Episode Transcript
[00:00:04] Speaker A: Why do we drink what we do? Why do some drinks become classics while others languish at the back of the drinks cabinet?
[00:00:11] Speaker B: Is it just because we prefer those drinks? Or are there underlying economic, social or technological trends that shape our choices?
[00:00:19] Speaker A: And that's what we're going to explore on A Question of Drinks.
[00:00:22] Speaker B: Join us as we explore the hidden side of the drinks cabinet. The decisions, reversals, and underlying forces that shape the beverage market. I'm Luli Halstead.
[00:00:32] Speaker A: And I'm Felicity Carter. And together we host A question of drinks, 1961. What does that year mean to you, Luli?
[00:00:44] Speaker B: Okay, so no hello, Felicity. How are you? So basically we're dispensing with pleasantries now, are we, by the way? I'm fine, thank you. How are you?
[00:00:54] Speaker A: Oh, sorry. I'm sorry. I'm glad to see you, Luly. All good here. I hope you're well. I hope your children are well, your little homegrown Gen Z's. All good.
Now let's go back to 1961.
[00:01:07] Speaker B: Okay. Right, so clearly your lady on a mission today, Felicity. So, 1961. Well, it wasn't the year of my
[00:01:14] Speaker A: birth, Although I didn't think it was.
[00:01:16] Speaker B: Although it's scarily close. But let's move on from that. But I know where you're going with this because it's linked to data and it's linked to data from the oiv.
[00:01:26] Speaker A: Yes, the oiv, of course, is the organization of vine and wine.
[00:01:29] Speaker B: Yeah, thank you. Yes, I should have said that. So, yes, they are the global authority on wine consumption and production. And they have said that global wine consumption in 2024 fell to its lowest level since 1961.
[00:01:44] Speaker A: So let me throw another year at you, 2007. What does that year mean to you?
[00:01:49] Speaker B: Well, very clearly not my date of birth this time, but I do know that one because it's another data one. It was peak wine consum moment. So that was when the world drank more wine than ever before. And then of course, it started going downhill from then onwards.
[00:02:05] Speaker A: That's right. And that leads us to today's question, which is, is wine becoming irrelevant?
[00:02:10] Speaker B: So, listeners, I am sure you'll be pleased and not surprised to know that we both have very strong views on this. So we have decided to split this into two episodes. So Felicity gets this one and is focusing on is wine becoming culturally irrelevant? And I get the next one where we'll focus more on is becoming commercially irrelevant. So over to you, Felicity. Is wine becoming irrelevant?
[00:02:36] Speaker A: For most people, I'm going to say yes, Now, I have to be clear that wine isn't one thing. It has many segments, and there are some segments of wine, particularly fine wine, which are becoming more culturally relevant. But let me put my thesis right up front. So my argument is that wine became a mass market phenomenon at a historically anomalous time. So it was a time when the baby boomers had disposable income, they had more leisure time, they had more interest in food, culture, they had more exposure to wine through travel and media than any generation before or since. So it wasn't that wine conquered the world, it was the boomers did, and wine went with them. The question has always been, what happens when the boomers are gone? So what about you, Luly? What are you going to argue?
[00:03:19] Speaker B: So I think wine remains relevant and won't change at its core. So that's really not going to change fundamentally. But we will explore more about that in our follow up episode, as I said. But I do believe that the wine sector has stumbled by refusing to adapt, which has caused specific problems which I know we're going to touch on. So, in good news, I do think that actually a lot of those problems can be overcome or solved.
[00:03:47] Speaker A: So you, you are offering the optimistic, practical view?
[00:03:50] Speaker B: I am, absolutely. So why don't you be pessimistic? Pessimistic? Felicity, take us off and argue your case for this one. Felicity, why is Rhino relevant?
[00:04:00] Speaker A: Well, irrelevant is too strong a word. But it's losing, losing relevance in the mass market. That's what I'd say. So I'm going to start with 1961. In 1961, you basically had two types of wine drinkers. You had very posh people who bought wine from their wine merchant. Now, these were not collectors like modern day collectors. These were drinkers. They bought it to drink when it was aged.
[00:04:19] Speaker B: Yeah. And so just to be clear here, the transformation of drinkers into collectors and wine into a financial asset isn't what we're talking about on this episode. So just to clarify that.
[00:04:28] Speaker A: No, it's an interesting topic and maybe for a future episode, but what we're talking about today, specifically as the broader mass market, and in 1961, branded wines were very few and far between. So there wasn't somebody standing in front of a supermarket shelf choosing between Marlborough Sauvignon Blanc, Provence Rose or an Argentine Malbec. It was somebody in a European country, typically filling up a jerry can at the local co operative and taking it home. Because wine belonged on the table the same way that bread did.
[00:04:54] Speaker B: Yeah. And wine is Infrastructure, basically is what you're saying, as opposed to winer's lifestyle. And that distinction matters commercially. So if wine is infrastructure, people don't need to be kind of persuaded very much. It's part of life, it's sort of automatic. But once it becomes lifestyle, it has to compete. It needs packaging, positioning, physical and mental availability. All the things wine often is quite bad at and still imagines its consumers are already convinced of.
[00:05:24] Speaker A: Yes. All right, so let's Fast forward to 2007. So at the top end, wine is now a tradable asset and everybody else below that can choose a well made branded wine off a supermarket shelf or off a retailer. So wine wine is now a widely available consumer good.
But that was the exact moment when the industry should have been asking what came next. Instead it doubled down on what had already worked. So scores prestige collectors, big reds and luxury signals. So I think that one of the great mistakes the wine world made was to mistake rising prestige for rising relevance.
[00:05:57] Speaker B: That's quite a statement, Felicity, and that's actually a really important distinction, isn't it? So prestige is what the insiders admire.
Relevance is whether normal people leading normal lives with normal amounts of both wine knowledge and wine interest, know where wine fits into their lives.
But having said that, certain categories of wine were always prestigious, weren't they?
[00:06:19] Speaker A: Yes, and they'll probably remain so. So the real story isn't that wine declined from 1961, it's that between 1961 and 2007, wine had an extraordinary and unrepeatable 50 year expansion. And what we're watching now is the end of that anomaly.
