Wine consultant Paul Tincknell disagrees. This June, as he listened to the Silicon Valley Bank’s 2024 Direct-to-Consumer Report, he became alarmed, There was, he wrote later, “very little positive to be found in the hard data presented”.
In his view, if small-to-medium wineries don’t take immediate action to secure their consumer base, the long-term consequences could be dire. Not only that, but “we may be getting into a pricing corner we can’t get out of very easily.”
Jeff Siegel, Meininger’s contributor and long-time industry veteran, agrees.
The decline of the entry level
Ticknell has worked in wine sales and marketing for more than three decades, and co-founded the Tincknell & Tincknell consultancy.
He’s particularly worried about the decline of the under-$12 category.
“If wine becomes relegated again to a rich person’s beverage or a special occasion beverage, then we’re going to see a continued decline,” says Tincknell.
If small-to-medium wineries don’t take immediate action to secure their consumer base, the long-term consequences could be dire.
Ticknell says that for some people, $12 might be the limit of what they can pay. “We shouldn’t be excluding them because they can’t afford a $20 bottle of wine.
He says the bottle itself is still important for many people, so the more affordable bag-in-box won’t satisfy them. “If the cost of entry gets too high, that will quash curiosity,” he says. “It’s much easier to go buy a bottle of craft beer or an inexpensive cocktail.”
Ticknell says some of the push towards premiumisation is “anti-customer”, and was done so that wineries could achieve higher margins. “We as an industry tend to focus on the high-end wines in our marketing, in our discussion,” he says. Worse, entry-level products are generally denigrated.
Is premiumisation really premiumisation?
Siegel couldn’t agree more. From 2007 to February 2024, he wrote a blog called Wine Curmudgeon, which focused on finding and recommending affordable wines.
“I ended it because I saw the future,” he says. “As wine became less relevant to people, there was no reason to keep going.”
Everything changed after the 2008 recession, he says, when prices rose and $12 wines became $15. Now, land and grape costs in California mean the only people who can afford to make $12 wine are the big companies.
“When I talk to people who are privy to sales data that is not publicly available, they always tell me that one of the reasons that wine has lost everybody younger than the oldest GenX is because they don’t want to pay $20 for a product they know nothing about,” Siegel goes on. “At the entry level, quality wines are gone.”
“If wine becomes relegated again to a rich person’s beverage or a special occasion beverage, then we’re going to see a continued decline.”
He says rosé is the perfect example. “When it came on the scene around 2015, it was going to be the gateway wine,” he says. “Then the first thing the wine business did was raise the price so you really had to look for quality, and everybody was told they should buy the Brangelina rosé.” When he speaks to marketers from Spain and Italy, they tell him their rosé “sales have been pounded because the wine business focused on high-end rosé from France and California.”
That wouldn’t be a problem for consumers if they could access the more interesting European wines that are still around at that critical price point but, increasingly, they can’t.
“For the first time in the United States, the majority of wine is sold in supermarkets,” says Siegel. “Supermarkets are dominated by the top five or six producers and the top two or three wholesalers.”
Consolidation at the retail level, coupled with consolidation at the wholesale level, means the kinds of wine on offer are mostly the big, commercial brands — exactly the kinds of wines being rejected by younger consumers.
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The annual SVB Direct to Consumer Report reveals just how different the US wine market is from Europe. Robert Joseph wonders whether it might have lessons to teach other markets.
Consolidation is not going away
The narrowing of the pipeline to consumers has also choked off routes to market for small- to medium-sized wineries.
“We saw this consolidation start back in the late teens,” says Tincknell. “I have had the misfortune of going in to [tell] some clients that unless there’s a radical change, you’re never going to make money. Some businesses are just not viable.”
As a result of consolidation, he says the split between big, global companies and small-to-mid sized wineries is becoming more pronounced, with the latter needing different strategies and approaches to the market.
“But the big-wine mindset and consolidation trend has been going through the whole industry, down through distribution and even into retail, where we’re seeing the expansion of big box retail,” says Tincknell. “The scale at which they’re operating gives them a lot of flexibility to undermine market practices that the small and medium wineries rely on.”
Big companies can “spread margins around different products and create and kill products on demand so they’re meeting market demand more efficiently and getting the shelf space.”
Smaller wineries have no such room to manoeuvre. The price is, generally, the price.
But smaller wineries haven’t helped their situation, because they’ve remained too product-focused.
