…a very responsible blog…catavino.net…[it's] refreshing to see such professionalism.
Robert M. Parker Jr.

Wine Future Conference: Brief Overview of Day 2 – La Rioja, Spain

winefuture

Editors note: Wine Future – This is the fifth post from Wine Future LIVE www.catavino.net/wine-future-live – read Day 1 morning and Day 1 afternoon, Parker Tasting and Ryan’s Speech on the Future of Social Media and Wine. We’re doing our level headed best to report to you exactly what we saw and experienced at one of the most important wine conferences in 2009. What you see below is brief summary of Day 2, focusing on a few sessions and written by Michael Oudyn. To see a more expansive report, check out the Live blog. We’ll be posting more articles and photos in the next few days. If you have any questions however, please leave them in the comments below. Cheers and thank you!

The Crisis in the Off-Trade—New Strategies
Mel Dick began by explaining some of the complexities of the US wine market with its decentralized system. After the repeal of Prohibition (1933), individual states were given authority to regulate alcohol including its importation which led to an importer’s nightmare. Some states have state control monopolies, others free markets, but all of the fifty are different. Dick sees a bright future for Spanish imports, even for Sherries. Most of his talk focused Spanish wine imports and especially the role of Hispanics. Much of his optimism is based on his analysis of this market; it is younger than the norm and has a disposition to drink Spanish wines, although they still drink a little more Italian wine. There are a few pitfalls: the Latin market comes from background of beer and spirits and getting them interested in wine can take tact. The key is advertising and being sensitive to the differences within the market and avoiding treating them as a homogeneous group.

Justin Howard-Sneyd analyzed recent trends and speculated on the future of the British market. One trend is clear; the role of wine merchants has decreased dramatically, while that of the supermarkets has risen. Discounting moves the supermarkets and has led to decreasing profitability. More wine is sold on promotion than any other grocery product. Looking backward is easy, it is more difficult to look ahead. “The future, according to a scientist, will be exactly like the past, although more expensive.” As in many countries customers are spending more money on nice food and wine then eating it at home.
He sees two scenarios. The ”bad one” is that the younger generation which is drinking more wine at the expense of the more traditional lager might switch in the future to new drinks such as lower alcohol spritzers or “Frankenstein wines” such as Chardonnay accented with peach and green tea. And health concerns and legal problems might reach a critical mass, so that supermarkets might decrease shelf space.

In the “good future”, simplified European regulation leads to easier commerce and health concerns lead to a “less-but-better” mentality so that consumers drink less but better quality at a higher price. There will be more independent dealers with significant social networking and wine tourism. Wealthy winemakers will buy into ownership schemes. In any case “the best way to predict the future is to invent it.”

Quim Vila of Vila Viniteca gave a little Spanish-wine history lesson. In 1993 (the old days) Priorat and Ribera del Duero were just getting started and Spanish wines hadn’t changed much. Then came pioneering sales of wine futures, which entered Spain late, among other innovations.

Like many countries, the crisis has driven down the volume of bottles sold, as well as the average price per bottle. How do you confront the crisis? By giving more care to each client, using more technology, trying to cut delivery time, and a keeping a highly trained staff. Some of Vila Vinoteca imaginative promotions include, La musica del vi and wine tasting in pairs with a prize of 12,000 Eur.

Christian Barre feels that things are not that bad, especially for Spanish wine; the crisis has meant changes in consumer behavior. Price is important, but brands are even more so, allowing ample room for growth.

Interestingly people are cutting less off their wine budgets than their clothing budgets, for example. There continues to be a very fragmented market. Off-trade is going to fewer and fewer players (Wal-Mart, Carrefour). Supermarkets are growing and the success of international brands like Jacob’s Creek, Campo Viejo, and Yellow Tail will continue to grow.

Undoubtedly, a clear strategy for getting into the off trade is needed if you want to go from a hobby to making some money. But Barre warns against “quick wins” at the expense of long-range health. Giving exclusive rights might seem a good idea now, but down the road, your options might be severely limited. Consumer education through tastings and the internet are key to protecting brand identity. Spanish wines should improve packaging strategies by using better labels and more attractive names for products; the name of a grandfather is not necessarily the best in the market place. But he cautioned that a clever design is not enough; the label should ”have authenticity and congruence with what the brand is trying to say”.

