I interviewed industry Consultant Peter McAtamney, who in 2003 founded Wine Business Solutions, that helps wine businesses become more financially sustainable through research into the On-Premise and DtC, and directly with more than 350 clients across the globe. In his report this month he says that conditions signal “The Once in 40 Year Storm."
The average bottle of wine according to OIV now costs 24% than it did in 2020, which sounds very positive. Yet you say margin creep is blunting that data. Why?
If you look at Silicon Valley Bank’s and other data on winery profitability, wineries have weathered this massive upheaval during and post COVID relatively well. Wineries are, on average, however, posting losses, as they have had to absorb more rises in costs than they have been able to recover in revenue.
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Wine Business Solutions
The so-called “Zelennials” do not appear to be embracing drinking wine as Gen-X did. Why?
There are many reasons such as the “better for me” movement and the general shift away from drinking alcohol, but perhaps the least talked about is that they just can’t afford it. Should the economic situation improve, then it will be interesting to see how this changes. People are saying they are giving up drinking in numbers that should terrify the industry but that isn’t necessarily being born out by the numbers. Yes, sales are down, but not to the extent that might be anticipated from consumer research.
New scientific papers have claimed that any amount of alcohol can be deleterious to one’s health. Has this given more fuel to the anti-alcohol lobby?
This is a much bigger subject and there are many excellent commentators such as Felicity Carter and Dr Liz Thach MW who have covered this comprehensively. As I mentioned in my Newsletter, it seems to me that the anti-alcohol lobby has chosen to attack the industry at the point at which it is least able to fight back. The industry therefore needs to work harder than ever to promote wine as a unifying, moderating, socially connecting medium that brings people together around a table.
Do you see people in the industry becoming desperate? Over what specifically?
This was just a general warning to clients and other readers of my newsletter that I am seeing the worst behaviours I’ve seen in 40 years, by winery suppliers and staff, as people who would be problematic in any case are less able to repay debts and wineries are more eager than ever to sell wine. So be careful who you deal with.
You say that they key is innovation? Can you give some successful examples?
The key, always, is value innovation. This started as an idea with Michael Porter and was further promoted by Kim & Mauborgne in their book Blue Ocean Strategy. I used to be Global Marketing Director for Yellow Tail, and there is a whole chapter in their book on that brand. The principals are simple. What do you remove or tone down that is getting in the way? What do you add or turn up that creates more value for customers?
You contend the industry must “mobilize those with influence,” including wine specialists, You Tubers, notable sommeliers and others consumers trust. How does one do that? Hire them for commercials?
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This is about looking to logical agencies. You can apply this to all social media but if we just look at YouTube, I have clients with YouTube channels that are the point end of wine geekery and they get 2-4000 views per video. This is enough to be the driver of sales for their not small (40,000 case) wine business. A Kiwi chef based in Sydney whose channel is called “Andy Cooks” gets 250Million views of “how to cook chicken biryani.” If we, as an industry, could only start talking to people about what they are really interested in – having more fun with wine and food at the table – then possibilities are endless.
You cite XXL, a flavored 16% alcohol wine out of Moldova, and Mucho Mas from Spain with 16 grams per liter of sugar, have had astounding success. Why?
XXL was originally source out of Moldova but is not now. It is the complete opposite of what everyone is saying about emergent consumers and is the fastest growing brand in the US right now. Mucho Mas also runs right against how the wine world is meant to be evolving and is one of the fastest growing wine brands in Europe.
I want to stress that it is not about de-alcoholised wine: flavor it, put it in a can and sell it as a complement to the burgeoning better-for-you snack food market as is suggested by everyone from major research firms to national bodies. It is about looking at all aspects of wine and applying value innovation principals. To be clear, you can absolutely do it at the ultra-premium level as well. [France’s] Domaine Faiveley has a Mercurey appellated wine that sells for more than $US60 called La Framboisière (The Raspberry Patch). Of course, it has the most exquisite raspberry flavors and aromas you could wish for. This wine will appeal to both new drinkers and the most hardened wine critic alike.
The Z-Gen consumers show less and less interest in wine.
Wine Business Solutions
You write that “Winning in the US is all about normalizing the moderate consumption of wine with a meal with friends and family.” What has prevented that from happening?We are, after all, largely a country of immigrants from wine-drinking countries.
As referred to in my Paper, the US drinks half the wine that Australia, Germany and Spain do, countries that have little to do with one another culturally. That is the biggest opportunity for the wine industry globally. There are many reasons why the US has not followed other wine producing countries in terms of wine drinking culture. One of the key things is the way drinking is portrayed in Hollywood as solo self-destruction, the thing you do after your boss, girlfriend, friend dumps you. My question is, if big tobacco can get away with blatant product placement in virtually every movie, why can’t we, as any industry, portray wine consumed in moderation with food and good friends as a more normal, healthier, enjoyable way to treat alcohol.
You advise wineries to “Beware of people in love with ‘big volume.’” Why?
It is often said that the worst thing that happens in the wine industry is winemakers sitting around boasting about volume production. Less and better is a winning strategy always and never more so than now. Yes there are businesses that are growing brands quickly as earlier mentioned, even in this environment. But you need to have scale and be able to scale quickly in order to do this.
What do you see happening in the next five years?
The wine industry has a choice. Either it can go the way of tobacco or it can position itself much closer to hospitality, as food, as an integral part of any dinning occasion and that has 8,000 years of history. The simple economic mathematics of imposing bilateral tariffs mean that everyone will be worse off. So, unless something happens that the world’s top economists are not anticipating, all will lose.
If Trump’s tariffs go through, what will be the effect in the wine industry.
The simple economic mathematics of imposing bilateral tariffs mean that everyone will be worse off. So, unless something happens that the world’s top economists are not anticipating, all will lose.
