Improving The Wine Retail Experience

In far Northern Minnesota lies Nicollet Creek. It’s similar to thousands of other creeks in the United States: the water is cool and fresh and in most places you can step or walk across it. What makes Nicollet Creek different from the others is that it is the primary inlet into Lake Itasca and the origination of the Mississippi River. The creek alone, however, couldn’t form the largest river in the United States. It takes a wide variety of tributaries and lakes, a complex and robust feeder system, to build the Mighty Mississippi. It takes the same kind of feeder system to build an industry.

Wine aisle 1Most research shows there is still a big upside for the U.S. wine industry, particularly with the millennial generation. Maximizing that upside, however, starts with bringing more wine drinkers into the entry level and then piquing their desire for discovery and to learn (and eventually spend) more. Large scale growth will not come from consumers who wake up one day and decide to go out and buy a 100-point Chateau Lefite Rothschild. To appeal to these new and younger consumers and unlock the full potential of the industry in the long term, U.S. wine producers, distributors and retailers need to work to make the product more approachable, make choice more openly available and provide a better, more engaging retailing process.

LOWER THE BAR

There are few people in the industry that I respect more than Robert M. Parker, Jr. His knowledge, insight and influence in the finest of wines is unsurpassed. That’s why I was so conflicted to read him criticize wine bloggers saying “The bar is so damn low.” Like wine itself, the market has numerous levels of complexity, and his writings serve an important part of the market. His reviews and the channels in which they are available do not, on balance, however, help the entry level wine or millennial drinker. To Alice Aperitif, a description of “graphite with a touch of forest floor” and a 89 rating is as meaningless as the theory of Quantum chromodynamics. And a printed newsletter is just as archaic. The biggest potential market for the industry continues be underserved by the traditional wine communication and education terrior. If a consumer reads the shelf talker for a new wine and thinks to herself that she won’t be able to taste the hints of wet stone and coriander that the reviewer says are in the better wine, she won’t be willing to pay more for it or try it as a new wine. If this the only way we connect with new and younger consumers, as an industry we’ve lost. What will sell in today’s market, and more importantly tomorrow, is the story behind the wine, the connection that a consumer can make with the varietal, the producer, an experience or a shared social discovery.

I am a little surprised that Mr. Parker failed to take into consideration that the audience for more advanced wine expertise (the kind he dispensed when with Wine Advocate) would grow faster if a bigger and broader feeder system were in place. Wine is very personal and tastes vary wildly. In order to grow that feeder system, more consumers need to be introduced and educated on wine in a context with which they can connect. That’s where the bar-lowering bloggers, educators and crowdsourced reviews (like CellarTracker) come in handy. With more ways to experience, learn and grow an entry level appreciation of wine, especially in the language and on platforms of the millennial generation, the base of wine consumers will grow faster. Once engaged, these consumers can then be moved up the ladder to wider discovery and more confidence in spending more for the right bottle that hits the consumer’s taste right on the mark.

OPEN MARKETS

I am a huge supporter of small and local business. These enterprises drive our economic engine and contribute the most to innovation. As such, I would love to be able to write blog posts about small, quality wine producers and then direct local readers to boutique retailers that carry the wine exclusively. That would be a win-win for the industry.

That scenario is almost impossible under the current three-tier distribution structure and restrictive state regulations. In today’s environment size almost always wins. That’s why Silicon Valley Bank sees more mergers and consolidation in the industry this year. First, simple economics says so. As a producer, the bigger the volume, the more you can cut into your margin (in order to give a cut to the distributor) and still cover your fixed costs plus have a profit. You really can make it up on volume. Smaller producers don’t have the luxury of giving a cut to a distributor and still making the profit they need on a such limited volume, structurally leaving many American producers with far less market opportunity in the USA than large foreign producers. Second, the law of attention says so. A producer that can sell a larger volume will get the attention of distributors and retailers who get a cut of the action. More money for less work is a great business model. Producers who can only sell a few bottles at each of a distributor’s retail locations don’t warrant the time and attention given the volume cap they can provide given the same amount of work to get the wine in the store.

