The United States wine market is a complex and competitive industry that has experienced a number of challenges in recent years. While wine consumption has been growing steadily during the past few decades, shifts in consumer preferences and behaviors have impacted on the performance of wine sales, which is top of mind for winery owners and CFOs.
One notable trend is the rise of alternative beverage options, such as craft beer and spirits, which have gained popularity among younger consumers. These alternatives offer a wide range of flavors and styles, appealing to a demographic that seeks innovation and variety. Additionally, the emergence of cannabis as a legal recreational option in some states has also posed a new competitive challenge for the wine industry.
In this evolving landscape, the right marketing investments play a crucial role in maintaining and growing market share for wine brands. Here are some key areas to consider:
Brand Differentiation: Effective marketing allows wine brands to differentiate themselves from competitors. By highlighting unique attributes, such as the winemaking process, vineyard location, or sustainability practices in the cellar and vineyard, marketers can create a compelling brand story that resonates with consumers. Differentiation is essential in capturing the attention of discerning wine drinkers and standing out in a crowded market.
Consumer Education: Investing in marketing initiatives that focus on consumer education can help combat some of the challenges the wine industry faces. Many consumers, especially those new to wine, may feel overwhelmed by the wide array of choices. Marketing efforts that provide guidance, such as food and wine pairing suggestions, tasting notes, and educational content, can help consumers navigate the selection process and feel more confident in their choices.
Targeted Advertising: With the proliferation of digital marketing channels and platforms, wine brands can reach their target audience more effectively. By leveraging data analytics and insights, marketers can identify specific consumer segments and create tailored marketing campaigns for their customer journey. This targeted approach allows for a more efficient allocation of resources and a higher return on investment (ROI).
Direct-to-Consumer (DTC) Sales: In recent years, direct-to-consumer sales have become increasingly important for wineries. Marketing investments in developing robust online platforms, wine clubs, and tasting room experiences can enhance customer engagement and loyalty. DTC sales also provide wineries with greater control over their distribution channels, allowing them to capture a larger share of revenue and build direct relationships with consumers.
Innovation and Adaptation: Wine marketers need to stay abreast of consumer trends and preferences and be willing to innovate and adapt their strategies accordingly. This may involve experimenting with new packaging formats, exploring sustainable and eco-friendly practices, or introducing new wine styles or blends that cater to evolving consumer tastes.
During a recent engagement, my client was dealing with the impact of the pandemic, global supply chain issues, and increasing input costs. The team decided to focus on product innovation. The team was able to identify products outside of the core portfolio, which had a simpler supply chain and met the needs of their customers. The customer was receptive to this innovation because of the consistency and high-quality service the client had historically provided. Also, they were pleased the client listened to what was important to them and delivered a solution that met their criteria.
Winery owners and CFOs must determine the appropriate level of marketing investments for their business, how best to allocate those funds across the categories outlined above, and most importantly, have a way to determine their effectiveness. This knowledge will allow the decision-makers to refine their strategies and make the most out of future opportunities.
Are you still evaluating your current and future marketing expenditures? Let us share our industry observations, insights and help you capitalize on current and future opportunities for your business. We listen, collaborate, and implement a solution with your end goal in mind.
About Mike Mathews
Mike Mathews is a partner in the Ag Division of the 2Go Advisory Group. He has worked extensively with beverage alcohol, food manufacturers, and other CPG companies to find and unlock value in their organizations. Mike can be reached at mmathews@cfos2go.com.