Source: Santa Rosa Press Democrat  

Young adults key to wine growth

Millennials a major force in industry as beer falls to No. 2

By KEVIN MCCALLUM
THE PRESS DEMOCRAT

Young people in the United States are drinking more wine than any previous generation, but it might not be why you think.

The surge in wine consumption by the so-called millennial generation - defined generally as teens to late 20s - is one of the key reasons the U.S. wine industry has experienced robust growth in recent years.

“The wine industry is basically healthy - despite a record 2005 crop and a worldwide surplus of relatively inexpensive wine - due largely to growing consumption by young adults,” said Robert Smiley, director of wine studies at the UC Davis graduate school of management.

Smiley released the results of an annual survey of winery executives Thursday that explores a range of issues, from which grape varieties are hot to the impacts of globalization and an oversupply of grapes on U.S. wineries.

The millennial generation has become a major force in the wine industry, one that helped wine eclipse beer as the most popular beverage in the nation for the first time ever last year, Smiley and several other speakers said Thursday at the annual Wine Industry Financial Symposium in Napa.

A 2005 Gallup Poll showed 39 percent of people surveyed claimed wine as their alcoholic beverage of choice, compared with 36 percent for beer.

But one beverage analyst suggested the increase was not caused by the wine industry. Instead, it is the result of the beer industry’s failure to effectively market its products, said Kaumil Gajrawala, an analyst with UBS Investment Research.

Beer companies lost market share to wine and spirits largely because their advertising campaigns in the 1990s and early 2000s were sophomoric and failed to deliver a message about the quality of their products, Gajrawala said.

To support his contention, Gajrawala played a compilation video of beer ads that showed bikini-clad women wrestling, overweight male sports fans in full-body paint, and men driving golf balls in ludicrously inappropriate places.

“A 23-year-old doesn’t want to identify with that,” he said.

Gajrawala then played newer campaigns by major beer companies like Coors and Budweiser, which he said are hipper and more likely to appeal to the millennials. The new ads are an indication brewers have learned the error of their ways, he said.

“Clearly, you can see the beer companies have changed their strategy in terms of how they are going after consumers,” he said.

That’s important for the wine industry because if the beer industry and its massive marketing clout does a better job of keeping young drinkers well into adulthood, wine may have a tougher time growing at the rates it has enjoyed, he said.

“The free ride for wine is probably over,” he said.

That doesn’t mean wineries aren’t up for the challenge.

John Grant, chief of staff for Kendall-Jackson Wine Estates, said he is so convinced of the importance of millennials to future growth that the winery has set up a separate division called White Rocket to focus on marketing wines to millennials.

“The bottle line is you have to be pretty damn edgy,” Grant said. “I’ve seen some of the stuff coming out of group and I say, ‘Man, I guess I’m not a millennial.’”

But Kendall-Jackson, the largest wine company in Sonoma County, needs to innovate to grow, Grant said. Experimenting with new marketing ideas is just one way the family-owned winery can stay a step ahead of risk-averse publicly traded wine companies, he said.

“Families can show more commercial courage,” Grant said. “They can take risks.”