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Wine Industry Conference

April 28

Santa Rosa

nbbj.news/wine17

With all the talk of wine consumer “upscaling” and “premiumization,” it might be natural for U.S. vintners to look to the globally recognized center of luxury wine — France — but that could be a mistake, warns an expert in Old World and New World wine business.

Since the 1976 Judgment of Paris put Napa Valley on par with French wine quality, U.S. winemaking has moved progressively upscale, from Sonoma County, the Central Coast, Pacific Northwest and elsewhere. But the lesson of upscaling from France should be caution in forgetting entry-level consumers, according to Damien Wilson, Hamel Family Chair at Sonoma State University’s Wine Business Institute since 2015. His 20 year wine career includes working in the French wine sector for nine years, including a stint as director of Burgundy’s School of Wine and Spirits Business.

“We need to be very careful in going forward, but we don’t want to fall into trap of what’s happened with the traditional [wine] producing countries, in focusing everything at the top end,” Wilson said.

A pervasive mindset in the French wine business is that wine should sell itself, and efforts at marketing signal a lack of quality.

“France is stuck in a situation that it is so proud of the quality of the wine it doesn’t realize it is losing customers,” Wilson said.

The country’s per-capita consumption has fallen from 140 liters a year (37 gallons) to around 55 liters, but consumption in the 15–24 age range — they start young — has fallen from 70 liters to 23 liters in 1990 and about 16 liters now. In same time, consumption for ages 45-plus went from 165 liters to 120–140 liters, but mostly in the upper price category.

“From 1980 onward, the French stopped refreshing their category,” Wilson said.

Born in and growing up around the beverage business in Australia, Wilson saw that country surge into oversupply of wine between the late 1980s and early 2000s. It has shifted exports to the top price points and touts successes, but the volume of sales in the $20-plus segment is tiny, Wilson noted. Overall, the country’s exports are still down from the previous year.

“Australia is trying to push that fact, because they are recognized as a bulk-wine producer,” Wilson said. “That’s what they’ve done to themselves over the last 10 years of the oversupply problem.”

Down Under vintners need to not only push the high end but also get new consumers. The U.S. and New Zealand have become pioneers among New World wine-producing countries in quality and attracting newcomers, but the U.S. doesn’t have a strong export focus.

“There’s so much focus on the domestic market, and it’s so profitable because the economy is doing really well here,” Wilson said. “It’s easy for wine producers to say, ‘An American will pay $200 for a new Napa Valley cabernet sauvignon.’ And then you try to push it into a foreign market, and they go, ‘Woah, woah, I’m not spending £200 for the same wine in the U.K. market.’”

U.K. wine consumers may not have the same background and tradition with Napa Valley cabs then may think they can get exceptional cabernet sauvignon wines from other New World countries, he added.

“Communicating [prestige] is one thing, but getting people to pay for that is a challenge.”

Wine Industry Conference

April 28

Santa Rosa

nbbj.news/wine17

Getting that message right and creating a “ladder” of products at various price points will become critical as the economic cycles shift, he said. The domestic-market focus of U.S. vintners may work with current conditions, but when the next cycle makes American consumers more frugal, export markets become more important.

“We need to focus steadily on what’s happening domestically and how consumers who have come into the category are moving their way up,” Wilson said. “What have they done to premiumize?”

Points to study: Are they moving from “safe” and consistent styles of wine to more experimentation, trying out new grape varieties, or trading their way up through selections in the same brand?

“People who go on that path tend to be more experimental and tend to spend a lot more as they learn their way through it,” he said. “We need to make sure their early mistakes aren’t detrimental to following that path up the premiumization curve.”

Jeff Quackenbush (jquackenbush@busjrnl.com, 707-521-4256) covers wine business.