Is organic wine too expensive? An ancient debate, but one that seems to be reaching a conclusion. Tom Smart examines the evidence and begins to realise that price shouldn’t be anywhere near the primary concern for organic vineyards in 2019.
Let’s get this one.
But it’s delicious.
We can’t justify it.
It’s organic though!
Let’s get the cheaper one.
Phrases and attitudes retailers up and down the country battle constantly as consumers pit their morals and desires against their purse strings. We all want the best, but we can’t always justify it.
In the wine aisle however, those conversations and internal monologues tend to fall silent.
The decade-long educational journey that consumers have been subjected to is bearing fruit, and that fruit has led people straight to the premium and organic sections of our retailers and off licences.
It all started with a clever infographic about what percentage of your bottle price actually gets spent on the wine itself. It has been re-modelled and updated numerous times since (we particularly like this one from Bibendum, updated for the latest budget), but even now, years on, some form of educational advert tends to be readily available in most retailers, particularly independents. If not, it is only a conversation away.
This visual statistic alongside changing consumer preferences is driving change. A recent report on the state of the wine industry would make one thing that it had worked too well, with the market stagnating. However closer look shows the root cause of the overall decline is low-end wine, where sales are plummeting world-wide. Premium, high-end, sparkling and the rest of the business is, for the most part, thriving. Organic is expected to show the highest growth rate; a staggering 9.2% CAGR up to 2022.
There could be reason for celebration. But work is still to be done, particularly if a recent ‘state of the US wine industry’ report by the Silicon Valley Bank is anything to go by. The report is well worth a read, namely because food trends that are seen in the US do seem to emanate into Europe a few years later. It paints the same familiar picture of the aforementioned changing marketplace, where retiring baby-boomers are being replaced by affluent millennials more in search of quality and willing to pay for it. It shows a huge growth in direct B2C sales (or D2C as marked in the report) fuelled by the migration of sales online, with less reliance on B2B sales in the form of restaurants and the hospitality. Trends in Europe are similar.
Interestingly, more and more vineyards are opening tasting rooms in order to open another revenue stream and engage with clientele, although feedback on the success of this is mixed. Here at Brand Organic we believe the chance of an organic retreat at a European vineyard offering accommodation could be a big winner in the years to come, and one that many high-end vineyards will continue to explore in order to diversify and attract new customers.
But there is only so much that can be read from a US report, no matter how detailed, as their consumer approach to wine is significantly different, notably with regards to one incredibly important word: organic. Europe accounts for 78% of the total organic wine market, compared to the Americas at 12%, with strong purchasing in old world (France, Italy, Spain) varieties. This is not expected to change.
If you want rare looking for real market penetration however look no further than Japan, where organics account for 10% of all wine purchases, the highest current share of any country in the world. In the UK, while market share is lower, a recent IWSR report showed that buyers are willing to pay 38% more for a tipple that comes with the official certification.
When you consider the price point of your organic wine it is important to bear in mind that it does come at a premium; comforting to know that consumers are understanding of this and even more so that they actually embrace it. For too long the alcohol section of retailers has been governed by price as a primary consideration. Not anymore. Educated millennials and Gen Xrs are now making decisions based around quality and sustainability first and foremost, and that is good news for everyone.
With a reasonable price now available for wines there are other issues on the horizon. Vineyards and retailers must start thinking long-term in order to maintain business success. The first challenge is to get to grips with a changing market place. As the previously mentioned SVB report stated:
‘Successful wineries 10 years from now will be those that adapted to a different consumer with different values — a customer who uses the internet in increasingly complex and interactive ways’
As a retailer, distributor or vintner there is a need to innovate to keep up with changing times. If your vineyard is thinking of constructing a tap room shortly, we beg you, stop, unless you have a considerable point of difference that will make it stand out (online). Most retailers have realised they need to start making substantial virtual investments, distributors are mostly there and vineyards are beginning to catch up. E-commerce sites, better storage, distribution and delivery links, thoughtful and engaging blogs and inventive customer engagement schemes are likely to lead to long-term sales from a new generation. Perhaps a virtual tasting room where wine is delivered direct before the event begins. The possibilities are endless; that is the beauty of online, but this is where anyone and everyone in the wine business will be looking in 2020. The question has to be: as B2C sales will continue to grow how do you reach new customers?
Cheap wine is dead. Long live organic. It justifies its price. Just make sure your sales and marketing plans are innovative and understand how to engage a new customer base. Only half the battle has been won - your customers now understand the premium of your product. But they now want to feel involved with it, and in ways that might not have been considered before. It’s time to think outside the box.