- Posted by Danielle Gillespie
This past week I spent some time reading through the Silicon Valley Bank’s 2014 Wine Report. I then wandered through various blogs and articles that discuss some of the key findings from the report. The findings are interesting and, I choose to believe, optimistic in the opportunity presented. However, there was one striking observation presented in the report that has prompted a lot of discussion:
“With Boomers hitting retirement age, we have a real question about the ability to increase wine sales when older generations who are willing to pay for a good bottle simply can’t consume the volumes they used to, and younger generations can’t afford a good bottle but could consume more.”
The thought of Millennials (22-34 years old) being a significant driving force to wine sales has thrown many professionals into a tailspin of fret. I, however, have chosen another route and am now asking, “what can we do to influence this energetic, connected and tech-savvy group of young people?” We have a great opportunity to guide and impart on those coming after us our infinite wine wisdoms (for whatever that’s worth!).
Hard as it may be to remember, I was once of an age considered to be the “next generation”. I had limited wine buying ability and equally limited knowledge. I had no idea how a killer Napa Cab could transform a meal. And, I’m sure that the Baby Boomers who came before us fretted to think of the buying power being handed over to our sad lot. As the years passed though, my financial outlook improved, as did my accumulated wine knowledge and my quest for more. Our group is now referred to as Generation X, a collective group of wine drinkers with a rather healthy potential for impressive wine consumption. And, in fact, according to the SVB Wine Report, “Perhaps the most interesting conclusion [of the report]…is the neglected Generation X…that 35-55 year old consumer; they have the purchasing capacity and are spending a larger amount of wine than [other wine buyers].”
EVOLVE THE NEXT GENERATION
So I am wondering; what contributed to my personal climbing spiral of wine budget and hopeless pursuit of wine? Answer: information, tasting, interaction, tasting…information, tasting, interaction, tasting, etc. repeated endlessly. And, can this information be translated and applied to foster the same transformation amongst the Millenials? Absolutely.
I will argue that, with more experience and interactions with wine will come the natural progression toward purchasing greater quantities and higher quality wines for consumption. Over time, Millennials will tend to up-sell themselves (even if they have to give something up as a trade-off) and will continue to do so creating an informed and mature customer who will evolve. This mature customer will be able to sustain wine sales when they become the dominant buyers in 5-7 years.
And, I found that the SVB Wine Report agrees, “… as Millennials age if they develop the capacity (income) to buy wine, and if their appreciation for wine is strong as reported in the press, they will be the long-term growth opportunity we can anticipate in the business out past 2020.”
The SVB report goes on to state that fine wine sales are predicted to rise 6 to 10 percent this year with luxury wines and wines priced between $10 and $18 expected to grow by the largest margins. Wow! Growth of 6 to 10 percent over last year…every wine business, right now, should be asking, “how do I capitalize on these favorable conditions?” There is a ready and willing market, increased demand for the first time in 4 years and an opportunity for growth in your business.
So, today there is a golden opportunity coupled with a responsibility to start shaping our wine buyers of tomorrow.
CUSTOMIZE AND REINVENT
In the next year, and those following, it will be important to focus on both Millennials AND Generation X (35-55 years old). In order to fully reach these two groups of wine buyers, start with your wine menu. Every customer has an individual response style when presented with new information. Some consumers respond to speech, others must read to understand and there is a third type of response style that requires touching and doing. As wine stewards, we must be aware of each consumer’s style and present our wine in a way that triggers a positive response.
Gone are the days when your wine list had to be a one-dimensional and fearful tome; it should be reinvented as a tool of invitation. Consider an iPad-based menu that provides a combination of visual and tactile interaction. An inviting menu layout, pictures of the wine label or bottle, and vineyard descriptions can combine with a server’s guidance to lead your guest toward an empowered choice.
Start cultivating your long-term buyer (Millenials) and sustain growth with your short-term buyer (Gen X and Baby Boomers) in a market that is ready and willing. Find an interactive menu to differentiate your program, establishing long term and loyal relationships with your guests. In doing so, you can beat the wine growth estimates and enjoy a 10-20% increase in your wine revenue this year.
Read the full report here: Silicon Valley Bank Wine Report, State of the Wine Industry 2014
Silicon Valley Bank’s Wine Division specializes in commercial banking for premium wineries and vineyards and the industries that support them. The report is based on SVB’s in-house expertise as one of the largest bankers to the West Coast wine industry, a proprietary database of more than a decade of winery financials, ongoing research, and an annual survey of 650 wineries.