July 12 2008
When purchasing wine at retail it is frequently organized by varetial, flavor intensity, price, country of origin, and by food pairing. Wine is even grouped in an indiscernible way by consumers as in, “I have no clue how to find anything in this store.” However, there is one simple no-brainer way that is infrequently, if ever, used in wine retail merchandising.
What is this genius merchandising technique so mystifyingly simple that it has eluded the grasp of wine retailers for decades?
Duh. Wine is never grouped by winery.
This simple fact confounds me. You can go into a store, scan the shelves, and see wine from an individual winery in seven different spots, but never together.
Consider:
• Research indicates that 97% + of people purchase wine at retail without any preconceived notion of what kind of wine they are going to buy.
• Wineries around the world try to build brands so they can be memorable to a wine consumer to spur affinity and a repeat purchase.
Yet, I have never been in a single wine retail store in the country that features and highlights the winery. Yes, the actual winery with all of the winery’s wines in one spot, telling the story of the winery that the winery has so painstakingly tried to craft.
Now, I’m not talking about a grouping of Yellowtail on end-cap, I’m talking about a wine retail shop that consistently and as a matter of business practice merchandises wine varietals from a winery leveraging the winery marketing as a merchandising mechanism for retail purchase decision. You would think that featuring a picture of the winery next to a grouping of the winery’s wines is a no-brainer. Not so.
Talk about a disconnect in the wine industry value-chain.
Yet, a quick scan of my Indiana Beverage Journal, the wholesale blue book of wines in distribution in the state tells me that, yes, most wineries, carried by single distributors, do in fact have multiple wine SKU’s in the state.
A few years back I wrote a business plan for a wine retail concept that played off two fundamental concepts – make wine retail like a winery tasting room. Sample the wine (I was planning to use an Enomatic) and group wines together by winery. There would be fewer overall SKU’s in the store, but the store, overall, would be merchandised in a much chic’er way—like a combination of a Starbucks and an Anthropologie store.
It would be like bringing the winery tasting room experience to retail.
The net result in my mind was to leverage the equity that the winery had built up, use their desire to build their brand at retail and present the winery in the same way that they try to present themselves at their winery. In doing so, an average store might only feature 60 - 80 wineries at a given time with 4-10 wine varietals per winery.
In doing so, the ability to taste through a winery offering on a rotating basis, the ability for a consumer to identify with a winery via merchandising all sharply increase. In my mind, they sharply increase for the better and build repeat business and loyalty.
This technique is a paradigm shift on a couple of levels:
• The retailer has to make purchase decisions based on a winery varietal grouping and not by an individual palate/buyer
• The retail has to make a purchase decision not based on current inventory of a varietal by price point. “Oh, I already have three Sauvignon Blanc’s at $14.99
• The retailer has to be committed to merchandising their store more like a boutique and less like antiseptic retail
A couple of thoughts on the future of wine purchasing at retail:
• The future expansion of Direct-to-Trade sales from winery to retailer, eliminating the distributor, gives a great deal of power to the winery to provide merchandising materials while using resources that were previously used to incent the distributor
• Small retailers need to get out of looking at inventory as an asset and focus on merchandising and inventory turns that are consumer-directed and not discount price or margin driven.
Let it be noted that I don’t have a single shred of evidence that tells me my instincts are correct, yet if I didn’t have the vagaries of a family, I would trademark the heck out of elements of my merchandising plan, and sink my 401(K) into this idea, that’s how cocksure confident I am in the notion.
I read the June Wines & Vines, a wine industry trade magazine that highlighted a new consumer lab at Brock University in Ontario, Canada, the article notes:
“Purchasing wine is often an overwhelming experience for people,” says laboratory research coordinator Erika Neudorf, a graduate of the Masters of Wine Business program at the University of Adelaide, Australia. “If it is understood how consumers buy wine, then it is easier to create a marketing mix to successfully reach a target market.”
Neudorf says the laboratory at Brock is the first in North America to exclusively study the relationship between consumer approval and wine origins and flavors.
For example, Lesschaeve, who specializes in biological sciences, studies how sensory properties in wine influence consumer preference. To conduct more accurate research, the new lab allows her to recreate the type of situations in which consumers would typically buy wine.
“The lab’s design is similar to a movie set,” Lesschaeve says, “in which the environment of a wine boutique, restaurant or tasting bar can be simulated.”
Here’s hoping that they investigate the simplest merchandising technique in the world—selling wine grouped together from the winery.
What are your thoughts on wine retail? Where are the deficiencies so consumers can make a purchase decision?
Posted in, Wine: A Business Doing Pleasure. Permalink | Comments (12) |
Given that I don’t understand wine retail a fraction as well as I’d like to (or perhaps even should), I wonder at how a retailer (thinking large now) like BevMo or Whole Foods or the like would merchandise in this manner.
Or perhaps it’s more that this method of merchandising is more “long tail” in its approach (leaving big boxy wine shops to do it by variety, aka the “old fashioned” way), and I can only imagine that it would forge closer ties between retailers and the wineries whose products are being merchandised as a group.
However, for those wineries going through three-tier distribution (ostensibly small to medium-sized), I don’t see how the distributor would be giving the kind of sales support necessary to enable merchandising by winery; instead, it would be left to the wineries to find a way to provide the added support to encourage retailers to move in this direction.