[00:06:35] Speaker B: Okay, so basically what you're doing there is kind of reframing the whole question. If the expans was an anomaly, then decline isn't failure. We could say it's just more like a course correction.
[00:06:45] Speaker A: Yes. And I should add that one of the consequences of this period was a huge improvement in quality. So back in 1961, wine was generally terrible by today's standards. British wine writing colleagues have told me that Even by the 1980s you could tell you were driving past a co operative because of the overpowering smell of vinegar.
[00:07:03] Speaker B: Oh my goodness me. So we have high quality wine at the top, that comes from merchants, et cetera, and a drink that was more like a kind of condiment for everyone else.
[00:07:13] Speaker A: Yes. And the world of 1961 was already facing pressure. So the first thing was that people drank wine all the time because they thought it had a sort of fortifying effect, which was very important for people who were doing manual labour and so it became part of the working day. So from the 1950s, in that post war period, people were beginning to move into cities and office jobs. So manual labour itself began to decline.
[00:07:34] Speaker B: So wine lost one of its sort of old functional jobs. It wasn't just a nice drink. It was believed to sustain people through their physical work, as you were just saying. So once the work changes, the, you know, people, urbanization, moving to white collar, the justification that you were just talking about there sort of starts to disappear.
[00:07:51] Speaker A: Yeah. And one of the other really big impacts that happened in that post war period is that as people got richer, they started buying more cars and so the drink driving death toll went through the roof.
[00:08:02] Speaker B: Yeah. And that's when in the late 1960s, you get the first blood blood alcohol laws in the uk and several years later, coming into France as well.
So what we've got now is combined with employers telling their employees not to drink if they were operating heavy machinery. We also get, therefore everyday consumption of wine starting to erode away.
[00:08:24] Speaker A: Yeah, though. Though it ended surprisingly late. So my partner Michael went to do a course at Airbus in France about 15 years ago and he was shocked to see that there was wine in the cafeteria. What?
[00:08:36] Speaker B: Airbus? Oh my. Just doesn't sound right. Is that even legal?
[00:08:40] Speaker A: Not in Australia it's not. So Michael actually asked one of the managers if they had a problem with people turning up drunk in the afternoon and he apparently replied, quote, not since we started serving in half bottles.
[00:08:50] Speaker B: My goodness, we've talked about half bottles before, but that is not the primary reason I thought they would be useful. So the health, the French approach to health and safety has always been admirably relaxed, shall we say?
It's true that drinking at lunchtime, during business meetings, though, it has become less acceptable, hasn't it, these days? You know, even for us working in the, in wine and in the drink sector, it's, you know, there is less of it. But why didn't beer suffer in the same way is what I'm thinking now.
[00:09:20] Speaker A: Well, beer actually is suffering right now and that's partly because of pressures from health moderation, which we're not going to talk about in this episode. Generic, we understand them, but I will say beer wasn't part of the food landscape in the same way. So it also came in small formats, it was very portable, so you could take it to footballs, you know, it was part of concerts, barbecues, television, you know, all sorts of low commitment occasions. But wine stayed heavily tied to food ritual and social competence. So opening a bottle of wine still feels something like an event where opening a bottle of beer doesn't.
[00:09:52] Speaker B: Yeah. So we have beer adapting to the sort of fragmented, modern life it gave. As you were just saying, people, smaller units, easier serves, clearer occasions, and probably more importantly, fewer rules.
I'm surprised that there wasn't beer in the Hair Bus canteen then, to be honest. It sounds like have solved their problems.
[00:10:11] Speaker A: Yeah, Well, I think this obviously says that the French aviation sector is full of people of taste and discernment. And also a bus is located in Bordeaux, so that's part of it.
[00:10:21] Speaker B: Okay, fair.
[00:10:21] Speaker A: So, yes, beer learned how to survive in a world of snacking and informality, whereas wine was still very much the drink of people sitting down for, you know, a long dinner. So the end result of all of this was wine as the default option, was beginning to disappear anyway.
[00:10:35] Speaker B: Yeah. Which is ironic because that period also saw, as you just pointed to earlier, that really huge improvement in quality, a sort of quality revolution in wine.
[00:10:45] Speaker A: Yes. And this is really where our story begins. So what we get is this rising prosperity. We get a new consumer culture where people are interested in new things. And the French and the Italians would never admit this, but if you go back to the 1980s, what really lifted quality was the coming of the Californians and Australians because they had all of this research from places like UC Davis and Australian Wine Research Institute. So they had this, you know, they got rid of faults. You know, they technically improved wine a lot.
[00:11:10] Speaker B: Yeah. And we could add closures in there as well, couldn't we, with the improvement in the understanding of how closures impact wine as well. So that was probably part of it then. So the new world also made wine easier to buy, didn't it, from a consumer point of view? So if we think about varietal labeling, meaning, basically, you don't have to understand chateau or appellation or anything like that. You could just basically buy Cabernet Sauvignon and Chardonnay.
[00:11:35] Speaker A: That's right. And so the Australians drove this tendency towards technically reliable, clearly labelled wine available in supermarkets. Now, that forced the Europeans to professionalize very fast. A lot of wine, which had survived through habit and lack of choice, suddenly had to compete on quality. So this is a period where people stop learning winemaking from their dad and they start going to Montpellier instead. You see this huge professionalization happening.
[00:11:58] Speaker B: Yeah. And this is where wine did make itself easier. So as we were saying, the varietal labeling was a brilliant simplification because it gave consumers that really straightforward heuristic that shortcut for choice, you know, moving away from our system to system one, making it easy to choose so you didn't need to decode. You could just simply say, I like Chardonnay. And that mattered.
And that was really important. But there's another, I think, really interesting impact going on at the same time. Let us not forget the impact of Robert Parker around this time.
[00:12:32] Speaker A: Glad you brought up Robert Parker, because, yes, Robert Parker is of extreme importance to this story. Story. So a group of Americans like Robert Parker, but him particularly, turned wine into a mass aspirational product for baby boomers. So he position himself as a true consumer advocate who would tell the truth free of commercial conflicts of interest. Now, he did this in the early 1980s, just as the baby boomers were coming into their peak earning years in the US and elsewhere. And they caught the wine bug from him.
