Wine is a people business Wine has unique attributes which distinguish it in the beverage market place. Some of these relate to fundamental inputs such as the type and source of grapes, variation in the wine production processes, and some to the situations in which the wine is consumed. It is the complexity of this blend of the physical environment, the technological environment and the cultural environment that can delight and confuse consumers and potential consumers of wine. Success in the domestic and international market makes demands on wine companies (large and small) to understand the relative influences of all attributes on how their customers will perceive, purchase and enjoy the end product. As about 70% of Australian wine is now exported, the demands on understanding consumer perspectives must now incorporate a huge diversity of customers. This paper will use the experience of the Australian wine industry, gained in a very rapidly changing market of the past 20 years, to consider how consumers will be even more influential. This will be linked with indications of change and opportunity throughout the value chain that underpins the production and delivery of wine for consumers.
?$.10 $4.50
Culture
$??? $.25 $1.00
Services Products Experiences Commodities
..we are not in the wine business serving people, but in the people business serving wine
(to paraphrase Howard Schultz, Starbucks)
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Grower x winemaker “negotiation” can be noisy – does it actually assist the consumer? The product – challenge to achieve brand identity; BOB; cleanskins New service pathways such as single glass premium wines Restaurant / cellar door Wine with food; identifying new market needs challenges and opportunities
Nuts & bolts
• something about the scaleof Australian wine
• long tail• about disruption in markets• about the wine market• about people• about changes
Over 700m litres into export markets Over 450m litres domestically 125million – a big number and with continued growth includes a huge measure of loyalty
Which one is your customer?
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Let’s not forget that amongst all those big numbers are some very committed customers (– while some consumers may purchase mainly from supermarkets they are wine customers and consumers)
A disruptive world
..incumbents prevail because they have the motivation to protect their current business and the resources to fight for it
…good companies are supposed to—cater to their most profitable customers and focus investments where profit margins are most attractive—and thus they leave themselves open for disruptive technologies to bury them.
…disruptive innovations—which are typically cheaper, simpler to use versions of existing products that target low-end or entirely new customers—emerge, established companies are paralysed.
After Christensen (1997), Innovators Dilemma
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Think global – ie. What for example have the French done as the global market changes? Disruptive innovations enable a larger population of less-skilled, less-wealthy people to do things in a more convenient, lower-cost setting, which historically could only be done by specialists in less convenient settings. Disruption has been one of the fundamental causal mechanisms through which our lives have improved. Almost always, disruptive innovations have been ignored or opposed by the leading institutions in their industries for perfectly rational reasons. Terroir, industrial wine, boring, commodity wine, gatekeepers vs. happy people, fruit bombs, new markets (elements of the reactive language trying to hold against a disrupted / disruptive market)
The real market – US example where about 50% of sales = 28 brands ( = no of brands in each category; yellow marker in large group ~ 14%)
Impact data, 2005
~7000
20
28
11447
60
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US 2005 data (small yellow dot is about percentage of market for <100k cases operators) brands /mean cases / market share 28 4957142 50% 20 1499000 11% 47 697446 12% 60 338166 7% 114 153508 6% 7000 5644 14%
Long tail ‐ a real feature of the wine market
• democratise the tools of production
• democratise the tools of distribution
• connect supply and demand
Anderson, C. (2006) The Long Tail: How endless choice is creating unlimited demand
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democratise the tools of production (take a local (grow anything anywhere & international perspective) democratise the tools of distribution (local eg. Cellar door & Australia Post; international x US) connect supply and demand (filters such as Google on net)
Resource changes – the tools of production
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Democratise the tools of production Land, labour, capital + entrepreneurial spirit – some of the reasons behind Australian success
Distribution changes
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Note: from 90’s-early 2000’s a lot of business value created by rapidly improving IT systems & increasing ease of B to B transactions (yes some war stories but NET effect dramatic) General linkages x computer power; whole systems getting things to customers so many customers now overseas so much mediated by “gatekeepers” (NOTE; WILL NOT EXTEND DISCUSSION INTO RETAIL MARKETING BEHAVIOUR) (from Woolworths – Full Year ended June 2006 reporting) Comparable store sales in all our liquor businesses were strong. • Dan Murphy‘s continued to expand with 15 stores opened during the year bringing the total number of Dan Murphy stores to 52. In addition to this, we opened a further 51 new free standing liquor stores (net). Opportunities to expand Dan Murphy’s operations has been significantly enhanced with the ALH acquisition. • Dan Murphy’s provides customers with excellent value for money, extensive product ranging and personalised advice and expertise. • Woolworths continues to bring greater price competition to the Australian liquor market with customers continuing to benefit from lower prices. • Group Liquor sales for the year (including ALH/MGW) were $3.5 billion, achieving our target of $3.5 billion annual liquor sales earlier than planned (this includes Hotel bar sales). • Woolworths had 1,015 liquor outlets at the end of the financial year.