All in all, a very interesting notion. I want to talk about this on Wine Biz Radio this Monday. If only El Jefe and Kaz give me a moment to speak.
Should small producers band together and open tasting room “outposts” - satellite tasting rooms - with their wines available for smapling and purchase and deep story-telling and info by winery?
I think sampling is KEY when trying to get folks out of their rut of status quo wine buying and into trying something new. The Israeli wine “house parties” we are hosting seem to work in part becasue people can taste, be pleased, and the risk melts away.
In addition, I think human brains are wired to want to make comparisons, and being able to do so in a sampling setting encourages reflection and (I think) buying.
Richard
In the mid 1980s many retailers used brand sets, but a large winery that often controls the way sets are arranged in supermarkets, discovered that it was easier to gain an advantage in shelf position if the sets were arranged by varietal type.
Because the winery in question offered more inexpensive wines than other wineries, their brands were typically found at knee or bottom shelf locations which are harder for consumers to shop. To combat that in a brand set, the winery had to argue that a whole brand needed to be moved up to waist or eye level, which is more difficult than arguing that a specific item needed to be moved up.
In addition, if a brand had one varietal that sold quickly and several that sold slowly shelf position was usually determined by the item that sold quickly, leading to items at waist or eye level that couldn’t justify that position.
As time went by all retailers bought into the claim that consumers went to stores looking for varietals, not brands. Even high-end bottle shops arranged their sets that way, thinking that t more trade up opportunities existed if they could surround a K-J Chardonnay with exclusive offerings or higher priced items that returned higher margins than the well known brands.
Brand sets were easier to shop and allowed the retailer to adjust the distribution of varietals by sales data easily. If Cabernet was selling more than Merlot, take a facing away from Merlot and give it to Cabernet.
Brand sets were very powerful for labels like Robert Mondavi that had expensive Oakville varietals with big reviews and also Woodbridge wines at the low end. The expensive items went on the top and eye level shelves, and the Woodbridge filled up the knee and bottom shelves. The message to the consumer that the wines were made by the same winery was very effective.
A recent survey by Constellation Wines found that a high percentage of consumers are “overwhelmed” by the wine category.
Much of the confusion could be eliminated by Brand sets. The retail trade is just not ready to except that concept.
Hey guys,
Thanks for the comment. Brand sets are not a concept I am familiar with—thanks to zinman for bringing it to light.
I am convinced that there are no new ideas, just variations of existing ideas, so I’m not surprised that “brand sets” existed as recently as the 80’s (when i was going through the ages of 7 - 17).
However, I do hope for adoption on some level. It’s too much of a no brainer for somebody not to give it a try. I think we’ve now found, empirically, that varietal groupings are okay, but not the end-all be-all in reducing consumer confusion.
Thanks again for reading!
Jeff,
What alternate universe does this occur in?
That has to be mass market Grocery research…
“Research indicates that 97% + of people purchase wine at retail without any preconceived notion of what kind of wine they are going to buy.”
How would you answer “where are your Cabernets?”
Doug
Doug,
Ah, you are correct, but maybe what I didn’t say that I meant to say is customer purchasing via label loyalty or a preconceived notion, separate from varietal.
Sure, somebody comes in looking for a Cab, but besides having an inkling for what amount of money they are willing to spend, the grand majority of consumers go into a wine shop not quite certain what they are going to buy.
Categorizing by winery helps merchandise wines in a different way than by the point.
Aren’t we forgetting here that, if such a store were to succeed in turning a customer on to a particular winery, that customer could (depending on the state) quite likely buy some or all of his/her wine directly from the winery going forward? And (through wine clubs or other promotions) potentially get it at better prices?
Kevin
I have found that, as a rule, the retailer usually charges a couple of bucks less than the winery. Additionally, with a winery, you end up paying for shipping when ordering from the winery.
Kevin,
Of course, you’re right. But, when was the last time you shopped at one grocery store or wine shop exclusively?
My wife and I buy groceries from Kroger, Meijer, Trader Joe’s, Whole Foods, Fresh Market, etc.
And, I buy wine from a half-dozen places, too.
Single channel purchasing has gone the way of the dinosaur and providing an inviting boutique-like place to purchase is the route that much of retail is morphing, too.
I can buy Starbucks at the grocery store, but I still go to the shop and plunk down my $3.
My two cents, but you have a valid point.
Jeff
Jeff —
I lived in Grand Cayman for a little while, and a wine shop that was on my way home from work was set up *exactly* as you suggest. It was probably just fine for brand browsers, but for me it was annoyingly difficult to shop. I nearly always had a specific varietal in mind, and comparing the Zins, for example, is not easy when they’re in six to ten different locations. (I’ve complained about that store ever since I moved back!)
From a retail perspective, it sounds like a merchandising nightmare — lots of rearranging to do when wines sell out or are released. I could see doing a promotional feature on a specific winery and stacking examples of all their wines in one area for a while, but trying to maintain a whole store arranged like that would, I think, be maddening.
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Jeff,
This is a very reasonable approach. Brand loyalty (whether that brand is the AVA, Producer or variety) is not to be ignored.
I am currently conducting a survey which (among other things) may help understand the validity of this approach.
The question is: of all the people who walk through the doors of a store which organizes its inventory by producer, how many will be more comfortable with that system and will then know their way around the sections?