Monday, June 17, 2019

Mapping an entire continent's vineyards

To many people, Australia is a small island somewhere off the coast of South America. It is, indeed, officially an island, the world's largest. However, it also officially a continent, the world's smallest; and it is also a country, with 25 million people.

Because it is a single country, there are things that Australians can do with their continent that no-one else can do with their own homeland. That is, even though it is roughly the same size as the contiguous continental USA, to get something done you only need 25 million people to agree on it, not 325 million — believe me, this is much easier!


If you now re-read this blog post's title, you will see what this has to do with wine. Yes, that's right — during 2018 they decided to use aerial imagery to map every single row of vines on their continent, comprising all 146,128 ha (361,090 acres) of vineyard area, scattered around the 7.7 million sq.km (2.7 million sq.mil) of space available.

This is called the National Vineyard Scan 2018, and is scheduled to be repeated in 2019 and 2020. This is an entirely automatic data-gathering exercise, designed by Consilium Technology, to geolocate all wine-grape vineyards in Australia. The high-resolution satellite images are scanned using an artificial intelligence computer algorithm, which has been trained to detect vineyards automatically. The accuracy of the system is reported to be at least 95%, based on test surveys. [Actually, the system scans only c. 5.1 million ha of the continent, because much of Australia is vineyard-free desert or semi-desert.]

The survey is funded by Wine Australia, the Australian Government statutory authority overseeing the wine industry — this organization is “funded by by grape-growers and winemakers through levies and user-pays charges, and by the Australian Government, which provides matching funding for research, development and extension investments”. This means that the detailed survey results are available only to the levy payers, via the GAIA (Geospace Artificial Intelligence for Agriculture) website.


You can download the full report for 2018 (with some pretty satellite images), or its much shorter summary, from here. In the meantime, above is the official infographic, summarizing the outcome for 2018. This should make wine-industry bodies on the other (multinational) continents green with envy.

Monday, June 10, 2019

The retention time of people on winery mailing lists

Each year the Silicon Valley Bank and Wine Business Monthly collaborate to produce some wine-industry metrics about Direct to Consumer sales in the USA. They do this by sending out a questionnaire to wineries across the land (see Insights for Successful Consumer Wine Sales Survey Questions). The results are compiled into the annual Insights for Successful Consumer Wine Sales publication.

One of the winery questions relates to the retention rate of mailing-list membership:
On average, how many months do wine club / allocated mailing list members stay in your most popular wine club release / mailing list program?
Last week, Wine Industry Insight highlighted the results for the surveys from 2015-2019, arranged by grape-growing region. These data are shown in the graph reproduced here, originally sourced from 2019 Insights for Successful Consumer Wine Sales.

Winery mailing list retention in the USA

There are several things worth noting about these results.

First, the average time for people to stay on a winery mailing list is 29 months, across the 5 regions and 5 surveys. Is 2.5 years a good retention time for mailing-list membership?

The marketing industry has always treated current customers as the “low-hanging fruit”, even suggesting that it costs 5–7 times as much to acquire a new customer as it does to maintain an existing customer relationship (The Wall Street Journal, Nov. 26 2008). The marketers therefore refer to the loss (and replacement) of customers as the “churn rate”.

It is therefore a maxim of successful company growth that retaining the existing customer base is more important than trying to acquire new customers. That is, if the retention rate falls below average then the company cannot be growing. There is the usual 80:20 rule — 80% of your business comes from 20% of your customers — which means that doing something to keep those 20% is more effective than trying to market to new customers.

It is not entirely clear to me that wineries understand these ideas particularly well. If mailing-list people (who are almost always current customers) are being retained for only 2–3 vintages, then this cannot be a Good Thing. How proactive are wineries at increasing their retention rates (or decreasing their churn rates)? It always seems to me that they expend a lot of their efforts on attending wine-tastings of various sorts, which are directed principally at getting new customers (or giving the wine trade free drinks). What are they doing for their current customers, beyond sending an email every now and then?


This is not to say that wineries do nothing, of course. Most wineries offer purchase discounts to their direct customers, for example, and also wines that are not available outside the mailing list. There are even wineries where almost all of their sales come from the mailing list, and there is actually a waiting list for the mailing list; and good luck to them. However, this begs the question of a 2.5-year average retention time. Discounted wine is apparently not enough for most customers to remain interested, at least on its own.

Some wineries also put on special events for existing customers, for example; but this is only effective for those customers who live close enough to attend conveniently. For example, I have always been on mailing-lists where these activities were of no practical relevance to me at all.

This highlights the important point about most of the business coming from the top 20% of the customers. Indeed, it has been suggested that the bottom 20% of the customers can actually be a drain on profit, because it costs more to service them than they bring in as income — the remaining 60% are break-even customers (CFO magazine, January 2009; The Wall Street Journal, June 22 2009). Strategies that target the top 20% (the core customers) are thus the key to financial success — trying to please too many different types of customers can be counter-productive.

This implies spending the effort to identify the top 20%. I am not suggesting that all wineries should conduct what is called a “customer-profitability analysis”, which would result in a “portfolio of needs-based customers”, who will be the profitable ones. However, it would probably pay dividends if the wineries did do it. Their limited resources could then be directed towards servicing and expanding the profitable customer relationships, rather than trying to keep everyone on the mailing list.

This is effectively a Loyalty Program of sorts, which will work only when it somehow enhances the overall value of being associated with the winery, and thereby motivates the loyal buyers to make their next purchase. Sadly, most of my experience with these things (such as frequent-flyer miles) is based on a workplace paying for the service but me getting the loyalty benefits. [Although I did once get free return plane tickets for my daughter and myself, based on the frequency with which we had traveled from Australia to Sweden.]


Other points

The second thing to note about the graph data is that the wineries in Washington state do best at retaining members, while the wineries in British Columbia generally do worst.1 It would be interesting to find out whether the winemakers of Washington are doing something different from their compatriots elsewhere. Or perhaps their wine is, in some way, simply more attractive for Direct to Consumer sales?

The third thing to notice is that there is an apparent increase in retention rates through time.2 In particular, the retention rates for the 2018 and 2019 surveys were 2 months longer than they were for 2015 and 2016. Is this cause for optimism? It would be nice to think so.

Later note: these issues are addressed by Rob McMillan in his comment below.

Conclusion

For me, the bottom line here is that a bit more attention to the current customers (mainly Baby Boomers, I guess) might be more effective than trying to woo new customers (eg. Millenials, etc). This will require careful attention to the causes of mailing-list churn, both throughout the wine industry as well as for individual businesses. The marketing people seem to be missing this simple point — the key to successful marketing is less publicity and more targeted selling. Customer relationships are not one-off events — we need to turn it into a long-term relationship (called the “customer lifetime value”).



1 The data are statistically significant: One-way ANOVA F = 10.59, p = 0.0001.
2 The data for the yearly averages are statistically significant: Correlation = 0.90, p = 0.039. The individual data for both Napa and Sonoma counties are also statistically significant.