[00:13:00] Speaker B: Yeah, and Parker helped people choose wine, but he didn't necessarily make wine easier to live with, I would say. So what he, he simplified judgment, not occasion. So, you know, 96 point Shiraz still doesn't solve the problem of wanting one glass with a bowl of noodles on Wednesday.
But I will concede that it did mean that instead of having to know about wines yourself, you could just basically use again, a heuristic, a shortcut. Just let's go for the highest rated one, the one with the most amount of points.
So it made it easier again, but in a different way to the varietals we were talking about for consumers to choose.
[00:13:39] Speaker A: That's right. And that's on the consumer side. On the winery side, a high Parker score could be like winning the lottery because your wine would sell out. So it was inevitable that wineries began to make these plush, rare, high octane wines of the sort that would please Parker's palate.
[00:13:53] Speaker B: Yeah, and this is where prestige starts to distort the category because producers weren't just asking, as you were saying there, what do people want to drink? They were asking, what will get noticed by the gatekeepers, I. E. People like Robert Parker. But we must add that not everyone was beholden to Parker. So I'm thinking of subcategories like champagne, sherry, German white wines, for example.
[00:14:17] Speaker A: Yes, I'm going to cop out because I'm going to say Champagne does belong to the prestige end of the market, where these forces aren't so relevant. But Parker was the most famous expression of a much bigger phenomenon. So across the wine world, prestige increasingly clustered around concentration, power, oak collectibility and ageability, particularly in red wine. So even producers who just didn't care about Parker, was still operating within that broader prestige system.
[00:14:41] Speaker B: Yeah, but Parker wasn't the whole story, though, was he? So he was the most sort of visible expression of the system that you've just been talking about already.
And he was really rewarding sort of concentration, power, collectability and seriousness in the wine. So he was perhaps. Was he the symptom of the market, of what the market already admired, I guess. Which came first?
[00:15:05] Speaker A: Oh, it's interesting question and probably very difficult to unravel, but yes, you're right. So now investment, criticism, restaurant culture and collector culture, which was emerging, all began to converge around the same ideal. So the whole system began to reinforce itself. And.
[00:15:20] Speaker B: Yes, and I. I can say that I'm glad that that era is over, personally. So those wines for me were not particularly friendly. Kind of too much oak, too full fruit, but really too high in alcohol, I would say.
[00:15:34] Speaker A: Oh, my God, it's wild looking back, you know, when I was first learning about wine, which was 98, 99, those wines were the gold standard. They were the default. So I remember me and my colleagues, we used to go to this Chinese restaurant for lunch and we. We always ordered the salt and pepper squid. But what we would drink with it was a high octane Barossa red.
[00:15:50] Speaker B: Every.
Well, one. You're drinking wine at lunchtime. Can I just say?
[00:15:54] Speaker A: Yeah, that's right.
Those were the days.
[00:15:56] Speaker B: Yeah. Two, high octane, I. E. High alcohol level. Three, salt pepper squid in Australia is my favorite dish when I am in Australia. It's awesome. It is the best.
But if you think about, you know, we drank all those enormous reds, and I'm. Is it because we were wanting to show we were serious and sophisticated? You know, did. Did any of us stop or anybody else stop to go actually, do you like them or are we just sort of performing sophistication with purple teeth?
[00:16:27] Speaker A: Oh, purple teeth. Yeah. I remember my first wine dinner. So by the end, everybody had such black teeth. It looked like a gathering of Victorian orphans. And anyway, so if you want. If you want. So I'm sure. I'm sure dentists were pretty happy at that point. Anyway, if you wanted to go back and pinpoint the moment when wine started to get into trouble, I think this is the place you'd start.
[00:16:46] Speaker B: Yeah, well, wine has historically always been part of the meal, hasn't it? But on the one hand, the domestic meal was disappearing, or at least. Or at least, let's say, say, being transformed. So therefore, wine's role is becoming less important.
[00:17:00] Speaker A: That's Right. And food culture was being transformed outside the home, and that turned out to be a problem as well.
[00:17:06] Speaker B: Yeah, but. Okay, let. Can I challenge you on this? But you can write. Thank you. You're right that there was a food culture explosion in the 90s and 2000s, and we had celebrity chefs, restaurants as destination food becoming all about aspiration.
But living through that period, I can tell you, and I'm sure you'll remember that there was an avalanche of cookbooks and cooking shows. You know, wine by the glass lists got better and better, and this was happening everywhere. So is that not kind of counting your argument?
[00:17:35] Speaker A: I remember parents putting fast food through the school railings cause they didn't like what Jamie Oliver was doing with school lunches. I remember all those. But the thing was that the nature of food was changing rapidly. So it was moving to lighter, much more innovative, many more vegetables, and much more multicultural, different spices, all the foods that do not go well with prestigious red wines.
[00:17:55] Speaker B: So you're saying food moved one way effectively and prestigious wine moved in a different direction.
[00:18:01] Speaker A: Yes. And unfortunately, you can see the consequences playing out today. So Australia alone is now sitting on hundreds of millions of liters of excess wine, much of which is red. You know, Bordeaux is ripping up red vineyards. The Rhone Valley is replanting to white. You know that. And that's the consequence of that, I think.
[00:18:16] Speaker B: Yeah, but we've got. Got this sort of fundamental flaw. No problem, flaw, whatever you want to say in wine, haven't we?
Which is it takes a lot of time and a lot of effort to replant with white. It's not something we can simply switch from one year to the next.
Now, we are seeing that happening to a certain extent. But what you're saying is the signal to do so had happened or was happening many years ago, and we just didn't see that signal.
[00:18:42] Speaker A: Yeah, that's exactly what I'm saying. And at the very same time that we had this explosion of food porn, eating was becoming more casual. And the formal. Well, what else? You know, the formal dinner party was disappearing. So all the food occasion where wine normally plays a role, were fragmenting and vanishing. But while this was happening, the wine industry was busy planting more vineyards, mostly to red wine.
[00:19:02] Speaker B: Yeah. And this was happening globally, wasn't it? So people had made money in other industries, you know, were kind of opening up wineries, not just in California, but in Australia and New Zealand and Chile and elsewhere.
