It's Time for Collaboration and Cooperation in the Wine Biz
Confronting the decline in wine means everyone needs to pony up.
Collaboration. Allied interests. Cooperation.
These ideas are rarely put to use within the wine industry. Cooperative efforts across the various sectors of the industry are even rarer. Ask yourself, when was the last time wine wholesalers, wineries, retailers, importers and the media could all agree on something and as a result of that agreement took collective action.
In more than 30 years in the wine industry, I can think of only one moment when this occurred. Few people will be shocked to learn that this moment was in response to Donald Trump.
In mid-2019 I saw in on a conference call with representatives of the importers, wholesalers, wineries, restaurants and wine retailers to discuss how to respond to the news that tariffs would be imposed upon European wines. These tariffs, which would eventually lock in at 25%, seemed to harm everyone. And that was the key to the formation of the United States Wine Trade Alliance.
But it’s one thing to find agreement that something is bad. It’s another to convince everyone across the wine trade to pony up funds to fight the bad thing. That happened too…to the tune of many thousands of dollars. A board was formed, nonprofit status was established, lobbying and PR firms were hired, websites created and off to the races we went.
Later in the year, I sat in Senator Wyden’s office in Portland. In the crowded room on a predictably grey day sat representatives from every sector of the Oregon wine industry. The goal, agreed to by all, was to give Senator Wyden the necessary information and tools to make the case to the U.S. Trade Representative Robert Lightizer that tariffs would harm every sector of the Oregon wine industry: wholesalers, wineries, retailers, restaurants, and importers. This collaborative effort did result in a strong push by Senator Wyden urging Ambassador Lightizer not to take action against European wines.
The fact that in the face of collective industry opinion the tariffs still went into effect isn’t what is notable. It was that all sectors of the industry worked together. The only reason this was possible was due to the fact that a single event threatened the entire industry.
Today another threat to the entire industry exists: Wine is consistently losing “share of throat”. What were once sales of wines are now sales of spirits, cocktails, ready-to-drink alcoholic beverages, hard seltzer.
Writing for Meininger’s Wine Business International earlier in the Month, Robert Joseph made a keen observation:
Wine producers have traditionally imagined that they were competing with each other. Now many will have to accept that, especially, among younger consumers, wine is increasingly just one of a range of options. And the fact that some hipsters have fallen in love with orange wine and pet nat is not going to help in the broader battle for attention.
When Joseph talks about a “range of options” he’s primarily referring to “Ready to Drink” or RTD beverages such as hard seltzer and canned cocktails.
Last June, writing in Food & Wine Magazine, Mike Pomranz reported that “By the end of 2021, Americans are poised to drink more RTD beverages by volume than wine.” He goes on to report:
“the idea that any coalition of alcoholic beverages besides beer could eclipse wine in total volume of consumption is a significant sea change-and one that becomes even more incredible when you track the rate of change over the years. IWSR says that while wine consumption volume in the U.S. has seen a mere 0.5 percent compound annual growth rate since 2016, the RTD category's annual growth has been 30.5 percent over that same period. And for 2021, RTDs are on pace to see an additional 48.8 percent jump in growth while wine consumption is expected to be up just 0.8 percent.”
Meanwhile, while sales of wine are flat or sluggish and have been for a while, spirits sales continue to grow and take market share from both wine and beer. Reporting on the alcohol market in the U.S. in 2020, IWSR reports that spirits are poised to continue their growth while wine, particularly still table wines, sales will be soft going forward:
“Total wine in the US grew slightly at +0.7% by volume and +1.5% by value in 2020…but still wine is forecast to go back to softening declines as RTDs and spirits grow at faster rates.”
What about wine in 2021? NielsenIQ reports that sales of table wine were down 7% while volume was down 11%. While this year-over-year comparison comes after good growth in 2020.
But let’s not leave out the really shitty news for wine. No and low alcohol alternatives to real wine, though still owning a small share of the U.S. alcohol market, are growing pretty significantly. Again it was IWSR last year that reports that these no and low alcohol beverages are points to grow by 31% by 2024.
Then there is cannabis. Anyone who does not believe that legalization will come to a majority of states soon and with that growth in legalization will also come interstate commerce in the weed is kidding themselves. It’s coming. Moreover, all alcoholic beverages, including wine, will be in competition with cannabis for the pool of “inebriation dollars” in the economy.
Then there is the conclusion drawn from the recently released State of the U.S. Wine Industry 2022 produced by Silicon Valley Bank:
“The lesser interest in wine among younger consumers, coupled with the encroaching retirement and decreasing wine consumption of wine-loving baby boomers, poses a primary threat to the business.”
My point is this: long-term the U.S. wine industry is set to see a significant reduction in its market share as consumers migrate to other alcohol and inebriation alternatives and no one is doing anything about this.
Does the wine industry care? I promise that the beer, spirits, and cannabis industries don’t care. They are thrilled to watch the wine industry give up market share and do little or nothing about it besides extolling the virtues of Napa Valley’s $500 wines, point to the cool kids drinking “natural wine” and discuss the “ever-evolving nature of appellations”.
There is only one solution to the continued decline of market share for wine: sell more wine.
The battle for the current set of 21 to 36-year-old palates has already largely been fought. Wine didn’t win. If the U.S. wine industry is going to gain future market share of those palates currently enjoying gaming videos on Stitch and Youtube while they ponder whether to get their algebra homework done, it needs to start promoting and marketing its wares now and get more wine on the table for everyone to see and notice.
The only way this happens is with a collaborative marketing effort across the wine industry in which large and small wineries, importers, distributors, retailers and restaurants get on board, pony up funds, and create a campaign to grow the entire wine market.
It’s a multi-channel effort coordinated by a new trade organization that welcomes all sectors of the wine industry with consistent messaging using every medium currently in use to transmit information. It’s a multi-billion-dollar effort that will primarily be funded by the largest producers, with significant funding added by smaller U.S. wine producers, distributors, retailers, and restaurants.
This effort will require the high-end wineries in the U.S. to forgo their concerns that new entrants into the wine category that result from this promotional effort will largely be reaching or low-end box wines, entry-level wines and less expensive wines primarily sold by the Gallos, Constellations and Treasurys of the world.
Building and holding together this coalition and extracting dollars from all concerned will be the toughest part of this kind of effort. The person charged with building the organization to carry out a new generic promotional effort for wine will need to be thick-skinned, charismatic, relentless, well funded out of the gate and able to communicate the dire circumstances requiring this effort.
The multi-sector effort to stop tariffs on EU wines is small potatoes compare to an effort to bring together a coalition to spark wine sales. The USWTA has a very specific mission and a very specific policy goal. However, it remains the model for going forward with a marketing and promotional effort to stem the decline of wine in the U.S. and spark sales renaissance that will take market share back, keep land under vine in America’s wine growing regions, enhance sales for distributors, retailers and restaurants and put the Ameican wine industry back on solid footing.
All this leads to the founding of WineRamp, which is a new coalition of primarily wine producers concerned with exactly the threats outlined above and beginning the effort to ramp up a generic promotional campaign for wine. The goal is to goose demand.
As mentioned, the primary supporters of the WineRamp are producers and large producers at that. However, unless the WineRamp efforts include input by and is funded by retailers, distributors, restaurants and importers, it will likely not achieve its full potential.
Nonetheless, the effort is underway via WineRamp. If you are concerned about the future of the American wine industy then I urge you to reach out to WineRamp and see how you can help the effort and help funding.