In my activity as a strategic consultant in the wine business, the hardest question for my clients is when I ask: “Why should someone buy your wine?”
Yet, in a healthy business, you need to have a good answer to that question.
If we move from the company to the industry level, the question becomes: “Why should people drink wine?”
Letting aside the ethical implications of promoting the consumption of any alcoholic beverage, finding the right answer can be the response to the structural oversupply situation mentioned by Robert Joseph in his article about the need to uproot 15% of the world’s vineyards.
A product that no one wants is expensive even if given away for free.
Even if these measures were taken, it may work only in the short term because it doesn’t address the issue of declining demand. A product that no one wants is expensive, even if given away for free.
Moreover, cost structure and profit expectations vary for different companies and, as an old proverb in the wine world goes, there is always someone willing to give a lower price in order to sell.
Taking Robert Joseph's fictional company UNIF as an example, any big private corporation would address the issue of supply/demand imbalance through reduced production only in the short term and would immediately start working on developing new sales in the short, medium, and long term. Otherwise, you are just managing the decline.
The solution cannot come from the “invisible hand of the market” as Professor Bentzin suggests. Since the 1929 Great Depression, we have known that the price is a very inefficient means to regulate markets, even structurally efficient ones like the stock market. On the contrary, the wine market is a structurally very inefficient market, where the supply can hardly adapt to price changes. Actual annual production is determined all at once at harvest time and production potential is given by the planted vineyards. The result is a supply that is highly inelastic to the market price.
So back to the key question of “Why should people drink wine?”. The old traditional answers of calories and wine being a healthier drink than water (because it is certainly not contaminated) are gone forever and the “thrill” is far less important.
But there are plenty of new answers: wine is sustainable and strongly linked to nature, wine varies by variety, production method and place; wine is joyful, wine is status, wine is authentic.
All these rational values are in line with current consumer trends, so the potential is there.
So, what should the wine industry do? It must communicate these answers with messages that resonate with the consumers at an emotional level, forgetting the current educate/patronise paradigm.
Let's make wine fun, in all the meanings that this term can have for different people.
Let's make wine fun, in all the meanings that this term can have for different people.
How should we do this? I believe that time is ripe for a collective communication campaign of “wine” as a category. The California Wine Institute is planning to do this and all over the world there are many other institutions and associations in the position to follow this example.
The competitors' free riding problem that has held back campaigns like this up to now is minor compared to the loss of consumers.
Lorenzo Biscontin is the founder and CEO of Labhornet, the Italian start-up who created Vinophila Wine Expo. Vinophila Wine Expo mission is to provide wineries with a new media to integrate and enrich their physical strategies and to better target their customers – especially a younger consumer group. Biscontin is also a consultant in the wine industry on marketing and business management and writes about these topics in several on and offline magazines.