[00:19:14] Speaker A: Oh, God, I remember that. So when I was editor in chief of Mining as Wine Business International, so I took that role in 2008. Every time time I went to Provine over those years, there'd be some millionaire standing in the corridor wanting to talk to me because they needed help.
[00:19:27] Speaker B: Oh, don't tell me. They had bought trophy wineries and were making wine, but they hadn't really thought about how they were going to sell the stuff.
[00:19:35] Speaker A: That was exactly what had happened. Sometimes they were building wineries and buying new oak, but they hadn't set up their distribution. So I ended up knowing where the winery was just by what the guy's job was or his accent was good to valley people they went to until they got priced out. Then they went to Virginia. If they were British lawyers or telco millionaires, they went to Languedoc because you buy really nice chateaus. You went out to entre de mer and Bordeaux. And if they were Swiss bankers, they went to Tuscany.
[00:20:01] Speaker B: So, okay, close by.
[00:20:02] Speaker A: Yeah, that's right. So it was already obvious by 2008 that there were just too many people with too many vanity projects all hoping for high Parker points.
[00:20:10] Speaker B: Okay, so just to stop you there, I agree with you about the kind of trophy wise wineries point though many of them we should add, that actually turned out to be wonderful wineries and make really good wine. So you know, let's, let's put that out there. But, but, but you started by saying you thought it is the middle of the wine market. So the sort of mass middle of the wine market that's in trouble.
What we're talking about here is the trophy wineries very much belonging to the high end of the market. So that's, that's two different things.
[00:20:40] Speaker A: You're absolutely right. But the reason I'm bringing it up is I think they're all a symptom of the same underlying problem. And this is where I'm call on the work of an economist called Charles Handy.
[00:20:49] Speaker B: Okay, don't tell me you're about to introduce a framework for listening.
[00:20:52] Speaker A: I am, I am. I've learned a lot from working with you. Really so proud. So Charles Handy came up with a theory called the law of the sigmoid curve, which is an S shaped curve which lies on its side, if you can imagine that. So he made a very simple argument. He said every successful system, this is whether you're talking about a product or you're talking about the Roman Empire, will eventually peak and decline unless it reinvents itself before the decline has begun.
[00:21:17] Speaker B: Okay, so this is what, where his thesis is in business, that at the moment of maximum success that is, when you jump off in another direction, you kind of don't wait for it to keep playing out.
So you have to do it before that peak or you won't have the resources to invest into something new.
[00:21:37] Speaker A: That's right, because it's a mathematical certainty that decline is coming. Now, of course, there's no guarantee that the second curve will works. So he, he makes the point that reinvention isn't easy, but failing to reinvent is fatal.
[00:21:50] Speaker B: Okay, so the second curve isn't magic. It's not innovate and everything's going to be fine. It's much more brutal than that. Basically, you have to be willing to walk away from the thing that made you successful before the market forces you to. And that's a really hard thing to do in business, isn't it?
So you're basically saying that this is, was what's happened to wine. This has been wine's problem.
[00:22:13] Speaker A: We, we did have some of these second curves happen which extended the boom, which we'll talk about in a second. But you can see a strong signal of failure emerging in the, you know, the push to premiumization that happens. So when a mass market category starts losing casual consumers, the people who remain are disproportionately the committed ones, the people who care enough to keep buying it even as the occasions erode. So of course they spend more per bottle. They always did. So it's not that the category became more premium, it's just that it lost its bottom and middle and what's left looks premium by comparison.
[00:22:45] Speaker B: So you're saying it's a sort of a statistical artifact, not a genuine trade up from a consumer motivation point of view?
[00:22:52] Speaker A: Yeah, partly, of course. You know, the other part is that the trade up is real, but it's fragile because this is where it depended on a generation of boomers and maybe older Gen X, who, you know, were happy to pay the money because they were interested, but they're now aging out of peak consumption. So when the, that group of people drinks less for health reasons or whatever, the premium segment loses its volume base as well. So you can see it as premiumization is the industry telling itself a very sort of self serving, flattering story about a shrinking market. It's not wrong, exactly, but it's not a strategy. What it's doing is it's riding the existing curve, not kicking off a new one.
[00:23:28] Speaker B: Okay, so if the industry following on from that, because you're on a roll. So if the industry was riding the wrong curve, what's the right One, what should they have been doing?
[00:23:39] Speaker A: Watching what was happening in food culture. So what was emerging was the type of food that just doesn't pair with high octane red wines fermented in new oak. But the prestige hierarchy of wine was still running headlong after Parker points and high end reds, even when they denied they were doing it, you know, after Parker retired. So white wine was often treated as secondary.
[00:23:57] Speaker B: Okay, another pushback coming in. Incoming.
So we also had a sparkling wine boom and a boom and increase in the number of wine bars, for example, during this time. So this wasn't just happening in London, it was happening everywhere. And we've documented a lot on this podcast already. Those booms, those. Those increases. And of course, we had the explosion of New Zealand Sauvignon Blanc at the same time.
[00:24:24] Speaker A: Yeah, absolutely. And I think those are excellent examples.
[00:24:26] Speaker B: Thank you.
[00:24:26] Speaker A: Of handy second curve in action. Right, absolutely. And that's. And that's what you want an industry doing. Doing. But what's key here is that those things didn't accrue the prestige that is critical in the entree, which is really where brands are built. You know, I've judged wine list competitions for nearly 20 years, and over and over, I have seen the same thing. Sauvignon Blanc, the world's most popular white wine style, is either completely absent or it's given one listing in total, while there might be ten Barolos sitting there.
[00:24:52] Speaker B: Yeah. And that's because the sommelier list is designed to impress other sommeliers.
[00:24:59] Speaker A: Yeah, I think this is. I think this is a really big problem. You know, sommeliers really worry about what other sommeliers are going to think of them. And so restaurants kept treating wine as a status performance rather than a recruitment tool.
[00:25:09] Speaker B: Yeah. But can I just take us back a moment because I think you're underplaying this. So I'm going to, you know, Prosecco and Sauvignon Blanc, and, you know, all of these growths, these aren't like tiny footnotes. These were major recruitment routes. So Rose and Prosecco and the wine bars, as I said, all made wine feel easier and more social, less reverential, more accessible. And the irony is that the places most obsessed with preserving wine culture were often making ordinary people feel stupid about wine.