Thanks to Bob Henry for directing me to this topic and its discussion.

Monday, June 3, 2019

Is Riesling the world's most under-rated premium grape variety?

I was in a Bengali restaurant (Taste of Bangla) the other evening, and among the beers (Bangla Premium Beer), cocktails (Bangla Sunset, Monsoon Rain) and wines there was a white wine called Last Night a Riesling Saved My Life. I didn't get to taste it, but the name is brilliant. It comes from Rheinhessen (in Germany), and apparently its fruity sweetness goes well with spicy foods.


This contrasts with the word “riesling” from my youth in Australia, where “riesling” was not always a grape but often a wine style, made from any one of a number of grapes. For example, “Hunter River Riesling” was made from Sémillon, and “Clare Riesling” was made from Crouchen.* Fortunately, since Riesling deserves to be treated better than this, the industry started to use the name “Rhine Riesling” when referring to the grape itself (which must have annoyed the people from Alsace and the Mosel), and then later simply “Riesling”.

However, Riesling has long had another image problem, not just in Australia. This is the matter of the style of wine to be expected from any given bottle. Put simply, Riesling has long had an identity crisis — this makes it probably the world’s best “forgotten” grape variety.

Sweet and dry

So, let’s jump right in to the essence of the issue. I will let Rhys Howlett describe the problem:
Riesling is versatile. Around the world its range includes the bone-dry Clare Valley beauties, which take years to lose their vice-like acid grip; austere Oregon offerings; through to some of the most generously proportioned Alsatian examples — rich, mouth-filling, luscious. Riesling can fizz, it can botrytize, it can do just about everything. And another thing it can do very well, or we can do on its behalf, is confuse the drinker.
Given the wide range of potential styles, how is the poor drinker to know what is in the particular wine bottle they have in their hand?

The blatantly obvious solution is to have a bottle label that tells them. The International Riesling Foundation has been trying to promote this idea, using their Riesling Taste Profile, which is a little diagram for use by the label maker, based on a simple linear scale. It describes the style of wine, rather than merely the sugar content, as in this example:


The winemaker provides the word taste description, and the IRF provides the pictorial scale. Note that there are also words to help with understanding the scale, but it is the arrow that contains the actual information. The style information is based on the relationship between the wine's sugar content and its acidity, as indicated in this small table.


For consumers, the focus with Riesling is often on the apparent sweetness of the wine, although fruitiness is often mistaken for sweetness. However, it is the balance between sugar and acid that makes a great Riesling wine. This, of course, means that temperature plays an important part in growing the grapes — the cooler, the better.

Where is Riesling grown?

Given the importance of temperature, we cannot expect Riesling to be grown just anywhere, even within grape-growing regions. Journey Through Wine: an Atlas says of Riesling: “A true mirror of the soil, it expresses terroir brilliantly. In Alsace and Germany, there are surely as many Rieslings as there are villages!”

There are c. 50,000 hectares of Riesling vineyards recorded, as shown in the next table (compiled from here and here).

Riesling acreage

Almost precisely half of the world’s Riesling vineyards are is in western Germany, along the Rhine and Mosel rivers, and in the neighboring part France. (Alsace is good to visit because it looks so perfectly German while culturally being so clearly French.) Here, and here alone, is Riesling the No. 1 grape. The locals treat it with a great deal of respect, even though they cannot usually charge as much for their wines as can many of their brethren elsewhere — this does not say that you can't pay breath-taking prices, if you want to.

The USA is the second largest producer of Riesling, although you will be hard put to find out much about in the wine media. A tad over 50% of the growing area is in Washington, which receives much less media attention than does California (or should I say: the Napa Valley?). The focus in Washington is more on Syrah and Chardonnay, to the obvious detriment of Riesling wines.

Australia is the third largest producer, although the majority of the wine comes from only two regions, as shown in the next graph, from Wine Tasmania (production is indicated by the size of the bubbles). Tasmania is emerging as the highest quality region for all cool-climate grape-growing, and current Riesling grape prices are higher there than elsewhere (as shown by the vertical axis in the graph). However, in keeping with the theme of this post, it is the Tasmanian sparkling wines (made from Chardonnay and Pinot Noir) that garner most of the attention from the wine industry (see Riesling reaches high status in Tasmania).

Riesling yield and price in Australia in 2018

Riesling is also slowly making headway in New Zealand, where it is also expected to do well (see Champion of a ‘misunderstood’ class).

What about climate change?

The sweetness of the wines is a balance between the sugar and alcohol contents of the wine, since sugar creates both alcohol and residual sweetness. There is an obvious concern about a potential relationship between quality (sugar content of the crushed grapes) and quantity (the amount of grapes harvested). The American Association of Wine Economists’ Facebook page looked at this relationship for recent vintages in Germany, without finding any problem:



However, changing temperatures are likely to create more challenges for Riesling growers than for many other grape-growers. Warmer seasons will affect the grapes' balance between sugar and acid, which will make choosing the ideal harvest time more difficult. Making a consistent style from year to year may be impossible. David Schildknecht recently described the effect of the weather on the 2017 Riesling vintage in Germany, for example.

The AAWE Facebook page also looked at this relationship for recent vintages in Germany, and found a strong relationship temperature and grape sugar content. Hotter seasons produce more sugar, as expected:


If you want to drink wines with a lot of residual sugar, such as the Beerenauslese and Trockbeerenauslese styles, then 2018 was a good year for you (2003 was another legendary year).

Grape yields, on the other hand, were much less affected by temperature, as shown next.


Indeed, it is usually reported that yields are most affected by rainfall, both when it occurs and how much there is, so precipitation variation may be a more interesting aspect of climate change to investigate.

Finally, climate change is not only a direct threat to Riesling vineyards but also an indirect one. As pointed out recently, changing weather is also changing pesticide usage, as a means to ameliorate some of the effects; and this is also now an issue in Germany: Riesling wine, holding out between pesticides and climate change.

Conclusion

Riesling vines appear to still be alive, and more-or-less well, in spite of the current dip in consumer focus on the resulting wines. If you want to explore this part of the industry in more detail, then a couple of recent books will help you:
  • Stuart Pigott (2014) Best White Wine on Earth: the Riesling Story.
  • John Winthrop Haeger (2016) Riesling Rediscovered: Bold, Bright, and Dry.



* At the same time, “White Burgundy”, “Red Burgundy”, “Claret”, and “White Hermitage” also referred to Australian styles not French regions, and the wines were rarely made from the grapes usually associated with these wine names. For whites, it is amazing how many different styles you can get just by mixing different proportions of wine from Muscat Gordo Blanco (aka Muscat of Alexandria) and Sultana (aka Thompson Seedless)!

Monday, May 27, 2019

Which countries consume the most premium wine?

