Wine Sector Outlook and Baby Boomer Impact
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Wonderfully received presentation in Ontario on the outlook for the wine sector
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Wine Sector Outlook and Baby Boomer Impact
- 1. Damien Wilson/Insight Ontario, March 1, 2016 A presentation for the Ontario Insight Conference March 1, 2016 Wine Business Institute Wine Sector Outlook
- 2. Damien Wilson The challenges on the horizon that the wine sector faces @WineBusProf
- 3. Damien Wilson/Insight Ontario Conference Theme 1: Baby Boomers and Wine…
- 4. American Route To Market Hourglass… 1995 2016 ~1,800 Wineries ~3,000 Distributors 9,461 Wineries* ~700 Distributors
- 5. Damien Wilson/Insight Ontario Conference Theme 2: From Introduction to Enthusiasm
- 6. LET’S TAKE A LOOK AT THOSE WINE- LOVING BABY BOOMERS… Theme 1: Baby Boomers and Wine
- 7. Damien Wilson/Insight Ontario Conference The difference in branded, premium wine From Silicon Valley Bank 2015 Boomers number more than 3x Millenials in highest price categories
- 8. Damien Wilson/Insight Ontario Conference The Outlook in Wine Consumption SVB STATE OF THE WINE INDUSTRY 2016
- 9. Damien Wilson/Insight Ontario Conference What we know about wine consumers AN ILLUSTRATION OF HOW CONSUMERS COME INTO THE CATEGORY
- 10. Damien Wilson/Insight Ontario Conference From the OIV WINE CONSUMPTION OVER THE PAST 50 YEARS IN BILLION LITRES Boomers coming of age window Xers coming of age window
- 11. Damien Wilson/Insight Ontario Conference Millennials’ Coming of Age Window From Euromonitor 2015 0 50 100 150 200 250 300 350 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Market Size at Retail Selling Prices in Billion US$, 2014 value World +15% Western Europe -15% N.America & Asia +50%
- 12. Damien Wilson/Insight Ontario Conference The Unknown… KNOWING THAT WINE PREFERENCE CORRELATES WITH LIMINALITY… Millennials coming of age window
- 13. IN A MARKET RELYING ON WINES OF A LOCATION… Evidence Submission #2
- 14. Damien Wilson/Insight Ontario Conference In France: decline. No other way to explain it From France AgriMer ~45Million ~31Million
- 15. Damien Wilson/Insight Ontario Conference But an even bigger problem is pending… From France AgriMer
- 16. Damien Wilson/Insight Ontario Conference In case you missed it… • Awareness of French wine>Bordeaux>Every AOC • Regions with salience attract a price premium - From Combris (1997) to Schamel (2006), to Oczkowski (2010) and numerous others • Tellingly, there’s a premium from generic to specific but loss of awareness brings pricing discounts through loss of potential sales (Gillespie 2005) • Specifically, AOCs in France have doubled since the 1970s • So, as the prestige of French wine has increased, no mechanism existed to bring new drinkers to category
- 17. HOW ABOUT ONTARIO? Evidence Submission 3
- 18. Damien Wilson/Insight Ontario Conference Beginners choose yes/no wine… Novices on the left, the enthusiast on the right….
- 19. Damien Wilson/Insight Ontario, March 1, 2016 Use evidence more than emotion • Alex my Nemesis 1. Wine Making gets the attention. Deal with it. 2. Make sure they know your value • VQA Riesling outsells PG more than 2 to 1 • But consumers otherwise don’t gravitate to Riesling • Don’t assume your customers understand. Find out • Measure your brand’s character Just because you want it to be that way…. Own Image
- 20. Damien Wilson/Insight Ontario Conference Brand Character Measuring Character: How you behave when no-one is watching BRAND CHARACTER: How consumer’s behave when you’re not watching
- 21. Damien Wilson/Insight Ontario, March 1, 2016 Research has found… • Sales rely on two things: 1. That consumers are aware of your wine, and 2. That your wine is available where they like to purchase • Millenials are growing, and they like wine • But they are influenced differently to previous generations • Know how they perceive you • The journey from Novice to Expert provides the answer to the riddle behind sustained growth in the wine sector How the boffins are trying to make your job easier Image found at : http://goo.gl/V92k5N
- 22. Damien Wilson/Insight Ontario, March 1, 2016 For my details, photograph the QR code • Getting growth back will rely on understanding transition from wines of style, then variety, then….? • Enthusiasts love the minutae of wine trivia, but non-wine enthusiasts just want a wine that’s not bad! • With tomorrow’s market witnessing the end of boomer dominance, wine needs to embrace the transition process from novice to enthusiast, and encourage transit through that process IMAGE TAKEN FROM: HTTPS://GOO.GL/CTVLF4
- 23. Damien Wilson/Insight Ontario, March 1, 2016 Growing the Ontario wine market… • Trading-up (only) is a false economy • Refresh the market with new consumers. Constantly • We suspect that every time a wine consumer is irritated by a wine snob, a kitten dies. • Please think of the kittens when encouraging more consumers to drink wine from Ontario IMAGE TAKEN FROM: HTTPS://GOO.GL/NM942G
- 24. Damien Wilson/Insight Ontario Conference Thank you! DAMIEN WILSON - @WineBusProf
Editor's Notes
- Market dynamics: refreshing the new market. Don’t make the same mistake as the French. Create the ladder from entry-level to connoisseurship
- Why I don’t detail my experiences here… No-one ever remembers more than one or two – and even then it’s only if they’re interested. I’ve noticed that it’s this time during the presentation that you lose the audience. How many of you checked your phones as soon as Greg started going over my biography? Sponsors – take note of the interest in your message!
