Authenticity Key to Wooing Younger Wine Consumers, Price Says
California’s $20 billion wine industry needs to work harder to entice young consumers who resist conventional marketing, said William Price, a co-founder of buyout firm TPG Capital and chairman of Vincraft Group.
Younger wine buyers, those born in the 1980s and 1990s and known as Generation Y, or millennials, are the fastest-growing segment of the U.S. wine market and are notoriously averse to obvious marketing tactics, said Price, who spoke on a wine- business panel at Bloomberg’s San Francisco bureau yesterday.
“The key thing to the younger drinkers is being authentic -- they have super-sensitive noses about what’s not authentic about your brand,” Price said. “Just trying to be sure what you stand for is true in every aspect in your business, all the way from where you contact people to how you make your wine, how you grow your grapes.”
The Bloomberg panel featured Price; Michael Honig, president of Honig Vineyard & Winery, who serves on the board of directors of Napa Valley Vintners, a trade association; and Rob McMillan, executive vice president and founder of Silicon Valley Bank’s wine division. They talked about wine sales in the aftermath of the financial crisis, winery buyouts and the emergence of Asia, including China, as increasingly important markets for the U.S. wine industry.
California wine sales have been growing since the recession ended in 2009, hitting a record in 2011, with about $20 billion in U.S. sales, according to the latest completed figures from the Wine Institute, a San Francisco-based trade group. After a decade of increasing sales, the estimated retail value of California wine declined during the recession in 2008, falling to $17.9 billion the next year.
With the economy recovering, McMillan expects the fine-wine business to continue seeing steady growth, although at a lower rate than in previous years. He estimates that sales will increase 4 percent to 8 percent this year.
“The business is trending up really nicely now,” McMillan said. “We’re starting to see improved pricing and improved profitability for the business. It got pretty ugly there for a while.”
Price, whose wine investment firm, Vincraft Group, owns a majority stake in cult Pinot Noir producer Kosta Browne and Gary Farrell winery, also founded Three Sticks winery in 2002 and owns the Durell, Gap’s Crown, Wilson, Dupont and One Sky vineyards.
Honig agreed with Price about the challenges of marketing to the millennial generation.
“They’ve been lied to so often and so many times about these fanciful brands,” Honig said. “It’s like the Wizard of Oz, what’s behind the curtain? Well, there’s nothing behind the curtain.”
As part of his role on the Napa Valley Vintners board, Honig helped seek recognition from Chinese authorities for the California winegrowing region’s “geographic indication” status, giving Napa wineries the opportunity to improve brand protection and marketing.
Some care is warranted when approaching the Chinese market for California’s fine wines, Honig said.
“We’re being very cautious right now,” Honig said. “We’re looking at other markets that are very developed -- South Korea, Vietnam, Malaysia, Japan -- as we grow into China, knowing there’s a lot of hope in the future.”
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