Wine’s Great Replacement Theory(s)? or “Don’t look up”

This is a guest post by John Stallcup. *
John is a brand consultant, former VP of marketing at The Wine Group, Director of DTC for Allegretto Winery, and the author of How to Hack a Wine Tasting.

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The Wine Gourd recently referenced the key reasons for not drinking beverage alcohol as being: religious, political, social, and health (Which people do not drink alcohol?). However, at least four other variables lower the likelihood of personal alcohol consumption, and especially wine:

1. The increasing percentage of adults with the genetic propensity for bitterness sensitivity,
2. The lack of brand equity in the wine category,
3. The lack of income for the cost of wine, and
4. The coming shortage of ten million adults in places like the U.S.A.

Let’s look at each of these topics in turn.

The percentage of adults with a genetic propensity for bitterness sensitivity is expected to double in the next decade. The recent SVB Wine Report pointed out: “A member of the millennial generation is twice as likely to be a non-white minority. While only 28 percent of the boomer population is non-white, 45 percent of the millennial population — and almost half of Gen Z — is non-white.” Increasingly the U.S. population is made up of non-white minorities from areas genetically predisposed to bitterness sensitivity. In some areas of the world, eighty-five percent of the native peoples are sensitive to bitterness. In other areas, it is only five percent.

The "Geography of Taste" map (see below) was created by Dr Utermohlen M.D. at Cornell as part of her research. The areas with the highest percentage of native populations genetically predisposed to bitterness sensitivity include Southern Africa, most of Asia, and parts of Latin and South America. The percentage of the U.S. adult population of these non-white minorities is increasing. The people with the lowest prevalence of bitterness sensitivity are declining as a percentage of the adult population. They tend to be genetically from Europe and the Middle East. Humans who are sensitive to bitterness are less likely to drink any beverage alcohol, because alcohol is bitter. Their tendencies will be toward not drinking, or consuming sweeter beverage alcohol, because sugar masks bitterness (Bitter masking by sucrose among children and adults).

There has been an online nature vs. nurture debate, concerning whether your genetic predispositions matter in adult wine acceptance and preference, featuring Jamie Goode, Ph.D. (plant biology) and Tim Hanni, MW. I call this the “Don't look up” vs. “Ignore at your own peril” of wine thought leadership. I agree with W.E. Deming:” In god, we trust — all others bring data.” Tim’s side has the data.

Moving on to point 2, a brand is a story in which you can find yourself. What is wine’s story? What is the story of wine, and how often has the wine category told its story? Neither the wine category nor any leading wine company has invested in brand marketing over the past forty years in the same strategic, consistent, brand equity-building manner as have those in the beer and spirits categories. Just ask most wine consumers whether they can remember an advertisement for wine. Interbrand’s 2022 list of the top 100 brands worldwide includes Budweiser, Corona, Heineken, Jack Daniels and Hennessy, but no wine brands.

Wine is not winning the beverage alcohol contest for the next generation’s “share of stomach”, because individually and as a category wine brands have done and still do little to grow the “Share of mind” for brand wine among any consumer groups (Building equity for the U.S. wine brand).

In a 2015 study by a University of Texas researchers found that spending on advertising can be related to consumers’ choice of brands or categories of alcoholic beverages, but not consumption (Beer, Wine or Spirits? Advertising’s impacts on four decades of category sales). The study analyzed the total expenditure by the beer, wine, and spirits industries on “measured media” from 1971 to 2011, a period of 40 years. Measured media included: print, outdoor, network TV, spot TV, cable TV, syndicated TV, network radio, spot radio, internet, Spanish TV, and FSI coupons. During this period, the beer category invested more than $27 billion on measured media — 6.5 times more than the wine category. Spirits invested over $10 billion — 2.5 times more than the wine category.

This five-decade-long lack of investment in building brand equity, combined with a category brand “tone of voice” that is exclusive, not inclusive, creates an even lower share of voice. Share of voice, modified by the tone of voice, equals the share of mind, which equals the share of the market over time.

