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Feature Article
There's no" typical" North American
wine consumer
Best-of-Appellation™ Evaluation:
Seeing the Need, Part I
Building Diversity
Despite the endless roll out of over-generalizations and trend revelations in the media, there is no “typical” North American wine consumer. As an industry, we disrespect their diversity at our own peril.
by
Roger Dial
October 28, 2008
APPELLATION AMERICA’s Best-of-Appellation™ Evaluation Program is designed to repair the chronic disconnect between the structure of the wine industry in the US and Canada, as it has developed through diversification over the last four decades, and our under-developed appreciation of how to effectively market that diversity.
We start by asking the most basic question...
1.) Wine-as-Food
The Wine-as-Food consumer, like his traditional European counterpart, is not knowledgeable or particularly interested in wine, anymore than he gives much thought to bread, vegetables or whatever else hits his plate for sustenance. Wine is just food; a regular part of his diet – in short, a reliable beverage of habit, often derived from ethnic heritage.
The Wine-as-Food Consumer
Chances are the Wine-as-Food consumer is brand loyal, often purchasing in jugs or boxes for the sheer volume, as well as to achieve better value. Producers targeting the Wine-as-Food consumer know that the quality bar need only be set at “satisfactory”, and this is an important factor because this consumer is also the most price sensitive and competing for his trade requires a sharp pencil on the supply side. He may be brand loyal, but he is wholly without prejudice about where his wine comes from.
The Wine-as-Food niche was a relatively important segment of the table wine market back in the 1960s, 70s and 80s. America’s biggest wine empire was built on understanding and fulfilling the needs of this profile. Still, the Wine-as-Food consumer has never represented a large percentage of the North American population; hence the oft repeated truism that “Americans are not wine drinkers”.
2.) Wine-as-Status
The Wine-as-Status buyer finds utility in wine, notably expensive wine, as a symbol of personal rank and superiority. He may or may not know much about wine, any more than he is necessarily an authority on the expensive cars he drives or the fashionable artwork he hangs on his walls. For that matter he may not even be a daily consumer of wine…having it, not consuming it, is the core utility.
The Wine-as-Status Consumer
We used to call the Wine-as-Status individuals Wine Snobs. That term has faded in recent years, perhaps in recognition and respect of the important role the Wine-as-Status buyer has played in saving and transforming the North American wine industry in the critical period of the 1980s and 90s. Compared with consumers finding other utilities in wine, the Wine-as-Status niche is not large in demographic terms. However, with cult wines opening up the $100+ product niche, the Wine-as-Status buyers have pulled the price elasticity bar for North American wine up dramatically, creating broad acceptability for the $20-$60 mid-range of wines, which, ironically, are probably too “cheap” to serve the particular needs of the Wine-as-Status buyer, himself. Nonetheless, to the extent that “mid-range” pricing underwrites the solvency of the vast majority of the 5,000+ North American wineries, we owe much to the influence of they who have legitimized North American wine as a luxury commodity, on a par with the Great Growths of France.
That begs the question: who DOES buy those $20-$60 wines that underwrite the health of so much of the North American wine industry? What utility do they find in wine?
3.) Wine-as-Interest
The Wine-as-Interest consumer (aka: Wine Geek or Wine Enthusiast) finds intellectual and recreational utility in wine. Part of the intellectual satiation comes from continuously building personal knowledge about the more or less technical side of wine, and, not surprisingly, many Wine-as-Interest folks get into the wine business or dream of having their own vineyard. They think about wine, read about wine, talk about it, and socialize with wine as the focal point.
The Wine-as-Interest Consumer
It might be said that the Wine-as-Interest consumer is a vicarious corkscrew tourist…ever in search of new places as expressed through diverse wine. Where the Wine-as-Status individual is likely to buy a case of wine made up of 12 bottles of a particular prestige label; the Wine-as-Interest buyer will want 12 different taste experiences in the case. Even for a wine he truly likes, he has very little brand loyalty; one simply can’t discover new wines by refilling one’s glass with those previously tasted…unless, of course it’s a different vintage. To be sure, the ubiquity of vintage dating wines in the mid-price range, and even most cheap plonk, is a measure of our industry’s subtle respect for this consumer profile.