- The wine sector has been waxing lyrical about American consumers ‘trading up’… Hourglassing of producer expansion concurrently with constricting distribution channel. The hour-glass Boomers are shrinking. And cult wines have no strategy.... More on this later...
- As of yesterday, according to Wine and Vines
- There’s a symbolism to this slide. There are essentially two categories of wine attracting consumers Satisficing wines – Where exercising training, and applying a specific quantity of effort results in the producion of wines of consistency and reliability. Wines of place – This is your bread and butter. Wines from a location. The wines are valued due to their capacity to express their location of production. The appeal of the location determines the wine’s value and desirability We know that most consumers start with ‘wines of effort’, and some progress to wines of place. What we don’t know is how, when or why some do while others don’t.
- We know that wines of effort contribute much larger margins than wines of effort. Equally, we know that wines of effort dominate the volume of the wine market. The value/volume splits in contribution to wine business profitability vary to a degree, but rule of thumb is that 10% of volume is from the wines of place category, yet they contribute around 50% of profitability. With many of Silicon Valley Bank’s customers falling into this demographic, the outlook going forward is an important consideration.
- Boomers and millennials drink about the same volume of wine between them. We’ve got that bit, but Millennials drink more, from around 30% fewer drinkers. GenX drink like their parents, but only about 40% of them got into wine… When were GenXers learning to drink?
- This is how they come into the segment….
- Boomers and millennials drink about the same volume of wine between them. We’ve got that bit, but Millennials drink more, from around 30% fewer drinkers. GenX drink like their parents, but only about 40% of them got into wine… When were GenXers learning to drink?
- I’m predicting that the wine interest in each region will dictate how well wine will be adopted in coming generations. It’s definitely rosier on this side of the Atlantic than the other side of it.
- This little thing called the craft brew wave coincides with what we perceive as the challenge of craft brews.
- Since 2005, wine consumer numbers were up to approximately 31 million in 2010 (from 30 million in 2005), but down from almost 45 million in 1980.
- Regular consumers drink more, and more expensive wines in general. France has improved both the image and quality of its wines, but has failed to turn that into revenue. In effect, they’ve lost both wine consumers and revenue streams. The quality improvements have all led to a higher cost of producing and servicing their markets.
- To early consumers of wine, the choice is either ‘not bad enough to refuse’, or everyone else likes it. On the right, you see the enthusiast brain for wine, where every wine experience is compared against all others.
- Wine has an advantage over other consumer goods, given the accessibility of consumers via digital means Thach outlined the opportunities for wine businesses, with the need to develop skills in the area Wilson and Quinton found that being present was only half of the task. Trade and consumer discussing wine in a different manner. Intrinsic qualities and knowledge-based v. Enjoyment and event-based Szolnoki et al
- Corsi, Cohen and Lockshin (2014) Conducted an experiment on new wine consumers. From six wines tasted blind they examined their wine preference, perceived price point, willingness to purchase, variety, region and style. Then one group was exposed to three sessions on identifying grape variety, a second on grape variety and region. The third group had no training. The varietal training group’s capacity to identify the variety in a blind tasting was significantly improved, but region identification was no better than chance. However, those receiving the regionality training significantly improved their liking ratings and willingness to purchase. The ‘no training’ group’s results did not significantly change just from the experience of the experiment.
- Wine has an advantage over other consumer goods, given the accessibility of consumers via digital means Thach outlined the opportunities for wine businesses, with the need to develop skills in the area Wilson and Quinton found that being present was only half of the task. Trade and consumer discussing wine in a different manner. Intrinsic qualities and knowledge-based v. Enjoyment and event-based Szolnoki et al