Help! Matching supply & demand
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One product - is access to a “wall of choice” enough to engage the customer? Real part of supply – demand; imagining what the consumer might choose & when they make that choice Small note on how many women make the wine choice and how many men seem to make judgements; is the language of wine sales and information addressed to women?? (Women probably make at least 60% of purchases)
What information or data do I want as a wine consumer?
breadth of data
depthof
relevantdata
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Comprehensive, Fresh, Relevant results: Comprehensive: broad coverage of data sources Relevant: accurate results w/ deep match on what matters to me again -- use metadata (ex: LinkedIn lookup, GoogleMaps location mapping) Fresh: recent & frequent data Genome (Cbrands) – I can describe groups but have I described their needs?
Google's share of all searches was 64% in March 2007
Finding & relating
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As the price of product rises more and more consumers are using web to assist decision process; in an increasing number of cases the purchase process may also be conducted at the same time How do we find something? How do we know what we find might be appropriate? Do we want to know more? ie the relationship between what we find and other “things” in that domain
All sorts of networks
• incentives for provision of quality in markets where the quality level may be unknown to consumers
• a complex network of social relationships is used by consumers for transmitting/ receiving information about quality
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Word of mouth; gatekeepers (wine writers); wine judges (& medal / awards system); personal experience
How likely is it that you would recommend wine to a friend? (& some do both vis Sideways)
Pinot noir
Merlot
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Little reminder of influence of Sideways x Merlot & Pinot noir (risk both +/-); the web (or SMS etc) allows both +/- messages to move fast
Australian Brand personalities
accessibility Brand ChampionsWines that appeal to a broad market base through accessibility, ease of enjoyment and a strong premium brand message about product and country.
innovation Generation NextWines driven by innovation (marketing; product; packaging) that appeal to consumers who drink wine for social occasion and/or peer group affinity, rather than for wine attribute.
interest Regional HeroesWines from somewhere rather than wines from anywhere -adding and sustaining interest for consumers by fostering a clear association between region and variety and/or style.
aspiration Landmark AustraliaHigh-profile, aspirational wines built on inherent quality and world-class reputation.
Australian Wine & Brandy Corporation 2007
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Personalities: in part the shift from “Brand Australia” to a next level of detail or context; is this going to be sufficient in a world that is so rapidly has such rapidly multiplying communications networks?
Consumer occasion & brand mapping – what does your distributor’s matrix look like
Location
Consum
er Occasion
Pubs/Clubs Cafes Restaurant Fine Dining
Luxu
rySp
ecia
lEv
eryd
ayB
asic
after Fine Wine Partners 2006
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�Various ways of constructing such a matrix; individual companies or distributors can do this --- can we do it for a nation’s wine offerings? (all about the spectrum of offerings; not about judgement about why the consumer picks a particular wine)
Where to now? Influence & change
Change is constant for the wine consumer
• Closures
• More wine by glass in restaurants
• Casks becoming understood in Europe & US
• PET bottles
• New varietals
• Imports fight back
• What’s happening with demographics
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opportunity for diversity countered by risk of poor quality – glass in restaurant many changes are about consumer utility , often presenting challenge to “tradition” – positive is diversity & reinforcement of quality of Aus wine NOTE: every change seems to result in a flurry of RIGHT/WRONG wine press? Are they representing consumer benefit or some ‘old school” view of wine ?? [screw caps an entire story unto themselves]
Wine and life experience
I am a hearty red from the wide open spaces of Australia
Look up flavonoids on Google,but while you wait join me and think flavour
I would like to join you with your meal this evening
Nature FoodHealth
(Inspired from Leo Burnett)
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Differentiating from other alcohol beverages –part of 2025 – now arguably more important than ever as health lobby gains momentum in relation to alcohol
Supermarkets
from Larson, Bradlow & Fader (2005)
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Contributed to change in the wine market and continue to do so; think UK, US. Many Chinese will meet new products in supermarket environments eg Carrefours, Tesco etc. What does a supermarket offer A) current customers B) future customers C) customers in international markets
Describing what you smell – when did you last hear that it smelled like
a young or old riesling?