Most of the wine sold on this planet fits into either the Low-price or the Value categories, which cost less than $10 or €10 per bottle. At the other end are the Premium, Super-premium, Ultra-premium and Prestige categories (for alternative category names see the post How many wine prices are there?). The latter wines are often grouped as "Premium-plus", which group exceeds $20 or €20 per bottle.

This combined group is the topic of this post. Which wine-drinking countries seem to preferentially consume premium-plus wines? The answer may surprise you.


The information comes from The International Spirit and Wine Record. The graph below shows the data for those 78 countries where estimated wine consumption exceeded 1 million 9-L cases (a dozen bottles) for the year 2017. The vertical bars show us the estimated number of premium-plus wine cases as a percentage of the total number of cases of wine. [Note: only every second country is labeled.]

Countries that consume the greatest proportions of premium wine.

Globally, premium-plus wine consumption comprises only 13% of the wine market. However, there are two countries where premium wine sales exceed 50% (Ireland and Hong Kong), and 6 countries where sales exceed 33%.

Most of the top 15 countries do not produce much wine of their own, and thus are importing the premium wines, except for New Zealand and Australia. These are the countries where 2017 premium-plus sales exceeded 20% of the wine market:
Ireland
Hong Kong
New Zealand
Canada
Australia
Singapore
Switzerland
Denmark
Norway
Japan
Costa Rica
Puerto Rico
Israel
Malaysia
Taiwan
United States of America
United Kingdom
Thailand
66.9%
50.5%
47.1%
37.2%
36.7%
36.5%
30.4%
30.3%
29.0%
29.0%
27.9%
26.9%
25.5%
24.1%
23.8%
22.6%
22.3%
21.9%

What on earth are those Irish doing!? They are well known for being connoisseurs of Guinness beer and Irish whiskey, but apparently when they drink wine they overwhelmingly prefer fine wine, as well. Who would have thought it?

It is pleasing to see the Australians and New Zealanders setting the standard for the wine-producing countries. There is probably an expectation that local wine consumption in many regions will preferentially be for simple table wines; but the Australians and New Zealanders do not follow this European-inspired approach, but follow much more the approach of the wine-importing cultures, with a much more marked preference for finer wines.

I have noted before that The USA imports more expensive wines than anywhere else, both by volume and by value. This is because of the large population size, which generates large wine importation. Obviously, the U.S.A. drops down the list when adjusted for population size (as shown above).

There are a number of other regions with small wine consumption that also have notable preferences for premium-plus wines, including: Bermuda (70.5% premium), the Cayman Islands (58.6%), Saint Vincent and the Grenadines (52.2%), Grenada (45.1%), and the U.S. Virgin Islands (43.4%) (but not so much the British Virgin Islands, 24.6%).

The countries at the bottom of the list include some well-known wine-producing and wine-consuming countries, notably: Germany (2.7% premium), Portugal (2.2%), Romania (1.7%), and South Africa (1.1%). Compare these figures with those for the biggest wine producers: Italy (9.6%), France (7.8%), and Spain (6.7%), where simple table wines comprise most of the wine consumption.

Sadly, I must note the poor performance of Sweden (11.6% premium), compared to the data for their Scandinavian neighbors, Denmark (30%) and Norway (29%), and even Finland (14.9%). I do my best to drink only fine wines, but it is obviously not enough!

Monday, May 20, 2019

In which countries is wine the greater part of the alcohol market?

Actually, there appears to be only one country where wine is >50% of alcohol sales, by volume — Italy.


This information comes from The International Spirit and Wine Record. The graph below shows the data for those 78 countries where wine sales exceeded 1 million 9-L cases (a dozen bottles) for the year 2017. The vertical bars show us the number of wine cases as a percentage of the total number of cases of alcohol (i.e. including beer and spirits). [Note: only every second country is labeled.]

Countries that consume the greatest proportions of wine.

Globally, wine consumption comprises only 10% of the alcohol market. There is only one country where wine sales exceed 50%, and only 8 countries where sales exceed 33%.

Of the top 5 countries, 4 are in Europe; and 8 of the top 10 are located there (as are 14 of the top 20). These are the countries where 2017 sales exceed 20% of the alcohol market:
Italy
France
Georgia
Portugal
Greece
Switzerland
Montenegro
Uruguay
Slovenia
Malta
Argentina
Morocco
Denmark
Uzbekistan
Hungary
Sweden
Macedonia
Belgium
Luxembourg
Chile
Israel
Netherlands
Moldova
Austria
Germany
Australia
Serbia
Romania
56.6%
48.5%
46.1%
44.3%
41.0%
36.1%
34.7%
34.2%
33.1%
32.9%
32.5%
31.6%
28.7%
28.3%
26.7%
26.4%
24.4%
24.1%
24.1%
22.2%
22.0%
21.7%
21.7%
21.6%
21.6%
21.3%
21.1%
20.4%

Surprisingly, Spanish sales are at only 16.8%, which is unexpected for one of the world's top-3 wine producers — compare with Italy at 57% and France at 48%. Even some of the top importers are at relatively low levels, with the USA at 10.4% and the UK at 17.3%.

The countries at the bottom of the list are mostly those where beer consumption predominates, including India (0.3% wine), Vietnam (0.4%) Thailand (0.4%) and the Philippines (0.6%). The biggest potential wine markets include those with extremely large populations but currently low wine percentages, such as India, China (2.3%), Brazil (2.4%), and Indonesia (3.1%). Mind you, the USA currently seems determined not to participate in the Chinese market.

Other countries with low percentages have traditionally been known for relatively high spirits consumption, including Poland (3.4% wine) and Russia (7.7%). Indeed, this is why some of the Nordic countries long ago introduced government alcohol monopolies, to try to get people away from binge drinking of spirits, and move them to lower-alcohol beverages such as beer and wine. They seem to have succeeded: Sweden (26% wine), Norway (19.4%), and Finland (11.0%). Beer is therefore probably the most popular beverage in these countries.

Monday, May 13, 2019

A century of French wine vintages

A few weeks ago I discussed the topic of quality scores for different vintages from particular wine-producing regions (How different are regional vintage quality-scores from different sources?). These Vintage Charts are intended to tell us how the wine quality has varied from vintage to vintage, for each region. They naïvely simplify the complexities of each harvest (where there can be considerable spatial variation) down into a single number; but nevertheless, they can be an interesting and informative guide to the general quality of each vintage, especially if they cover a long period of time.

In this post I will use the information from one specific vintage chart, to look at the variation over the past century for the vintages from the most prominent wine regions of France (see Which French wine region is right for you?).


The Cavus Vinifera web site markets a wine-cellar management tool (also available in English as Your Cellar). Along with lots of other information, the site contains vintage charts for several of the wine-producing regions of France, mostly from the year 1900 up to a couple of years ago (Les millésimes en France de 1899 a nos jours). This is very unusual, as most vintage charts cover a much shorter period of time. This circumstance thus provides the opportunity to compare these French regions over the past century, to investigate to what extent vintage variation is correlated among these areas.