The Wine-as-Interest consumer tastes wine everyday, and is not adverse to good value if the wine has identifiable character to go with the savings. Depending on his financial means, the Wine-as-Interest individual will take that same character/value equation up through the mid-price range, but he is more likely to experience the $100 bottle on a Wine-as-Status friend’s tab, rather than buy it himself.
Since the 1970s, the Wine-as-Interest “enthusiasts” have set the exciting tone of the North American wine culture and underwritten the solvency of a dynamically expanding industry, operating under a glass ceiling of prohibition which has constrained the development of the Wine-as-Food sector.
The good news is that there are signs of stress and cracks in that prohibitionist glass ceiling; signs that America may still have a chance of becoming a nation of wine drinkers, with wine earning a regular place at the table of a significant percent of the population. In the last decade or so, wine has found a new utility value in the North American discovery of food as a cultural metaphor…that is, food as a core lifestyle engagement for the middle class.
4.) Wine-as-Lifestyle
The Wine-as-Lifestyler is typically a “newbie” to wine. The utilities he (and, more importantly, SHE!) finds in wine are really not well defined, and may touch in varying degrees on the value that can be found in wine as food, status symbol and interest/hobby.
The Wine-as-Lifestyle Consumer
The Wine-as-Lifestyle niche has largely been created by the belated arrival of wine in supermarkets, notably supermarkets catering to the dynamic new “foodie” culture. Despite four decades of unsuccessful industry effort to get Government to detach wine from guns and cigarettes and define wine as an agricultural product, the grocery industry has slip-streamed the issue by putting wine and food together in the same shopping bag.
Unlike the traditional Wine-as-Food consumer, the Wine-as-Lifestyler is somewhat intellectually engaged with wine, at least as a diverse and stylish beverage to “pair” with the diverse and exploratory cuisine, which is the hallmark of the Lifestyler. This suggests that brand loyalty is likely to be transitory, even if the Wine-as-Lifestyler doesn’t develop into a full-fledged corkscrew tourist in the Wine-as-Interest model.
The evolution of the Lifestyler into a Wine-as-Interest consumer is also evident in the increasing willingness to move up the price ladder, not something the traditional Wine-as-Food consumer is inclined to do.
This typology of wine utilities and consumer profiles is, of course, not exclusive or exhaustive. It could be fairly said that there’s probably a bit of two or three of these characters in each of us, driving us to more complex patterns of wine buying.
However, the important thing to remember is that the consumer side of the equation has expanded over the four decades according to an increasingly diverse range of utilities to be found in wine. Despite the endless roll out of over-generalizations and trend revelations in the media, there is no “typical” North American wine consumer. As an industry, we disrespect their diversity at our own peril.
It goes without saying that, at the corporate level, any marketing strategy needs to begin with a precise appreciation of the consumer profile(s) being targeted. What does need to be said, however, is that the industry, as a whole, needs to work to build a marketing paradigm that connects the full range of diverse consumer interests with the full range of diverse industry assets. That paradigm is missing, and the “diversity connection” has yet to be made systematically.
To see the marketing gap more clearly, let us quickly profile the industry side of the equation.
In terms of geographical and ecological diversity, the North American viticultural map has become every bit as rich as all of the
Old World wine regions combined.
Indeed, in terms of geographical scope and ecological diversity, the North American viticultural map has emerged in just a generation to become as complex and rich as the whole of Europe, all the way to the Caucuses…and you can throw in North Africa.