[00:25:40] Speaker A: Yeah. And I completely agree with everything you've said, and I think it's very revealing because the market was clearly telling the wine world what ordinary consumers wanted. They wanted fresher, lighter, more aromatic, easier wines that worked with modern food and modern life. But the status system inside Wine kept rewarding, rewarding something else.
[00:25:59] Speaker B: So we have critics and collectors and sommeliers still signaling that the serious wines are the big red ones.
[00:26:05] Speaker A: Yeah, exactly. And obviously, when I'm talking about wine, I'm not talking about some central body that's making all the decisions. It's the sort of the collective energy of lots of players, particularly the gatekeepers, from sommeliers to buyers to wine writers.
[00:26:17] Speaker B: And you're saying that basically they were rewarding the wrong thing.
[00:26:20] Speaker A: Yeah. So you ended up with this really strange situation where the commercial energy of the market was moving in one direction, but. But the prestige energy was moving in another.
[00:26:29] Speaker B: Yeah. And that matters because prestige drives investment, doesn't it? So it drives what gets planted, therefore, and what gets written about, and then, you know, ergo, what then gets poured in restaurants.
[00:26:40] Speaker A: Yeah. And critically, it's also what ambitious producers aspire to make.
[00:26:45] Speaker B: Okay, so when you say wine missed its moment on the Sigmoin curve, which moment are you specifically talking about, Felicity?
[00:26:54] Speaker A: The post 2007 world. So established that was when wine was at its peak consumption. And that's where you start to see the dynamics playing out. So the fine wine world, you know, was turning wine into a financial instrument. You know, people have stopped buying aged wines from merchants, and they were now identifying as collectors who could make money buying and selling cases of Bordeaux. So this was very much the world of red wine.
[00:27:15] Speaker B: And it's pretty weird, isn't it, if you think about it, that a perishable liquid had become more valuable than gold at this time, or some of it, anyway.
[00:27:23] Speaker A: That's right. And so this effect trickled down to the.
So the middle market was trying to be fine wine on a budget, so it stuck tightly to red wines, and that's what growers were producing. And then, you know, so did the mass market because, you know, there were. There were oceans of fairly good red wines that could be turned into yellowtail and all of its imitators.
[00:27:40] Speaker B: Okay, so first up, I'll pull you up for saying anything negative about yellowtail, as you full know. As you know.
Okay. Okay.
[00:27:48] Speaker A: So.
[00:27:48] Speaker B: Okay, so full disclosure, for transparency. I've worked with the team at Casella yellowtail for over 15 years. Years.
[00:27:55] Speaker A: Okay, well, just. Just to be clear, I said there was a lot of very good red wine that comes.
[00:28:00] Speaker B: But.
[00:28:01] Speaker A: But anyway, so. So, all right, so let's pursue this. So you've tasted a lot of yellow tail in your time, is what you're saying?
[00:28:07] Speaker B: Yeah, well, actually, yes, I have. So I'll do a quick tangent on my recent sabbatical, Felicity, when I was in Belize, let's say that the.
[00:28:19] Speaker A: The hard hardship you suffered in Belize. Tell us about that.
[00:28:22] Speaker B: Yeah, well, I don't know. I was trying to get wine, and that is quite a hardship to do in Belize, let me tell you. But let's go, because the wine selection in the local stores, shall we just say, is not very broad.
[00:28:33] Speaker A: See, if you'd planned ahead, you could have had a suitcase full of needle gin and tonic.
[00:28:37] Speaker B: I could have done. I could have done.
But let's just say that Yellowtail Chardonnay and I became very reacquainted as best friends when I was in Belize. And I was very happy about that because it was one of the few wines on the shelves and Belize that hadn't gathered what clearly looked like many months, possibly years of dust because nobody was taking the wine off the shelves, but Yellowtail was clearly flying off the shelves in Belize, so who knew?
But, but. But. Getting us back on track, Felicity, So you're basically saying the whole industry was looking in the wrong direction at the critical moment. And I. And can I just say that that's a pretty big sweeping statement from. From you.
[00:29:18] Speaker A: No, no, no, no. Not. Not the whole industry. We've already established, you know, the rise of sparkling and white and rose, which we shall get into in a minute. I mean, the world of wine is a very big place. Yes, but the direction of travel hadn't changed, and the trophy wineries were a symptom of that. So there were still people thinking about how to get high Parker scores or high Wine Spectator ratings or get invited to the right events, you know, and that's why Today you've got 500 wineries in Napa all producing much the same type of wine. Wine.
[00:29:44] Speaker B: Okay. So if you want to go back to 2007, also, we have to remember that this is a huge moment for wine, because in February 2008, the Hong Kong government lifted duties on wine, and suddenly wine flooded into Southeast Asia via Hong Kong, particularly into the Chinese market. And this is where we see the start of the huge wine boom, therefore, in China, and again, especially for red wine.
[00:30:07] Speaker A: Yes. Now, I have to be really clear about this. There absolutely was a real Chinese wine drinking culture merging. So there was lots of collectors and things, enthusiasts, people signing up for WAST courses and all of that. Right?
[00:30:17] Speaker B: Yeah, exactly. That's true. But the main thing driving the increase in export of wine landing in China, this was depended really heavily on gifting, status signaling, and corporate banking, basically, which made it Much more fragile than the industry realized from a sort of true consumer demand point of view. So we could say that there really wasn't that consumer demand, but for wine. But there was a demand for a luxury product that had status that happened to be wine.
[00:30:47] Speaker A: Yeah, that's right. And when Xi Jinping launched his anti corruption campaign in 2012, it made ostentatious gifting dangerous, and the demand just collapsed.
[00:30:56] Speaker B: Yeah, absolutely.
But again, gonna push back because the Australians were still selling plenty of wine to China right up to the pandemic. So in. In this period that you're talking about.
[00:31:09] Speaker A: That's right. But notice what happened the moment tariffs were slapped on Australian in 2020. An enormous amount of that volume just disappeared, which suggests that a lot of the trade was really opportunistic rather than culturally embedded.
