This is the time of year when many of us are joining gyms, starting diets and making resolutions to alter the way we live our lives.
How many of us also need to rethink our business models?
According to Alix Partners’ 2023 Disruption report, an extraordinary 98% of the 3,000 executives it surveyed across the globe believe they are going to have to change the way they are doing things in the next three years. 70% of them see their own jobs being at risk.
The challenge for a tradition-bound industry like ours, is that change is easier said than done. But some will adapt, and here’s how they may do it.
New wine styles are on the menu
We plant vines that are intended to deliver specific kinds of grapes—and ultimately wine—for decades. Our techniques, give or take a bit of new equipment or the adoption of ancient methods, still fall within a fairly narrow range, and we still mostly rely on the same packaging options as our great-grandparents, because that’s what we’ve led consumers to expect.
In other words, people whose ancestors made Barolo or Bordeaux Rouge sold it in 75cl glass bottles a century ago, still expect the winery to be doing pretty much the same thing in 50 or 100 years’ time.
For some, that kind of assumption may be totally valid, but for many it won’t.
If they want to sell their wine in Scandinavia and through a growing number of retailers elsewhere, many will have to switch to making that wine organically or, at very least, sustainably.
Keeping up with consumers is another challenge. Red wine producers who would never have imagined making pink or white are increasingly launching examples and enjoying the cashflow advantages of beverages that can be sold quickly. I also expect to see a growing number experimenting with qvevri wines and Pet Nats.
Expanding the range of products may also open the door to new packaging, especially at a time of growing environmental awareness. In 2021, Jason Haas of Tablas Creek in California, for example, launched a Provence-style rosé in a three-litre Bag-in-Box, followed by a red and a white. It took courage to price these wines at $95—more than $30 per litre—but Haas explained what he was doing in the blog he sends to faithful customers. He sold out.
Wine will branch into new sectors
Cashflow, always a problem for a sector that relies on an annual harvest of uncertain volume, is also addressed by wineries ranging from Mirabeau in Provence and De Bortoli in Australia to Denbies in England, that have launched their own beer and/or spirits brands. Others have acknowledged current trends by dipping their toes into the growing stream of low and non-alcohol.
Tourism - and the income from events, tastings and selling gifts in their tasting rooms—is increasingly making a significant difference to wineries’ bottom line while contributing to their marketing and profitable distribution—through DTC sales.
The rise of wine collaborations
The coming year is surely going to see changes in the way many handle their marketing. Wine companies that delegated much of their marketing to their local appellation or consorzio and their overseas distributors are going to have to do far more themselves—or possibly with other like-minded producers. I certainly see groups ranging the Douro Boys to Australia’s First Families of Wine being models for the future.
Getting to know wine’s new gatekeepers
Producers that were slow to discover Facebook and Instagram are now struggling to catch up with TikTok. The even slowers adopters are belatedly developing a social media strategy and rebuilding more functional and user-friendly websites. Whether they like it or not, producers who have relied on friendly long-standing relationships with established critics and publications are having to come to terms with a new generation of ‘influencers’ and lifestyle writers.
Similarly, after the experience of many who have seen their export markets in China, Russia and the US hammered by tariffs, war and politics, now is a good time to rethink where wine is going to be most profitably and reliably sold. Many following the recent progress of the UK economy and the prognostications for the coming year and possibly beyond – and taken a look at new excise duty regime due to be introduced later this year - might be wise to reduce their reliance on British wine drinkers. Now may be the time for them to take a fresh look at less-explored markets like Ghana, India, Vietnam and Korea. Or Dubai, now that it has relaxed some of its restrictions on alcohol.
It’s time to raise prices
Finally, counterintuitively and perhaps most crucially, despite the fact that most people across the globe may have less disposable income, 2023 may be the time to look at selling more expensive wine. I’m not talking here about covering additional costs by charging more for existing products. What I have in mind is new, more premium wines or cuvées.
The writing is on the wall. People in many markets are generally drinking less but better, and the rich are getting richer. Those who fail to take account of these two trends and continue to focus on offering inexpensive, low-margin, wine to customers who struggle to pay for it and, in any case, might well be switching to other beverages, may have a hard time.
No way back
Nothing I have read about the wine industry or any other sector makes me imagine that we are going to return to any kind of previous ‘normal’. No one can say how long the conflict in Ukraine will last, any more than they can rule out China invading Taiwan – sooner or later – with all the unknown consequences that may entail.
Even if we have ‘beaten’ Covid 19 – and that’s a big ‘if’ – in our globalised economy, there’s almost certain to be another pandemic of some kind before too long. Anyone who imagines that Trump’s and Xi’s tariffs are the last politically-driven impositions we’ll see being imposed on wine is living in cloud cuckoo land. And then there are the implications of Artificial Intelligence that we’ve barely begun to imagine and the ones of climate change with which we are becoming all too familiar.
Most people’s New Year resolutions are forgotten by the end of January. Plans to adapt businesses to prosper in an uncertain and fast-changing world need to be taken a lot more seriously.