Silicon Valley Bank has rolled out its annual analysis of the wine industry. This year is different than some in the past with an oversupply of wine. “We’ve never made better wine,” Rob McMillan, executive vp and found of Silicon Valley Bank“s Wine Division. But, he says, “we are increasingly missing the mark on consumer expectations and our results show it.”
Certainly, there are problems. The growth rate of wine volume is declining, lower-price segments are still showing negative growth in terms of both volume and sales dollars, higher-priced wine segments that have provided most of the industry’s growth in the last 25 years are flattening, and the industry is awash in a sea of winegrape.
While top-shelf wines are doing well, the bottom quarter racked up a negative growth rate of 7.82%. Meanwhile, in the upper quartile, growth rates are average 22.34%.
One key to the problem is that in an era in which everyone is looking for health – how else do you explain Dry January, plant-based eating, etc.? – wine has gone silent on the message. It may be true that Baby Boomers embraced the scientific fact that moderate drinking can promote health by reducing the number of heart attacks, the No. 1 killer in America. But Gen X-ers and Gen Zers haven’t heard that message.
But, some will protest, “we can’t promote the health aspects of moderate alcohol consumption.” True, Alcohol & Tobacco Tax & Trade Bureau does have a rule that vintners can’t promote wine as a health food. But they can tell the truth about their product.
“We have stopped recognizing that wine is a natural product that should be integrated into a healthy lifestyle,” said Amy Hoopes, president, Wente Family Estates. And, she adds, the industry isn’t talking the language younger drinkers want to hear.
McMillan noted that 32% of consumers say they are drinking less to have a healthier lifestyle, and 21% say they aren’t single-category drinkers.
“We could do something about lower-calorie,” Hoopes said, wondering why the industry isn’t promoting “the pour that gives you 100 calories.”
“We haven’t done our job pushing back about health,” McMillan said. “Look at the back label on water or the White Claw (Hard Seltzer) label. As an industry, we haven’t wanted to talk about calories or gluten-free, etc. We can do that!”
Not only can wineries provide truthful label information, but the health gag rule doesn’t apply to trade groups such as Wine Institute of WineAmerica, McMillan said.
“WE all care about health,” said Paul Mabray, ceo, Emetry. McMillan agreed, but added, “the message we are delivering is ineffective for younger consumers.”
“We have to reteach it for the next generation,” Hoopes said. Mabray added: “Science says Dry Januarys aren’t actually healthful.”
McMillan suggested wineries talk with their own club members about changing their positioning, using A/B tests to evaluate messages.
Hoopes added wineries need to rethink their packaging. “We’re seeing exponential growth in 375mls. “With a 375, we can both have a glass of wine for dinner.” Younger drinkers like 375s because they are a form of portion control and they don’t have to worry about the wine in a 375ml container going bad.
McMillan endorsed canned wine. “Cans cross the serving-size barrier. Cans are single-servings. They induce trial. Ready-to-drink single-servings will be the gateway for our success.”
Julianna Coleangelo, West Coast director of Coleangelo & Partners, noted that tasting room traffic is trending down. McMillan compared relying on tasting rooms to sell wine to have to go to Detroit to buy a car. If that was the norm, he said, “there’d be a lot less car sales.”