After a decade or two of outstanding growth, the wine industry faces the possibility that those heady days may be giving way to more modest increases in the future. This is especially true on-premise, where, with traffic flat and stiff competition from a host of adult beverage options, wine doesn’t seem to be growing at all.
That’s in general, of course—there are many operations with robust wine programs that bolster profitability and generate customer loyalty. But to maintain that growth, operators need to be aware of current trends when crafting their wine menus, and, if they aren’t already, they should pay close attention to Millennials.
Millennials’ behavior continues to be subjected to scrutiny, yielding results that might surprise. The flavors of wine—more than country of origin, varietals, price point and service styles—seem to be their motivating factors as we enter the second half of the decade.
The slowness in wine growth can be attributed to the inroads of spirits, cider and craft beer, says Donna Hood Crecca, senior director of the Adult Beverage Resource Group at consulting firm Technomic, Inc. And that fight is particularly pitched at the Millennial level.
“They have a much different and varied drink portfolio—it’s more diverse than with any previous generation. Millennials have tended to embrace wine at a much younger age, they over-index on all varietals on-premise, and they really are engaged in the category. So it’s good that they are more wine savvy than previous generations, but they are behaving the same way with beer, cider and spirits,” she says.
That competitive dynamic has made it difficult for an operator to know how to keep up. The difficulty of altering programs intensifies at each level of operation: single independent, multiple-unit operator, regional chain, then national chain, where change comes slowly.
Millennial consumers have confounded the wine industry in ways that impact restaurateurs as well: They are remarkably resistant to brand loyalty or even varietal affinity, Crecca says. “They are really looking to explore and experiment, yet a lot of chain restaurants, especially casual-dining chains, have pared down their selections and gone with some of the more recognizable brands. To the Millennial consumer, that means they have less opportunity to explore.”
Draft systems provide easier sampling opportunities, making wine exploration more accessible to consumers. It’s something on the mind of Marybeth Bentwood, executive director of the promotional and marketing concern Wines of Chile USA. “Many varietals that aren’t well known here fit right into this trend of people diversifying what they are trying. That Millennial interest in discovery and innovation allows new brands, varietals and regions to gain attention. For that reason we’re very Millennial-focused, both trade and consumer.”
Chile has undergone a remarkable evolution in quality. But many older consumers were turned off by certain wines imported in the early years. To Bentwood, that’s another reason to focus on Millennial consumers. “Many people think they know our wines, and it’s too expensive to change opinions. We’d rather attract a new audience and reveal to them who we are now.”
Millennials are known as consumers who expect to see more styles and types of wines—the more exotic the better. But not all Millennials are the same, cautions John Gillespie, president of Wine Market Council and CEO of Wine Opinions, whose presentation on the state of the wine industry for the Council this year revealed slow growth. Between 1994 and 2007, U.S. wine consumption grew by 2.5 percent annually every year but one. Since 2008, annual growth has been 2 percent or less in every year but one.
“Right now I’m most obsessed with the differences you can see in the behavior of older versus younger Millennials. I think that if there is a prolonged slowdown in growth it will be because of the behavior of that younger half of the Millennials. One of the remarkable things about older Millennials is that they were coming into wine as frequent consumers from the start; they didn’t start out as occasional consumers and work their way up.”
Gillespie’s annual study focuses on the behavior of frequent wine consumers, defined as those who drink wine several times a week or more, who account for a disproportionate percentage of consumption. But he’s also seen a big drop-off in wine consumption by occasional wine drinkers, many of whom became regular wine drinkers over time.
Younger Millennials skew more female, who on average don’t consume as much per occasion as males, so that’s one possible explanation for the slowdown. Another is the state of the economy. And there’s the impact of craft beer and cider. Gillespie doesn’t claim to know the cause, “but I can see it’s real and that there’s a big difference between younger and older Millennials.”
Flavor Trumps Tradition
Among the trends that are Millennial-led is the idea that wine is first defined by flavor. Ben Salisbury was vice president of on-premise sales for Constellation Brands before starting his consulting business, Salisbury Creative Group. He says flavor is key today.
“Not everybody understands how Millennials are driving change. For example, previous generations grew up in a culture of wine knowledge. If you got into wine, you learned about the national rules and regulations and geographic areas. These folks have turned that on its ear. It isn’t about knowledge now, these wine drinkers just care about taste, quality, a good value, and whether they would buy it again.”
