Posts Tagged ‘Buying’

At the roots of organic wine ...

At the roots of organic wine …

 

“Do you offer organic wine?” It’s a question I hear frequently while on the wine trail.

Wine retailers, once cautious about the idea are suddenly eager to stock organic wine. A smattering of selections has burgeoned in recent years, crowding store displays. Once on the fringe, brands featuring words like nature, earth and the prefix “eco” now edge closer to the wine mainstream as consumer interest intensifies. But the simple question remains: which wines labeled as organic are really worth a look?

Not many, it turns out. Wine brands marketed as organic are seldom worth bringing home again. It’s unusual to find a drinkable red — with Organic splashed across the front label — which begs another taste.

For supporters of organic consumption, there’s a bright side; one you’ll find useful if you support some notion of organic farming and expect well-made wine to boot.

The far more exciting end of organic viticulture is the juice made from organically farmed grapes — from France, Italy and Spain, as well as from domestic producers — where organic may be barely noticeable on labels. It’s wine sold on the merits of taste and authenticity first. Validating these wines requires reading fine print, or decoding unfamiliar symbols. Quite a few estates feature organic production without fanfare or gaudy marketing campaigns. The challenge is finding them.

In the 1980s, the fledging category began to appear in stores, with wines from California among the first examples available in mass distribution. Initially the concept raised a murmur of excitement, in part because organics were considered healthier options than conventional versions. People bought organic wine as they did food, mostly to avoid a perceived surplus of chemical herbicides, pesticides, fertilizers and other additives thought to be common in conventionally made wine. From the outset, however, customers encountered unstable, highly variable bottles. Many of the wines were hard to identify from the varietals listed on the labels. Opening the early organic bottles was like spinning a roulette wheel — one bottle stinky and cloudy, another one browning, dull, others grapey but odd examples. Moreover, the wines were expensive for the times. Organic wine seemed more an experiment than a reliable new category. Consumers had every right to worry about chemical additives in winemaking, but it remained that bottles had to taste as good, or better than conventional versions.

 

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Boom go the millenials…

 

John’s Grocery in Iowa City is an upscale wine retailer whose customers include doctors and employees of the nearby University of Iowa Carver College of Medicine. As such, says wine buyer Wally Plahutnik, his customers are knowledgeable and service oriented, regardless of age and demographic. Except for one very intriguing thing.

“I can’t get the older ones to use the camera on their phone to take a picture of the wine label,” he says. “The younger ones, no problem. But the older customers still come in and tell me they had a bottle of wine, but can’t remember the name. And when I ask them why they don’t use the camera, they just sort of look at me.”

In this, Plahutnik is in the middle of one of the biggest changes the wine business has ever seen—the revolution in consumer demographics, of which the role of new technology is just one small part. The Baby Boomers, born between 1948 and 1962 and widely regarded as the best friend that retailers and restaurateurs ever had, are becoming increasingly less important in the marketplace. Their replacement? The Millennials, two generations behind them but already numerically more significant among core wine drinkers, according to the 2012 Wine Market Council report. Though the Boomers make up 38% of wine drinkers, they consume only 32% of the wine. The numbers for Millennials are 29% and 38%.

 More broadly, Boomers will account for less than 20 percent of the U.S. population over the next eight years, and the number of Baby Boomers younger than 60 will fall by more than two-thirds, according to a 2012 study by Jeffries-Alix Partners. Meanwhile, Millennials (born between the early 1980s and the early 2000s) older than 25 will make up almost one-fifth of the country’s population. And that doesn’t take into account the 8 million Millennials who will turn 21 and start buying wine over the next three years.

“The Boomers are famous for consuming more stuff than anyone else in history,” says Dan Graham, a vice president with the Dechert-Hampe marketing consultancy in southern California. “The question is not so much whether the Millennials will be like them, but how to reach them, since they’re so different from the Boomers.”

The key is understanding—or, first, trying to identify—those differences. It’s one thing to market to Millennials with cute wine names or to approach them through social media because they use it, but that doesn’t mean it’s going to work. The Millennials may not be as jaundiced as their older cousins, the Gen Xers (born between born the mid-1960s and the early 1980s) about marketing, but they’re still more wary than the Boomers.

