These are challenging times for many (but not all) consumers. Rising housing and interest costs are squeezing budgets. Pandemic-era stimulus check bank balances are going or gone. Student loan payments, paused for a time, are back again.
Faced with tight budget constraints and rising debt costs, consumers are struggling to cut costs without sacrificing their standard of living, which means they are more and more focused on value for money. Perhaps the most obvious indicator of this trend is the surge in purchases of store-brand supermarket products at the expense of similar but more expensive name-brand products. But, as the financial news reports, the changes in buying patterns go far beyond that.
Do You Want Fries with That?
Two recent news reports suggest that consumers want value, not just lower prices. A Wall Street Journal story about casual dining restaurant chain Red Robin (see article link below), noted a two-prong strategy to get diners back. Step one was to improve food quality. Step two was to expand the number of “bottomless” offerings so that there is a sense of abundance and value, even when (like me) diners rarely ask for free extra servings. Menu prices have not declined, but business traffic is up. Value sells
The Economist newspaper’s “Schumpeter” business columnist recently compared fast-food king McDonald’s value strategy with casual Mexican chain Chipotle (see article link below). McDonald’s has struggled in the post-pandemic era and recently introduced $5 meal deals in an attempt to regain its lost reputation for good value. Chipotle, on the other hand, has actually raised its prices. Which strategy do you think would be more successful?
Chipotle wins, at least according to the Economist columnist, who argues that Chipotle is better value despite being more than twice as expensive as the McDonald’s meal deal. Maybe, as the column notes, the demographics of the two food chains are too different to make a comparison valid. But perhaps restaurant dinners look beyond price in calculating value. Schumpeter reports having two generous meals from his Chipotle order, but not wanting to even finish the salty McDonald’s $5 meal.
Price vs Value?
If value for money is a rising priority for many consumers it is fair to ask if wine provides good value? Or is wine’s value proposition one of the reasons the industry is facing headwinds these days?
This is an awkward question because different people have different ideas of what makes something a good value and also because wine comes in so many different price/quality combinations. When I asked my university students to do an economic analysis of the wine wall at a local Safeway store, for example, they found wines as cheap as about $2 per bottle equivalent and as expensive as about $225 per fancy glass bottle.
How can you generalize when there is such wide variation? One way is to look at average cost per serving of wine and other alcoholic beverages. Every study that I have seen suggests that wine is more expensive per serving than either beer or spirits using average price data. So there is reason to believe that consumers might see a value problem with wine.
The way that wine is packaged is a value problem, too. Many consumers hesitate to open a 750 ml wine bottle for only one or two glasses because they are afraid that what’s left will quickly go bad, making the bottle purchase an even worse deal than the per-serving averages suggest. (By comparison, beer comes in single-serving containers and spirits can keep for a long time, so they don’t suffer the same wasted money problem.)
Well, you might say, if this wine is too expensive, trade down to cheaper brands. Indeed, wine can be very cheap (per bottle or per serving) if that’s what you really want. But, good value isn’t the same as cheap price, as McDonald’s problems show.
And, indeed, consumers have for several years moved away from inexpensive wines, calculating perhaps that they are not worth even the low price charged. The premiumization trend has plateaued, too, suggesting that perhaps higher price doesn’t always mean better value.
It’s in the Bag?
If consumers are feeling the budget squeeze (and many are) and looking for value in wine as they are, apparently, in fast food and casual dining, where will they go? Some will abandon wine and indeed cut ties with beverage alcohol, generally. Some will drink less but focus on quality when they do. Others will try to find the spot on the wine wall with the best value proposition. Where is that?
NIQ market data reported in Wine Business Monthly finds only a few bright spots on the wine wall, one of them is for “premium” 3-liter bag-in-box wine selling at about $5 per bottle equivalent. Sales of wine in this format have held up pretty well while sales of glass bottle wine at about the same price point have fallen. Maybe that Red Robin sense of abundance applies here, too.
Clearly, the economic side of the wine market equation, with its focus on disposable income, consumer budget constraints, and value for money, is not the whole story when it comes to today’s challenging environment. But I am convinced that it is part of the story and one, perhaps, that should be taken more seriously. The people who are having trouble selling other consumer goods have got the message.
What is wine’s value proposition? Food (or maybe drink) for thought?