Almost every vintage from 1900-2014 has been rated on a scale of 0-20. The regions and wines covered by the entire time-span include:
   Bordeaux (red)
   Bordeaux (white)
   Bordeaux (sweet)
   Burgundy (red)
   Burgundy (white)
   Rhône (North)
   Rhône (South)
   Loire (red)
   Champagne
   Beaujolais
   Alsace
The data are incomplete for the Loire (sweet) and South-West regions, which I have thus left out of my analysis.

As I did in my previous post on the topic, I have used a network to visualize these data, with the network being used as a form of exploratory data analysis. I first used the manhattan distance to calculate the similarity of the different wines, based on the quality scores. This was followed by a neighbor-net analysis to display the between-region similarities as two phylogenetic networks.

The network for the 11 wines / regions is shown in the first graph. Each wine type is represented by a dot in the network. Wines that are closely connected in the network are similar to each other based on the variation in their vintage quality scores through time, and those that are further apart are progressively more different from each other.


Not unexpectedly, many of the different wines from the same general regions do form neighborhoods in the network. For example, the three wines types from Bordeaux (in south-western France) are together; as are the three wines from Burgundy and Beaujolais (along the Saône River in eastern France); and the two wines from the Rhône River (in the south-east). Thus, we may conclude that broad-scale regional conditions do, indeed, affect the different grape types in a similar fashion.

However, the network location of the other three wines is less easily explained. For example, the Loire reds (from western France) are associated with the Rhône wines; the Alsace wines (from north-eastern France) are loosely associated with the Bordeaux wines; and the Champagne region (in northern France) is somewhat isolated. If I had been asked to guess beforehand, I would have expected the Alsace, Champagne and Burgundy wines to have similar vintage variation, based on their geographical proximity. So, why does the network reveal something quite different? There is something worth looking into here.

The network for the 115 years is rather a simple graph, which mostly just shows the same pattern as a graph of the annual vintage quality-scores averaged across all of the regions. This does, in fact, mean that a vintage chart for the whole of France could be generally useful. So, I have shown the simple annual averages in this next graph, instead of showing the network.

Average quality scores for the past hundred years of French wine vintages.

The poorest French vintages include 1902, 1910, 1913, 1930, 1931, and 1968. The best French vintages include: 1929, 1945 and 1947, followed by 1928, 1949, 1989 and 1990, and then 1906, 1953, 1959, 1961 and 2005. The 1910 vintage stands out as particularly poor, with none of the regions scoring more than 10 out of 20 for their grape harvest, and both Burgundy wines scoring 0! This contrasts with the best years, where no region scored less than 16 out of 20. Some of the top years are still revered by connoisseurs, at least for some of the regions.

Note that the 1930s were generally not a good time for wine-making in France, and nor were the 1910s (although 1906 was an early-century exception). The 1940s and early 1950s, on the other hand, were generally good times for wine production. Moreover, there has not been a bad vintage since the end of the 1960s, or even a mediocre vintage since the early 1990s.

Indeed, this graph shows one of the clearest effects of climate change in France — the consistent elimination of low-quality wine in regions that have traditionally been considered marginal. Marginal growing conditions have always been considered desirable for high-quality wine-making, but this comes at the risk of poor vintages when the weather is particularly nasty. These days, climate change has created considerable variation in vintage harvest volume, but has reduced the variation in vintage quality. Consistently warm growing weather ensures high-quality grapes, but it comes at the expense of potentially reducing the quantity of the harvest — for example, by late spring frosts (see Frost – the new normal?), lack of rain (see Wine’s emerging water crisis), or even heavy rain.

Climate change is a particular type of weather change, associated with atmospheric warming — it thus increases the variability in some weather characteristics and reduces it in others.

Monday, May 6, 2019

Why online systems for recommending wine seem not to work very well

In the marketing world there is a clear distinction between “buying” and “selling”. “Buying” means that the customer comes to the retailer in search of something specific, and will make a purchase if the item is available at the right price. “Selling” means persuading the customer to purchase something they had not yet realized they wanted.

Most wine is sold, not bought. This post looks at how this happens in the modern world.


There is plenty of wine that is bought, of course, mostly by people with a specific wine interest. They hear about a particular wine, and they go in search of it, or they make direct purchases from wineries, for example, after tasting. Indeed, it seems that: “the online world has been a godsend for boutique wineries, many of which have had their market access stymied by the increased dominance of supermarkets in the liquor retailing scene.”

Selling

But most wine is not bought in this targeted way. This applies to both online and bricks-and-mortar retailing. Most casual drinkers start the purchasing process with little or no specific idea in mind, and it is up to the retailer to sell them something, lest the customer moves on. This should preferably be something that the customer will like, and which is also financially remunerative for the retailer. The latter point is of particular importance, because selling loss-leaders is a no-brainer, and selling high-volume items is a little-brainer — the “art of selling” refers to the remainder of the inventory.

The tricky part is therefore the point about the customers purchasing something they will like. How on earth do we do this? Let's put aside the idea of prior marketing for the moment, which is a whole other business (“Sales is fishing with a hook; marketing is fishing with a net.”) Supermarkets often work in this way.

In the bricks-and-mortar world, one traditional selling method is to have an actual human being talk directly to the customer. In some mysterious way, the seller persuades the customer to leave the store with a bottle of wine of the seller's choice. This may or may not work, depending on how well the seller judges the tastes of the purchaser. It can fail for any number of reasons, including misunderstandings due to words, genetic differences in wine tasting, and psychological factors like social pressure (Wine has a problem because it is “sold.” Badly. Or not at all). Moreover, a large proportion of wine is purchased in supermarkets and grocery stores, where there is no dedicated seller. This has been referred to as the Vino Casino, because getting a suitable wine is then a lot like gambling (“you pays your money and you takes your chances”).

In the online world, on the other hand, the method that has become best entrenched is to have a computerized recommendation system. The customer is shown a series of items that the computer has decided might be of interest, so that the computer system effectively becomes the seller. Instead of an interaction between two people (purchaser and seller), in this case there is little or no interaction at all — the seller presents and the targeted purchaser reacts.

This general idea seems not to work all that well, currently, often because the recommendations are not relevant most of the time (eg. 90%). However, this does not mean that the online stores do not rely on recommendations for a large part of their revenue — see The promise (and pitfalls) of current recommendation engines.

Online recommendations

How does the computer do this recommending? There seem to be five general ways that allow a computerized recommendation system to function.

The first way is based on “trending”. The idea is to identify things that have recently become popular, and then recommend them to a broader set of customers. That is, the computer system tries to detect things where the attention is accelerating, as opposed to sustained signals in the world of consumers. Twitter, in particular, uses this idea.

