How to Fix the Problem with Millennials and Wine

The narrative surrounding Millennials and wine has changed. Where previously the focus was on Millennials’ apparent interest in non-traditional wine (read: Not your Baby Boomers’ noble varietals), now the focus appears to be on Millennials’ lack of sufficient interest (read: not buying at sufficient levels) in wine. This new narrative is more worrisome than the former narrative. It appears to presents an existential threat to the American wine industry’s profits.

Remember these headlines:

How Millennials Are Changing the Wine-Selling Game

How Millennials Are Changing the Wine-Selling Game

Millennials Are Drinking More Wine Than Boomers

Now comes this:

“Millennials aren’t yet embracing wine consumption as many had predicted. Damaged financial capacity is a major component, but cannabis legalization and a cumulative negative health message surrounding alcohol have combined to temporarily stall the growth and adoption of wine among young consumers.”
Rob McMillan, Silicon Valley Bank 2019 Wine Report.

“As a category we need to realize we are in a pitched battle for the hearts and minds of the next generation. They are becoming less connected with alcohol generally, for a variety of health and lifestyle reasons. When they do choose alcohol, they now have diverse and interesting offers in spirits, beer and cider….The anecdotal information coming from the trade in the past year or so has suggested that the wine category might be losing traction with its younger drinkers, and the data for this report supports this view.”
Lulie Halstead, CEO of Wine Intelligence

Let’s acknowledge one thing. The reduced rates at which Millennials are embracing wine is not a matter of them not liking wine. In fact, there is no information that suggests Millennials like wine any less than their peers in previous generations. This point isn’t made often enough probably because it’s so obvious. But it’s important to keep in mind as the wine industry looks to do what it can to turn Millennials’ interest toward wine.

McMillan’s diagnosis above is the best explanation for the lack of engagement in wine by Millennials. To put it bluntly, most wine is too expensive for Millennials because their earnings have been depressed by a number of factors that will occupy historians and economists for decades.

But the second thing to acknowledge is this: Millennials will come to wine and their arrival into the premium and super premium category is only delayed as boomers stay employed longer and Gen Xers grab the premium jobs first. But, Millennials and their very large numbers will arrive at the premium end of wine. And when they do arrive in the Napa and Sonoma tasting rooms, they will arrive in large numbers.

The question is what to do in the meantime? Do you focus on them and try hard to draw them to the tasting rooms before they are likely to naturally arrive? Or do you simply wait them out, focus marketing dollars on those who are in the tasting rooms (boomers and Gen Xers) than embrace the Millennials when they arrive?

For the individual winery, the answer depends on their product mix, pricing levels and location. I personally don’t believe that the winery that today chooses to focus on Boomer and Gen X customers instead of Millennials will end up behind the curve when Millennials start to arrive at wineries. Brand loyalty isn’t what it used to be. Millennials aren’t going to remember that “this winery or that winery didn’t market to me when I was 25!”

The better question to answer is what should the wine industry as a whole do now to focus on Millennials? In fact, this is the critical question.

Considering the large size of the Millennial cohort, moving the wine drinking and wine buying needle a couple of points represents a big increase in spending on wine. That, in my opinion (working today to move the Millennial wine buying patterns), is the right job for the wine industry as a whole and something to which the wine industry as a whole and together can and should collectively contribute.

Here we must be talking about an industry-driven and industry-funded collective marketing effort aimed at the Millennial generation. At its base, we are talking about a collectively financed marketing campaign that makes a simple pitch: “Buy Wine”. That message can come in a variety of forms, obviously with digital leading the way, but also including broadcast, radio, events, and display marketing and advertising.

The real fear of those who have been ringing the warning bell that Millennials are not taking to wine in a timely manner is that when they do get around to being the primary source of wine purchases, their dollars will have already been captured by beer, spirits, cannabis and others. An industry-wide and industry-funded “Buy Wine” campaign should be aimed at preventing any sort of permanent migration by Millennials away from wine. The campaign is an insurance policy. But it’s also a motivational campaign that should be aimed at cementing in Millennials’ minds that wine consumption delivers a specific set of personal and emotional benefits that beer, spirits and cannabis cannot provide; that including an appreciation of wine in one’s life is the “indispensable pleasure” and an instrument creating a connection between people and a place.

