Is the Millennial market all it’s cracked up to be?

Rob McMillan/credit Robert McClenahan
Rob McMillan/credit Robert McClenahan

The wine business has recently turned its attention to US millennials, those consumers born between 1980 and 1995. This generation is one of the most-hyped in history, sought after because they are willing to travel, explore their tastes and try new things. But, says Rob McMillan, founder of the Silicon Valley Bank’s Wine Division, the rise of the millennials may not be a uniformly positive trend for the wine industry.

“The millennial generation receives a great deal of ink because we are all looking for the next market,” he says. “Yet when we survey wineries and ask them what percentage of their wine is sold to various generations, millennials are near the bottom.”

McMillan has the facts to back him up. In the mid-1990s he began to put financial information on the wine industry together for an internal bank report, and decided to share his findings with clients. “The response was remarkable, with clients clamouring for more,” he says. “The next year I added additional content, and put it in the form of a report, sending it out to a wider audience, which in turn brought questions from the press.”

Today, that report takes three full months of research to prepare and is given away free by the Silicon Valley Bank (SVB). And what that information is showing is that the baby boomers still dominate wine consumption. “I know that’s boring,” McMillan admits, “but that’s what the overwhelming evidence suggests.” He does add, however, that younger consumers are making an impact in the lower-priced wine segments, particularly those between $8.00 to $14.00 – because millennials are frugal. “If they see an $11.00 wine by the glass and a $6.00 premium beer, they are more likely to have the beer.” Not only that, but if they know a wine sells at retail for $25.00, they won’t buy it when they see it on a restaurant menu at $50.00.

“The younger consumer is approaching wine in a discovery phase. They talk about it, research it, share it and experiment. They are ambivalent about their choice of alcoholic beverage at this stage, but they know more than their parents did at a similar stage in life,” McMillan explains. “That said, wine as a subject is daunting and the younger generation is impatient. They want what they want, when they want it and it’s confusing. Enter the red blend.”

The ‘red blend’ trend McMillan is referring to kicked off in 2004 with the introduction of Apothic Red, a sweeter-style blend of Syrah, Zinfandel, Merlot and Cabernet Sauvignon. It was such a hit, that a flood of other off-dry red blends soon followed.  By 2014, more than 30% of new labels introduced to the US market were red blends, according to Food & Beverage magazine, and is now the third-biggest wine category after Chardonnay and Cabernet Sauvignon. “They are the current-day solution that is making wine easier for the newest consumer to understand,” says McMillan. “No longer tied to confusing notions of vintage, varietal and region that boomer parents understand – younger consumers place their palates in the hands of the large wine companies who take good bulk juice and make interesting, though not distinctive, blends.”

Tastes change and the red blend craze may come to an end one day. But what is more likely to impact the long-term health of the market is consumer spending patterns. “What I am starting to see is an impact of the retiring boomer,” says McMillan. “What happens when they are living on a fixed income? Will they still buy for their collections, or just drink their collections?”

He adds: “Today they are being replace one-for-one by the frugal young millennials.”

Who may not be the saviours of the wine industry that many are hoping them to be.
Felicity Carter, based on an interview by Robert Joseph

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