Also important, and often overlooked: Any discussion of the Millennials must take into account three things. First, that since the end of World War II, the U.S. economy experienced unprecedented growth. Will that continue? Many of the projections on Millennial spending assume they’ll have the same economic opportunities that the Boomers did, and that may not be the case given what appear to be major structural changes in the U.S. economy (to say nothing of ongoing wrangling about government spending).

Second, the Millennials are saddled with $1 trillion in college debt, which could limit their spending in a way that didn’t bother the two older demographics. One guess is that the Millennials’ penchant for low-cost social events like Wine Riot and the success of companies like Groupon represent evidence that they want to go out but can’t afford the bars and clubs that the Gen Xers and Boomers could.

Third, says John Gillespie, president of Wine Market Council, there appear to be some differences between younger Millennials, ages 21-28, and those 28 -36. The latter, he says, act more like Boomers—more willing to spend money, for instance. The younger group may change as it ages, too, but no one knows for sure.

Moving forward, every business looking to capture Millennial dollars needs to know what sets them apart from the Boomers—things that take into account not just demographic but economic and cultural differences:

 

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Per bottle or per glass?

Per bottle or per glass?

 

Politicians may keep telling us the economic downturn is over and western economies are on the road to recovery, some market data actually tell us otherwise. A case in point is the latest market research by GuestMetrics in the United States. Based on its proprietary database of POS transactions of over $8 billion dollars in transactions and over 250 million bills from restaurants and bars across the United States over the past two years, it shows that on-trade consumers in the US traded down from bottles to glasses in 2012.

In fact, the shift was significant with the number of bottles ordered in restaurants and bars declining by 13 percent, while the number of wine glasses increased by 4 percent. “Given the large difference between the price, with the average bottle costing over $43 and the average glass costing $9.60, we believe this shift was driven by a consumer base that is still feeling pressure from a sluggish economic recovery, not to mention the unusually high level of uncertainty towards the end of the year with the spectre of the fiscal cliff,” commented Bill Pecoriello, CEO of GuestMetrics LLC.

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So many choices!

In an ever more digital world, there are a few things that remain reassuringly analog. Wine, for example. The mysteries of a Montrachet or the magic of a Margaux remain too complex and too nuanced to reduce to the zeros and ones of digital DNA, though I imagine someone must be trying. Although technology has its limitations in the making of wine, it is increasingly useful in the buying and selling of it.

The Internet accounts for only a tiny fraction of worldwide wine sales. Most people buy their wine at local shops or supermarkets. But online sales have been growing strongly for a few years in Britain, Germany and some other European markets, as well as China and Japan. There are signs of progress in the United States, where regulatory hurdles have been a problem.

At the end of last year, Amazon opened an online wine shop in the United States. Presumably the e-commerce giant hopes to do for Bordeaux or Barolo what it has done for books: Make a previously unimaginable selection available to anyone, anywhere, at any time and at a bargain price.

But Internet wine sales in the United States have been complicated by Byzantine rules. Some states forbid online sales, others restrict cross-border shipments. Others maintain monopolies over distribution. So Amazon is starting with only a handful of states and the District of Columbia.

Europe, so fragmented and divided in other ways, is more coherent and unified in this niche of the economy. From my home in France I can order wine online from almost any other European Union country and expect it to show up at my door in a few days.

The only variable is cost. For some reason, Italian parcel services tend to charge more than €50 to ship a 12-bottle case of wine to France, about $70. German delivery companies often do the job, faster, for less than €20. There you have the euro crisis in a nutshell — or a case of wine. Still, my cellar would be a lot poorer without those occasional deliveries from the sunny south.

The most advanced online wine market is probably Britain. Wine Intelligence, a research firm in London, estimates that up to 15 percent of all retail wine sales in Britain take place online — perhaps five times the U.S. percentage.

Growth in Britain has been led by supermarket chains like Tesco, which have been using wine as a way to promote Internet grocery shopping services. But specialist British wine merchants like Berry Brothers & Rudd were also early online innovators, opening e-commerce sites well over a decade ago.

“Not only do we like wine, but we also like the Internet,” said Antonia Branston, an analyst at the research firm Euromonitor in London. More and more British online wine specialists, like Laithwaites, Slurp and Naked Wines, are expanding to other countries in Europe, the United States or Asia. Slurp, for example, opened sites in Germany and France last year. While the prospect of a British Web site trying to sell wine to the French might sound a bit like carrying coals to Newcastle, Slurp insists there is a place for it.

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