Moving on to point 3, the young adult population of the USA is saddled with $1.63 trillion in student debt, stagnated wages, and the highest percentage of adult children living at home in seventy-five years (A majority of young adults in the U.S. live with their parents for the first time since the Great Depression). The majority of federal student debt is concentrated with Generation X. The average Baby Boomer with student loans tends to owe more than the average Millennial, although Millennials have a larger overall debt than do Baby Boomers (see the graph above). Generation Z held 6.4% of the total $1.57 trillion student loan debt. Millennials held 30.4% of the total debt. Generation X held most of the debt at 38.8% (Student loan debt by generation).

When you exclude the idea that a serving of wine purchased at retail in a bag-in-the-box package costs less per ounce of ethanol than does a serving of beer or spirits, wine is far more expensive than these other beverages. Premiumization costs far more in the wine category than it does in beer or spirits. Jon Moramarco, managing partner of bw166 LLC, reported (see the SVB wine report) that, on average, the cost per serving of wine is $2.15 per 5 oz. glass, $1.28 per 12 oz. bottle of beer and 93 cents for a 1 oz. shot of spirits. This cost disadvantage is evident in the “on-premise” category.

Finally, for point 4, according to U.S. census data, in 2022 there were four hundred thousand fewer Gen Z entering the adult workforce than the number of Baby Boomers retiring (see the graph above). Gen Z is the smallest generation, even smaller than Gen X. That deficit doubles to over eight hundred thousand per year, culminating in a shortage of ten million adults by the end of the decade. Peter Zeihan, geopolitical analyst provides a concise description of the issue.
 
So, in addition to the religious, political, social, and health reasons for not consuming wine, there will be ten million fewer potential wine consumers in the U.S. than during the reign of the Baby Boomers, regardless of their genetically determined sensitivity to bitterness, incomes, or brand preferences.

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* From David:
I have been in another town, doing a tasting of some 2005 red Bordeaux wines. Very nice! I am therefore grateful to John Stallcup for providing this week’s guest post.

Which people do not drink alcohol?

Last week, I provided a summary of various reasons Why young people apparently don’t drink wine these days. However, this is only part of the picture, because some people do not drink alcohol at all, which is what I will look at this week.

There are only four general reasons why people might choose to be teetotalers: religious, political, social, and health reasons. These do not necessarily have anything to do with age, which is what I looked at last week. I will take them in turn, and make a few points.

The fourth reason is easily dealt with, so I will start there. If alcohol creates serious health problems for you, even temporarily, then you should stop drinking, immediately. Indeed, there are obvious times to greatly reduce alcohol intake; and there is a list of a few types of People who should never drink wine, according to an expert: People with diabetes; Individuals with asthma; Anyone taking sedatives or painkillers; and People taking disulfira.

Moving on, next we will look at religion and politics, before turning to the most important point of this post.

Different religions have very different official (formal) attitudes towards the consumption of alcohol. As a (pro)active member of any given religion, these precepts must be upheld.

For example, Christianity does not actively encourage alcohol consumption, but neither does it ban alcohol. Indeed, it treats red wine as symbolizing the blood of Jesus of Nazareth while he was on the cross, at the end of his human life. I learned this as a child, because at that time my father was a minister of the Methodist Church, serving some of the country towns of NSW, Australia. So, wine in moderation is acceptable; we are even told that Church loopholes during Prohibition saved California’s wine industry.

The Quran (Koran), on the other hand, discusses alcohol (in Arabic: khamr­) in several of its verses (Alcohol in the Quran), explicitly speaking against it each time. For example: “wine, gambling, idols, and divining arrows [gambling] are evil and of Satan’s act; therefore, leave them aside in order that you may prosper”. So, it is not possible to consume alcohol and simultaneously be a member of the Islamic religion.

In a geographically more restricted sense than most religions, and irrespective of the religious make-up of the indigenous population, some specific countries also reject alcohol consumption. A search of Wikipedia will lead you to: List of countries with alcohol prohibition. Some of these bans are only partial, including drinking in public, or drinking during certain hours of the day (eg. middle of the night) or weeks of the year (eg. Ramadan), with prescribed exceptions for some religious groups (eg. non-Muslims in Muslim-dominated countries).

Nevertheless, as an example, denizens of these countries are breaking the law if they consume alcohol at all: Afghanistan, Djibouti, India (four provinces), Kuwait, Libya, Mauritania,  Somalia, Sudan. So, choosing to drink there could be very risky.

