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A Bubbling Relationship: Cava & Millennials

Cava - Sparkling Wine SpainEditor’s Note: Lindsay Holas, a student at the Groupe ESC Dijon Bourgogne school, recently pitched a rather intriguing marketing observation among the Spanish Cava industry. We liked her take on it and offered the Catavino stage to show how Millennials genuinely interacted with the Spain’s sparkling wine, and where the industry might be able to take away some useful tips!

Champagne. For centuries the name has evoked images of glamour, prestige, and celebration. For most, this bubbly concoction is reserved for special occasions, but in Spain the consumption of sparkling wines are not so limited. Last November a friend and I were in the small Catalan city of Sant Sadurní d’Anoia, the heart of cava sparkling wine production.  We found our way to a small café with just a few small tables and bar stools and ordered some sandwiches and coffee.  The cheerful café owner served up homemade sausages and pan con tomate (traditional bread slathered with fresh tomatoes). As we devoured our breakfast, he left and returned to the table with two flutes of golden, bubbling cava- “this is much better” he said placing them down next to our coffee cups. Indeed it did hit the spot and what a way to kick-off the day! The gesture represented the vivacity and relaxed manner in Spain.

This is one of the great things of Cava. At a fraction of the price and of a respectable quality, it is great option for everyday occasions. Not being luxe can in fact stand to be strength. Low price, however, and perhaps a lack of quality regulation has led to a different impression however.  In November Decanter published an article regarding a growing movement for Spanish sparkling wine producers to leave the Cava DO. The logic of this move being that the name has come to be associated with low quality and low prices, making it difficult for producers to survive in the commercial market. This has motivated some producers to opt for labeling “Spanish Sparkling Wine” or even apply for new DO status in an effort to differentiate themselves. This is hardly a solution. Since the adoption of the Cava DO following EU regulation over the use of Champagne on labels, the term has grown to be synonymous with Spanish sparkling wines in the consumer mind. So at this point I question the real impact this small change on the label can really have.

A more important question to be asked is who is Cava being marketed to? During an interview with one of the largest cava producers it became evident that problems in the region ran deeper than DO classifications. When questioned about their social media campaign and recruitment of younger consumers, the response was, “cava consumers are older. Young people don’t want to drink cava.” I was stunned. Yes, they were on Facebook and Twitter, but the message is directed at a market other than the Millennials I had assumed. For all the money being spent on new marketing campaigns, the focus remains on older consumers. For example, Cava producing giant Freixenet‘s promotional efforts to elevate the style, elegance and overall prestige of the brand have all been in line with the idea of premiumization, but are remaining largely focused on using this image to appeal to an older generation and entering in a more “champagne-like” category.

Now the current issues with price and quality perception seem a bit clearer. Older consumers tend to drink less frequently and are more frugal than the upcoming Millennial generation. Of course if one is focusing on selling to this group price sensitivity will be a consideration. Continuing to perpetuate an image directed toward this group, however, will prove to be detrimental. Prices of cava are already dangerously low and the added image problem between generations may be the final straw.

Millenials ,those currently aged between 21 and 34, make up over half the world population and are set to reach their economic peak in the next 10-20 years. In the US alone, Millenials total 80 million people, a staggering three times larger than Gen X and second only to Baby Boomers who will be moving into retirement and adopting more frugal consumption patterns [ref]Moezidis, N., & Portnoy, J. (2012, June 28). Attracting Millenials With Your Wine Program[/ref]. In the next 10 years, Millennial consumers will make up 40% of American 21 and older market [ref]Nielsen. (2011). Millenials redefine the alcohol beverage landscape. From Nielsen [/ref]. The sentiment was echoed at a conference recently held by the Luxury Institute, at which they stated that “affluent Millennials will be moving into the prime of their luxury consumption years as baby boomers are moving out [in the years to come]” [ref] Shea, E. (2013, January 17). Luxury Institute CEO: Affluent millennials are target audience of the future. From Luxury Daily [/ref]. While historically young professionals have displayed rather strong price sensitivity, today’s Millenials are armed with higher disposable incomes as a result of continued parental support and lack of housing debt  [ref] Duke Greenhill Partners. (2013, February 10). Gen-Y Millennials Luxury Spending Trends [Infographic]. Retrieved from The Idea Factory: Greenhill + Partners [/ref].

Millenial Charts

It must also be considered that this group will soon be reaching its optimal disposable income level and more likely to spend more on wine and other luxury goods in the future. There is a growing sentiment to live for the moment and “have fun while growing up” instead of saving for an uncertain future as past generations have done [ref]Faw, L. (2012, October 2). Meet The Millennial 1%: Young, Rich, And Redefining Luxury. Retrieved from Forbes [/ref]. Wine consumption has been on the rise with Millenials over the years, jumping from 10 percent in 2004 up to 17 percent in 4 years [ref]Resnick, E. (2008). Wine Brands: success strategiess for new markets, new consumers and new trends. Palgrave Macmillan.[/ref]. Today wine purchases account for approximately 20% of alcoholic beverage purchases [ref] Moezidis, N., & Portnoy, J. (2012, June 28). Attracting Millenials With Your Wine Program [/ref].  This shows that the group is already interested in wine and there is considerable opportunity for wine producers struggling to capture an eligible market due to the intense international competition and decreasing consumption in historic markets. It can also be said that choosing to market to Millenials will ultimately have a pump-up effect, as they impose their influence on today’s 35-74 year olds [ref] Boston Consulting Group. (2012). The Millenial Consumer: debunking stereotypes. Boston Consulting Group.[/ref].

For the time being, some lower cost Cavas are in perfect position to introduce their product to this younger demographic. In the long-term however, companies must be wary of the cost/quality perception and also prepare to meet a strong demand for more luxury goods  [ref]Nielsen. (2011). Millenials redefine the alcohol beverage landscape. From Nielsen [/ref]. The fact that the Cava DO producers have been focusing on exporting lower-grade cava for many years now, positioning it as a “cheaper alternative to champagne” makes it difficult for smaller, quality producers to sell. Though the enduring recession may temporarily help inflate sales of these less expensive brands, the future is quite uncertain.

Cava ValueThe issue comes down to product positioning and promotion. Strategies need to re-vamped to ensure long-term survival. For instance, on-premise sales could serve to elevate the more premium brands that are demanding higher prices and tie the brand to the desired degree of luxury while less expensive brands can position in different atmospheres and gain inroads to a more relaxed group of drinkers that will appreciate it differently.

Promotion too needs to be targeted differently to include younger Millennials. Champagne house Veuve Clicquot has been exemplary in its media campaigns which keep the brand luxe while increasing its appeal and aspirational qualities in what I would pin as: young, fun and glamorous. The message is clearly directed at Millennials, but does not exclude older consumers by any means.

Instead of positioning cava as the “cheap alternative” to Champagne, a more effective strategy may be recreating the category and taking a cue from their centuries of success. Individuals can do this by elevating the brand name. That way, it is not simply “cava” but the brand that influences the consumer decision. While it can be said that large producers are responsible for the cheapening stereotypes, they have also been the most successful at differentiating their brands. With the name already established and the necessary distribution channels available, repositioning the brands to target younger consumers should not be a difficult task. To keep products commercially viable, quality should not be compromised, nor should the price.

Younger consumers are willing to spend, but want to be reassured that it is worth it.

Cheers,

Lindsay Holas