the wines with a casual glance at the label. In fact I used to take bets that I could name all of the wines being drunk in a restaurant by the shape of the bottle and the hint of the label that I could discern peering from my chair. Nowadays I would have trouble recognising 10% of the labels in a bottle shop (especially if you take out Penfolds) such is the proliferation of choice. Wineries now have reserve wines, secondary (or more) labels and various blends and varieties to attract attention. What one wonders is how the consumer chooses the wine they want…or perhaps more intriguingly …how does the wine company choose the consumer that they want?
The core tenet of a good business strategy is to work out which segment you are trying to reach, target them and compel them to buy your product. And of course this is true in the wine industry as well. The challenge going forward is that there are some fundamental changes taking place in the industry that will redefine the markets as we know it. Consider these:
The Rise of the “Super”Market Chains
You may have seen recently comments by the head wine buyer of UK’s Tesco supermarkets, Dan Jago, saying that Australian wines ”lacked personality”. He revealed that his customers are looking for more refreshing wines and Australian winemakers need to meet these new consumer demands. His comments created a wave of derision from Australia with Jago even being tagged a “wanker” by a prominent winemaker. But beware, this guy knows what he is talking about. Tesco is famous in business circles for its insight into customer behaviour. In fact there has been a revered business book written about it’s success (“Scoring Points”).
So if you want to sell bucket loads of wine, Tesco can probably tell you what it should taste like, identify who in their client base will buy it, where they live and what they are likely to serve for dinner with it. So ignore them at your peril! While Australian supermarkets are not at that level of sophistication yet, it will come. Woolies and Coles are waging a battle for control of the wine market (they have 44% and growing) and will play a huge role in the future in advocating the style demands of their massive customer bases. And winemakers will have to listen.
The Baby Boomer Phenomenon
In the finance world, the baby boomer is the segment to chase. Why? A lot of them have oodles of cash… and they don’t mind spending it.
What are the boomers looking for? It seems to be two things :-
- Single vineyard, hard to get stuff; and
- wines of lower alcohol with less in your face flavours.
Why single vineyard wines? A defining trait of the nouvelle riche is that they want to say that they have stuff that no one else does. My friends at United Cellars in Sydney tell me that they only have to mention “single vineyard and small allocation” and they could shift quantities to wealthy boomer clients that Jacobs Creek couldn’t satisfy.
And why lower alcohol, less “in your face” wines? Simply, the boomers are getting older. Prior to reaching age 45, your average male red wine drinker can put away three bottles of Duck Muck in a sitting. After reaching midlife, however, the second glass of a 15% blockbuster starts to taste like petrol and the headache that dawns next day is reminiscent of a bad concussion. So there is a move by the boomers to savoury, more food friendly wines that can be quaffed without fear of palate destruction or next day hospitalisation.
Daniel Eggleton, winemaker with Creed Wines in the Barossa Valley, believes that the focus on alcohol levels is bordering on a conspiracy. To him it is a question of balance in the winemaking art not a simplistic debate about a number on the label. Daniel explains that he simply cannot produce his style of Barossa shiraz at 13.5% alcohol levels, and in any case if he did it would not taste like a Barossan wine. There is no doubt, however, that there is rising consumer awareness of alcohol content in wine and this has commercial ramifications. Daniel didn’t rule out winemakers using new de-alcoholising techniques in a quest for market acceptability.
The bottom line is that the baby boomer market is a lucrative segment. They are the most likely to have cellars and hence buy by the case and they can, and will, pay top dollar. But there are challenges in accessing the boomers both in creating the right product and finding the right access point.
So as we move into this new millennium one of the world’s oldest industries, the humble pursuit of turning grapes into wine, faces significant new challenges. As in all industries the global marketplace stands still for no one and only those with foresight and adaptability will thrive.