Trends in the Wine Industry: A Tale of Two Types

MoscatoIt's reported in today's New York Times that marketing behemoth Omnicon is involved in starting a new agency aimed at spotting "emerging trends in popular culture and take advantage of them by creating and distributing content sponsored by brands and products."

Trends. They are an interesting phenomenon. Most often they are spotted when they are unstoppable, rather than when they are emerging. This is particularly the case in the wine industry. However the nature of the wine industry makes for two distinctly different kinds of trends: Market trends and product trends.

Product trends in the wine industry are extraordinarily slow to develop—unless helped along by by significant cultural events. Consider the trend toward lower alcohol. There does indeed seem to be a trend toward lower alcohols in wine, but it is happening at a very slow pace. Despite the report from Fiona Beckett that research at Pro Wien shows that the biggest issue for consumers in China, the UK, Germany and the U.S. is lower alcohols, there is no massive or even semi-modest attempt by producers to assuage the desire among consumers to drink lower alcohol wines. In fact, we've been hearing about the move to lower alcohol wines for many years now. Yet, there is no discernible evidence that producers are widely attempting to bring alcohol levels down.

Consider the idea of unoaked wine. Again, we have been hearing about this trend for quite some time. And although it is easier to find "naked" or unoaked wines, they are hardly making a big splash in the marketplace. They are not a "category" that is newly developed or one that is being championed by consumer buying habits in any significant way.

New directions and new trends that impact production must usually be slow for the simple reason that making wine differently is not something that can happen over night, particularly fine wines. We need new vintages to produce something different. In addition, most fine wine producers are not easily swayed or cowed into doing something new. For this reason, any significant change in production trends need real help to actually happen.

The amazing rise in Moscato sales currently underway and the earlier trend where Merlot fell by the wayside are both examples of production trends being helped along significantly by that great motivating force called "popular culture". I don't know anyone who believes the big fall off in Merlot sales and the accompanying increase in Pinot sales would have been nearly as severe had the film, "Sideways," not played a key role in those trends.

Where Moscato is concerned there is no question that its popularity within the hip-hop community has played a critical role in its rise. According to Wendy Nyberg, Director of Marketing for Trinchero Family Estates, the market for Moscato is being driven by the “urban, young, hip and online. There is a viral enthusiasm for the wine on Twitter and through pop culture.”

It appears that until L'll Kim starts demanding lower alcohol wines, this trend will continue to move slowly.

But then there are "Market Trends". These are something different than production trends. Two examples demonstrate how such trends can move much faster than trends having to to with production.

Consider the 2009 Bordeaux vintage. We have seen how reviews and ratings can change the perception and value of a category. Robert Parker's recent reviews of the 2009 Bordeaux vintage, with nineteen 100-point wines and an overall assessment of the vintage as among the best ever, have resulted in a dramatic trend of increased pricing for the category.

As reported in The Independent, "Wine investment group Vin-X estimated that Parker's scores added a staggering $100m to the value of the 2009 vintage, which may trickle down to other years."

It has been suggested by a number of folks of late that Robert Parker's influence and his ability to alter the marketplace is waning severely. Further, the suggestion is that wine critics are less and less influential in general and that their power is waning. I don't see this trend playing out as suggested by many commentators.

For another example of how "market" trends move faster than production trends, consider the issue of marketplace regulation. We are in the midst of a burst of regulatory changes that will have considerable effect on the marketplace. Washington State, Pennsylvania, Connecticut, Kansas, Utah, Idaho and Georgia are in the midst of making or considering significant changes to their regulatory systems, either through legislative efforts or ballot box results. Driven either by the needs of marketplace actors or by the economy, states have all of a sudden become quite willing to change or alter they way they regulate alcohol. This translates into significant changes in the way wine is sold. What appears to happen, as far as I can tell, is that as a few states successfully change their regulatory practices, this spurs other states to investigate the same. While political changes can happen slow, they have the potential to happen much more quickly than product-based changes because they are not dependent on waiting for fruit to ripen or for winery owners to alter their business plans.

The new Omnicon marketing group, named "Sparks and Honey", will, according to its founder Terry Young, "identify and see pop culture trends when they’re starting and incorporate our brands early in the process.” This is possible, he says, due to the emergence of social media that allows earlier identification of pop culture-driven trends.

One wonders if any wine industry companies could take advantage of the kind of work that Sparks and Honey will be doing. Certain industries are driven significantly by consumer trends and even the active creation of new trends. I'm thinking here of fashion and cosmetics. I'm not sure wine is an industry that can either take advantage of consumer trends or actively push them. That said, the large wine companies such as Gallo, Constellation, Fosters, and others may in fact want to take a look at what the likes of Sparks and Honey can do for them.


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