How the US wine industry is losing young consumers

The state of the US wine industry is bleak, according to an annual analysis report that is often closely watched by the market. Wine producers and advertisers are missing out on younger consumers, the report found, by not producing wines that fit younger consumers’ budgets and by not conducting targeted marketing campaigns.

The latest edition of the State of the US Wine Industry, an annual report that has been making industry recommendations for more than 20 years, found that the only growth area for US wine was consumers over 60, the author said. of the study, Rob McMillan, executive vice president of Silicon Valley Bank in Santa Clara, California, and a veteran analyst of the US wine industry. The biggest growth area, he added, was consumers in their 70s and 80s.

As has been the case in recent years, the report urged the wine industry to do a better job of attracting younger consumers, who now have far more beverage options than was the case with the baby boomer generation. [os americanos nascidos entre 1946 e 1964] in their formative years. These include craft beers, low-yield spirits and craft cocktails, hard seltzers and other new beverages such as alcoholic kombucha and hemp drinks.

The problem, in McMillan’s opinion, is not so much the wine itself as the marketing. He believes that the wine industry as a whole needs to take steps to arouse curiosity and interest in wine, and to highlight aspects that he believes would appeal to younger generations.

Specifically, the study points out that the industry should emphasize the environmental sustainability of wine, and should embrace transparent labeling practices regarding the nutritional value and ingredients of its products, something the sector has been resisting for years, in order to win over consumers. concerned about health and well-being.

The pessimistic prognosis extends and expands the conclusions of last year’s report, which focused on the millennial generation, whose members do not show the same interest in wine as the baby-boom generation, the main consumer of wine.

New data compiled by Sovos ShipCompliant, a company that helps winemakers comply with the numerous shipping laws that apply in the 50 US states, allowed McMillan to track 80 million consumer transactions since 2007, in order to paint a clearer picture. for the 2023 report. He said that today, consumers under the age of 60 were even less interested in buying wine than was the case in 2007.

“It’s worse than I thought,” McMillan said in a telephone interview. “I thought we would have made some progress among the under-60s. I’ve been talking about this problem for seven years, and we still haven’t responded.”

It’s not that younger consumers can’t afford wine, McMillan said. He cited an annual report on luxury goods by Bain & Company, a consultancy that says the luxury goods market is experiencing healthy growth, and attributes this to spending by millennial consumers (born 1981-1996). and Generation Z (those born from 1997 to about 2010).

Sales of bottles priced above US$ 15, approximately, the segment that the industry defines as “premium wines”, showed good results, with “excellent growth and return”. The biggest problem is with wines priced under $15, which McMillan calls “production wines” because, in the US at least, most brands priced under $15 are mass-produced.

What’s missing, argues McMillan, are seductive wines for beginners, bottles that provide a moment of interest that entices consumers to learn more about wine and perhaps begin a lifelong quest for the same pleasures. He cited “wine coolers”, wines mixed with carbonated water and sold in cans, or small bottles from brands such as Bartles & Jaymes, which, according to the researcher, were instrumental in introducing the pleasures of wine to the baby boom generation in the 1980s. and 1990.

Nowadays, according to the report, this category that includes wines in small doses has been captured by hard seltzers and pre-mixed cocktails, although the text suggests that canned wine is an opportunity to build sales.

“There has never been a greater gap between mass-produced wines and premium wines in the wine business,” says the report, which also warns producers of higher-priced wines not to get complacent. “The issues that affect lower-priced wine will eventually affect producers of higher-quality wines as well, if nothing is done to change the current trajectory of consumers.”

Not everyone in the business entirely agrees with the report. Carlton McCoy Jr. —a member of the millennial generation and managing partner of Lawrence Wine Estates, which owns wineries in the Napa Valley and Bordeaux—does not entirely trust the Sovos data, which tracks direct transactions between producers and consumers. He believes the numbers underestimate the number of younger people who like wine and buy it in stores or restaurants.

“I’m not sure whether or not we tracked the wine drinking habits of people in their 20s and 30s three decades ago,” he said, “but the people I work with who are in their 60s and early and age 70, none started drinking wine until after 30. I feel the wine industry is evolving in ways that appeal to many different age groups.”

