Wine industry predictions for 2020
A few thoughts on what the coming 12 months have in store for the wine trade. Hopefully some value here regardless of where in the industry you’re working.
2020 will likely be a difficult year for many in the wine trade. Environmental challenges and a contracting global economy will make things tough for everyone. That being said, those who can leverage the seemingly endless opportunities granted by technology to communicate their stories, grow their audience and deliver value -while at the same time streamlining their business processes - stand a great chance of having a successful year.
The looming environmental crisis
Recent catastrophic wild fires in California and Australia have provided yet another reminder of just how precarious our situation is. If unpredictability continues to be the new normal in 2020 we may well see whole appellations in ruin rather than single vineyards and individual wineries. We can expect the environment to take centre stage this year, for businesses in all sectors of the trade. Collaboration, difficult and political though it often is, will be critical to ensuring negative impacts are reduced and reversed. In some wine regions (the Langhe for example) whole ecosystems have been transformed as a result of monoculture expansion and this is creating new environmental challenges that can only be dealt with through a joint, coherent response. On the production side sustainability is crucial. Whether this is related to water usage, waste removal or reducing the use of chemicals, wineries have a responsibility to continually pursue sustainable policies. Consumers have a responsibility to demand it.
Economic uncertainty on a global scale
There are plenty out there that think a full blown global recession is on the horizon. Regardless of when the next one strikes, an unpredictable Brexit, trade tension between the U.S., Europe, and China (and everyone else) and the lingering sense of chaos in Hong Kong is a worrying state of affairs for the wine industry. Diminishing confidence may hold back investment in innovation and undermine the implementation of longer term strategies. That being said, as the Georgian wine scene experienced during its disputes with Russia, these adversities can force us to seek new markets and new methods of doing business.
Changing consumer habits
Social media is causing lighting fast transformations in culture and lifestyle. The rise of the abstainers is a very real and worrying trend for the wine trade. As, perhaps, is the creeping emergence of cannabis based products in a post legalisation world. On the flip side, there are more well informed, ethically driven consumers than ever before. They are searching for authenticity above all else, and this is fantastic news for small growers who think local and practice sustainable viticulture. Many predicted that low alcohol wines would push themselves further into the consumer mainstream. This trend will likely continue and the category’s marker share will grow - although not as rapidly as the headlines suggest.
Accelerated innovation, particularly in packaging
Perhaps these three factors may push some of the bigger wineries and drinks companies into taking bigger risks with packaging. Being seen to respond to climate change will be a key strategy for most businesses in 2020 and as such we should see a shift in the way wine, at the mass market end of the industry at least, is packaged. Any packaging or distribution move that is seen to be less detrimental to the environment will be fast tracked by buyers. The effects of this are unexplored. Tinned wine makes a lot of sense, especially when it comes to selling smaller measures. Who knows, the lunch time glass of wine might make a return when you can buy a 175ml glass of your favourite Syrah.
Will the wine trade wake up to the endless digital opportunities?
It’s widely felt that the wine trade has been slow to take advantage of new technologies, particularly on the sales and marketing side. Although we’re aware of just how much change, innovation and disruption technology has invited into our daily lives, this hasn’t really upended the traditional consumer approach to buying wine. At a global level, less than 10% of all wine sales takes place online.
Wine is a relationship business. It’s a touchy-feely, emotion driven product. In the trade we (more often than not) buy wine from people we like. Consumers, from all sorts of demographics, buy any given wine for a myriad of reasons. And this includes low priced branded bulk wine. The idea that even Amazon hasn’t really managed to figure its wine offering out should speak volumes about the landscape of selling wine. So, where does technology fit in?
