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What is the “New, New Normal?”

Bar none, the one piece of research I look forward to reading every year (and get the most value out of) is the Silicon Valley Bank “State of the Wine Industry” report.

Written by Rob McMillan, using plain language that is artfully juxtaposed against a pop culture reference point, he typically nails not only his predictions for what is around the corner, but he puts current events into a context that leads to “a-ha” moments.

McMillan has clarity of thought that is refreshing.  I find that he synthesizes information in a way that I “feel,” but can’t quite articulate or substantiate.

As a precursor to the full 2010 report released in late spring of ’10, McMillan has published short-form guidance for 2010 at this link.

True to form, it’s a good read.


This past summer, I wrote a couple of posts about what I sensed as intractable shifts in the view of luxury-priced wine.  I used a book called Reset as a backdrop for the posts; the book by Kurt Andersen optimistically describes our current hardship with hopefulness, not in the sense that we will return to the old ways of living, but, triumphantly, we will not do so, learning from the lessons of our near-term past.

In the post(s) I suggested that luxury wine and the attendant pricing needs to be radically adjusted to current reality, not only for what people are buying but what the sensibility for spending money will be in the future. In response, I received numerous comments from industry-related folks that essentially said, “People will return to their old ways of buying luxury goods, they always have, they always will.”

Yes, of course, that is a true statement.  But, “when” is a better question because it doesn’t look like it will be for several years, or in the previous form.

Mind you, I live in a suburb of Indianapolis, IN.  That’s the filter I view things through.  No offense to Northern California, or the East Coast, but both are a bubble in relative affluence, wine culture and politics.  Indy is affectionately known as the “Crossroads of America.”  What the geography lacks in true wine culture, it makes up for in temperature readings of our culture at-large.


As an example, the lease to my car is coming up in a couple of weeks.  In a previous era, I would have been pushing to get a new lease, a better car, something in the “near-luxury” category that I felt denoted how I perceived myself and my place in society.  What am I doing instead?  I’m going to buy the car out of the lease and drive it until the wheels drop-off.  Why?  It’s because a “functional” and “affordable” car have become more important to me than a status marker.

I think I’m in good consumer company, too.

What the “Crossroads of America” have told me, as an abstract set of tea leaves, if you will, is that the days of buying a $65 dollar wine Pinot just because you can are as distant of a memory as meeting your wife at the arriving gate at the airport, or driving an Acura because it speaks to a self-concept.

Two very salient quotes from McMillan’s report include,

“Defining a new normal is more prudent than waiting for the old normal.”

“When will the market return to normal?”  The real answer is not very soon.”

The report concludes by noting,

“We do believe we are in the midst of a price reset in fine wine that will lower the wannabe cult wine prices and collapse brands into narrower price bands below $50.”

It’s an interesting set of points.  As an aside, somebody should take note of the price bands quote because price segmentation above $25 hasn’t yet been stratified into consumer categories.


In a nutshell, similar to post-9/11, what was previously accepted as “normal” has changed.  Just as our airport routines are radically different, so too are our consumer patterns, particularly around wine.

One thing is certain, if I were a luxury wine producer, I would completely rethink my go-to-market planning around a new structure of consumer categorization.

Acting as a complement to the Silicon Valley Bank research is recent consumer research that goes to the core of this “new normal,” defining new consumer segmentation.

In the study, entitled “Marketing to the Post-Recession Consumers” by Decitica, they state, “This research decisively shows that marketers need a fresh lens through which to view consumers in the post-recession world …”

The abstract of the summary notes:

Experts posit that the household deleveraging process is far from complete. Adjustment of household balance sheets, which had begun in earnest in the thick of the recession, continues apace with nary a sign of ending anytime soon.

With this backdrop, the debate continues whether American consumers are so indelibly scarred by the recession that they have forever abandoned the profligate spending habits of the past in favor (of) a more restrained approach.

This study goes beyond superficial measures of consumer sentiment.  …this research not only concludes that the recession has caused a profound, deep-rooted change in consumers’ spending habits but also that there are four distinct consumer segments emerging from the recession.

The report goes on to highlight four consumer categories:

• Steadfast Frugalists
• Involuntary Penny-Pinchers
• Pragmatic Spenders
• Apathetic Materialists

At this point, it’s a manifest reality that our “normal” is a fresh coat of paint over a near-term past, both from an industry perspective looking at consumers and consumers looking at producers.

Where the rubber meets the road is what happens now.  Rob McMillan used the movie, “It’s a Wonderful Life” as the pop culture context for his report.  The key for boutique wineries with luxury pricing is to figure out how to tap into that “wonderful life” in a way that is sustainable for both them and the consumers that buy from them.

With McMillan’s words echoing in my ears, ““Defining a new normal is more prudent than waiting for the old normal.” 

I hope producers take his advice.

Additional Reading

More Wine Unsold During Economic Slump

Post-it Note Image Credit


Posted in, Wine: A Business Doing Pleasure. Permalink | Comments (9) |


On 11/22, wine club wrote:

It’s something we really worry about all the time.  I read recently that the average winery makes as much on one $80 bottle as it does on 2 cases of $10 bottles.  Pretty similar to me in the 3rd party wine club circuit.  Although there are going to be less people willing/able to pay $200 a month for our high end club we think we’ll do ok using some other revenue streams.  For one, we should export wine this year to Latin America which has not been hit as hard by the economic downturn….like all business wineries need to be able to diversify their offerings and where they are selling them!

On 11/22, .(JavaScript must be enabled to view this email address) wrote:

This is a great post.  Wineries that have relied on expense account restaurants and gullible consumers are having entirely new experiences when they try to entice buyers with their “get it now before we run out” marketing.

Even retailers like Sam’s and Costco who used to want an allocation of Silver Oak (substitute Chalone, Jordan or Phelps as you prefer) more than anything, now are wary of anything that retails over $20.

Smart customers check out prices on line. If a winery has made a deal in Florida or California to help move a backlog, the few consumers that are interested will only be tempted to purchase by the lowest price they can find nationally.

Wine cannot continue to just pile up in warehouses. Something will change and soon.

On 11/23, Thomas Pellechia wrote:

Once again, not much new under the sun.

A paraphrase from one of my books on wine history: The Roman wine market experienced a series of booms and busts over the life of the Empire…

The Roman wine industry also experienced a series of “what’s hot and what’s not hot” cycles.

Not much is new, unless we decide to forget the lessons of the past.

On 12/01, car performance wrote:

Acura is the luxury vehicle division of Japanese automaker Honda Motor Company.The Acura brand has been used in the US, Canada, and Hong Kong since March 1986 to market Honda’s luxury and performance vehicles and near-performance vehicles.

On 12/12, prague airport shuttle wrote:

Access from land side areas to air side areas is tightly controlled at most airports. Passengers on commercial flights access air side areas through terminals, where they can purchase tickets, clear security, check or claim luggage and board aircraft through gates.

On 01/18, Roger wrote:

This was an interesting article with many good links. The winery industry can be rather tricky, so hopefully producers do take his advise. Nice blog with great features!

On 04/06, .(JavaScript must be enabled to view this email address) wrote:

Well I definitely liked reading it. This information provided by you is very constructive for correct planning.
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On 05/05, Aircraft jack repair wrote:

One thing is certain, if I were a luxury wine producer, I would completely rethink my go-to-market planning around a new structure of consumer categorization.

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