WHY MILLENNIALS MATTER IN THE WINE INDUSTRY

Why millennials matter in the wine industry

Millennials (individuals born between the years 1982 and 2000) represent an 83 million-strong segment within the United States alone (an entire quarter of the population).  Due to sheer numbers and the fact that they continue to transition into their prime earning years, that generation, the largest in history, represents a prime focus for most industries.

The wine industry is no exception.  Although some of them haven’t yet reached the legal drinking age, Millennials are turning the wine industry on its head. Why? Simply put, Millennials drink more wine than anybody else in the country. In 2015, Millennials consumed 159.6 million cases of wine alone, a figure that accounts for a whopping forty-two percent of the wine consumption in the entire nation.  To put that in perspective, that’s about 23 bottles of wine per Millennial per year (not even discounting for the underage ones).  Their per capita consumption is exceptionally high. 

As the wine industry attempts to adapt, there are lessons to be learned from beer—a market in which Millennials have already had a major impact.  Millennials helped springboard craft beer culture by demanding, among other things, brand, flavor and packaging innovation. For the beer industry, Millennials have brought a shift in tastes, preferences and consumption occasions.  That has resulted in more frequent and wider innovation (e.g., flavors, sub-categories like cider, etc.) as Millennials seek distinct, authentic and meaningful connections with the brands they choose to engage with.  These trends have allowed small breweries to thrive in an industry typically dominated by big brands and well-known companies.  As a result, below the upper echelon of breweries, the craft market is highly fragmented and rich with successful, innovative brand owners.  That has set Millennial expectations as they’ve now come to expect the same standards within the wine industry as well.

And in terms of consumption patterns, Millennials are much more likely to take a casual approach to drinking wine, in stark contrast to the Boomers and Gen-Xers who came before them. Whereas previous generations were interested more in exclusive, hard-to-get wines but tended to also gravitate more towards brands they knew, trusted and built long-term relationships with, Millennials exhibit far greater brand promiscuity. They are not only willing but actively want to try a wider variety of wines because they’re looking for experiences that set them apart. This puts substantial pressure on an industry that has to-date been known less for innovation and more for craftsmanship.  How will industry execs adapt their offerings when the largest wine-consuming segment evaluates not only taste and price, but also an array of secondary factors?  Things as seemingly trivial as a witty name or innovative label are two things to consider. The rules of the game are changing.

We’re undoubtedly beginning to see adaptation in terms of liquid production.  For example, winemakers have taken note that many young Millennials have a similar start along their journey into the world of wine: sweet red blends. As recently as five to ten years ago, the red blend portion of the wine market scarcely existed. Now, it represents the second-largest sub-category within the industry. Winemakers are continuing to track and evaluate these shifting trends and preferences as they lay down liquid that requires significant time and cost to age.  They understand that mistakes in decision-making today have a long tail  (i.e., that the impact --good or bad --will be felt in an on-going and substantial way years down the road with little time or opportunity to course-correct quickly at that future-stage).

Whatever the future holds for the wine industry, we can conclusively say one thing: the Millennial generation is going to play a huge role in it. Winemakers across the globe would do well to de-risk their liquid mix, innovation and marketing strategies by continuing to develop and refine their understanding of this critical demographic segment.  The same goes with any consumer product that requires long development cycles.

To learn more about new segment targeting in the Wine and Spirits Industry, or how Millennials should be factored into your marketing strategy, contact us.

B2B BRANDS: GET WITH THE PROGRAM

Looking across consumer markets, it is obvious that companies spend substantial time and resource carefully organizing their brands into a compelling and easy-to-understand hierarchy (well, at least they try). And, within that hierarchy, market leaders are obsessive about ensuring that they first define a brand personality and then consistently and clearly communicate that personality across every consumer touchpoint for a given brand.  In contrast, though most B2B companies would claim they care about their brands, few dedicate the same level of resource or focus to branding.

Is that a wise decision?  Our experience would indicate that it's not.  In fact, we've uncovered a tight correlation between manufacturer and industrial player brand strength and the resulting revenue, margin and operating profit performance of a company (r-squared = 0.648 on a recent client assessment).  And our peers at McKinsey, Deloitte and others have found similar correlations with financial performance in B2B segments, including direct links to EPS, a metric near-and-dear to the Boardroom. 

As a starting point, we would recommend that our colleagues at B2B players take as step back and think about whether their brand management activities simply consist of an amalgam of Marketing / PR efforts or whether they truly possess a coherent brand strategy.  A strategy that manages and fine tunes how a given brand performs relative to customer expectations across all of the cumulative experiences those customers have with the brand in question. From Advertising to Sales to Manufacturing to Installation and Aftermarket Service and Support, top-performing B2B brands provide a seamless and consistent customer experience across the customer lifecycle, creating a self-reinforcing reputation that drives customer lock-in, increases pricing power, provides opportunities for cross-selling and a platform for pursuing adjacencies.