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The Penny Plan

On Thursday I wrote about the significant challenge of “core” consumers representing such a small slice of overall wine consumers, particularly related to high-end winery sales sustainability. 

It’s pretty simple, if people are trading down, and there is only a small percentage of wine consumers who are considered “core,” drinking wine daily or several times a week, when those people abandon or siphon away from the over $15 price segment most of the small production wine industry shakes like an 8.0 earthquake has hit.

At the same time, there is an ongoing vigorous debate in California about a tax hike on wine and alcohol.

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The post I wrote received a ho-hum response.  The tax issue in California is one that incites vigorous debate.  While the two – my post and a much broader alcohol tax issue aren’t completely analogous, they are loosely interrelated.
I can’t help but be reminded of a February email exchange I had with John Gillespie, President of Wine Market Council, who produces the research on wine consumers, “core” and otherwise.

I asked:

Based on your experience with campaigns in trying to make wine a more casual part of everyday life, what are the barriers to creating large scale consumer mindshare in the same vein as what the Food Boards like beef, eggs, and cheese do with advertising?

Gillespie observed:

Back in 1989-90 there was a mandatory wine commission in place which supported an advertising test market campaign put in place by Wine Institute.  The campaign failed and many divisions among producers were created.  From that point forward, it has been understood by all major players that only a voluntary contribution plan could work, but even on that basis there has never been sufficient agreement or support to do a national advertising campaign.

He continued:

At Wine Market Council, we’ve accepted the reality of the situation and now focus our more modest budget on producing valuable consumer research for the industry …

A lot of time has passed since 89-90.  I was a junior in high school, looking for scarce night moves and paradise by the dashboard light, Nirvana and Pearl Jam hadn’t yet hit it big and hair metal, now enjoying a renaissance, hadn’t fallen out of favor.  19 years ago is a long time ago ... 

I can’t help but wonder if organizing support around an industry campaign aimed at the positive lifestyle and health benefits of wine ala ‘Got Milk’ and other food boards isn’t a good idea whose time to revisit has come.

Again, by my reasoning, there are not enough consumers to support the number of domestic wineries and continued sales growth in the high-end.  Creating actionable mind share to convert “marginals” to “core” consumers seems like a reasonable and healthy thing for the wine industry to rally behind.

The counter-argument might go, “why do this, Millenials love wine, they’re our next generation consumer.”  Yeah, they are.  And, they are also the next generation consumer for the cocktail culture and craft brews, too.  You don’t think every packaged good company looks at Millenials as the growth savior?

Maybe it’s time to look at a winery opt-in “Penny Plan” whereby a penny goes into a fund for every bottle sold to support broader market advertising and mindshare creation. 

Heck, pass it to the consumer and round up pricing, encouraging retailers to charge $0.01 instead of .99, while the actual funding takes place at every level of the value-chain, the winery level, the distributor, the retailer and the consumer. 

I think we have to do something, anything.

This is a hypothesis on my part, but the increase in volume and per capita consumption is based on Gen. Y taking to Y and drinking more while Gen. X adopts wine a little bit later in life, yet, converting this activity from casual affinity to orientation seems like an imperative, a mandate, not hopeful thinking.

As I noted, it would seem that a rising tide raises all ships, except in this case where increased wine consumption, IS NOT creating a rapid acceleration of “core” consumers, at least not to the extent that creates long-term health.

Is it hyperbole to say that thousands of wineries may hang in the balance?



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Posted in, Wine: A Business Doing Pleasure. Permalink | Comments (3) |


Comments

On 04/19, Colleen wrote:

Friends and I were at the VinoCruz winebar and shop yesterday, where they only sell Santa Cruz Mountain wines. Small producers, great quality, not cheap. The owner (J-P, who’s a sweetheart) was very appreciative of our business. I can see why if “core” consumers are scaling down their per bottle cost. As an occasional wine buyer and drinker, I haven’t yet reached that point! Thanks for this perspective ...

On 04/20, Dylan wrote:

I like your thoughts on this, Jeff. I’d be curious to see what happens with messaging aimed at buoying the entire product category—or, put another way, what would happen if Yellowtail wasn’t the only wine talk on mainstream TV?

Of course, a major issue with this idea is that it’s mainstream TV—for small wineries to feel the effects through a general product category push, the effect may be negligible. It would certainly do great things for the category, but it’s a long-term investment that’s difficult to predict: “If we attract more Millenials to our spirits category of wine, how long will it be before they start exploring all the low-yield, ultra premium wineries?”

The ones getting hit hardest may be clouded by the short term view and see this as helping more mainstream wines garner more of the mainstream population, rather than a turnover into core consumer.

On 04/21, .(JavaScript must be enabled to view this email address) wrote:

I tend to agree with Dylan.  The problem with focusing on health benefits is that one can get the same antioxidants from a bottle of Charles Shaw as from something pricier.  Getting people interested in ‘entry-level’ wine, for lack of a better term, will likely result in some of them gravitating to the higher-end wines, but are the high-end wineries willing to subsidize a temporary increase in market share of mass-market wines in the hopes that some of those drinkers will eventually become customers? 

And because of the relatively high per-serving cost of wine at $15 a bottle, is it unreasonable to expect that such a campaign might convince beer or rum & coke drinkers to switch to wine, but won’t result in those drinkers purchasing any more of the “good stuff?”  If a consumer simply shifts his or her alcohol budget from beer or liquor to wine without increasing it, that consumer sticks with wine that costs $7 to $10 per bottle.  How do you convince that customer to switch to high-end wine without either drinking less wine or spending more?


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