[00:31:21] Speaker B: Yeah. And that's real danger, isn't it? When a market is built more on trade opportunity than consumer demand, consumer habit, it can look huge and then it can disappear with terrifying speed.
[00:31:32] Speaker A: Yeah. And I want to come back to the fact that I'm talking about the bottom and the middle market in this episode, not the top end, which has a whole different set of economic structures.
And just on China, I should add that the two countries that are seeing success there at the moment are New Zealand and Germany with their aromatic white wines. So the revealed preference of the Chinese consumer is actually white, which shouldn't surprise
[00:31:51] Speaker B: us, should it, if we think about what's happened in other markets? So let's go back to the period.
Wine may have passed its consumption peak, but it was still pretty healthy, say, by. By 2012.
[00:32:03] Speaker A: Well, this is the period where you get a massive wave of women entering wine.
[00:32:07] Speaker B: Oh, okay, Felicity, so again, I'm gonna let you. You sweeping statement there. So what do you mean by a massive wave of women entering wine? So let me data, let's learn. I'm going to quote you some data. If we look at consumption patterns in the key developed and established wine markets at the time, the female to male ratio of regular wine drinkers is pretty much evenly split parity.
[00:32:30] Speaker A: Yes, you're right. I will absolutely concede that. What I should say is this was the moment that the wine trade noticed that women had had huge spending power and could be specifically marketed to.
This actually happened in spirits at exactly the same time. Now, this was the moment that the wine industry could have leapt off in a new direction, and it partly did, but not well enough to halt the decline that was happening.
[00:32:51] Speaker B: Okay, so I'm looking forward to seeing where you're Going with this, because this period saw, as I said previously, the rise of sparkling, including Prosecco, of which directionally undercuts your red wine thesis.
[00:33:04] Speaker A: Can I do a bit of a rant for a second?
[00:33:06] Speaker B: Oh, you. You're asking me for permission to run?
[00:33:09] Speaker A: Well, no, I've held this in for a long time.
[00:33:11] Speaker B: Okay, go.
[00:33:12] Speaker A: Hated the marketing to women trend. I thought, and I still think that that was one of the worst things that happened to the wine sector.
[00:33:19] Speaker B: Okay, I've got so much to unpick against that statement, Felicity. So I think you might be conflating two different things here. So many brands in many categories are successful at having their primary target market in one core demographic. So female could be male, could be older, et cetera, et cetera. I'm assuming that the positioning and communication of products for female consumers, or what you're talking about there, is. That is insulting.
So I. Is that what you mean by that?
[00:33:51] Speaker A: That's absolutely what I mean. So I remember standing on stage in Portugal, you know, raving about this in about 2017.
So I first noticed this happening around 2012. And so every time I'd walk into a winery and wherever I went in the world, there'd be one nicely designed bottle in a sea of forgettable ones. And so I'd pick it up, and the usually male winemaker at that point would look pleased and tell me that their bottle was their wine for women. And if I was a woman and I'd picked it up, therefore, they'd done a great job.
[00:34:17] Speaker B: Okay. Other than the appallingly misogynist statement that was told to you there on repeated occurrences, by the sounds of things.
We could argue, Felicity, that they'd actually done a really good job from a marketing and a branding point of view, because their brand had appeal, its target audience. You just saying?
[00:34:37] Speaker A: Well, that's what they thought. The thing was, the bottle appealed to me not because I'm a woman, but because I'm somebody who notices good design. I would have picked it up regardless of my gender, and so would many men. But the big problem wasn't the design. It was that what was inside the bottle was generally extremely mediocre. So the assumption was that women liked pretty packaging, and that's what you had to do to sell wine to women.
[00:34:57] Speaker B: Okay, so you're saying they thought the prick. The effective, lovely, pretty packaging was it. That's all we needed, us ladies.
[00:35:03] Speaker A: Absolutely. And I remember Jane Thompson, who runs the Fabulous Wine Society in Australia, telling me that when she started, she was mocked.
[00:35:10] Speaker B: Yes, she was. I Said the amazing Jane. So she'd invite winemakers to come and present their wines to her members of the Fabulous Ladies Wine Society in Australia, you know, and the winemakers would want to turn up with Moscato and Because that's what they thought. Women drunk.
Knowing Jane, I'm really surprised the winemakers got out alive.
[00:35:30] Speaker A: Yeah, well, she said they learned pretty fast that they could sell their top wines to her audience, which are all sort of bankers and lawyers. So she ended up with long waiting lists of winemakers wanting to come. But the key thing is that insight did not translate across the industry.
[00:35:44] Speaker B: So if I understand you correctly, you're saying that the wine trade didn't take women seriously right at the moment in our Back to our curves, where they should have been leaping on this new growth curve.
[00:35:55] Speaker A: Yeah. So this would have been the time to introduce really delicious, high quality, interesting wines that didn't have to be expensive. They had to be interesting to an increasingly affluent and discerning audience. Instead, what you got was mostly bulk wine in pretty bottles.
[00:36:10] Speaker B: And, you know, I think that could be a topic, couldn't it? Or in and of itself for a whole new episode. Felicity.
And I'd want to add in why there aren't more female founders in drinks as well, but maybe we should put
[00:36:24] Speaker A: this on the editorial calendar, I'm sure,
[00:36:25] Speaker B: because I'm not part of one for now.
[00:36:27] Speaker A: That's right. Let's go back to the. Yeah, going back to the topic. So the industry was already past its peak energy and it couldn't. It literally couldn't afford to take this new curve seriously because it had too much wine it needed to offload.
[00:36:37] Speaker B: Yeah. Well, that brings me back to the sparkling wine and ros? Which I still seem to be going on about.
How are you going to explain the immense success of those categories? Because this is where I think your argument gets interesting. Sparkling and look like evidence against decline. They show wine can attach itself to new occasions and new moments.
[00:36:57] Speaker A: Yes. Yeah, look, I think sparkling and absolutely show the power of handy sigmoid curve idea because they show that wine absolutely could jump onto new curves. So Prosecco did it. Did it. Champagne has done it repeatedly. They attach themselves to new occasions. Aperitivo, culture, brunch, blah, blah, blah. And that's exactly what Charles Handy would say you're supposed to do.
