Comments on: Fat Wine: Middle Class, Middle Market, Middlebrow

By: 360 SW

360 SW — Sun, 20 May 2012 05:04:07 +0000

Good points. So while Gallo can hedge against longer term rising grape prices through extended grape contracts they may not be as agile to offer popular varietal wines to the 70% of millennials that are of age to buy wine. I guess that puts more emphasis on them to focus on up-front marketing, branding, and packaging.

By: bobzaguy

bobzaguy — Tue, 15 May 2012 15:26:00 +0000

Sorry, posted before tagging:
Vines by the Rhyme
Rappers boost a varietal.
By Willy Staley in New York Magazine.

By: bobzaguy

bobzaguy — Tue, 15 May 2012 15:24:20 +0000

Millennials are, by description, in the 16-34 year old profile. Quite a significant portion (28%) of these are unable to buy alcohol of any type – over 19 million of the 70 million. Some are still 5 years away from being of age.
Gallo has long controlled the spot market pricing of grapes throughout northern California with their long-term grower contracts.
As for the M-Boom: “[Hip-hop rapper] plugs have accelerated a full-blown Moscato boom: According to Nielsen, sales grew about 73 percent in 2011 after doubling the previous year. It is the fastest-growing varietal in California—E.&J. Gallo, California’s top bulk winery, has introduced five new Moscato products over the last two years. Growers in California have been frantically planting Muscat grapes (the kind used in Moscato) to keep up with demand, marking the first known occasion in which rap [music] has directly affected the biosphere.”

By: Andy

Andy — Thu, 10 May 2012 05:37:50 +0000

Very interesting series of posts.
In the long run, I think that the availability of more “middle” wines is great for consumers and by extension, for the industry as a whole. Personally, I only began to understood the incredible diversity of wine once I started drinking reasonably-priced wines on a regular basis. That exposure led me to understand higher-priced wines as well, although they still aren’t everyday wines for me (and probably most consumers). Using your lingo, I would guess that many wine aficionados only become a Martian after a period as a Wagnerian.

By: 360 SW

360 SW — Wed, 02 May 2012 07:56:05 +0000

Thanks for the article. I agree that amongst the two options, fat vs. flat, “fat” in the middle is more directionally correct. And yes, they might amount to the same thing. But the reasons for that are fascinating because they reflect how dynamic, responsive, and fragile the wine industry can be on both the demand and supply sides. Muscato is a great example to demonstrate some of these characteristics.

The “moscato boom” demonstrates that the world of wine is flattening, though I don’t know the common consensus on the root causes for the boom. But, I believe the “boom” is driven, in part, by popular culture, and wine consumption growth amongst emerging niche market wine consumers. Muscato in recent years has been the beverage of choice for many high profile figures, ranging from hip-hop artists to reality show personalities. These figures can wield huge influence potential. Take for example Cristal having to publicly distance themselves from hip-hop mogul Jay-Z for fear that consumers were to closely aligning the Cristal brand with his life-style attributes. Popular culture (music in particular) can transcend broadly across many wine market segments, and have impacts in new key market niches.

Things like celebrity influence may resonate highly with emerging large niche consumer segments like “Millennials.” This consumer segment demonstrates a high receptivity to wine consumption and has a market population potential of 70 million (according to estimates). Based on number alone this segment may prove to be a powerful “flattening agent.” Studies suggest that individuals in this segment tend to appreciate new products so long as they are genuine, sincere, and reflect similar value propositions. Another way of stating this is that “Millennials” want to feel special.

So on the supply side, industry giants like Gallo have the market strength to successfully manage profit and lost margins across brands (perhaps even as grape crop prices rise) and capitalize on the buying power of this niche segment. Well, that is so long as individuals in the “Millennial” category can afford to buy wine, and so long as Gallo can continually create and market new brands like Apothic Red which appeal to “Millennials” without making them feel targeted (because then it wouldn’t be sincere).

Great conversation Professor, thanks for letting me contribute.