While there will always be an upper tier of consumers interested in learning more, the flavor experience is what matters today, and can help explain the popularity of everything from emerging varietals to sweet red blends and sparkling Moscato. “A huge chunk of consumers of all ages don’t care about any wine knowledge. You can see this the way big companies crank out new products right and left that are all about flavor, labels, packaging and experience,” he says.
Gillespie recalls other sweet wine phenomena, like the Lambrusco craze in the 1970s. He says that without the recent growth of those red blends and Moscato, the market might have declined last year.
J Bar’s WineStein Sommelier app analyzes the flavor profiles of both foods and wines, then computes the best match. It’s something Crecca’s research bears out. “The driving factor is that flavor dictates what’s going to win the occasion.” While traditional leading varietals—Cabernet Sauvignon, Chardonnay, Merlot, Pinot Noir and Sauvignon Blanc—dominate on most menus and in sales, roughly one-fifth of on-premise wine drinkers are selecting such varietals as Grenache, Tempranillo, Malbec, Riesling and white blends more often, says Crecca.
Newly popular wines with a sweet component, even those with a higher price point, have been markedly absent from most restaurant lists. But the trend in sweet wine shows no sign of ending, and Salisbury says wine sellers can expect to see more from a burgeoning group under the classification OTS (“other than standard” wine). These wines are allowed to include fruit flavors, added sugars, syrups and essences not allowed in traditional table wine. They may not seem a natural fit for many restaurants, but their evolution surely indicates sweet white and red blends deserve a second look.
Bentwood notes that whatever the flavor profile, the Millennial consumer also craves experience: “‘Give me something I can Tweet about, Instagram about, post about’—that increases their social currency.” In other words, technology is only waiting to be properly applied by operators to engage customers.
Tablets are frequently used these days as ways to list wines, but they aren’t being used much to gather information, educate or sell wine—although that is changing (see “The Virtual Sommelier” below).
Steve Raye, whose Brand Action Team consults with wine regions and brands trying to make inroads into the U.S. market, often focuses on social media. He notes that apps are changing the on-premise wine experience; consumers are better educated and quicker to adapt new technology than most restaurants. “These apps allow you to take a picture of the wine or input the name and find out what’s been written and what your friends think—that makes consumers significantly better informed about what these wines are going to taste like.”
They can also get immediate off-premise price information to see how good a value the wine is. “This is unprecedented that consumers have access to so many tools that are democratizing wine and empowering consumers to be more informed and selective,” he says.
The Virtual Sommelier
Restaurants were quick to adapt tablets as a place to enliven their wine lists, but gathering data or actual interface with customers has lagged.
Now at least one concern is trying to change that. The J Bar, a recent concept from Heart of America, which operates six branded concepts including Johnny’s Italian Steakhouse based in Moline, Ill., implemented a wine and food app called WineStein Sommelier that’s designed to match wines with dishes.
Ajay Singh, vice president of brand development, says the app, which is loaded onto tablets but is also available for free download to smartphones for use at home, is a way to make wine purchasing easier for customers. “We put this together partially because while there’s a certain segment of the population that can pick and choose with knowledge, there’s another segment that likes wine but is a little intimidated,” he says.
WineStein combines a set of key flavor profile components of wine and food and runs a comparison to see which would go best together. In the process, J Bar provides a list of their wines and dishes, and WineStein creates an algorithm based on flavor profiles and makes suggestions. In the past, the operator would create a list based on an individual’s preferences, but invariably, some items would end up gathering dust. In the initial process, some of the wines didn’t match well with any dishes, and the list was subsequently tweaked.
WineStein doesn’t score wines alone but on a scale in reference to each dish—a score of 100 indicates a perfect match. The program also can combine recommendations, finding wines that will pair well with multiple entrées.
“When we opened J Bar, we intended for wine to be at the forefront, and this has not only helped us do that, but it’s helping our staff become more knowledgeable about how our wines and food go together,” says Singh.
Joined with J Bar’s program that allows pour options in one-, three- and five-ounce sizes as well as by the bottle, WineStein has encouraged the company to consider broadening its use to other operations.