Nearly 40 years ago, Coca-Cola ran away from the wine business. Six years after buying Taylor Wine Company, the soda giant was selling 8 million cases a year, but it cut loose its wine division, selling to Seagrams. The 3 percent profit margins of wine just couldn’t satisfy executives accustomed to the double-digit profits of soft drinks.
Now Coke is rejoining the alcohol business, hoping to court young adults, but tellingly the company is not investing in wine. It has partnered its Simply fruit juice brand with Molson Coors to create Simply Spiked Lemonade, a canned beverage made from fermented sugar cane. Flavors will include strawberry lemonade, watermelon lemonade, blueberry lemonade and regular lemonade. This comes less than a year after Coke introduced Topo Chico Hard Seltzer and Fresca Mixed.
Coke has been successful for decades by knowing what consumers, especially younger consumers, want. Sadly, wine companies don't even seem to be trying to know.
This was drilled home in Silicon Valley Bank’s (SVB) latest “State of the Wine Industry Report.” Every year, the firm surveys wineries and crunches sales data to provide one of the best snapshots of America’s premium wine industry. At the start of 2021, Rob McMillan, the founder and head of the bank’s wine division, predicted that the year would spark a boom in alcohol sales as pandemic restrictions started to unwind. He proved partially right, he admits. “It turned out that a celebration did take place, but the wine category wasn’t invited to the party!”
You can see it in data McMillan pulled from SipSource, which aggregates sales from distributors to retailers, showing demand for wine and spirits starting in January 2021 as vaccinations began and people started going out. Orders for spirits grew by about 6 percent each month. Demand for wine shrank more each month.
The pandemic changed a lot, forcing wineries to find innovative new ways to reach customers. But it did not change a fundamental trend. Baby Boomers, who embraced wine at the start of the 1980s and made it their beverage of choice, are getting older. Younger Millennials and Gen Zers are more open to a variety of drinks, but their beverage of choice is increasingly spirits.
Frankly, why would younger consumers opt for wine? Wineries have paid them little attention. If you walk through your favorite wine store, how is most wine marketed? Well, most of it comes in a 750ml bottle that is portioned to be drunk over dinner and requires a special device to open it. The packaging and marketing are designed to project tradition and prestige. Maybe there’s a colorful image and an intriguing name, but more often the name is vaguely French or Italian, even when the wine is not from France or Italy. These wines were crafted for a generation just discovering wine, looking to Europe for hints on what was respectable.
Many wineries are doing just fine in 2022. In fact, more than 30 percent of wineries surveyed by SVB called 2021 their “best year ever.” (Anything looks good after the dumpster fire called 2020.) Most of these wineries are prospering by focusing on premiumization. Their customers have been trading up for years, paying more for better quality. But 75 percent of the wine sold in this country costs less than $10 a bottle, and those wines are suffering from shrinking sales, sometimes by more than 10 percent a year.
And how will a new generation discover wine if there are not value-priced bottles for them to try? If you look at the bottom shelves of that wine store, where the value wines live, you’ll see a lot of old, familiar names—bottles you probably tried when you first got interested in wine. “There are plenty of brands in the market under $10,” says Stephen Rannekleiv, global strategist for beverages at Rabobank. “But most of the big ones are brands that are decades old—often brands that were developed to target Baby Boomers.” Rannekleiv warned back in 2015 that sales of wines under $10 had shrunk by more than 5 percent in the previous three years.
Younger consumers are interested in luxury products, at least ones they can afford. So where are the wines geared toward them?
The irony, as McMillan points out, is that it would be very easy to switch gears and market wines toward younger consumers, because they are already looking for many of the things wine has to offer—an artisanal product, often made by small farmers, with few added ingredients.
Younger consumers "appreciate locally sourced foods and plant-based products,” says McMillan in the report. “What is our industry if not locally sourced and plant-based? We just aren’t transparent enough to let [younger consumers] see how our existing winery values already mirror theirs.”
Meanwhile, grab a can of White Claw and look at the back label, and you’ll find something almost no wine label has—nutritional information. Every can of White Claw stresses it has 100 calories per serving and just 2 grams of added sugar. (By comparison, a typical glass of red wine has 120 calories and a similar amount of residual sugar, but you wouldn’t know it.) The can also says, in all caps, “THE PUREST HARD SELTZER IN THE WORLD.” (White Claw actually trademarked the phrase "Made pure.") Perhaps it is the purest beverage made in a factory from neutral fermented grain alcohol and added fruit flavors and fizzy water?
Some young wine brands are touting that they are natural or “better for you.” But they tend to do this by contrasting themselves with other wines, implying that most wines are fattening or unhealthy or unnatural. And while the canned wine category continues to grow, producers are still trying to find the balance between a can of wine that says convenience but also high quality.
So here’s my challenge for wine companies for 2022. It’s time to embrace younger consumers, actually listen to those you haven’t traditionally marketed to, and offer them affordable, quality wines. It’s also time to put ingredient labels on wines—and if you employ ingredients you’d rather not list, perhaps it’s time to get rid of them.
No one’s asking you to go on TikTok and try some clumsy marketing. (Please don’t.) Just focus on what makes wine truly special: This is a product that starts on the land and has true personality. It’s simply grapes.