What is more, having gone wide with earlier AVA delineations, the newly certified winegrowing designations are more likely to come out of larger, ecologically imprecise, appellations than from wholly new winegrowing territory. The drive for more terroir specific identity is evident in both the US (e.g. the “sub-appellationization” of the Lodi AVA into seven different regions) and Canada (e.g. division of the Niagara Peninsula DVA into twelve sub-appellations).
While there is no shortage of opponents to this, arguing that marketable identity of the parent entity will be diluted by sub-appellations, they’re failing to appreciate the fact that the Wine-as-Interest and Wine-as-Status buyers are thoroughly socialized to the French layered appellation system, and the value scaling that goes with it. Melting pot (mega-appellation) wine definitely has its place (generally in the Wine-as-Food niche), and we need to see sub-appellationization as shoring up “grosslagen” prices, not diluting the customer base for generic blends. Indeed the real problem is not too many regions for the public imagination, but rather too little marketing sense about how to build any sort of marketable appellation identity.
Though the North American wine industry emerged from Prohibition with an industrial structure (consistent with the distillate adjunct of the market of the time) there have always been family wineries and a smattering of artisanal startups. However, in the last four decades the growth of the family and artisanal sector has been phenomenal in all regions:
What is more, there is no indication of a slow down. Quite the contrary…
(January 22, 2007)
This rapid expansion of the Vitis catalog has also been driven by the artisan ambitions of thousands of producers trying to distinguish themselves and their new winegrowing regions by finding the right match-ups of variety to terroir.
3-Tier has certainly liberalized and become more competitive over the years, but the fundamental problem of consumer access hasn’t changed. 98% of North American wine products were – and still are – NOT available to 98% of the public through this channel.
The middle stage of development in the American and Canadian wine distribution system could be characterized by the old expression: If the mountain won’t come to Mohammed, then Mohammed will have to go to the mountain. Let the “mountain” in this expression stand for thousands upon thousands of regionally distinct North American wines.
The winery tasting room retail channel, piggy-backing on tourism, has certainly taken the industry forward in terms of effective place-branding of products, but only for the relatively few wine tourists who get to actually see wine in its geographic context. Yes, winery bottom lines have been enhanced, but the egregious imbalance in the larger access equation, that has stifled the industry since Prohibition, was not corrected by this channel.
However, the long awaited fundamental correction in the distribution system for wine is now well underway, since Granholm vs. Heald in 2005. It is consumer driven, technology facilitated, and legally enabled (battle-by-battle).
The mountain can now get to Mohammed through the online channel. Only about seven-tenths of 1% of the $30+ billion in American wine sales passed from wineries directly to consumers through the online channel last year. Still that adds up to about $200,000,000 in winery revenues and doesn’t include online purchases channeled to 3rd party retailers.
To be sure, the online shopping culture is not fully developed in the wine sector, and consumer borne shipping charges have been a barrier to many consumers,
even in the Wine-as-Interest and Wine-as-Status buyers.
However, not to put too fine a point on it, rapid socialization of the public to online wine shopping, as well as elimination of the shipping cost hurdle, are on the immediate horizon as new distribution players, such as powerhouse internet retailer Amazon.com, enter the game.
In the Online channel of distribution, there is no reason why 98% of the public can’t have access to 98% of the diverse spectrum of product…if they so desire. This so-called “Long Tail” marketplace is a win-win for producers and consumers, alike. As we’ve seen in both the book and music sectors, the online distribution model is designed to deliver diversity. And diversity, of products and consumer desires, is what we’ve got in the wine culture that has been built over the past four decades.
See Part II of this essay:
Best-of-Appellation™ Evaluation: Seeing the Need, Part II - Branding Diversity
to download a pdf version of this essay, click here
We start by asking the most basic question...
Consumers: Who drinks wine…and why?
Forty years ago the North American wine consumer could pretty well have been categorized according to two utilities to be found in the beverage. In the intervening decades, a couple more broad and important utilities have emerged as drivers of consumer interest in wine.1.) Wine-as-Food
The Wine-as-Food consumer, like his traditional European counterpart, is not knowledgeable or particularly interested in wine, anymore than he gives much thought to bread, vegetables or whatever else hits his plate for sustenance. Wine is just food; a regular part of his diet – in short, a reliable beverage of habit, often derived from ethnic heritage.