This leads us on to the more general part of this topic — social issues. By that, I mean a personal decision is made irrespective of religion, politics or health. This is social behavior, in the most general sense. Personal decisions can have all sorts of effects, both on yourself and on those around you. You need to tread carefully. *

For many people, consuming alcohol is unproblematic. It is a normal part of their life, and it may well have been for most of their adult years. The actual form of drink may vary, but alcohol is an ordinary part of their life. For example, wine with dinner is commonplace in the southern European countries. There is not much to say in this blog about these persons.

However, many people are part of what Charlie Leary recently referred to as The Disenfranchised — those “deprived of some right, privilege, or immunity”, as a result of their circumstances. Here, I will take myself as a classic example.

My parents got divorced when I was very young, and neither of their households consumed alcohol, as far as I knew as a child. So, I was very effectively disenfranchised from growing up seeing this social activity. (I discovered, literally on my father’s deathbed, that there were things going on in his life of which my siblings and I knew nothing. Of course!)

So, I had no personal experience of alcohol until my final year of high-school. My mates and I used to “go down to the pub” on Friday nights, to fraternize, play pool (or snooker), and drink a few beers. (We could not go to the Bull and Bush Hotel, which was the closest pub, because some of the teachers went there, and so we went to the Winston Hills Hotel, instead.) None of us were yet 18 years old, and so we should not have been served. However, in the 1970s no-one ever checked, or asked for ID. (Later, we could go to the Castle Hill RSL, if a member would sign us in.) **

What did I learn, as I started to become enfranchised? Never ever drink too much. The sight of young men hanging out the back of a car, clearly in alcoholic distress, remains with me to this day.

At university, beer was still the go-to drink, if only because the University of Sydney is in an old part of the city, and there were more pubs nearby than you could poke a stick at. Indeed, there were so many that I once photocopied the relevant double page from the street directory, and marked them all on it. (This was decades before Google Maps, remember, which now has exactly that same information.)

It was not until my postgraduate years that a girlfriend and I started to visit the wineries of the Hunter Valley, on weekends, three hours north of Sydney. It was this that finally enfranchised me, in a sense that would make sense to the wine industry.

So, what is the point of this long personal history? Well, it seems to me that, as far as the social drinking of alcohol is concerned, there are:

• those people who are enfranchised from early on,
• those who become enfranchised through time,
• those who have become disenfranchised through time, and
• those who have remained disenfranchised.

I am in the second group; and this is the group that the alcohol industry needs to target. The first group can be left to their own devices, so long as the industry is providing something that they want to drink. The fourth group may actually be inaccessible, in practice; although it could always be worth a try.

This leaves the third group, along with the second — those who have become enfranchised (second), but some of whom have then reversed this (third). One of the important things about this third group is the trend to what has been called the “New Temperance Movement” (From dry January to fake cocktails, inside the new Temperance movement) or “neo-Prohibition” (US wine industry in a tailspin). There is also what has been called the growing “Sober-Curious" movement” (What is the sober curious movement?) — those people questioning societal norms surrounding alcohol consumption, and being mindful about when, how, and why one drinks.

The difference between these attitudes is whether one outright opposes alcohol or merely suggests its personal regulation. Discussion of both viewpoints exist (Is Prohibition returning?) and (Who is drinking low / no?). The first of these alternatives is often concerned with the idea that “Alcohol consumption and its associated harms are reaching a crisis point” (Alcohol warning labels need an update). The second alternative is often concerned about the idea that the taste of non-alcohol options is improving; along with the fact that the lines between the drinks originally categorized as beer, wine or spirits have become blurred, so that a fourth category of ready-to-drink (RTD) beverages has emerged (Big Soda’s alcohol drinks worry health experts).

It is important for the wine industry to recognize these distinctions, because only some of these groups of people can be targeted as future wine drinkers; and these are thus the ones that need to be thought about now, in terms of new or revised strategies for promotion.

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* Personal aside

During the summer holidays before my final year of high-school, I did not shave. So, when I returned to classes I had quite a nice beard; indeed, one that was better than could be grown by some of the younger male teachers. This caused a lot of commentary among the other students and also the teachers, because this was a new school, and we were the first year to go through — this meant that I was the first pupil to ever grow a beard at that school.

