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.

5 comments:

  1. Hi David,

    This post is based primarily on a chart that was originally from The Wine Handbook (2017) and then posted on the ASWE Facebook page. Without knowing more about the source of the data (sample size, how conducted, etc.), I'd be very wary about drawing any conclusions about what young American consumers want in wines. A second point is that the numbers you cite from the State of the Wine Industry 2018 report are growth in value from previous year and could be misconstrued as market share.

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    1. Thanks for the clarification. Marketing is a tricky thing, which is why I note that the "message" is not necessarily obvious. However, I think that the general suggestion might not be too far wrong — these days wine marketing is as much about price and an "experience" as it is about the contents of the bottle.

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    2. I agree, and would add that it pretty much always has been about external factors ("experience") as much as internal factors (the taste of the liquid in the bottle).

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  2. When I was 21 in the late 90's I was drinking Black Opal. Because I was poor and not exposed to good wine. Australian wine, as a rule, is slightly above Kangaroo urine in quality. It generally competes with Fresno, not the best.

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    1. Not having tasted kangaroo urine, I cannot comment on that. But I suspect that you should have spoken to your supplier, and got them to do something about it.

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