The problem with this approach is that it filters out ongoing trends, and focuses instead on the novel and sensational. This has always been the approach of the traditional media, of course — 500 people killed in 500 car crashes is not “news” but a single plane crash gets front-page headlines. This is hardly a useful way to recommend anything sustainable. It is also very easy to “game” such a system, simply by generating a little ersatz velocity.

The second way to recommend is via what is called “profiling”. This means that the fundamental characteristics of the items being sold are determined, usually by an expert. For example, the Music Genome Project tried this approach, in which 450 distinct musical characteristics were coded for each of more than 1 million pieces of music. Recommendations could then be made for new customers, who first specified some pieces of music that they like, and were then told about other pieces of music that have similar musical characteristics.

The first version of this idea for recommending wine was apparently SmartTaste, based on the organoleptic qualities of a set of wines; and this approach was also adopted by the likes of SavvyTaste. Neither system prospered, apparently due to inconsistencies between people regarding the interpretation of the sensorial profiles.


The third approach is therefore to focus on people, using what is called “collaborative filtering”. Each person in the customer database is categorized based on their likes and dislikes. This happens whenever they rate any of the items in the database — they "like" items they rate highly and "dislike" ones they rate poorly. In order to make a recommendation, the new customer is matched to similar people from the database, based on their apparent likes, and recommendations are made based on those similar people's ratings.

Obviously, this approach does tend to promote the idea of stereotypes (eg. recommending wine to females and beer to males), which can create a feedback cycle that entrenches the stereotypes. But the practical problem here is that most of the items have never been rated by most of the people, in spite of the fact that the databases used by the likes of Amazon and Netflix have billions of ratings. This means that the similarity calculations need to be constantly updated as new ratings come in, at the rate of millions per day. This progressively becomes unworkable, as in practice the calculations need to be repeated for each new customer.

The fourth approach is therefore to focus on the items, instead of the people. Each item in the database is categorized based on which people like or dislike it, based on their ratings, and/or which items are purchased together (eg. a set of wine glasses plus a separate decanter). In order to make a recommendation, items that each new customer looks at are matched to other items in the database, and recommendations are made based on how similar those items are, in terms of who likes them or has purchased them.

This is better than option 2, because once there are sufficient ratings for any given item the similarity calculations will stabilize — the calculations do not need to be updated anywhere near as often. This is the basic approach used by most of the recommendations engines, such as those used by Amazon and Netflix.


The failure of this fourth approach comes from the assumption that because one person likes an item that someone else will also like it, in some consistent manner. Take a basic marriage as a counter-example. Mathematically, such a situation might be ⅓ ⅓ ⅓ — one-third of the time the husband and wife like the same thing, one-third of the time the husband goes long with the wife's choice, and one-third of the time the wife goes long with the husband's choice. This will work in practice, because both the husband and the wife are getting what they want two-thirds of the time. However, if an outsider sees the wife and husband together doing something, which of the three possibilities is it? There is only a one-third chance that my wife will like something that I like, in spite of the fact that she is getting what she likes two-thirds of the time. This is not a reliable basis for a recommendation system.

The fifth type of recommendation system therefore gets personal, by focusing on individuals rather than stereotypes (as in the third approach). In effect, what is needed for consistent wine recommendations is to find someone whose wine tastes are the same as your own, and to then follow their advice. This seems quite obvious, and it has been said many times before about the only possible usefulness of wine critics and commentators — for practical purposes, each of them is only as useful as the similarity of their tastes to your own. Unfortunately, how to implement this idea in an automated (computer) system is not necessarily obvious. Both the Tribes and Clans wine-recommendation systems claim to do this; but their inner workings are still subject to patent-application non-disclosure.

Conclusion

Computer recommendation systems are not likely to go away, in the wine industry or anywhere else, because they seem to be the only way to sell things to non-buyers online. We should not, however, conclude from this that they are currently in any way optimal for their intended purpose: which is consistently recommending something that the customer will like. While we wait for improvement, we will need to continue to take their recommendations with a grain of salt.

Monday, April 29, 2019

How can you doubt global warming?

Every time we look at the viticulture news these days there is something about the current problems with grape harvests, whether it be drought, flood, or fire. These are all the result of climatic effects, and are therefore attributed to climate change.

Climate change is a big issue for all parts of the agriculture industry, not just grape-growing, because of the industry's almost complete reliance on the weather, which determines both the timing and the size of each harvest. Climate change thus leads inevitably to agriculture change. At the moment, the changes seem to consist of an increase in variability from year to year, from boom to bust. This is no way to try to make a living.

NASA forecasts of how global temperatures might change.

Global warming first became a big news story in 1988, which had the then hottest northern-hemisphere summer on record, with widespread droughts, and with fires from the Amazon rain forest to Yellowstone National Park. It is now 30 years since that time, and there are still climate-change skeptics running around, notably in Australia and the USA.

It is thus important to note that there are three separate issues related to the current concern about global climate change:
  • evidence that temperatures have increased recently
  • ideas about what might be causing this increase
  • and what, if anything, we might do about it.

The first of these issues seems to be unproblematic — every country on Earth has a Bureau of Meteorology of some sort, and as far as I know they have all been recording a slow but steady increase in world temperatures for at least 5 decades now. Furthermore, as discussed below, we have temperature records that go back 6 centuries that show the current temperatures to be unprecedented during that time.

The second point may be slightly more problematic, although the consensus is that the cause is increased carbon dioxide (CO2) in the atmosphere. Many people do not know that the idea that our climatic temperatures are determined by atmospheric gases actually dates back a century, now. So, I will look briefly at the history in the next section.

I guess that it is the third point that is the problematic one for the skeptics. They ask: "why should we do anything?" To me, the answer lies on our formal taxonomic name, Homo sapiens, which is Latin for "thinking person". Not only can I learn to use a screw-driver, which most other species cannot, I can think about my effect on the world, and about what sort of world I would like to live in. Maybe, just maybe, it is our effect on the world that is causing the sort of world we currently live in.

Atmospheric carbon

It was back in the 1820s that Joseph Fourier realized that some of sunlight's energy must be held within the atmosphere, helping to keep the Earth warm. It was thus apparently he who first concluded that Earth’s air layer acts like a greenhouse — energy enters through the transparent "walls" and is then trapped inside. It was 40 years later that John Tyndall tried to work out what kinds of atmospheric gases were most likely to play a role in absorbing sunlight, and demonstrated that CO2 is the principal culprit.


It was not until the 1890s that Svante Arrhenius started to wonder how much CO2 decrease was required to explain the Earth's cooling during past ice ages (as was apparent in the geological and fossil record), and what would be the effect of similar CO2 increases. It is ironic that he wrote:
By the influence of the increasing percentage of carbonic acid [CO2] in the atmosphere, we may hope to enjoy ages with more equable and better climates, especially as regards the colder regions of the Earth.
In the 1930s, Guy Stewart Callendar first noted that both the United States and the North Atlantic region had warmed significantly, on the heels of the Industrial Revolution. Sadly, this observed effect was then counter-balanced by the subsequent 30 years of global cooling, now attributed to aerosol pollutants blocking the entry of sunlight. So, it was thus not until the 1970s that the start of the current long steady increase in global temperatures became clearly evident in the world's many meteorological records.