Don’t get me wrong. I think that distributors play a vital role in the industry: fueling efficiency and supplying larger retailers with a ready-supply of the wines that consumers pick up on a regular basis. I don’t wish for the that to change. But that can’t be the only way that a producer can get local presence at retailers across the country. For smaller producers to be left to compete only on winery visits, email lists, and online sales is far too restrictive given how many consumers will never buy wine online or visit a winery. And boutique retailers who only have access to the exact same set of products that big box sellers can get through the same limited distributor lists have a hard time building market differentiation based on a unique or interesting product line, which might give them a chance to offset the big box advantages of scale, selection and price. Any state legislator who say he or she supports small business but also supports the restrictive three-tier-system or other barriers to retail sales is lying. You can’t do both.

Consumers, especially the critical millennial generation, expect openness. There hasn’t been a generation in our society that is more attached to fundamental fairness, transparency and entitlement (think participation trophies) than the millennial generation. Closed and restricted don’t resonate with this generation. And it won’t optimize the kind growth of the wine industry requires for long-term stability.

IMPROVED RETAIL EXPERIENCE

How intimidating it must be for a consumer to walk into the normal retailer and see shelves with hundreds, if not thousands, of labels that all look relatively the same and no help other than the shelf talker that shouts “graphite with a touch of forest floor.” I am certainly not suggesting that every grocery store should provide an Apple-like retail experience for consumers, but if you want to talk about the bar being so damn low, it is, and has been, in the retail area. Yes, there are a smattering of retailers who provide consumers a good experience (like New York’s Marketview Liquor), but to be of benefit to the industry overall, a quality retail experience needs to be the rule, not the exception.

Given the current retail experience, why would any consumer pick any bottle other than what they’ve always bought. There is very little documentation at retail on how a consumer can find a new wine she’d like, very few questions being asked by retailers that are relevant to the wine decision (“are you planning to pair this with food or give it as a gift”), and very little real insight being provided at the retail level. In anything, after a while, the same old same old gets tired and consumers move on. There is an entire universe of wine varietals and labels to be discovered, but the retail experience in general does little to fuel consumer discovery beyond what is being pushed by the largest producers and distributors and what consumers already know. Without discovery, there is little change of continued growth by a consumer.

WHY THIS MATTERS

Here is where this all gets critical. The Silicon Valley Bank is forecasting that starting this year inventories will being to decline and bottle prices begin to increase. A result of this, according to SVB, will be increased difficulty in obtaining consistent quality wine at lower price points. The price of that same old bottle of wine is most likely going up. That means that the area where long-term wine market growth will be burgeoning (millennials) will have a harder time finding a constant quality at a price they choose or can afford. That price might come from different varietals or new appellations, but without the tools to guide discovery, switching to a different appellation or variety is hampered. Beyond price alone, this also is a generation that is willing to pay a premium for experience, which will go to those retailers willing to invest on experience. Doing a better job of improving communication with these consumers through language and channels they use, opening markets to give more choice and improving the experience at retail are the best ways we as an industry have of keeping this group of consumers engaged with wine now and growing as more sophisticated consumers in the future.

4 Comments Add yours

  1. Great post! I agree, the wine industry needs to pay attention to the up and coming generations. The long term with them is way different than anything we’ve experienced. Very true that wineries struggle to get their product out to consumers in retail shops….as I’ve been that frustrated wine buyer that can’t get a wine I’ve read about online. You’re spot on w/ retail needing to step up their game as well. I hope to see change come in this industry…although the realist in me, isn’t holding my breath.

  2. Great article! We are a startup that is addressing this exact problem and think the article was spot on: http://www.savvodigitalsommelier.com

  3. Kate Smith says:

    Great post! Robert M. Parker Jr. – “the world’s most prized palate” . I respect that man, for me is the most powerful wine critic.

  4. Preach it man! This article is great! Totally on point!

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