[00:37:16] Speaker B: So wine wins out by adapting to occasion. So, not that I've been banging on about occasions for 30 episodes of our podcast or 20 years. Felicity.
[00:37:28] Speaker A: Yeah, so parts of wine adapted successfully, but I do think there was this still remaining problem of prestige moving in one direction and people kind of, you know, not taking these other things seriously even while they were selling bucket loads of wine. So what they created was specific growth segments, not replacements for the old sort of mass market base. So Prosecco became huge, but it didn't restore the everyday dinner table wine habit, became culturally enormous. But, you know, for a long time it was very seasonal and socially specific.
[00:37:53] Speaker B: Okay, I'm going to stop you again, Rose was seasonal and socially specific, as you said. But today the growth has come from the fact that it's become year round for some, not all, but a lot of consumers. And actually now if we look at the data, relatively gender and age neutral.
So if we look in kind of core consumption markets, we see around 40% of the core consumer drinkers are male, for example.
[00:38:21] Speaker A: Yeah, no, that's fair.
Also see, you know, Champagne becoming even more luxury oriented. So these were very successful, but they weren't enough to carry the whole category.
[00:38:29] Speaker B: So if I understand you correctly, your argument is not that wine failed to innovate, but the innovations were too fragmented to replace the whole that had been lost.
[00:38:38] Speaker A: Yes, that's right. And because these new curves, and this is really interesting, were built around identity and incasion, they were somehow going to be difficult to scale indefinitely. So the moment this, my argument is the moment that something becomes a lifestyle signal rather than an embedded habit, it becomes vulnerable to fashion cycles and consumer drift.
[00:38:56] Speaker B: Again, so much to unpack against that statement. So can you really say that the growth in sparkling wine and is too occasion limited?
Surely that's the whole point of their success, that these wines have met the needs of a large enough set of consumers at occasions that have enough scale to be meaningful and that has driven significant volume of growth at premium price points. Can I just add in because the average price point of is higher than the average selling price point of red wine?
[00:39:28] Speaker A: No, absolutely. But these were, these were marketed as lifestyle. So you weren't really buying wine. You were buying Summer Saint Tropez poolside glamour, you know, Instagrammable pictures. So this is where wine becomes shorthand for lifestyle.
[00:39:40] Speaker B: But Felicity, what's wrong with being associated with lifestyle? I don't really, really get that. Surely that's the, the like the nirvana for brands. I want consumers to associate me with moments in their life. If I was a brand that is. And moments in their lifestyle. Isn't that what brands and marketings wants to do?
[00:40:01] Speaker A: Yeah, look, so, so recruited millennial into wine through lifestyle identity rather than through habit of ritual. Right. So they weren't coming in through the dinner table. And Rose worked because it didn't require, require any knowledge and own commitment and no social competence particularly. You're just like, it's, it's hot and I want something photogenic and gold and here we go.
[00:40:18] Speaker B: Yeah. And if we look back to consumer data, we can see that the growth in was across, as I was saying, a range of age groups.
So I guess, you know, surely this is wine successfully adapting to new opportunities, new occasions and potentially a new generation.
[00:40:34] Speaker A: Well, so I'm going to argue that life's and identity are actually very unstable categories, unstable foundations for wine, because every generation wants a different signal. So millennials embraced and the generation behind them looked at wine including and a significant portion decided the identity signal they wanted was not drinking wine at all. Now, I can't prove this, it's just my, it's just my theory, but my private theory is that because nobody wants to do what their mother did, the whole wine mums thing on Instagram helps kill wine for just Gen Z.
[00:41:05] Speaker B: You're being very critical today. You really, you've got, you, you're on, you're on a roll, aren't you?
There was. I, I. Surely we could say, we should be saying that there was a huge amount of innovation going on. So a lot of white wines, a lot of rose, a lot of sparkling and then lest us not forget the natural wine phenomenon that we've been seeing.
[00:41:26] Speaker A: I do. Look, I'm absolutely agreeing. This is, this is all part of handy second curve. And it's what, it's what you should do in a category like this. Sparkling and white were genuinely innovative. I won't disagree with that. In the case of natural wine, you had a backlash to Parker and all the over extracted fruit bombs and so on.
[00:41:41] Speaker B: Yeah. And it's found a huge passionate, huge relative proportionally not that large compared to all wine drinkers, but still very passionate audience, particularly amongst younger drinkers. Exactly. The generation you're saying has turned away from wine.
[00:41:57] Speaker A: Yeah. Natural wine's not such a great example because although it did everything that Handy prescribed, it contains its own ceiling. So it's entirely higher. Value propositions are authenticity, provenance, you know, the specific person who made it on a specific patch of soil, it's incompatible with scale. So the moment that if natural wine ever grew, you know, big enough to replace mass market volume, it would cease to be natural wine in any meaningful sense. So it wasn't really a candidate for the curve, it was a proof of concept that the industry Couldn't really use.
[00:42:24] Speaker B: Okay. And I would also add that not only is it small category, as I was just alluding to there, and in a parallel market, but it's one that grew in part by effectively disparaging the overall wine category. So natural wine proponents, you know, we both know, have been very fond of saying, you know, that there are all kinds of crazy additives and bad things in so called normal wine.
[00:42:50] Speaker A: That's right. That's right. So natural wine had a lot of cultural energy, or still does, I guess. But it also recruited partly by saying we're not winning wine.
[00:42:57] Speaker B: Yeah. Which is. It's a pretty powerful niche, but awkward for the parent category of wine. So it's a bit like sort of saving the family business by telling everyone your relatives are crooks.
[00:43:08] Speaker A: That's right. Well, trying to get them in prison. Yeah. So. So the, the middle market kept declining because the people leaving it, they were not looking for more authentic versions of wine. They were moving to cocktails or hard seltzers or whatever. So natural wine couldn't follow them there. It's still wine.
[00:43:22] Speaker B: Yeah. And wine where they charged €40 a bottle for something that smelled like nail polish and made you feel culturally, we
[00:43:29] Speaker A: have to, we have to pay that. That's a very impressive business model.
[00:43:32] Speaker B: Yeah. It feels like you're, you're making an argument where wine can't win, though, under any circumstances. Felicity. So you said that it needed to leap into a new curve, which it did. Started marketing more to women, found people who love white wine or sparkling wine. So what's going on here?
