My friend Rémy Charest has been reporting on events from the London Wine Fair over at PalatePress.com, and one of his recent reports really struck a chord with me.
What stood out for me was the concept of “infinite substitution” introduced to Rémy during one of the conversations that he had at the Fair. To the tape (emphasis mine):
Dan Jago, category director at Tesco, the supermarket chain that is also the largest retailer of wine in the United Kingdom, pointed out that in the wine world, a major difficulty is what he called “infinite substitution”. “There is always another product that will do the trick, in any shop. And if you do anything new, there are 45 others that will jump in and do the same thing”, he summed up, pointing out how most customers in supermarkets or large wine stores pick bottles rapidly, to get a price point and taste profile.
This stood out for me because Jago effectively summed up the vast majority of wine brands available right now in the U.S. For a sense of the volume we’re talking about here, Rémy mentioned a conversation he had with another friend of mine (damn, this wine world really is small!), Nomacorc’s Jeff Slater, who told him “there are something like 700 different wines in an average US supermarket.”
It sums up the vast majority of the 1200 or so bottles of wine samples that have overtaken my basement, and if they’re any indication of the U.S. wine market at large (and I’d certainly argue that they are), then the average wine consumer has learned something very important about how to shop for wine, something retailers have picked up on and have already factored into their stocking approach:
Most wine brands, within certain flavor profiles, taste the same and are priced the same; and so they are effectively interchangeable. And that is bad news for a lot of wine brands….
Now, if you’re a wine producer who is making a cheap wine that tastes like everyone else’s similar cheap wine made from the same variety and hailing from the same region, you might be tempted to think that through consumer outreach you will create more demand by building relationships with your customers, who will go to bat for you at the supermarket if your brand gets substituted.
But chances are really good that will not happen.
Being unique is not the same as being cheap and good. Being cheap and good might you get copied, so it only works in your favor if you’re the first one in your marketplace for your category (in which case, you have a lot less to worry about). Most people do not buy anything because of brands. The wine biz is full of people who think that the average Joe or Josette is as deeply passionate about their wine brand as they are, but recent data from researchers strongly suggests that view is mistaken. Most people buy wine based on price (and often in a serious hurry), fewer actually buy based on taste, and the ones who care enough to buy based on more than those criteria can still be swayed to move to another brand, unless you can give them a compelling reason not to do so.
If you want an example of how all of this can go totally pear-shaped, think about the recent fate of entry-level Australian Shiraz in the U.S. (and having just gotten back from a two week stint in Oz, I can tell you that they are keenly aware of the impact that cheap, clean, uninteresting Aussie Shiraz has had on their export market, and they’re predicting similar crashes for New Zealand Sauvingon Blanc, Argentine Malbec, and Chilean everything).
All of which is a long way of saying that if you’re not unique, then you’re product is akin to someone holding a job that can be outsourced overseas as soon as another region can do it more cheaply, which in a global marketplace is always going to happen sooner or later.
Yes, some producers are enormous and have products across several ranges, theoretically protecting them from some of this – but no one is too big to fail anymore (seen Constellation’s performance lately? Net down 63%…).
The method to counteract some of this, according to research firm The Source (who looked specifically at this issue), is for a wine brand to “focus less on itself and more on the customer” (now… where have we heard that one before…?). Focusing on customer and consumer engagement is a long haul play, with long haul payoffs, but when you’re in the wine game – particularly the fine wine game – then you’d better be set for a long haul anyway because you may not even see a profit for something like fifteen years.
I do think that communicating with the people who actually buy your wine will minimize this effect. But if a wine producer who thinks that you’re good at communicating with consumers, chances are very good that you’re wrong. You can either take my word for it, or you can take Jago’s word for it (I’m willing to bet that Tesco sees more everyday wine consumer interaction than most wine brands do… by a factor of, like, a few thousand).
The take-away for wine brands is that it’s now a smarter play than ever to not only reach out to consumers, but to actually listen to them; and then, when the opportunity is right, articulate to them clearly what makes you uniquely you.