McCoy said he thinks it’s exciting that the wine industry is diversifying the way it sells and markets sub-$15 labels, which includes packaging and marketing changes.

But McMillan said the wine industry is failing badly in terms of advertising and promotion, which play an important role in piquing consumers’ interest in wine.

He cited figures showing that $122 million was spent advertising wine in 2021 — far less than advertising spend for beer ($886 million), spirits ($533 million) or flavored malt drinks ($533 million). $328 million).

What little advertising is carried out, he said, is aimed at older consumers, “in that white linen tablecloth and luxury house style, in many cases with a nod to the lifestyles of the rich and famous — information that might interest devotees.” of wine and consumers over 60 years of age, but it probably doesn’t interest the vast majority of potential customers”.

“That message is, at best, a waste if aimed at younger audiences,” he said. “At worst, it drives them away from the wine.”

Marketing to younger consumers should reinforce the aspect of sustainability and social responsibility, McMillan said, themes the wine is well positioned to highlight.

Health awareness is an area where wine has already shown some success, with so-called clean wines, a largely meaningless term implying health, a drink that does you good.

McMillan said young people are skeptical of marketing that appears opaque and inauthentic. I’m not aware of any indicators that this applies more to younger generations than anyone else, but visiting a wine bar in any major city offers some support for the idea.

Customers are often young, and drink wine. It is often natural wine, often imported brands, rather than “clean wines”, which can in many cases serve as perfect examples of opaque marketing.

I can go further, regarding the attractions of natural wine. Perception of health is important, but authenticity and a spirit of unpretentious fun are the most crucial elements. If the baby-boom generation portrayed wine as a reward within what Robert Mondavi used to define as the “good life”, —exemplified by prosperity, bucolic surroundings and abundant leisure time—, natural wine is seen as a characteristic of any life. It is a basic consumer product of everyday life, not a product that people should aspire to.

McMillan suggested an ideal selling point for the wine: “Our wine is made from organically grown grapes and contains natural yeast, natural and added sulfites for freshness, and less than 1% residual sugar from harvested grapes. has 140 calories”.

It’s an attractive proposition. Only one element is missing: the price. I can guarantee that few, if any, organically grown West Coast wines produced with natural yeast will sell for less than $15, a price that is essential to attract new consumers, even as younger consumers are buying more. luxury goods, now.

At the start of the pandemic, the New York Times recommended 15 wines, all priced under $15 a bottle. Only two were Americans: one from the Finger Lakes region of New York and the other from Oregon. In the “20 for under $20” column, it’s getting harder and harder to include West Coast wines without repeating nominations from the past.

There are plenty of cheap American wines out there, of course. But for the most part, they’re not particularly good, and wineries struggle to compete with imports, especially from historic wine-producing regions.

The reasons are clear. Land and, especially on the West Coast, labor are more expensive in the United States, particularly in places suitable for wine production. Much of California’s cheap wine comes from the Central Valley, a warm, flat area dedicated to quantity over quality. Many of the wines produced there are mass produced, low cost, downgraded derivatives of higher quality wines.

Consumers looking for American wines can find expensive, labor-intensive Cabernet Sauvignons, Chardonnays and Pinot Noirs made to the exacting standards of Napa and Sonoma, for example, and Cabernets, Chardonnays and cheap pinot noirs produced with technology and using gimmicks to imitate the expensive bottles.

In contrast, Europe is full of family wineries in “appellations” [regiões] little known, who grow unknown grapes well adapted to their lands. These wines express heritage and tradition, and can often be produced at lower cost than American wines of similar quality.

But they are at a disadvantage. If young people, or indeed anyone with little wine experience, want to order a glass of wine in a restaurant, they are more likely to order a glass of chardonnay, a well-known variant, or even a mass-produced Italian pinot grigio, in instead of, say, a grillo from Sicily or a berry from Bairrada, from Portugal.

As a result, Americans are perhaps paying $15 to $20 for a mediocre glass of wine, which is sad, as wines purchased by the glass are a perfect opportunity to get to know the drink. Otherwise, the same money could be earmarked for a top-notch cocktail or craft beer, two higher value propositions.