Navigating the Challenges of the Wine Industry: Understanding the Needs of Millennial and Gen Z Consumers
According to the latest report from Silicon Valley Bank, ‘State of the Wine Industry Report 2023‘, the wine industry is facing a number of challenges, including a decrease in overall consumption and an increase in competition from alternative drinks such as beer, spirits and hard seltzers. The report also notes that the industry is facing a significant shift in consumer demographics, with the millennial and Gen Z consumer cohorts becoming increasingly important segments. These consumers have different tastes and preferences than previous generations, and they are more likely to opt for lower alcohol alternatives and various drinks other than wine.
One key takeaway from the report is that consumers older than 60 are the only growth segment. Consumers younger than 60 have a lower share of wine consumption compared to what they did in 2007. The report also highlights that the premiumization trend is slowing. While older consumers are paying more for premium wine, younger buyers are increasingly less engaged with the wine category.
Another important trend is that more consumers are abstaining from wine. 35% of 21-29-year-old consumers drink alcohol, but not wine. That number drops 7 percentage points to 28% for individuals 50-59 years old. Of those consumers, two percentage points moved to being at least marginal wine consumers. Meanwhile, five percent are now abstaining from drinking alcohol.
In light of these challenges, it’s important for wineries to pivot and innovate with targeted new products. Sticking to current strategies has clearly not worked. It’s a second consecutive year of negative growth. After years of declining growth, sales volume could stabilize, but swift action is required to turn the tide. These trends are making it increasingly important for wineries to understand and cater to the needs of their target market, in order to stay competitive and continue to grow their business.
By tapping consumer sensory data, wineries can better understand and cater to the needs of the millennial and Gen Z consumer cohorts, and take effective action to adapt to the changing market and consumer trends.
This type of data, traditionally not part of a winery’s typical arsenal, can provide the wine producer with valuable insight into consumer preferences and tastes, which can help their teams make better business and product decisions.
For example, sensory data on consumer preferences for specific types of wine, such as those that are lower in alcohol content or residual sugar, the hard seltzer or fizzy category, or products made with organic grapes, can help wineries identify product development opportunities to enter new growth markets.
Additionally, data on how consumers perceive the taste, aroma, and appearance of different wines can help wineries optimize products and make them more appealing to these consumers. This can help wineries create targeted marketing campaigns, and develop more tailored products.
RESOURCING FOR A NEW NORMAL
Sales reports offer familiar data that wineries use effectively for many decisions. Consumer sensory data however are a new element. Not a replacement, but a critical addition to the decision making process. Data that enables winery professionals to be more pre-emptive than reactive, and gain access to deeper insight when searching for answers.
While several wineries have begun to successfully deploy sensory data, many still have not and could be left behind as market dynamics advance and early adopters get ahead.
Making effective use of sensory data however requires:
i) emphasis on its importance, by upper management;
ii) adequate funding; and,
iii) developing internal skillsets or recruit to ensure the use of the data is optimized.
Over the past three years, we have observed a healthy transition at wineries we work with. More conversations now include consumer palate discovery. Sensory data access and training are part of a new normal, recruits are more and more experienced in the area of consumer research, and annual budgets are adequately allocated to give marketing, innovation and winemaking teams access to sensory data.
THE BOTTOM LINE
Younger consumer cohorts is where the long opportunity is. Innovating along their preferences requires new thinking, palate discovery and analysis tools. By staying on top of evolving consumer trends, wineries can make more informed decisions about product development, marketing, and business strategy. This can help producers to stay competitive and continue to grow in an ever-challenging market.