Emerging Wine Markets

With consumption down in traditional wine-drinking many are looking to Asia as a magic fix in a difficult world market: it has a huge population with a rapidly expanding per capita consumption.  But Asia may not be the panacea it seems. Throughout Asia there are few accurate statistics about importing or consumption and this lack of clarity is exacerbated by the huge black market and smuggling. Throw in language problems and there as many challenges as opportunities.

Lisa Perrotti-Brown sees Asian markets as “unique and dynamic” and each country is equally interesting, but she concentrated on Japan and Singapore, where she has actually lived.  Japan is somewhat unique in that it is monocultural; it is 98.5% Japanese.  Beer, sake, and low-malt beer (which is 2% alcohol and used to avoid taxes) are ahead of wine. The trade is still centered in Tokyo and sparkling wine is still booming. One Japanese curiosity is that to have a wine called “Japanese” it need have only 5% Japanese grapes.  France still has about 50% market share and the returning strength of the Yen is helping imports. But the crisis is worse in Japan than in any other Asian country which has lead to lower consumption of upper-end wines.  A new wine phenomenon, in Japan at least, is the supermarket which has just gotten the right to sell wines. Now even the 7/11 stores are selling wines which is appealing to housewives because of the intimidation factor.

Singapore is perhaps the most multicultural culture where 71% of the people speak English, the highest percentage in Asia. Per capita consumption is very low: 51% of the population drinks alcohol once less than once a year, in clear contrast to Japan where drinking is a big part of business culture. Australia is the leader by volume due in part to extensive mutual tourism.

Don St. Pierre says “the future of wine” is the Chinese market. Volume is increasing especially in “second tier-cities”. There is a trend from local wines to imported wines in local restaurants. The challenge is that there will soon be more quality Chinese wines, and the Chinese government is encouraging drinking Chinese. Another challenge the inefficient and fragmented distribution/wholesale channels. There is a need for consumer education and brand awareness;  little understanding of wine beyond the fact that it is healthy and fashionable. There is also significant smuggling from Hong Kong and Macau. Laws are vague and can be interpreted loosely by local officials which means that your “personal relationship” with the local officials is key.

Ulf Sjodin points out that we don’t think of Scandinavia as an emerging wine market, but it has some interesting characteristics.  Another traditional beer and spirits consuming country, Sweden consumed more spirits than wine only thirty years ago. On the other hand, Denmark’s per capita consumption is very high (over 32 liters per capita). In Norway, despite fish consumption, wine is mostly red. 55% of all wine sold in Sweden is bag-in-box; only one of three glasses in Sweden comes from a bottle. One of the advantages of bag-in-the-box for Swedes is quantity; Swedes can go to government stores and buy wine in large amounts, allowing for consumption by the glass, rather than by bottle. Another advantage is that brand recognition, crucial in Sweden where advertising is illegal. Bag-in-box allows for greater surface area for advertising and brand recognition. German wines with low alcohol do very well in Norway because taxes drop dramatically at lower alcohol levels.

Dimitry Pinsky explained that in Russia there are strange laws which lump vodka and wine together and consider any wine over 15% fortified wines.  Internet sales are completed banned.  The subject of alcoholism has led to a national campaign which has led to a movement for a state monopoly of alcohol sales.

Branding and the future of the industry

Robert Joseph predicted that there would be fewer wineries and AOCs in the future, as many have no reason to exist. Corks are also going out; “we eat sandwiches with our hands. Why would you put corks in a rosado?” He spoke about “lovebrands”, where brand loyalty is not logical, and brand identity is necessary. Instead of wine education, he advocates just making wine easier. Just as a Chinese menu is incomprehensible, nothing on wine bottles offer simple and standard information. Consumers like labels to be consistent and understandable, so he issued a plea to wineries to provide simple and standard labels across the board. Vintages and regions can be unnecessarily confusing as well. A positive and effective example of branding is the The Douro Boys of Portugal who promote themselves by promoting each other and their region.

He pointed out that you have to have excellent brand loyalty if your consumers are to forgive your periodic “corked bottles”. Van Morrison gives you a lot of “corked concerts”, but he is forgiven because of brand loyalty. The label he points out is your free advertising and he urges putting websites on the back label. He jokingly wondered if producers really want people to visit their website because the website is often written in the smallest letters on the label.

