Decanter reports that Constellation Brands is considering selling its wine portfolio because of the continuous, global decline in wine consumption. The changing drinking patterns of younger generations and especially Gen Z is no news, but what are we doing about it? Are we keeping fingers crossed for the trend to change or are we coming with innovative ways to face this challenge to our turnover?
I always find generational behaviour interesting. When it comes to drinking patterns, Baby Boomers are considered the heaviest drinkers. They were coping post war, alcohol consumption was socially acceptable – even in the office! – and there was little awareness of the health risks of alcohol abuse. Alcohol studies and statistics seem to be lacking for Gen X, also known as the forgotten generation, but right now, they are at the peak of their careers with the highest disposable power and therefore also the highest purchasing potential for alcohol. They are often wine drinkers and their choices are based on preference rather than trends. They also drink to relax rather than to cope. Millennials were the first generation who grew up with social media and therefore were better informed about the risks of alcohol consumption. While consuming less than previous generations, older Millennials still choose more alcohol than young Millennials and Gen Zs. Gen Z is very much aware of all health-related risks and turns to therapy, retreats and other holistic options to deal with concerns, worries and mental issues, rather than inviting a friend for a beer or a glass of wine as older generations would’ve done. (Read more) While still young, Gen Z is our future customers, but they seem to prefer socialising with a phone in hand rather than a glass of wine.
Regardless of one’s personal opinion on this, this generational behaviour pattern has a serious effect on the wine business. We have seen it in our own sales and if a company like Constellation is considering parting ways with its wine division, one can’t help but to feel concerned. The wine industry wants consumers to enjoy wine responsibly. The idea was never for it to become a coping mechanism or crutch, but rather something to enjoy in moderation with your meal or friends. But we also know that just as some of us find it hard to put away a slab of chocolate after having a row of three pieces, some of us might have a glass or two too many. For some of us a tub of ice cream or a bowl of pasta might be the comfort we need after a bad day in the office, for some it is a glass of beer or wine.
It is good for consumers to be more vigilant when it comes to their health and social behaviour and without questioning that, what are the options for our industry having to deal with a smaller turnover year on year? I don’t think we can just wait on the trend to change. What can we do? Branch into de-alcoholised? Embrace complementing industries like tourism? It might already be too late to be really proactive, but perhaps we should come with innovative solutions before the purchasing power of Baby Boomers and Gen Xers also starts to dwindle.
I don’t think the solution will be easy. More than creative ideas, innovation requires novelty and viable solutions. According to the Harvard Business School: “Innovations don’t have to be major breakthroughs in technology or new business models; they can be as simple as upgrades to a company’s customer service or features added to an existing product.” When the inherent qualities of the product are the challenge, however, customer service and tweaks won’t do the trick.
We have some classic examples of brands that failed to innovate. Remember Kodak, Nokia, Yahoo? (Read more) Photography, mobile phones and internet usage are bigger than ever and as the pioneers in these fields, these brands were well positioned to lead the way, but because they failed to innovate, they disappeared. In wine, rather than other brands, our current challenge is in our offering. I don’t have the answer and I don’t think it is an easy one to get either. How do we keep an age-old global industry with so much history and tradition alive and flourishing when consumer don’t have the same romantic notions about its product anymore?
Can AI perhaps come up with a solution where we are struggling? AI recommends smaller serving sizes and alternative packaging, sustainable wine production to reassure those worrying about environmental issues, de-alcoholised wine, low- and no-alcohol wine, personalised wine selection and wine tourism. Nothing new, but perhaps worth a revisit? Let’s think.