One day, I was walking through the area with the school’s administration offices, and I heard an explosion behind me: “Who was that boy!!!???” I looked around, noting that I was the only student there, and so it must be me. I walked back to the Deputy Principal’s office, and peered in the door. He had turned red/purple: “How dare you!!! Get home and shave it off immediately!” This was the only hint that I got about what the issue was.

So, I went home and shaved the beard off. However, this then caused a stir amongst some of the girl students. You see, this was the 1970s, when male hair was long; and the girls were outraged that a bureaucrat thought they could tell us about hair length. So, the girls actually rang up the government Department of Education. They thereby discovered that, indeed, the bureaucrats could not determine our head-hair length, but they did have the right to determine facial hair. So, I remained shaven for the rest of the year; but I have determinedly had a beard for most of the five decades since then!

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** I should note here that I borrowed my mother's car to get to these pub events, and so I wisely drank lemon squash (non-alcoholic) rather than the beer being drunk by my compatriots. Interestingly, Random Breath Testing was introduced in NSW only in 1982, long after the events described here — the slogan “Be Under .05 Or Under Arrest” meant nothing in my day!

Why young people apparently don’t drink wine these days: a summary

If you haven’t been reading about the dire forecasts for the future of the wine industry, or listening to podcasts about it, then you must currently be living under a rock. The sales data do not currently look good, and there seems to be no immediate reason why they should improve, in either the short term or the long term.

The basic issue seems to be quite straightforward. The current market is declining globally, and no new one is appearing to replace it. So, why are modern people not choosing to drink wine? Let's summarize the situation here, in this blog post. (Note: I am not discussing alcohol in general, but wine in particular — Why not choose wine as an alcoholic drink?)

The Baby Boomer generation (now aged 55+) have often drunk wine as a normal part of their culture; but they are (sadly) starting to drop off, and so their group wine drinking is declining. Each new generation seems to reject much of the culture of their parents and grandparents, and so the persons from the subsequent Generation X (age 40-54), Millennial (age 25-39) and Generation Z (< 25 years old) are apparently not all that interested in wine — apparently their uncles drank it, and so they don't. When you combine these two patterns, you potentially have a serious market problem.

There are potentially two issues here: 1) there are reasons why non-wine consumers avoid wine, and 2) there are reasons why wine consumers avoid particular wines.

If we briefly take the second one first, we can briefly note that people these days may be drinking less wine but of better quality. That is, it is the low-end commodity market that is suffering the most, while the high-end premium market may even be increasing. For example, you can read about this two-part idea here:

The bourgeois war on French wine
Why Port production is down, but its quality is up
Wine is still a drink primarily for upper-income college grads

Another reason that is commonly given, as noted by Linda Ovington and her colleagues, is that much wine has too many calories. However, this applies to lots of alcoholic drinks.

Moving on to issue 1), one of the classic examples of the current reduction in overall wine consumption concerns the French (Young France isn’t drinking wine) — also see the graph above:

French citizens remain some of the world's leading consumers of wine, drinking about 55 liters annually, according to a recent study carried out by the University of Montpellier. That's almost six cases a person. But that number has declined more than 50 percent since 1980, when the French drank an average of 120 liters. The drop is chiefly due to changes at the dining room table. The French tradition of drinking wine on a daily basis at mealtimes is practically broken. Perhaps more important for the future, the next generation of French wine drinkers is not learning to consume wine at the dining room table. That's leading to a big change. Roughly 50 percent of young people in France never drink wine, according to the Montpellier report, and less than 10 percent are regular consumers. The rest limit their consumption to two to three times a month.

Sadly, this ongoing trend does not apply only to France. For example, the most frequently cited report for the USA, instead, is from the Silicon Valley Bank *, as discussed here:

Younger people are not drinking wine, according to a new report
The wine business sees a problem: Millennials aren’t drinking enough

This SVB report also emphasizes that the issue isn’t necessarily with premium wines or older demographics — expensive wines continue to sell, but bottles that cost less than $15 are not doing so well (The paradox of the US wine industry: falling volumes, yet more regular drinkers).

