Consumer-Driven Economics: An Update on the State of the Wine Industry

In early 2015 a panel of wine industry leaders said one of the challenges vintners face is that the casual drinker’s choice of everyday beverage is becoming beer. Craft beer in particular encroaches on wine’s territory. It is ritzier than its domestic predecessors but does not have the black tie feel of a glass of wine. Craft beer is an indulgent, every-day choice for many consumers.

“The sophistication of the consumer has increased,” said Charles Benson, Senior Marketing Manager, BASF. “Today’s consumer requires a more personalized experience.”

Small breweries have tapped into this desire for personalization. Consumers come to the production site to not only purchase but consume the products in brewery taprooms. They can interact with brewers, try a variety of beers in a tasting format, and leave with their favorite brews to enjoy at home. Often, craft beers are only available for a short period of time, creating exclusivity for those who have tried a beer.

Another factor driving the steady increase of craft beer consumption is that consumers understand the science of beer making. Since 1978 when homebrewing was legalized, the hobby has steadily grown and spread across the country. Homebrewers understand what goes into a good beer and can appreciate when a craft brewery creates one.

“The creation of beer has become a hobby that makes consuming it a complete experience,” Benson said. “Craft breweries have capitalized on this experience.”

Due in part to consumers’ inclination for craft beer, sales of inexpensive table wine fell in 2014, while sales of premium wine grew. This shift could throw the industry for a loop, destabilizing the base of inexpensive wine drinkers who eventually buy premium wines to creating a top-heavy market where most sales are of premium beverages.

Millennial consumers could be the key to complete and maintain the shift to premium wines.

This market segment is consuming more and higher-value wines, in part because of the ease with which they share information. Social media and online retail has contributed to Millennials’ ability to find more niche products that feed their desire to undertake new experiences. The foodie movement is one way Millennials incorporate wine into their experience-driven lifestyles. Wine subscription services and wineries as destinations may also play a role in Millennial consumption.

New innovations in the wine industry could be the foothold in new market segments. The wine industry has the attention of Millennials and needs to keep it by utilizing sophisticated marketing and communications techniques. One way to do this is to incorporate practices employed by craft breweries to build strongly committed relationships with consumers.

“Something the wine industry can learn from craft beer is you do not need to be the biggest to succeed,” said Benson. “You need to deliver innovation in engaging ways.”

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