Jeremy Bensen, president of Benson Marketing Group, mentioned the crucial role of social media in “price transparency”, the first huge trend in the industry.  It is “marketing’s turn to shine” after the great technological advances that have been made in winemaking. Sharing information is the wave of the future and social media is not just a social network: it is “definitely” right for wine. Tools like Twitter and Facebook are almost free and are in common use in a demographic which is younger, wealthier, and female–all of which tend to be wine buyers. A second trend is that “commanding and controlling of brand” has changed; we now have a two-way dialogue with consumers. Twitter provides an amazing reach for winery promotion. You should show how you feel about your product and tell your human story. A two-minute video is inexpensive and does the job well. Millennials are different wine consumers; they tend to go straight to the top instead of going from sweet to white to red.

I-phones are great enablers of transparency since Snooth and Wine-Searcher can be accessed anywhere with and will show you prices for different products at different places. We can’t be absolutely sure of the long-range impact of this, but we can instantly calculate wine markups at restaurants. He speculated that this could push prices up for upper-level wines because of more demand, while pushing prices down for less expensive wines. Through social media consumers can buy more cases with friends and therefore cut individual deals. He ended by wondering aloud at further implications of “borderless, frictionless marketplaces” and asked what other product is “so authentic, so green, both contemporary and ancient at the same time.”

Esteban Cabezas spoke about “inspiration” and “practical approaches” to wine. We really need wines with a sense of place; terroir wines with a real sense of tradition and natural wines. Choosing a wine is very complicated and can bring tension and pain. Building “category” is important. We should try to link wine in with health and with memorable experiences, or try to tell new stories using wine. He said that we shouldn’t fear experimentation and that many individual attempts will fail, as exemplified by 15% of Coca Cola’s products and 10% of Danone’s products fail. He also cited the Douro boys as an example of the benefits of small producers working together to create a brand; they are all different, but all equal.” (photos by by vivancowineculture)

Q&A Panel Regarding the Future of Wine

Reblog this post [with Zemanta]
  • Bill

    Gabriella,

    Thanks for the detailed summary. As one outside the trade, I don’t really think about these things too much.

    I’ve also had 30 years to educate myself about wine, the point being that I’m not the consumer most of these people are trying to woo (I’m outside the 18-54 demographic).

    If education is the key, then the work you and Ryan are doing is helping to pave the way for the next generation of wine drinkers. Keep up the good work.

    Bill

  • http://www.adegga.com Andre Ribeirinho

    Great summary and great coverage of the event. Thanks for taking the time to write such a long (no pun intended) article on the Wine Future!

  • DaveT

    Great work, Gabriella — I know how hard it is to write good summary on the fly.

    I’m a nearly-50 wine geek, so also outside of the target demographic, but that wasn’t always true. I come from a family that simply did not drink alcohol, at all, when I was growing up. My friends were beer-and-spirits types. So what happened?

    1. I had an unofficial college roommate, who squatted illegally in my apartment for a year. He couldn’t afford to pay any rent, so he paid in wines that he’d set aside back when he had some cash. My intro to fine wine.

    2. My best friend, the semi-pro chef, wanted to learn more about wine. Since it’s more fun to share tasting notes (and even more fun to taste together), I kept a tasting log for a year or so, and started reading Robert Parker and Frank Schoonmaker and Hugh Johnson. (God bless Johnson’s pocket guides, in those pre-iPhone days.)

    3. I won a contest (baseball-related, of all things) in the early ’90s, and the prize was 4 bottles of very nice wine — a Stag’s Leap cab, a Navarro dessert riesling, a bottle of Pleiades, and one I can’t remember now. More exposure.

    4. By this time, my natural “if you’re going to do it, do it all the way” personality kicked in, and I eventually became the guy who knows the difference between Amarone and Ripasso, syrah and petite sirah, Vacqueyras and Gigondas.

    There’s a lot of serendipity there. I guess the question for the industry is how to make less serendipity required, or (better yet) how to mass-produce serendipity to create markets. I keep going back to that contest — the combination of contests where you can win GOOD wine, and low-key tastings where you can learn what you both like and can afford, would seem to be a good 1-2 punch.

  • http://www.catavino.net Gabriella

    Thanks everyone for the very kind remarks, but I think it’s important to keep note that I didn’t write the article, Michael Oudyn, a key player on our Wine Future team took that responsibility and we couldn’t have been more appreciative of his great work!

  • Esteban

    Gabriella, I said ONLY between 15-20% of consumer products succeed. Out of 10 new products launched by Danone or Coca-Cola … 8 are retired before the end of the second year. The point is that even companies with huge budget, supposedly well paid talented people, good innovation is really difficult and success rate very very low. Failure is part of the process, and several mistakes have to be assumed.. and should not discourage anyone to try new things

    Nice coverage of the event on-line. Congrat!

    Esteban Cabezas