Convincing a majority of the major industry players (including producers, wholesalers, retailers importers, associations, etc.) to come together to finance and agree on a theme for a collective marketing effort aimed at Millennials is the hard part. The creative part flows from the mission and the product. The cost represents a multi-million dollar effort. The benefits accrue to different segments of the industry before they accrue to others. These are challenges, but shouldn’t be deterrents.


14 Responses

  1. Roger King - January 22, 2019

    I continue to read this graph out of step with the presenters as it also shows wine drinking increases with age (and inherent achieved financial stability.)
    http://wineindustryinsight.com/?p=97221

  2. Michael Barnes - January 22, 2019

    Maybe have the campaign try to nudge Millennials towards making wine consumption with food (e.g. dinner) a habit. Once one develops an appreciation for the combination (with a dollop of history), its hard to ever go back. Plus, it seems like a great launch point for future broadening of the appeal. That is, not aim at the wine as a social/party beverage kind of thing.

  3. Tom Wark - January 22, 2019

    Michael,

    Yes. Because “Wine is the indispensable Pleasure.”

  4. Rob McMillan - January 22, 2019

    Tom –
    I agree with 90% of your perspective and conclusion. I believe we have an Indulgence Gap that is delaying the young consumer’s move into wine and the question should definitely be as you state, “what should the wine industry as a whole do now to focus on Millennials?”

    Where we differ slightly is the point about “they will come.” That’s what I used to believe too because generally young people move from beer to wine over time, but with the age of the cohort now 25 – 39, I have to question not only why they are stalling, but ask the follow-on question, “Will they ever come to wine?”

    It’s not price alone that’s holding them back, but it is a component. Truthfully, the craft spirits business is delivering a more compelling product. There is more ethanol per dollar, and they are creating craft spirits that taste good, are easier to understand (less fragmented) and in bars – as I say – they have mixologists while wine has ….. for in-bar embellishment.

    I want to believe they will come, but given the passage of time and seeing no movement, now I’m not sure. The Mature Generation were beer and spirits consumers. The boomers broke from their parents and drove the growth we’ve seen in wine the past 20+ years. So it can reverse.

    Where we totally agree is if we want to recover from sagging sales growth and lack of millennial interest, we need to do a better job in selling and marketing and that’s an industry issue.

  5. Tom Wark - January 22, 2019

    Rob,

    What I’d like to see is a comparison between boomers, genx and millennial. I’d like to see what percent of beer, wine and spirit each generation consumed in comparison to their percentage of the drinking age population. I’d like to see this for different moments in their aging. Are we sure that millennials are not engaging with wine?

    For example, what percent of total wine consumption were boomers responsible for in 1985, 1995, 2005 and 20015 in comparison to their proportion of the population? What about GenX in 2001 and 2011? And what about Millennials last year? This will tell us if Millennials are keeping up.

    Regarding spirits, they are more fragmented and complicated as ever with numerous different kinds of offerings than in previous years. But I don’t think this plays into the issue.

    If my the “Mature” generation you are referring to the generation prior to boomers (1928-1945) consider that when the last “mature” came into their legal drinking age (1963/4) there was not much of a wine industry or wine country to visit and their parents drank spirits and beer. I don’t think it can reverse, as you say, because the circumstances that allowed the Matures to ignore wine don’t exist anymore. If what I say is the case, then you need to formulate an explanation as to why Millennials by give up on wine (not altogether obviously, but in part large enough to give the industry reason to freak out).

    I don’t see spirits and beer as being so much more compelling to Millennials other than your explanation that there are more ethanol per dollar in spirits. Moreover, wine has a much more concrete connection to the land and environment and culture than beer and spirits.

    I don’t see Millennials giving up on wine. I see them as not being able to afford good wine right now. But they will be able to.

    By the way, you are responsible for keeping me up way past my bedtime a couple nights ago with that excellent report. Kathy had to tell me to “turn the ipad off please!”

    Cheers.