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Wine has the challenge of using “everyone else’s descriptors” ; Reminder of use of these terms across culture & language boundaries Search for compounds to allow measurement (perhaps “it goes with might still be a better way of basic explanation?)
Simultaneous change – lines between culture, craft and modernity
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A = transport mode B = choice eg. Organic / biodynamic THIS IS NOT ABOUT RIGHT/WRONG BUT CHOICE? (that lovely tension in the industry between modern, & craft / culture)
Environmental footprint- consumer power or trade manipulation?
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Constant challenge & change; will often be characterised by emotion (MAP IS THE 4000+ km journey of a small pot of strawberry yoghurt within Germany)
Arabian Travel Mart 2007
World arrivals – we move and learn(Source: UNWTO World Tourism Barometer Volume 5, No 1, January 2007)
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A reminder of movement x engagement with new ideas / culture etc (some already predicting year when 10m Chinese will visit Paris) Multiplier effects through hotel / hospitality – central & regional tourism Consider this: China’s 31 million international travelers spent US$15.2 billion in 2005.
Internet is driving buyer behaviour
From Channel Advisor 2007
*Comparison Shopping Engine
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More consumers are shopping online via search, comparison shopping engines, marketplaces Direct traffic decreasing substantially Today up to 75% of sales for an internet retailer is driven by online channels
Online shopping continues to grow –wine delivered to your door
Virtual Surveys Ltd 2007
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eg Tesco x home delivery system With an aging population won’t more people enjoy the convenience of home delivery? (and more old people will have spent time with computers etc so there will not be a technology gap)
• SOMETHING MISSING• determined that fragrance in rice, a recessive trait, is due to a large deletion (8bp) and 3 SNP’s in a gene on chromosome 8 which encodes a putative betaine aldehyde dehydrogenase 2 (BAD2)
• SOMETHING ACCUMULATES• this leads to an accumulation of the principal fragrant molecule, 2-acetyl-1-pyrroline
AIM = SIMPLE DIAGNOSTICS & MEASUREMENT TOOLS
Louis M. T. Bradbury et al 2005
Opening doors – modern biology and genetics (examples from all directions, this one rice aroma)
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Can’t escape without some return to tech R&D – lots of complicated language but end-game is simple Abstract Allele specific amplification (ASA) is a low-cost, robust technique that can be utilised to discriminate between alleles that differ by SNP's, insertions or deletions, within a single PCR tube. Fragrance in rice, a recessive trait, has been shown to be due to an eight bp deletion and three SNP's in a gene on chromosome 8 which encodes a putative betaine aldehyde dehydrogenase 2 (BAD2). Here we report a single tube ASA assay which allows discrimination between fragrant and non-fragrant rice varieties and identifies homozygous fragrant, homozygous non-fragrant and heterozygous non-fragrant individuals in a population segregating for fragrance. External primers generate a fragment of approximately 580 bp as a positive control for each sample. Internal and corresponding external primers produce a 355 bp fragment from a non-fragrant allele and a 257 bp fragment from a fragrant allele, allowing simple analysis on agarose gels. Keywords Aromatic - Assay - Basmati - High-throughput - Jasmine - Oryza sativa Robert J. Henry�Email: [email protected]�
Australian food and beverage exports by destination – sharing experience
0 2 4 6 8
Asia
Americas
Europe
Pacificmeat
dairy
grains & flour
fruit & vegetables
seafood
wine
other food &beverages
US$b
ABARE, 2007
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Use market experience as conclusion point (note where different industries have gained their experience – let’s collaborate some more than just writing Gourmet Traveller) The Australian meat industry for example has a lot of people in-country in Asia with great market, consumer development and language skills Wine + meat + seafood + dairy + bread / pasta + food in general
To conclude: people are fickle, fast and fascinated
To keep pace, the wine sector needs to work with change from all of these people driven directions.
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These elements have all been touched on in some form; they remind us of the drivers of markets and its amazing that not many of them are the things found on the back labels of wine bottles!
• Ideas and thoughts tested on a range of patient wine industry people and interested consumers• Material and data acknowledged and sourced mainly from web searches• Images courtesy of web sites and more formal open access material such as FLICKR and SlideShare