The Wine-as-Food Consumer
Chances are the Wine-as-Food consumer is brand loyal, often purchasing in jugs or boxes for the sheer volume, as well as to achieve better value. Producers targeting the Wine-as-Food consumer know that the quality bar need only be set at “satisfactory”, and this is an important factor because this consumer is also the most price sensitive and competing for his trade requires a sharp pencil on the supply side. He may be brand loyal, but he is wholly without prejudice about where his wine comes from.
The Wine-as-Food niche was a relatively important segment of the table wine market back in the 1960s, 70s and 80s. America’s biggest wine empire was built on understanding and fulfilling the needs of this profile. Still, the Wine-as-Food consumer has never represented a large percentage of the North American population; hence the oft repeated truism that “Americans are not wine drinkers”.
2.) Wine-as-Status
The Wine-as-Status buyer finds utility in wine, notably expensive wine, as a symbol of personal rank and superiority. He may or may not know much about wine, any more than he is necessarily an authority on the expensive cars he drives or the fashionable artwork he hangs on his walls. For that matter he may not even be a daily consumer of wine…having it, not consuming it, is the core utility.
The Wine-as-Status Consumer
We used to call the Wine-as-Status individuals Wine Snobs. That term has faded in recent years, perhaps in recognition and respect of the important role the Wine-as-Status buyer has played in saving and transforming the North American wine industry in the critical period of the 1980s and 90s. Compared with consumers finding other utilities in wine, the Wine-as-Status niche is not large in demographic terms. However, with cult wines opening up the $100+ product niche, the Wine-as-Status buyers have pulled the price elasticity bar for North American wine up dramatically, creating broad acceptability for the $20-$60 mid-range of wines, which, ironically, are probably too “cheap” to serve the particular needs of the Wine-as-Status buyer, himself. Nonetheless, to the extent that “mid-range” pricing underwrites the solvency of the vast majority of the 5,000+ North American wineries, we owe much to the influence of they who have legitimized North American wine as a luxury commodity, on a par with the Great Growths of France.
That begs the question: who DOES buy those $20-$60 wines that underwrite the health of so much of the North American wine industry? What utility do they find in wine?
3.) Wine-as-Interest
The Wine-as-Interest consumer (aka: Wine Geek or Wine Enthusiast) finds intellectual and recreational utility in wine. Part of the intellectual satiation comes from continuously building personal knowledge about the more or less technical side of wine, and, not surprisingly, many Wine-as-Interest folks get into the wine business or dream of having their own vineyard. They think about wine, read about wine, talk about it, and socialize with wine as the focal point.
The Wine-as-Interest Consumer
It might be said that the Wine-as-Interest consumer is a vicarious corkscrew tourist…ever in search of new places as expressed through diverse wine. Where the Wine-as-Status individual is likely to buy a case of wine made up of 12 bottles of a particular prestige label; the Wine-as-Interest buyer will want 12 different taste experiences in the case. Even for a wine he truly likes, he has very little brand loyalty; one simply can’t discover new wines by refilling one’s glass with those previously tasted…unless, of course it’s a different vintage. To be sure, the ubiquity of vintage dating wines in the mid-price range, and even most cheap plonk, is a measure of our industry’s subtle respect for this consumer profile.
The Wine-as-Interest consumer tastes wine everyday, and is not adverse to good value if the wine has identifiable character to go with the savings. Depending on his financial means, the Wine-as-Interest individual will take that same character/value equation up through the mid-price range, but he is more likely to experience the $100 bottle on a Wine-as-Status friend’s tab, rather than buy it himself.
Since the 1970s, the Wine-as-Interest “enthusiasts” have set the exciting tone of the North American wine culture and underwritten the solvency of a dynamically expanding industry, operating under a glass ceiling of prohibition which has constrained the development of the Wine-as-Food sector.