  6. Eduardo - January 22, 2019

    Rob,

    I run a small wine shop in a northern California community of about 150,000. We have an on-premise license and offer daily tastings in addition to a wine by the glass program. I maintain a “something for everyone and every budget” inventory approach consisting of over 9,000 bottles. We have an active, local wine club and host weekly events. 65% of my customers range in age from 21 to 40 and they Moscato me to death! Other than specific availability, they are less concerned with price and more interested in ABV. – which is odd, given the low ABV in our most popular Moscatos. If I were a producer and wanted to increase my sales to the Millennials, I would shift my focus to high residual sugar wines and leave the dry wines to the boomers.The store next to me sells over 180,000 high-sugar, carbonated “fountain” beverages a year. Kids now grow up on sugar – lots of it in fast food, snacks, breakfast cereal and beverages. No wonder they find most (dry) wines unattractive. Unless a winery has the checkbook to be the lead sponsor for next year’s Bottlerock, they should focus more on what millennials actually drink (or might drink).

  7. Bob Henry - January 22, 2019

    “Disposable” and “discretionary” income for Millennials is a challenge.

    From The Wall Street Journal (posted January 16, 2019) online:

    “Fed Says Student Debt Has Hurt the U.S. Housing Market”

    URL: https://www.wsj.com/articles/fed-says-student-debt-is-u-s-hurting-housing-market-11547657473?ns=prod/accounts-wsj

    By Josh Mitchell and Laura Kusisto
    Staff Reporters

    Excerpt:

    “The Federal Reserve has linked rising student debt to a drop in homeownership among young Americans and the flight of college graduates from rural areas, two big shifts that have helped reshape the U.S. economy.

    “The effect of student debt on the economy has been debated in recent years, as the total has soared to $1.5 trillion, surpassing Americans’ credit-card and car-loan bills. Congress and various White House administrations have pointed to federal student loans as a key way for Americans to pay for college and boost their career earnings. Critics have said the debt is damaging the economic prospects of a generation of Americans.

    “The Fed research published Wednesday didn’t offer a verdict on those assertions. But it showed that student debt is linked to key life decisions for some — including whether to buy a home and where to live.

    “Homeownership among people ages 24 to 32 fell 9 percentage points, to 36% from 45%, between 2005 and 2014, the Fed said. While many factors affected the homeowner rate, the Fed said 2 percentage points, or about a fifth, of the decline was tied directly to student debt. That translated into 400,000 borrowers who could have owned a home by 2014 but didn’t because of student loans.”

  8. Bob Henry - January 22, 2019

    I question Tom’s assertion that:

    “. . . Millennials . . . when they do arrive in the Napa and Sonoma tasting rooms, they will arrive in large numbers. The question is what to do in the meantime? Do you focus on them and try hard to draw them to the tasting rooms before they are likely to naturally arrive? Or do you simply wait them out, focus marketing dollars on those who are in the tasting rooms (boomers and Gen Xers) than embrace the Millennials when they arrive?”

    This assumes that visits to “wine country” can drive national market consumer purchases.

    I would project that less than 1% of all wine drinkers have visited ANY winemaking region.

    Wine tourism is a lifestyle indulgence of the fully committed wine hobbyist . . . not the beginner or novice consumer.

    Winery tasting room visits aren’t going to “move the needle” on retail consumption. DTC is still a small percentage of the national market.

    Citing the “Wines & Vines” trade periodical chart titled “Where Do Frequent Wine Drinkers Buy Wine?” by Lewis Perdue in his Wine Industry Insight piece titled “Wine Has A Problem Because It Is ‘Sold.’ Badly. Or Not At All” . . .

    URL: http://wineindustryinsight.com/?p=59254

    . . . a high percentage of retail wine sales are transacted in grocery stores.

    A retailing environment that Perdue characterizes as “non-[wine] expert-equipped” outlets.

    Grocery stores don’t sell the “fine” wine brands that Tom has in mind when it invokes Napa and Sonoma tasting rooms.

