I think we are all very aware there are problems in the industry. Oversupply, higher interest rates, tariffs, and an aging wine loving population without a younger generation to take its place.
The obvious first step is to reduce supply and find ways of creating interest to bring in new consumers. What steps should the industry take to improve things?
this will happen organically, as more and more wineries (particularly smaller ones, unfortunately) have to drop out
This has been attempted, and will always be attempted, for many decades. It’s business 101. Clearly the need to do so has increased, but it’s a rough spot when the market is depleting, as the cost of getting new customers, on reduced revenues, is pricey
For certain it’s a large enough industry that whatever CAN be done will be done, but I feel this is a natural, albeit rough at the moment, moment in the timeline of alcohol consumption cycles, particularly wine at the moment.
I agree with most of this but will add that something needs to change with restaurant offerings as for many people was the gateway drug into this passion. A combination of crazy markups and crap mega-produced offerings at the lower price points doesn’t exactly inspire future generations.
This is particularly true in Socal, let me assure you
If the US lowered the excise tax on wine to be lower than other forms of alcohol, wine coolers would be a thing again. It now might be called Gatorwine though.
Have you seen buzzballz? Many are exactly that - and they seem to be doing very well . . .
Anyone who has ever taken a marketing course knows we are at the mature stage of the cycle and there are things that can be done at that stage.
The maturity stage of a product or industry life cycle is characterized by high competition and stable demand. To succeed, consider the following strategies:
Differentiate Your Offering: Since the market is saturated, a unique value proposition is crucial. This could involve product innovation, superior customer service, or cost leadership.
Focus on Efficiency and Being Lean: Maintain profitability by streamlining operations and being flexible enough to adapt to changes in the competitive landscape.
Explore New Niches:Look for unmet needs within the existing market segments.
Consider Mergers or Acquisitions: Acquiring smaller, innovative companies or merging with a peer can help expand your customer base and market presence.
Adapt to New Technologies and Trends: Leverage emerging technologies like AI for deeper customer insights or embrace sustainable practices to attract environmentally conscious consumers.
I personally would like to see more packaging options like more boxed, quality wines. Linne Calodo is up to three boxed offerings now. The equivalent of 4 bottles of various GSM blends for $99. I buy those.
To me, the biggest thing is pricing. If you compare the price per serving of decent, mid-tier beer or spirits to wine, the comps aren’t great. A $10 6-pack of beer or $30 bottle of bourbon are roughly ~$1.70 to 1.80 per serving. That equates to an $8-9 bottle of wine. At that pricepoint today, one’s options for decent wine are pretty thin. This is a hard nut to crack though because the economics of producing wine that cheap are difficult, especially when volumes are falling so facilities are experiencing fixed cost deleverage. I think as we right size vineyards and facilities for a lower volume future, hopefully large producers will be able to deliver better value near that price segment. The majority of drinkers don’t geek out about wine so they need an easy, cost-competitive on-ramp.
I also think that packaging innovation that enables single-serving wine is another lever. There are obviously headwinds (consumers expect a glass bottle for wine) but large suppliers making a push for high quality bag-in-box and 200ml Tetra offerings should help.
How much would wine price drop if we skip the 3 tier system and have wineries sell directly to consumers?
It would drop some, but would affect all alcohol so it would keep the difference in tact between wine, spirits, and beer. Also, even if it was not legally compulsory, most wineries would still need to use distributors to go to market nationally. I think the savings to the end consumer would be modest.
As for supply, a lotttttttt of vineyards and blocks have been ripped out in the last 30 days in Napa. Vine disease combined with difficulty finding fruit buyers has led to some ripping under-performing blocks out, hoping in 4-5 years when the replants are in full production, that the industry is rebounding.
Less supply translates into higher prices, not lower, which will further suppress demand. Wine, except for micro production, very high end, and very low end, has entered a doom cycle.
For starters, restaurants should adjust the markup on wine. Wine by the glass should be less expensive, as should bottles.
We are so lucky here in NJ that there are literally hundreds (probably 300+) really good to great restaurants that are totally BYO……We hardly ever go out to dinner at a restaurant with a liquor license because the wine lists are mostly mediocre and way overpriced……
State liquor laws dictate if corkage is possible.
We do as well in Chicago (incl restaurants that have a corkage fee) which is a great option for those of us already into wine. My point was more so directed to attracting new enthusiasts. Being able to sample BTG or having the Somm recommend an inexpensive bottle that’s actually good has long term benefits to the industry.
At the end of the day, most wineries at ALL price levels really do try to get their wines on BTG lists as much as possible - and at very reasonable pricing.
Restaurants in general need to be more open minded . . .
Not sure restaurants, where margins are tight, are going to forgo their alcohol revenue by reducing prices. Also more good boxed wines that provide ‘single pours’ that don’t risk the rest of it going bad too soon, would win over more folks.
Fantastic point. I see this often when my 27 year old son text pics me wine lists when he’s out on dates. Rarely anything of interest in the price points of kids that age, and he does have a refined palate. So what often happens is this: he orders cocktails, or as @ToddFrench knows, I’m the big sucker and make a primo reco for him and then have my wife Venmo the kid some money. honestly, I enjoy spoiling, and why not. I only have one. But this cannot be good in growing the next generation into the wonderful life of wine appreciation.