Long-term temperature records

The problem with "long-term" records is that we haven't been accurately measuring anything for all that long, in the big scheme of things. Take, for example, our records of the amount of CO2 in the atmosphere, as shown in the first graph.


The Scripps Institute of Oceanology did not set up the Mauna Loa Observatory (on a mountain in Hawaii) until 1958, which is our main source of instrumental measurements of global carbon dioxide. So, we have to use indirect measure of atmospheric CO2 before that time, as in the graph. This makes it a bit tricky to show that CO2 has increased since the Industrial Revolution, which is a key part of connecting global warming to atmospheric gases.

Temperature, on the other hand is a bit easier to measure. Many of you will know that the international scale for measuring temperature is named after Anders Celsius (not that other scale, named after Daniel Fahrenheit, and now used by only a few countries). Celsius was professor of astronomy at Uppsala University, in Sweden, and so it should come as no surprise that the longest daily temperature record in the world is from the city of Uppsala.

Mind you, even that is not as simple as it seems. In the early years, for example, the temperature was recorded only on week days, not every day; and, of course, the instruments used were not as good as those used today. Nevertheless, the yearly averages from the year 1722 are shown in the next graph. Note that the numbers shown are the averages of the 365¼ daily average temperatures each year — if you want more details, then you can also look at the seasonal average temperatures here.

Average temperatures in Uppsala, Sweden, over the past 300 years.

Note that the interest is in temperature change, and so the graph is centered on the long-term average temperature, with blue years being below average and red years being above average. The recent cluster of warm decades is pretty obviously anomalous over the 3 centuries shown. Aside: being a Swede, Celsius was interested in how cold it gets, not how hot it gets, and so his original scale had water freezing at 100 °C and boiling at 0 °C — it was some time before it was inverted to the current form.

If we stick to the idea of yearly temperatures, then we can actually go back a bit further than the daily record. Gordon Manley has compiled the monthly mean temperatures for the Midlands region of England from the year 1659; and these are shown in the next graph, from the American Association of Wine Economists. Once again, the recent trend is clearly anomalous. [Note that the Midlands is on average 4°C warmer than the Uppsala region!]

Temperatures in central England over the past 350 years.

Finally, I have noted before (Grape harvest dates and the evidence for global warming) that grape harvest dates can be used as a reasonably accurate record of annual (summer) temperature variation, although obviously not as good as instrument measurements. There are formal records for the Burgundy region of France that go back to the late 1300s, which takes us back another 3 centuries before the above graphs. The data are shown in the final graph — as before, the recent trend is completely anomalous.

Grape harvest dates in Burgundy over the past 650 years.


Conclusion

Points 1 and 2 listed above do not seem to me to require much discussion, even by skeptics — we have clear temperature records, and we know how carbon dioxide works. Fortunately, for many people point 3 has moved beyond discussion, and into action.

Monday, April 22, 2019

Introducing the "Responsible Alcohol Marketing Scheme"

If you look up "ABAC" on Wikipedia you will currently find five choices of meaning, but none of these refers to the Alcohol Beverages Advertising Code. This is a voluntary code of conduct for the alcohol industry in Australia (also known as Australia’s Responsible Alcohol Marketing Scheme). I though that the ideas behind this scheme might be of interest to some of the readers of this blog.


There are, of course, various codes of conduct for the alcohol industry, notably the Code of Responsible Practices for Beverage Alcohol Advertising and Marketing, provided by the Distilled Spirits Council of the United States. However, the sort of self-regulatory initiative that I am discussing in this blog post is precisely the sort of thing that it much easier to organize in a relatively small country like Australia, since it is much easier to make implementation national.

The intention of ABAC is not just to provide the alcohol industry with some idea of "best practises" for advertising and packaging, rather than some sort of free-for-all. Instead, the main intention is to provide a quasi-regulatory system for alcohol advertising and packaging, which is separate from any other codes that might apply to advertising in general. Whether such a Code can work in practice is something that is yet to be determined; and I discuss this below.

The ABAC Scheme was introduced in 1998, and can be thought of as the centre-piece of Australia's self-regulatory system for alcohol advertising and packaging. The Code is designed to ensure that alcohol advertising will be "conducted in a manner which neither conflicts with nor detracts from the need for responsibility and moderation in liquor merchandising and consumption, and which does not encourage consumption by underage persons."

The guidelines have been negotiated with the national government, but consumer complaints are handled independently. ABAC is administered by a Management Committee that includes industry, advertising and government representatives, currently with representatives from the Brewers Association of Australia, the Spirits & Cocktails Australia, Australian Grape & Wine, and The Communications Council. All costs are borne by the alcohol industry.

There are actually only two main practical things that the ABAC Committee oversees:
  1. provide a pre-vetting assessment of intended advertisements
  2. adjudicate public complaints about existing advertisements.
In its quarterly and annual reports, ABAC has always laid stress on the usefulness of their voluntary Alcohol Advertising Pre-Vetting Service, as a means to avoid potential problems for the advertisers (e.g. ABAC highlights the benefit of pre-vetting adverts; ABAC report highlights importance of pre-vetting). In effect, any ad that passes the pre-vetting process should not generate any complaints that would be upheld by the adjudication process. In 2018, ABAC received 1,751 pre-vetting requests (see ABAC Scheme releases 2018 Annual Report).

Complaints about an advertisement or packaging are dealt with by an Adjudication Panel:
During 2018 the rules were tested by complaints, including by public health groups, resulting in the highest number of determinations (61) and the highest number of Code breaches (21 complaints upheld) in the 20+ year history of ABAC.
The most complained-about marketing campaign in 2018 was for Rusty Yak Ginger Ale, with 13 complaints made, but these were outside ABAC’s jurisdiction, as the concerns were unrelated to alcohol as a product, but were concerned with discrimination against a sector of the community [people with red hair!].
It seems a bit odd that "discrimination against a sector of the community" is not within ABAC's remit.

Comments and criticisms

From 1998-2003 ABAC was fully administered by the alcohol industry itself, via the Australian Associated Brewers, the Distilled Spirits Industry Council of Australia, the Liquor Merchants’ Association of Australia, and the Winemakers’ Federation of Australia. However, a formal review by a National Committee for the Review of Alcohol Advertising, on behalf of the Ministerial Council for Drug Strategy, concluded that the system was seriously deficient and had failed to ensure alcohol advertising complied with the ABAC (see A decade of failure: self-regulation of alcohol advertising in Australia). This review had followed a prior critical report from academia (The decline of ethics or the failure of self-regulation? The case of alcohol advertising). The ABAC system was then modified to its current management form.