    Those brands are sold in expert-equipped “fine” wine stores — the type (with wine tasting bars) alluded to in the Wine Opinions survey chart titled “[Retail] Purchase Influences”:

    URL: https://1.bp.blogspot.com/-ZgHHdvhpGvg/WJvNd5wYcyI/AAAAAAAAGvU/87oXLHPBmSwICHyxOyp6dafu0EJAlReAQCEw/s1600/influences.tiff

    What will move the needle is “fine” wine retailers doing a better job of fulfilling their historical (but increasingly abandoned) role as mentors and “opinion leaders” and “taste makers” to the buying public.

  9. Bob Henry - January 23, 2019

    Tom, what you wish to see are INDICES of consumption, segmented by age group over the arc of time:

    “What I’d like to see is a comparison between Boomers, GenX and Millennial. I’d like to see what percent of beer, wine and spirit each generation consumed in comparison to their percentage of the drinking age population. I’d like to see this for different moments in their aging. Are we sure that Millennials are not engaging with wine?

    “For example, what percent of total wine consumption were boomers responsible for in 1985, 1995, 2005 and 2015 in comparison to their proportion of the population? What about GenX in 2001 and 2011? And what about Millennials last year? This will tell us if Millennials are keeping up.”

    You would have to approach data miners such as IRI and Nielsen for that grocery store point-of-sale (read: cash register transaction) information.

    And they track grocery stores and “big box” general merchandise retailers (e.g., Walmart, Kmart, Target).

    IRI and Nielsen don’t track “fine” wine stores.

  10. Millennial - January 23, 2019

    SVB’s data is not sufficient. Millennials are buying more wine, but not from SVB customers. Has anybody asked all of the entry level online wine clubs about their demographics?

  11. Brian - January 23, 2019

    I don’t think it’s as simple as just saying “buy wine”. Millennials have grown up being bombarded with ads and in my opinion are somewhat immune to them. If you look at recent trends such as Moscato, it didn’t gain popularity because Gallo or Trinchero plastered ads everywhere, it gained popularity because rappers were talking about it.

    I think advertising targeting millennials needs to be more subtle. Lebron James posting a picture on Instagram of one of his favorite wines can do more for a brand than a pop up ad on a website. It validates the product.

    I don’t think the big brands are using social media well. You don’t need a professional photographer and beautiful people enjoying your wine to appeal to millennials. People see right through that. Just make it authentic.

  12. Rob McMillan - January 23, 2019

    Millennial –
    You are presuming the data about cohorts come from our wine clients. It doesn’t. Its from a survey of 800-1,200 wineries, representing millions of consumers. Its statistically significant in representing consumption in price points and by winery sizes. No data is perfect and our aren’t either. I know the weaknesses and we try and be transparent about that. I also don’t depend just on our own research.

    I used a second source that I reported on that reports young consumers even less engaged with wine. That is from a big data house.

    You might also be curious to read Wine Intelligence’s report that was just released last week and came to the same conclusions from a disparate set of data. But you are also right on some of your points.

    Millennials are buying wine and to the extent they are, huddle in the $8 – $14 segments. The issue I bring up is the young consumer is not engaging with wine at a significant enough pace to offset the reduction from boomer consumers. Millennials are drinking more craft beer and spirits versus all the other cohorts, and while that’s normal for younger consumers to do so, with the oldest millennials now 38 and average at 30, we should expect better engagement.

    I’m not bashing millennials. I’m bashing the wine industry for not meeting the young consumer’s desires and looking for solutions to the way we market and sell so we can reach that cohort.

  13. RH Drexel - January 24, 2019

    Maybe if we realize millennials are just people who are just trying to live their lives as best they can, instead of banging our heads against the wall about we can make money off them, then maybe they’d read an article that sparks their imagination about wine, instead of a slew of articles about whether or not scores matter, if natural wine is good or bad, etc. etc. We are a divided industry that is largely uninteresting to read about.

  14. Tom Wark - January 24, 2019

    RH,

    I think you might be overstating the issue of what’s available for Millennials to read or discover when it comes to wine. They can find any and everything they want to know about wine and perspective after perspective on the drink. From Loam Baby, the Wine Spectator and newsletters to newspaper articles, natural wine-oriented columnists and wine bloggers that focus on things like scores, the good or bad of natural wine and the politics of wine.


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