Tincknell believes they haven’t caught up with the way that consumers buy now. “We’ve gotten very used to just-in-time buying. I don’t need to go out and buy huge amounts of stuff and stock up when Amazon will deliver in less than two days,” he says. Many wineries, however, are still trying to lock in customers through subscriptions.
“In the beginning wine clubs were a novelty, but now they’re mainstream. We have subscriptions for everything.”
As big companies show less loyalty to consumers and offer less customer service, consumers in turn feel less loyal to companies. “All of this is changing customers’ approaches to consumer goods.”
This means the old set-and-forget wine club schemes are no longer effective. There is new software that can help wineries become more flexible, giving consumers the ability to buy when and how they like, but the uptake isn’t fast enough. Tincknell says it’s because too much of the ecosystem around wine clubs has “kind of solidified pretty strongly”.
Another reason that the new approaches aren’t being adopted, particularly by smaller wineries, is that they require “good solid insights into your customers, so you have to develop personal connections with them. It takes more effort and dedication,” which doesn’t always come naturally to an industry that’s so focused on the product itself, rather on the consumer.
"Sometimes you can run across people who have fallen into the trap of believing that people want to know every single boring detail of how the wine is made.”
As a consultant, Tincknell says he’s often tasked with mystery shopping, where he goes into wineries and acts like a customer. “We’ll listen to the spiels. There are some very good people out there, but sometimes you can run across people who have fallen into the trap of believing that people want to know every single boring detail of how the wine is made.”
He says, “I’ve been in those situations where it feels like I’m training for my somm pin and I’m wondering, ‘can we just get on with putting the wine in the glass, please?’”
Consistent brand message
Tincknell says one of the big problems he sees with smaller wineries is inconsistency of brand message. “We’ll go in and see five different wines and five completely different labels. You can’t develop any kind of cross-product strategy if everything looks like it comes from a different winery. So those are easy fixes.”
Careful market selection
Overhauling the direct-to-consumer system, and being more selective about which markets to focus on would also yield quick results.
But many of the problems in the market are now so big, they demand more collaborative problem solving.
Partnerships
Given the lack of resources available to smaller wineries, Tincknell says they need to build partnerships with other wineries.
He also believes the wine trade needs to collectively communicate why things are more expensive now. “I’m in California,” he says. “There are areas where our cost structures have just changed radically and that’s not going to reverse.”
Explain the costs
Some of those costs arise from an increased focus on sustainability and better conditions for workers. “That’s some of the messaging we need to do as an industry. These wines may seem more expensive, but the value you’re getting is our dedication to sustainability and fair pay.”
As for who should be doing this work, he thinks it’s partly the big companies, because they have the “power and the data that would allow them to be more expansive in their outreach”.
Why should anyone buy one wine rather than another - apart from because of the way it tastes (and its price)? This is a question Robert Joseph suggests needs to be asked rather more often.
Changing the marketing messages
Tincknell also believes there needs to be more industry cooperation between all levels. “I don’t think creating a marketing strategy based on a Got Milk type campaign would work in this day and age,” he says. “But what we do need is somebody coordinating the other organisations to create messaging that their membership would use so there’s more of a unified voice in the industry.”
“I would love to see more communication between industry organisations.”
He may get at least part of his wish, as California’s Wine Market Council is in the middle of developing a campaign aimed at a younger audience.
Siegel suggests it’s time that marketing differentiated between commodity and premium wines.
He notes that the big companies don’t make bad wine. “It’s palatable. It’s drinkable, but they insist on selling their commodity brands like premium brands. It’s not about having fun with people,” the way Coke — the ultimate commodity — is. “What little wine marketing we get is either ‘wow, this won an award!’ or here we’re all sitting around holding the wine glass properly and showing respect.”
It’s time that marketing differentiated between commodity and premium wines.
Siegel says that over the years he wrote his blog, he spent a lot of time on YouTube looking at wine marketing and either didn’t find any, or found ads that were “cringe worthy”. Treasury’s 19 Crimes, which has made itself into an entertainment brand, is the exception.
Obviously it takes a big budget to produce ads like Coca Cola, but Siegel says wine marketers should just follow their strategy rather than hiring a fancy ad agency. “Get somebody who’s really smart and you can figure out a way to do it without the budget.”
He also believes the big wine companies have another responsibility — to make wine into an everyday beverage. “Wine is an ordinary beverage in Europe,” he says. “In the United States, it’s a special occasion beverage. I never understood why that was.”
But it’s clear that too many companies would rather go for premiumisation, than accept the need that some wine should be an everyday beverage. Tincknell and Siegel believe the consequences of that approach are increasingly clear.