I haven't seen much in the way of complaints about ABAC from within the alcohol industry. Indeed, they seem to be of the opinion that it is working perfectly. However, there have been a few academic research papers that question the success of the current scheme.

There is a very interesting literature review, from 2013, comparing the regulation of alcohol advertising in Australia, New Zealand, Canada and the United Kingdom (Regulation of alcohol advertising: Policy options for Australia). It concludes that there is "considerable evidence that alcohol advertising influences drinking behaviours, and that current regulatory systems based on co-regulation and voluntary regulation (as is the case in Australia) are ineffective."

Academic criticism of the ineffectiveness of ABAC has continued over the past decade. For example, Donovan et al. (Magazine alcohol advertising compliance with the Australian Alcoholic Beverages Advertising Code) found that:
52% of items appeared to contravene at least one section of the ABAC. The two major apparent breaches related to section B — the items having a strong appeal to adolescents (34%) and to section C — promoting positive social, sexual and psychological expectancies of consumption (28%).
Similarly, Pierce et al. (Regulation of alcohol marketing in Australia: a critical review of the Alcohol Beverages Advertising Code Scheme’s new Placement Rules) concluded that:
[the rules for placement of advertising] are inadequately defined and narrow in scope, resulting in the dismissal of almost all relevant complaints. Weaknesses identified in the regulatory processes include limited representation from external stakeholders in the development of the Placement Rules, a lack of transparency and independence in the Scheme’s administration, and limited monitoring and enforcement options.

One specific example of the critical comments about ABAC refers to sports advertising (Don’t worry about the kids: Let’s just protect the alcohol industry). It is worth quoting at some length:
The broadcast of alcohol advertisements on commercial television in Australia is restricted in order to limit the exposure of young people to alcohol advertising. Alcohol advertising is only permitted during periods of M (mature classification), MA (mature audience classification) or AV (adult violence classification) programs (which are restricted to between 8:30pm and 5.00am).
The one – completely counter-intuitive – exception to this is that the broadcast of alcohol advertisements is permitted during the live broadcast of sporting events on weekends and public holidays. It is not surprising that this "exception" results in alcohol advertising being shown at the time that children and teenagers are most likely to see it and most likely to be influenced by it.
In relation to sport, the current iteration of the Alcohol Beverages Advertising Code (ABAC) states that a Marketing Communication must NOT show (visibly, audibly or by direct implication) the consumption or presence of an Alcohol Beverage as a cause of or contributing to the achievement of personal, business, social, sporting, sexual or other success.
The previous version of the Code also used to say that alcohol advertisements must NOT “depict any direct association between the consumption of alcohol beverages, other than low alcohol beverages, and the operation of a motor vehicle, boat or aircraft or the engagement in any sport (including swimming and water sports) or potentially hazardous activity” but now it says “before or during any activity that, for safety reasons, requires a high degree of alertness or physical co-ordination, such as the control of a motor vehicle, boat or machinery or swimming”.
Somehow, in its efforts to toughen up the Code and better protect kids from inappropriate messages about alcohol, the ABAC managed to drop the specific reference to sport. Does that make you wonder whose well-being they are protecting?
Needless to say, the sports industry is full supportive of the alcohol industry in this case (Sport codes lay into proposed alcohol advertising laws, say it will hurt industry). As one example of this, see Calabria Family Wines becomes official wine partner of the Collingwood Football Club, where:
Calabria Family Wines branding will reach the more than one million people who attend Collingwood matches each season and be exposed to the club’s enormous social media, free-to-air and pay-TV audiences.
Conclusion

ABAC is unusual worldwide, as an example of voluntary sel-regulation. The idea of self-regulation is a good one, if it can be put into practice effectively. However, there is obviously some way to go before the alcohol industry in Australia advertises all of its products in a socially acceptable manner.

Monday, April 15, 2019

How different are regional vintage quality-scores from different sources?

I have written quite a few blog posts about the quality scores given by commentators to individual wines for each vintage. However, there is another type of wine score, as well: the annual scores given for whole wine-making regions.

Indeed, there are plenty of wine sites that are happy to score the different vintages for quite a variety of regions, using all sorts of scoring schemes (5 points, 10 points, 20 points, 100 points, etc). I have no idea how worthwhile such scores might be, although I assume that a single score for a whole country or continent (eg. Australia) is rather useless.

What I have always wondered is whether these scores are all telling me the same thing. That is, do the different sources of the scores agree on vintage quality? If so, then why are there so many different scores? If not, then who agrees with whom? This blog post is designed to provide some answers to these questions.


Vintage scores are erratically available, both as to which wine regions have scores and which vintages have scores. Europe has very standardized vineyard areas, and so most of the available scores apply to one or more of those regions. So, I have collated data from every scoring scheme I could find, for every region in Europe.

However, for the simple purposes here, I will focus on the most well-studied wine types of France only:
  • Red Burgundy
  • White Burgundy
  • Red Bordeaux
  • Sauternes
  • Red Rhone
Most of the other French regions (eg. Loire, Alsace) have data from only a few of the scoring schemes.

I will also focus on those 9 of the schemes that have the most complete data:
Finally, I have included the data from the years 1990—2015 inclusive (ie. 26 vintages). The data are less complete among the schemes for other years.

Results

Since there are 9 scoring schemes, 5 regions and 26 years, there is no simple way to construct a picture of the dataset, or even three separate pictures. So I have used the form of multivariate data summary described in my post Summarizing multi-dimensional wine data as graphs, Part 2: networks. The details of the analysis are listed at the bottom of this post. The main thing is to understand how to interpret the network pictures.

This first network shows the 9 scoring schemes. Each scheme is represented by a dot in the network. Schemes that are closely connected in the network are similar to each other based on their vintage scores across all of the 5 regions and 26 vintages, and those that are further apart are progressively more different from each other.

Comparison of 9 scoring schemes for wine vintage quality in France


So, the first thing we can notice is that none of the schemes are in very close agreement with each other, as each has its own long terminal edge. However, the network shows that the Wine Enthusiast, Wine Spectator and Vinous schemes are all rather similar to each other, followed by the Wine Advocate. This is reassuring — the vintage quality scores are apparently not arbitrary! In a more practical sense, it probably does not matter much which of these schemes we choose to consult.

However, the other 5 scoring schemes become progressively more different as we move down towards the bottom of the network. Only pairs of schemes seem to share some features — Hugh Johnson + Wine Society, Wine Society + Berry Brothers, Berry Brothers + IG Wines. The Cavus Vinifera scheme has complex relationships to the 4 schemes at the top and to the 4 schemes at the bottom.

Next, we can look at the 5 wine types. As above, each vineyard region is represented by a dot in the network; and regions that are closely connected in the network are similar to each other based on their vintage scores across the 9 schemes and 26 vintages, while those that are further apart are progressively more different from each other.

