Overview
The image of a traditional wine drinker or wine collector has undergone wholesale change. Once upon a time the exclusive domain of the educated and wealthy male, wine consumption has now pervaded all areas of society, being consumed, collected and produced more widely than ever before. The question of whether supply has exceeded demand is a topical theme, though historically markets work in a cyclical pattern.
The Big Picture - Who Drives the Market?
Wine can now be classified as a fast moving consumer good. Most consumption is immediate, and drinking patterns have changed wine styles. Preferences for fruit dominated, earlier drinking styles have seduced a generation of consumers, and far expanded distribution channels enabling consumers to purchase wine with the weekly shopping in the supermarket or mall. Packaging has also followed suit with these changes, bringing about user friendly devices such as the wine cask (bag-in-box) and screw cap.
If we examine the beginnings of wine’s mass popularity, we can draw on the examples of winemakers becoming personalities, producers having cult status, or the initial limited supply of sought after brands. Indeed, it became less about the vineyard and origin of the wine and more about the personality of the winemaker. The retailer or distributor was merely a conduit to supply a legion of near rabid enthusiasts who eagerly embraced whatever style of wine was presented. Historic to the 1980s, the next main phase moving into the 1990s saw increasing customer savvyness and the demand for huge, turbocharged wine styles alter the market landscape. Rather than a push/production market, customer tastes and the 100 point phenomenon were now dictating or pulling the styles of wine produced.
Rise of the Gatekeeper
The current market has seen retailers take a far greater role in directing consumer tastes, such is the overwhelming choice offered to a wine buyer. Retailers are taking a gatekeeper role, and it could be argued they have replaced the customer as king. Demands are now placed on wineries and winemakers to produce wine to specification at directed prices, with wineries that fall out of mainstream distribution networks facing difficult times. The ever increasing presence of big retailers partnering with big brands backed by large companies is pointing to an increasing divide in retail, with smaller chains and independents forced to seek up and coming brands and points of difference.
The Importance of Retail Space
The Promise of a Bright Future
As drinking choices have exploded, so have sales channels and opportunities. Any wine producer fortunate enough to court favour with an audience through clever marketing or critical acclaim is now exposed to a whole world of wine drinkers able to be serviced by flexible distribution channels. The internet is an obvious tool of supply; it also fosters demand through providing an unending source of wine information.
The future really is in the hands of consumer preference if wines with a sense of place and individuality are favoured over broader, generic styles, fashioned to meet criteria of flavour, style and price. There exists within this dilemma another pertinent factor which will be the industry’s response to the cultural and social aspects of its product and consumption. In a legislative and social environment concerned with alcohol abuse we can expect change in the way wine is served and sold, and the awareness of wine’s role in a healthy, prosperous society.
Who Drives the Market Place
A Case In Point - Jim Humphrys, CEO Chapel Hill Winery – McLaren Vale, South Australia
“The growth of large retail chains in Australia and the reduction of independent retailers will continue, there’s no doubt that. Wine is becoming more established in supermarkets – it’s just accessible to more people, which is no bad thing.
I think prices will stay roughly the same, we’re in the midst of a big oversupply but it won’t get any deeper, and I don’t think there will be a big change one way or the other. Wines that receive accolades and those for which there is a big demand may see price rises but broadly I think things will remain relatively stable.
In older European countries consumption used to be up at about 70 litres a head, but that’s settling out now at around 20-22 litres per capita. We’ve seen that in the UK where it’s plateaued, as it has in Australia. In North America consumption is growing really rapidly, the US will be the largest purchasing country in the world in the next 5 years.
In the overall mix by volume Australia settles out at around 50:50 red to white. There’s a minor shift with things like Sauvignon Blanc and Pinot Grigio that are showing dramatic growth and Cabernet Sauvignon is obviously declining, but I don’t see a big red revolution or white revolution on the cards.
I think really positive things are happening in the industry overall and small players who are producing very good quality and value for money wines are doing really well. Opportunities exist even in a market downturn!”
Jim Humphrys