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The Ten Percent

Columnist: Tim Carl
April, 2017 Issue
Columnist

Tim Carl
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Roughly 90 percent of wine sold in the United States comes from the 30 top producers, and more than half of the wine sold domestically comes from E. & J. Gallo, The Wine Group and Constellation Brands, according to the 2017 Wine Business Monthly rankings. The fact that most of the domestic wine sold in this country is produced by a handful of companies is not shocking. What is shocking is that there are now more than 9,000 wineries competing for the remaining 10 percent of sales.

Got competition? There are 9,091 wineries in the United States and 4,202 are in California, reports Wine Business Monthly, What’s more, nearly 39 percent of those are “virtual,” meaning they don’t have a physical place to call home and instead make wine at a custom-crush facility or through some other arrangement. What this means is there are wine producers with significantly different cost structures, all trying their best to sell wine to an increasingly saturated market.

Got math?

According to Gallup Inc., about 60 percent of Americans drink alcohol at least occasionally, which is consistent with the historical average of 63 percent since 1939. Of them, about 35 percent drink wine. I have to assume this percentage is for those over the legal drinking age, which means that 27 percent of the total population is not considered here. The U.S. population is roughly 325 million people. If we take out those who are underage we get 237 million. Those who drink occasionally bring the number to 142 million, and those drinking wine reduces that number to roughly 50 million. Following me here? So the top 30 wine producers have about 45 million customers (90 percent) to attend to, while the other 9,000 domestic wineries have access to about 5 million (10 percent). Let’s say each of these wineries makes only 1,000 cases a year, which means they make about 9 million total cases of wine a year, which they must sell to 5 million people. And that’s just domestic competition  It doesn’t consider that the U.S. wine market is the most highly sought-after for global producers. I’m not even going to touch that math.

If you’re in the 90 percent club, then you’re not selling exclusivity, you’re selling a commodity. Perhaps you’ve found an error in my logic (or in my math), such as equating percent sales to percent population, and so you discount my findings. More power to you, my friend, shoot the messenger. My point is to highlight that competition is beyond brutal in the world of wine, and if you believe you’re producing something that is “exclusive” and a one-of-a-kind product, then I suggest you pull up your big-girl (or big-boy) pants and look around. You’re likely to find that you’re making a commodity that could be mistaken for thousands of other products out there.

“But,” you say, “I have my story.” Maybe you do, but is anyone listening?

There will always be those who find a way to rise to the top, producing something that attracts more attention than those around them.  The world of wine is full of previously successful people who’ve decided that because they were great at producing cutting-edge technology, they will also be excellent vintners, seeking out the newest, greatest technology to augment their business strategy.

Social media doesnt sell much wine

The Baby Boomers are slowing down and drinking a lot less wine, so high scores from some white male will not help much longer. That being the case, perhaps you and your organization are looking to the burgeoning Millennial generation to help you out. If so, you’ve probably spent a ton on social media and made some videos that are either hyper-dramatic. (You know the ones the slow scenes of mist over the vineyards with the rough-hands of Latinos working the harvest and people lounging around and playing bocce.) Or, you went out on a limb and made a “fun” video with young pretty people laughing and sipping wine in the vineyard. If so, then it’s likely you’ve also created Twitter, Instagram and Facebook accounts and even posted pithy content for awhile but then slowed or stopped posting because either you ran out of things to say or because no one was listening. If you’ve created a Snapchat account for your wine brand because it’s a part of your new global marketing strategy, then your desperation is palpable.

The two ways to make money in the wine business

One of my friends has a saying about the wine market: “There are only two ways to make money in the wine business:” he often repeats as he holds a glass of expensive wine, twirling it expertly in his glass. “Real estate and turnover.”

My friend might be right, but the wine in his glass has probably come from a small producer that is trying to make something special, something beautiful to pass along to their family and friends, highlighting that their lives mean more than the money they’ve made previously. The math is the math, but there’s more to life than just the numbers. 

 

 

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