So, what reasons are being provided by the younger generations for not drinking wine, in particular. Here, is one set of suggestions (Why young people don’t drink wine), which you can make of what you will:

• They don’t drink wine because they are not well informed.
• They don’t drink wine because there are not places which encourage them to do that. In general they are places that smell like they are expensive, elitist and look like they have certain snobbery.
• They don’t drink wine because of the price.
• They don’t drink wine because it has disappeared from the majority of the household tables.
• Finally, they don’t drink wine because their palates (so they say!) are not made for all tastes.

The report from Linda Ovington and her colleagues also lists some reasons, as shown in the table below. The key item here (as highlighted) seems to be that it is hard to actually select a wine, as also noted by Dwight Furrow (The unsolvable problem):

This is an unsolvable problem. The diversity of wine is what makes it intimidating; it’s also what makes it interesting. You can make wine less intimidating only by making it less interesting.

The obvious discussion about dealing with this issue must involve changing the way wine is marketed, for example to something like this (To reach different ages, wineries should try a different marketing approach):

• If you don’t care to understand more about the audience you are trying to reach, then you will miss the mark every time.
• One thing to understand, when it comes to marketing, the secret is not merely selling a product or service. It's about tapping into customer emotions.
• You cannot talk to Millennials like you talked to their parents. This might be a part of the problem that the wine industry has had as a whole.
• The wine industry has always assumed that younger generations would naturally increase their consumption of wine as they grew older, but the truth is that it’s not happening. Wine used to be seen as a premium option, but now many alcoholic beverages, including beer, can also be seen as a status symbol.
• Millennials and Gen Z are also more likely to be health-conscious and seek drinks that fit into their lifestyle, like hard seltzers, leading them further away from consuming wine.
• Where wine used to be seen as a healthy alcohol, it has been replaced in the minds of consumers, thanks to marketing, by hard seltzers and other nonalcoholic drinks that tout better-for-you ingredients.

There are suggested actions, of course, which you should read about (e.g. 13 things Millennial and Gen Z wine pros say will reach young drinkers; How the wine industry aims to make wine lovers out of Gen X, Z and Millennials) although over recent years there have been a number of failed attempts to engage younger drinkers (Selling a younger generation on wine). Furthermore, it is important to remember that age group cohorts do not necessarily represent cohesive meaningful segments of the market (Younger people are turning away from wine — it's caused by everyone worrying about younger people turning away from wine).

Finally, there is also, of course, the suggested response of reducing viticulture, as discussed here:

France wine crisis: changing habits and climates are curbing viticulture
Why do France's winemakers want to destroy their vineyards?
10% of Bordeaux’s vineyard area to be uprooted

It is a simple argument: if people are drinking less wine, then we should be making less wine for them. This does, indeed, bode ill for the future global wine industry.

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* This bank who funded this has just been closed down: Silicon Valley Bank is shut down by regulators in biggest bank failure since global financial crisis;  Silicon Valley Bank crisis: everything you need to know about SVB Financial as regulators shut down the bank. Rob McMillan, who compiled the wine reports, has this to say about the future: Silicon Valley Bank: what comes next?.

Is widespread wine tourism safe again, yet?

This is quite a reasonable question to ask at the beginning of 2023. After all, it was almost precisely 3 years ago that a particular strain of coronavirus became globally widespread enough to be called the Covid-19 Pandemic. This has affected almost everyone in the world, one way or another (see my post: There seems to be a lot of public misunderstanding about the coronavirus).

First, we should take a look at the pandemic data, before we turn to the pandemic effect on the wine industry, and particularly tourism. The easiest data to access come from the Worldometer COVID-19 Coronavirus Pandemic website. Official figures are always minimum estimates, of course, because the officials do not always get to hear about all of the events; and in this case this particularly applies to China (the assumed origin of the virus).

The first graph (above) shows the time course of the number of infected people recorded up to the beginning of February. There were a total of 679,174,044 recorded cases, over the whole pandemic, which is c. 8.5% of the people on the planet. However, more importantly, the graph shows clearly that the global numbers are now as low as they have been at any time since the early stages of the pandemic. Yay!