The good news is that there are signs of stress and cracks in that prohibitionist glass ceiling; signs that America may still have a chance of becoming a nation of wine drinkers, with wine earning a regular place at the table of a significant percent of the population. In the last decade or so, wine has found a new utility value in the North American discovery of food as a cultural metaphor…that is, food as a core lifestyle engagement for the middle class.
4.) Wine-as-Lifestyle
The Wine-as-Lifestyler is typically a “newbie” to wine. The utilities he (and, more importantly, SHE!) finds in wine are really not well defined, and may touch in varying degrees on the value that can be found in wine as food, status symbol and interest/hobby.
The Wine-as-Lifestyle Consumer
The Wine-as-Lifestyle niche has largely been created by the belated arrival of wine in supermarkets, notably supermarkets catering to the dynamic new “foodie” culture. Despite four decades of unsuccessful industry effort to get Government to detach wine from guns and cigarettes and define wine as an agricultural product, the grocery industry has slip-streamed the issue by putting wine and food together in the same shopping bag.
Unlike the traditional Wine-as-Food consumer, the Wine-as-Lifestyler is somewhat intellectually engaged with wine, at least as a diverse and stylish beverage to “pair” with the diverse and exploratory cuisine, which is the hallmark of the Lifestyler. This suggests that brand loyalty is likely to be transitory, even if the Wine-as-Lifestyler doesn’t develop into a full-fledged corkscrew tourist in the Wine-as-Interest model.
The evolution of the Lifestyler into a Wine-as-Interest consumer is also evident in the increasing willingness to move up the price ladder, not something the traditional Wine-as-Food consumer is inclined to do.
This typology of wine utilities and consumer profiles is, of course, not exclusive or exhaustive. It could be fairly said that there’s probably a bit of two or three of these characters in each of us, driving us to more complex patterns of wine buying.
Despite the endless roll out of over-generalizations and trend revelations in the media, there is no “typical” North American wine consumer. As an industry, we disrespect their diversity at our own peril.
It goes without saying that, at the corporate level, any marketing strategy needs to begin with a precise appreciation of the consumer profile(s) being targeted. What does need to be said, however, is that the industry, as a whole, needs to work to build a marketing paradigm that connects the full range of diverse consumer interests with the full range of diverse industry assets. That paradigm is missing, and the “diversity connection” has yet to be made systematically.
To see the marketing gap more clearly, let us quickly profile the industry side of the equation.
Winegrowing: Where’s it Happening?
Since the 1960s, we’ve gone from a moribund prohibition-wounded industry with vestigial footholds in California, New York, Ohio and Missouri to an energized and expansive coast-to-coast viticultural industry, geographically structured and regulated in the AVA framework of the US and the DVA framework of Canada.In terms of geographical and ecological diversity, the North American viticultural map has become every bit as rich as all of the
Old World wine regions combined.
Indeed, in terms of geographical scope and ecological diversity, the North American viticultural map has emerged in just a generation to become as complex and rich as the whole of Europe, all the way to the Caucuses…and you can throw in North Africa.
What is more, having gone wide with earlier AVA delineations, the newly certified winegrowing designations are more likely to come out of larger, ecologically imprecise, appellations than from wholly new winegrowing territory. The drive for more terroir specific identity is evident in both the US (e.g. the “sub-appellationization” of the Lodi AVA into seven different regions) and Canada (e.g. division of the Niagara Peninsula DVA into twelve sub-appellations).
While there is no shortage of opponents to this, arguing that marketable identity of the parent entity will be diluted by sub-appellations, they’re failing to appreciate the fact that the Wine-as-Interest and Wine-as-Status buyers are thoroughly socialized to the French layered appellation system, and the value scaling that goes with it. Melting pot (mega-appellation) wine definitely has its place (generally in the Wine-as-Food niche), and we need to see sub-appellationization as shoring up “grosslagen” prices, not diluting the customer base for generic blends. Indeed the real problem is not too many regions for the public imagination, but rather too little marketing sense about how to build any sort of marketable appellation identity.