Where technology will start to make a bigger impact is on the logistics and processes of getting the correct orders out, quicker, to the correct place, with appropriate systems in place for dealing with re-orders, complaints, returns, damages etc. Although the least glamourous and least likely to earn press coverage, the most productive use of technology this year will be in streamlining business operations - customer relationship management, tracking shipments, dealing with paperwork, quickly printing and distributing sales materials, following up……
When it comes to sales, Wine Searcher has long dominated the commission space and helped facilitate the sourcing of wines from specific producers, grapes and vintages. This could soon change. Vivino's continued funding rounds and product iterations are starting to convert its massive user base into a customer base. Machine learning is transforming user generated opinion into style and flavour guides, which in turn is being used to identify potential customers.
Block chain and augmented reality
Convincing younger drinkers to turn down the lure of craft ale and gin and tonic, and drink wine instead is a battle that was generally lost last year. There were countless seminars and blog posts on how to engage these millennial drinkers. Some brands felt that augmented reality could provide the answers and in some cases (19 Crimes) this was introduced with success. For higher end brands interested in this approach though, the challenge will be in ensuring these ‘augmented’ experiences deliver genuinely valuable experiences in line with the brand without it appearing gimmicky. Put it this way, I’m not sure we’ll see Tenuta San Guido, introduce talking zombies on its Sassicaia labels.
Most of the conversations around block chain are in relation to demonstrating provenance for investment grade wines. There is wider potential here though. In the jewellery industry artisans are using block chain to promote process transparency and demonstrate adherence to international law and a respect for human rights. In the world of the ethical consumer, brand values go beyond labels and fancy parties. Consumers may care about the treatment of migrant labour in the vineyards or the behaviour of the businesses in its local community. Third party validation of these processes through secure block chain technology could help deliver transparency, trust and a stronger brand.
Direct to consumer sales
In the U.S. the direct to consumer channel is likely to grow. With a heightened focus on ‘at the cellar’ tastings, backed up by social media interactions and relationships, the opportunities to engage with the consumer are greater than ever before. This means some wineries may feel they do a better job than the distributor of selling their wines. In which case, they may as well take the retail margin. If wineries can solve the logistics of shipping wine in a sensible way (state law and tax implications permitting) then the direct to consumer route could well be a profitable route for small and medium sized wineries.
Product trends
What’s cool and on trend really does depend on where in the world we are talking about. Headline ideas centre around the sparkling wine category continuing its epic rise, rare grape varieties dominating the press, the usual squabbles over how to define natural wines, Italian wines gaining a larger share of investment portfolios, some Chinese wineries pitching for wider international recognition, more in depth thinking about terroir styles (especially volcanic), and even….more respect for rosé.
Journalists, writers, bloggers……..influencers
And what of the hapless wine writer and critic? Over the last decade technology has helped press the reset button on who can communicate their knowledge and / or passion for wine. Tens of thousands of wine blogs emerged, some good, some bad, but en masse, they crowded the space exponentially and removed the financial viability of all but a few wine publications. Good wine writing requires a great deal of insight, and thus travel, not to mention networking one’s way into good stories, or indeed the continued honing of the craft of writing. As such, my instinct tells me that the novelty of blogging is wearing off. Enthusiasts are now predominantly documenting their passions visually, using Instagram and Facebook alongside short comments. Some have huge audiences, and while their digital ‘work’ should be respected, it tends to offer a very different kind of value to that crafted by writers. Writers have the added advantage of being able to utilise these new digital storytelling methods as a gateway to more substantial work. As such, we may well see a clearer distinction between professional and amateur this year. Writers with the inclination and talent (and means?) may find that injecting some business thinking into their approach will unearth better opportunities in 2020. The tools for success are easily accessible and producers seem more switched on again to the need to re-build this important industry mouth piece.
Quick summary
So, 2020 will not be without its challenges, but the wine world is large and fragmented. There will be winners and losers. What’s guaranteed is that those who take an holistic look at their business will be better off for it. High level thinking about brand values and long term aspirations, honest appraisals about the quality and value of products and services, adequate thinking about digital processes, authentic customer engagement and a more open mind to collaboration will be crucial areas for consideration.
Wishing you all a great year,
Paul Caputo
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PS. Each one of these mini topics merits far more detailed thinking. Please feel free to get back in touch with your thoughts, regardless of which sector of the trade you work in.