Prior to this, the two biggest pandemics for which we can estimate their approximate size were the bubonic plague known as the Black Death (1346 to 1353), and the influenza outbreak known as the Spanish Flu (1918). The first of these killed a greater percentage of the people estimated to have been alive at that time, than any pandemic before or since (about one-third of the people in the affected area). The second one infected c. one-third of the people on the planet, without necessarily killing them.

So, for the current pandemic, this next graph shows the time course of the number of deceased people recorded up to the beginning of February. There had been a total of 6,794,531 recorded deaths, which is almost precisely 10% of the number of people who got infected.

So, we are talking about something pretty serious here; and it is little wonder that people stopped traveling from 2020 onwards, and thus exposing themselves to other people who may be infected. Many places declared a State of Emergency (justifiably), and quarantines were implemented by almost every country, putting people in isolation for up to 10 days after getting off a plane, for example.

The consequent effect on tourism will be obvious. Here is a graph illustrating the immediate and dramatic change in travel (Global travel remains subdued in second pandemic year). * This has had all sorts of further effects, from the upsetting (see my post: The (saddest) effect of Covid-19 on the wine industry) to the annoying (see my post: How do Covid-19 lock-downs affect wine blog readership?).

There were other big social effects, of course, but many of these seemed to be temporary, unlike travel. For example: US consumer confidence was recorded to recover within months, not years. This pattern is clearly seen in the next graph, where the measure of confidence was depressed for little more than a year. (Current confidence has subsequently decreased, as we all know, by a recession, not the pandemic.)

Perhaps one of the odder effects occurred in Italy (see the picture below): How Italy is reviving its historic ‘wine windows’ for the Covid era; Italy's "wine windows", used during the plague, reopen for contactless food and alcohol sales.

Anyway, for those of you who have not noticed it, the long-term effects are now officially changing, as well. For example, California has only just now removed its State of Emergency:

After very close to three years and more than 100,000 deaths related to Covid, the nation’s largest state ends its State of Emergency related to the pandemic at 11:59 p.m. tonight (March 1, 2023). On March 4, 2020, California Gov, Gavin Newsom announced the State of Emergency in a news conference carried on virtually every local network amid concern over the state’s first virus-related death, but tonight’s transition will take place with very little public notice.

So, someone there has officially answered my blog-title question in the affirmative. This action is based on the second graph above, which clearly shows that the number of deaths is now as low as it has been at any time since the early stages of the pandemic. The pandemic is not necessarily over, but it is damn close — we are now “living with” the disease. (There will continue to be people with what is known as Long Covid, unfortunately.)

Along with this, the media are now starting to sound optimistic, as well:

• Seven wine trends to watch (Wine tourism is set to grow)
• Tourism set to return to pre-pandemic levels in some regions in 2023
• Western Europe sees surge in tourism since the Covid-19 pandemic.

Hopefully, this is not mis-placed optimism. Indeed, we have been told that current air travel has reached 70% (Air travel recovery strengthens in 2022) to 80% (Air traffic recovery is fast-approaching pre-pandemic levels) of its previous scale. Nevertheless, even Shakespeare did warn us long ago: Beware the Ides of March!

Finally, I also hope that it is clear to everyone that being properly vaccinated is a key component of traveling in the immediate future (ie. for the rest of this year, at least). For those of you who do not know, vaccination was invented by a bunch of uneducated women. That is, it started out as a classic Old Wines Tale, which turned out to be absolutely true. These women were cow maids, and the Latin name (vaccination) translates as: The Cow Treatment. I love remembering this, every time I get jabbed. **

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* My wife and I are retired, and we had just started doing some international traveling. On the very day that we returned from a bus tour to parts of former Yugoslavia, the first official cases of Covid-19 were brought into Sweden, from people who had gone downhill skiing in northern Italy, during a school break week. So, all of our plans sadly “went out the window”, for the next 2.5 years.

** My wife and I have just had our 6th vaccination dose (ie. a fifth booster dose). We are both biologists who have worked with infectious diseases, so we know just how important vaccination can be, simply because it is such an effective way to avoid getting sick. After all, old-age pensioners like us are recognized as being the ones most at risk, especially when traveling (we have been to both Australia and India in the past year). So, we will have yet another dose later this year, as currently recommended by the Swedish government (which is apparently the only EU country to have yet released their official 2023 vaccination strategy).