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Blake Gray’s recent Wine-Searcher.com column is one example of what a value-driven wine marketing strategy might look like.
Here are links to the articles referenced above.
Economist newspaper “What Chipotle and McDonald’s say about the consumer slowdown.”
Wall Street Journal “Bottomless Fries, Floats, and Broccoli. One restaurant chain’s bid to get diners.“
Collio DOC, which hugs the Slovenian border in north-east Italy, has long been known for its excellent wines and it is home to many strong private wine brands. Sue and I visited 
More recently there has been an effort to promote a trademark Collio wine bottle shape, which is also shown in the photo above. The distinctive bottle actually requires a special cork to seal it properly. Adopting it is a serious decision from a practical standpoint.
[This is the second in a series of articles inspired by our recent visit to Collio DOC in north-east Italy. 
Sue and I keep returning to Collio because offers so much that we enjoy and appreciate in terms of food, wine, culture, and nature. It seems to us that Collio today is doubling down on the “Collio Experience” and not just the wine. That was the case at Collio & the Beach and Castello di Spessa. And the experience especially stood out at 
Collio DOC is a tiny appellation snuggled up against the Slovenian border in north-east Italy. It is a beautiful place. How beautiful? After our recent visit to the region, I noticed that Sue changed her computer’s desktop image to a photo of these hills. Collio replaced another beautiful vineyard area, Cartizze, on the screen, which last year replaced a photo of the Douro Valley. The competition for real estate on Sue’s desktop is fierce. Collio is that beautiful.
For this trip we explored all of the white wines, including also Pinot Grigio and Malvasia, in blind tastings led by the talented wine writer and Friuli wine expert Richard Baudains. One thing that stood out from the tastings, winemaker meetings, and winery visits, in addition to the overall excellence of the wines, was the rapid pace of change in the post-covid era. We found a lot to consider. A quick list includes:
Austria’s colors are red and white. Those are the colors of the national flag and the uniforms of the country’s football team, too. You can see them clearly on the bottles of many Austrian wines because a seal atop the bottle continues the red and white theme.
You can chill any red wine, I suppose, and it is conventional wisdom among wine geeks that most red wines are served too warm (and most white wines too cold). But what makes a red wine particularly suitable to this category? Think light body, low alcohol, fruity, juicy, refreshing. What’s not to like?
President Trump doesn’t drink beverage alcohol and neither does Vice President Pence, and yet wine is a constant at White House state dinners and similar events. What’s served is nice wine, too, according to records found in this rather fascinating new book.
Fine wine meant European wine in the 1950s. Eisenhower’s guests were only very occasionally served anything else. A typical Eisenhower state dinner started with Dry Sack Sherry, Spain, and then moved on to Chateau Climens Barsac, France, and what is listed as Beaune Greves Burgundy, France. Pol Roger Champagne, France, brought the evening to a close. There were variations, of course, for particular guests. German Rieslings for Chancellor Adenauer and Lafite for Winston Churchill.
Your first impression when you arrive at Cantina Tramin is that you’ve entered some sort of space portal. Here in the lush Alto Adige hills, you expect to see a sturdy old building housing
Maybe the biggest bet of all is Tramin’s signature wine, the Nussbaumer Gewurtztraminer. Although it is difficult to know for sure, many think Gewurtz originally hails from this region. It sure does well here, whatever its origin. It is an easy wine to enjoy when done well, as it is at Tramin, but not necessarily an easy wine to sell. There’s the name, which some consumers are afraid to pronounce, and then there are the different styles of Gewurtz that you find, from austerely dry to sweetish and flowery.
This is one of those annoying “devil’s advocate” columns. It seems like everyone I meet in the wine business is talking about sustainability and with good reason. Regional sustainability programs have had great success in bringing the industry together. Given all the attention, however, maybe it is no surprise that some people are starting to have second thoughts.
It is easy to see how consumers could become confused about what sustainable wine means. Sometmes you only have to pick up the bottle to start to have doubts.
No wonder Torcoli sighs that “We are (almost) all convinced of the need to think about sustainability, but the word is wearing out.” He’s right. Maybe we need to unpack this term and explain what we are trying to sustain, how, and why. It might be unrealistic to expect a single word to hold all that information and to convey it persuasively to consumers.