Wineries: Who are the producers?
- from zero to 43 wineries on Long Island over the period;
- in the Southwest, just in the last twenty years: from 4 wineries to 33 in Arizona, and a jump from 19 to 89 in Texas;
- in the “corn states” …who would have imagined 56 wineries in Iowa, 67 in Illinois, 28 in Nebraska?
- and, the growth rate for Canadian artisanal wineries (AFTER the 1987 Free Trade Accord, which opened the country to competition from US wine producers) is the most astounding of all, with British Columbia expanding from 13 wineries to 134, and Ontario growing 400%.
- even California, starting with over 600 wineries in 1987 has grown a phenomenal 400% to over 2500 wineries today.
What is more, there is no indication of a slow down. Quite the contrary…
(January 22, 2007)
New Winery Boom Spans North America
Overall, North America added nearly 1,000 new wineries during the last year, an increase of 28%. Though the number of new wineries continues to skyrocket, the wineries themselves are often small, boutique operations; approximately half of all North American wineries have an annual production of 15,000 cases or less, according to Wines & Vines Directory/Buyer’s Guide data.
Grape Varieties: What is being Produced?
The varietal catalog available to North America’s winegrowers has grown in waves over these decades to over 300 varieties currently in commercial production in the US and Canada, with 267 of them officially certified by TTB for use in American wines. The pattern of growth reflects – indeed is driven by – the ecological diversification of winegrowing all across North America.This rapid expansion of the Vitis catalog has also been driven by the artisan ambitions of thousands of producers trying to distinguish themselves and their new winegrowing regions by finding the right match-ups of variety to terroir.
Distribution: How has the transaction bridge to consumers developed?
We began the last four decades with a highly centralized, thinly spread, and punitively regulated 3-Tier distribution system of “liquor stores”. Often retail was in the hands of state monopolies, with a profit line perceived in terms of taxation, rather than product value or selection. There was certainly no need for imaginative marketing of diversity in that distribution formula…it boiled down to take what they have, at the price they set!3-Tier has certainly liberalized and become more competitive over the years, but the fundamental problem of consumer access hasn’t changed. 98% of North American wine products were – and still are – NOT available to 98% of the public through this channel.
The middle stage of development in the American and Canadian wine distribution system could be characterized by the old expression: If the mountain won’t come to Mohammed, then Mohammed will have to go to the mountain. Let the “mountain” in this expression stand for thousands upon thousands of regionally distinct North American wines.
…the long awaited fundamental correction in the distribution system for wine is now well underway, since Granholm vs. Heald in 2005. It is consumer driven, technology facilitated, and legally enabled…
However, the long awaited fundamental correction in the distribution system for wine is now well underway, since Granholm vs. Heald in 2005. It is consumer driven, technology facilitated, and legally enabled (battle-by-battle).
The mountain can now get to Mohammed through the online channel. Only about seven-tenths of 1% of the $30+ billion in American wine sales passed from wineries directly to consumers through the online channel last year. Still that adds up to about $200,000,000 in winery revenues and doesn’t include online purchases channeled to 3rd party retailers.
To be sure, the online shopping culture is not fully developed in the wine sector, and consumer borne shipping charges have been a barrier to many consumers,
In the Online channel of distribution, there is no reason why 98% of the public can’t have access to 98% of the diverse spectrum of product…if they so desire. This so-called “Long Tail” marketplace is a win-win for producers and consumers, alike. As we’ve seen in both the book and music sectors, the online distribution model is designed to deliver diversity. And diversity, of products and consumer desires, is what we’ve got in the wine culture that has been built over the past four decades.
Best-of-Appellation™ Evaluation: Seeing the Need, Part II - Branding Diversity
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