Comparison of vintage quality for 5 French wine regions

We can, once again, note that the 5 wine types are not especially similar to each other in terms of which years are "good" and which not. However, we can see that the two white wines are loosely grouped at the left of the network and the 3 red at the right; and the 2 Burgundy wines are loosely grouped at the bottom. So, there are actually some consistent patterns across the 26 vintages. I am not sure whether the grouping of the Rhone wines with the Bordeaux wines is of any practical significance.

Finally, we can look at what the original scorers might think is most important: the vintages themselves. As above, each vintage is represented by a dot in the network; and vintages that are closely connected in the network are similar to each other based on their vintage scores across the 9 schemes and 5 wine types, while those that are further apart are progressively more different from each other. So, we are looking at a general summary of French vintages, rather than any particular vineyard region.

Comparison of quality for 26 French wine vintages

Those 5 vintages that all of the schemes rated most highly are grouped at the top of the network, and the 3 worst ones are at the bottom. Note that the 1990 vintage, which was a good one across all of western Europe, not just France, was immediately followed by the 4 worst vintages.

There is some disagreement about the other vintages, as 6 of them are arranged at the left of the network, and the remainder at the right, although they still generally run from top to bottom as better to worse. This variation is due to which scoring schemes preferred which vintages. For example, the 2002 vintage actually received scores that ranged from 5 to 9, even for the same region, which did not happen for the vintages at the top of the network, which all got 8–10.

Conclusion

There is a lot of similarity among the scoring schemes for regional vintage quality, but not as much as we might like. Presumably, personal preferences are playing a large part in the scores assigned. Indeed, the scoring differences between schemes are often larger than are the differences between regions.



Methods

The various scoring schemes were first standardized to the same scale of 10 points:
   10-point scale: left alone
   20-point scale: 10 = 20 / 2
   100-point scale: 10 = (100 - 50) / 5
Of the 1,170 observations, 15 were missing (1.3%). These were interpolated using the minimum-variance method, based on row and column averages.

Three datasets were then constructed, one with the Schemes as the objects, one with the Regions as the objects, and one with the Years as the objects.

For each dataset, the pairwise distances between the objects were calculated using the Manhattan metric. A Neighbor-Net was then calculated based on these distances, using the SplitsTree program.

Monday, April 8, 2019

Younger U.S. consumers prefer Australasian wine

A couple of weeks ago I discussed the disadvantage of trying to lump generations into cohorts of consumers (Millenials do not exist: so why market to them?). This does not mean, however, that the age of consumers has no effect on their behavior. A case in point is the preference of younger consumers for imported wine.

The focus of discussion for imported wine in the USA has usually been on volume and value, particularly which countries are increasing and which are decreasing their sales. However, there is another interesting aspect, which is market penetration for drinkers of different ages. It has long been noted that the younger US generations buy more imported wine than do their parents. For example, this was noted back in 2006 for the so-called Millenial generation, and it has been re-iterated in 2013, 2015, 2017 and 2018 for the so-called Post-Millenials (or iGeneration or Generation Z). There is apparently nothing unusual about this — for example, it has also been noted that "in Albania, younger consumers preferred Italian wines whereas older consumers preferred domestic wines."


This trend has been seen as a "good news-bad news situation [for the US wine industry]. While Millennials are drinking more wine — the good news — much of it is imported wine, which is the bad news ... imports are nearly at an all-time high, and that is a challenge of great importance to domestic producers." The State Of The Wine Industry 2018 report noted that "bottled import wine has been highest for those coming from France, New Zealand and Italy (15.2%, 10.7% and 2.4%, respectively) while slightly negative for Australia, Spain, Argentina and Chile." However, this misses a key point — the age of the consumers.

What about younger drinkers, usually defined as being less than 25 years old (the Post-Millenials)? Obviously, these people are part of the key to the future of any industry (Forecasting wine's future: America is now wine's biggest market, and younger drinkers are starting to shape it), as they now constitute 25% of the US population. So, which imported wines do they prefer? It turns out to be Australasian wine. [Note that Australasia = Australia plus New Zealand; see Wikipedia.] I have not seen this topic being discussed very much.

The current situation is illustrated in the following graph. It shows the share of young consumers for the top 24 imported wine brands in the U.S. in 2016, taken from the American Association of Wine Economists' Facebook page. Clearly, the Australasian brands generally have much greater market penetration among young drinkers than do imported wine brands from elsewhere.

Proportion of young consumers for 24 wine brands imported into the USA

There is presumably a message here for wine marketers, although exactly what that message might be is not necessarily clear:
  • Are the Australasians making wines that appeal to young people? It certainly seems so (see below).
  • Is their advertising directed at young people? We are constantly being told that modern people have very different behavior as consumers from their parents. Wine has long had an image that you have to be "old, white and rich" to drink it.
  • Is the price right for young people? We are constantly reminded that Millennials and Post-millenials have much less disposable income that did previous cohorts. "Ambitious" pricing is usually restricted to local wines, because importers know that they have to compete on price (see Millennials and Napa cabernet: an uneasy relationship).
  • Are the Italians, in particular, doing something wrong? Perhaps they are using old-fashioned marketing strategies — social media seems to have taken a dominating importance in reaching younger consumers (see How to market wine to Millennials).
Modern marketing discussions focus, of course, on the first point — how to market to younger generations; see, for example:
The main points about younger people from these discussions are: the importance of brand recognition, the focus on quality and value rather than a wine's origin, sweeter varietals as part of their introduction to wine, the relative lack of interest in the details of varieties and appellations, and their interest in visually distinctive labeling. Most, importantly, the younger generations are reported to have an interest that extends beyond what’s in the glass. There must be a broader experience, which can be achieved, for example, using augmented reality labels to tell a bigger story (eg. check out the 19 Crimes label, which is the top Australian wine over $10).*


Australasian wine marketing seems to be leading the way with these ideas (see More wine drinkers in U.S. market, but Aussie marketing, not domestic brand names, draw younger consumers). This has been of particular interest to Wine Australia, the nationally funded statutory body servicing the Australian grape and wine community (see Embracing the evolution in the USA market).

So, maybe the marketing problem is not so much trying to sell wine to young Americans, as trying to sell American wine to young Americans. We are told that they expect an "experience" from their consumables, and exotic wine can be part of that experience. Trying to market "being an American" as part of a wine experience may not have all that much impact, because the buyers are likely to think that they already have this experience, without the wine.



* To quote from my own ancestry:
Elizabeth Mitchell: "Convicted on 6 March 1790 at the Assizes. Her crime was aiding and abetting in breaking into a dwelling in Studley, North Wiltshire, and the stealing of 5 cheeses and sundry other articles. She was sentenced to 7 years transportation. Transported on the Mary Ann, arriving Sydney 9 July 1791."
Can you believe that the British once treated their fellow citizens like this? Apparently cheese was more valued in Wiltshire than were humans.