[00:43:50] Speaker A: No, look, all of this is fair. And I'm not saying wine is dead and that people are never going to drink wine.
[00:43:54] Speaker B: Okay.
[00:43:54] Speaker A: What I'm actually saying is that the baby boom is represented a particular moment in time. And what we're saying seeing is a world where they're retiring. So the second wave, you know, of boom and sparkling, that bought the sector time, maybe 15 or 20 years of it, but it didn't change the underlying trajectory.
[00:44:10] Speaker B: Okay, so that's pretty bleak. So you're saying that the decline was inevitable, or was there something. Again, back to my previous question, what should wine have been doing?
[00:44:21] Speaker A: Look, I do think that we've been living through an anomaly that had to come to an end. And so that was always going to be inevitable. But. But the crash that we're experiencing didn't have to be quite as savage as it is. So one thing, you know, that could have been done is what you're so expert in is marketing. We both agree that wine has not been very good at this. But I think wine could also have protected itself more by asking what was happening outside wine, particularly what people were eating.
[00:44:46] Speaker B: Okay, so the risk of jumping in one more time.
Wine has been, is, and has been relevant across multiple occasions. So, yes, whilst cooking, but when the kids have finally gone to bed. Beats cafe on a train. Pre gaming. Before I go and meet my friends in the park.
[00:45:05] Speaker A: Is this a list of how wine is specifically relevant to the Halstead household?
Really?
[00:45:10] Speaker B: Maybe it's a list of all my occasions last week. No, no, moving on. If we accept. Okay, so if we accept your dinner, dinner table, primary occasion point, which is fairly safe to say. I. Indeed. That sounds like a strength, potentially not a weakness.
[00:45:30] Speaker A: Well, it was a strength when those OCC were reliable and frequent. But those occasions have been eroding for 30 years. So the long lunch is gone. Sadly, the dinner party is in decline. The habit of opening a bottle with a weeknight meal is disappearing, particularly among younger drinkers. Now, part of that is just economics. You know, there's precarious work, there's smaller homes, there's delayed family formation, there's nowhere to put your bottles, all of that sort of stuff. So wine historically thrived in slower domestic environments and modern urban life is just a lot less compatible.
[00:45:56] Speaker B: Which means it's time for new occasions then. And this is where good marketing comes in.
[00:46:03] Speaker A: Yeah. The problem is that, you know, while you can market existing, I, I have great faith in your marketing powers.
[00:46:08] Speaker B: Really.
[00:46:08] Speaker A: I'm sure that you can do this, but it is, it can be very difficult to create problem, you know, occasions from scratch. So just ask the makers of Sauterne, who are well aware that while everybody loves the taste of dessert wines, there's no dessert wine occasion anymore. And so their sales keep going down.
[00:46:22] Speaker B: Yeah, yeah, very true point. But you can spot emerging occasions and make yourself easier to choose for those or associate yourself more with those occasions. So what wine is often effectively. That's what wine is often really slow to do. So it waits for consumers to come to wine instead of asking where consumers already are. So you, you mentioned earlier about women in women as wine consumers. And, and I'm thinking here about particularly women embracing aperitivo culture. I think that that one's quite clear, isn't it?
[00:46:53] Speaker A: Yeah, no, I'm not. I'm going to agree with you about that. So aperture Ativo culture is a genuine new occasion that wine found. I would still argue it's still somewhat food adjacent though.
[00:47:04] Speaker B: Okay, Is it really hasn't it evolved into more about taking time for an early evening drink that I don't know, may involve a few crisps, nuts and olives of your pot charcuterie Luly, what
[00:47:16] Speaker A: kind of aperitivo are you having in your household?
[00:47:19] Speaker B: Yeah, I think opening packets always easier, isn't it? Pour it in a bowl and say it's a protivo hour. It's very simple.
So let me just summarize your argument because I want to make sure I've understood it. So you're saying that wine boomed on a set of structural conditions that no longer exist. The dinner table ritual, the fortifying myth, the baby boomer cohort with money and enthusiasm. And your conclusion is that wine should have made more of an effort to connect with the way gastronomy was changing both at home and in the on trade.
All the things we've talked about in previous episodes, like smaller formats, I guess, and white wine are ways, could be ways of solving this.
[00:47:59] Speaker A: Yes. And so the prestige, which like we said, drives so many decisions around what is planted, what is served, you know, what is valued. The prestige stayed with red wines for too long. So wine lists remained intimidating by the glass. Lists were pretty conservative or they were geared to making the restaurants high margin, not towards consumer discovery. And unfortunately it's still true that wine is mind's logic is food. It's not arranged around drinking occasions the way beer or spirits or RTDs are. It typically rises and falls with food culture.
[00:48:29] Speaker B: Okay, I'm not sure I 100 agree with you on that. So you, you could say that about plenty of other drinks as well. So you were just saying RTDs and BE and beer, there were not kind of food adjacent in the same way. But you know, RTDs are consumed at ball games alongside a hot dog. You know, cocktails are consumed, consumed with bar snacks or dinner or charcuterie. As you said earlier, beer turns up at pubs, at football matches, at barbecues. All of these occasions also have kind of food hovering nearby. The difference isn't that those categories are free from food, it's that they've been much better at claiming the occasion, not just the eating occasion.
[00:49:13] Speaker A: Well, they've historically been associated with the occasions. And so I think the more, the more that you put, you know, wine into those non food situations, the more it is going to lose to beer and spirits.
[00:49:22] Speaker B: Yeah. What? Go ahead. Question back to you. Why should wine automatically lose in those contexts? That there's no reason it couldn't win.
[00:49:32] Speaker A: No, but gin, whiskey, tequila, beer, they all survived the Erosion of the dinner table because they already existed without food. Though I will note that spirits consumption is also for, you know, for other reasons which are affecting our alcohol market. But. But overall, so you can have the cocktail, the long drink, the bar rounds. They don't need the roast chicken, and wine actually kind of does.
[00:49:51] Speaker B: Okay, I'm not gonna let you get away with that statement.
Wine needs a roast chicken. Although it is quite interesting, wine has been perfectly capable of existing without food. So receptions, gallery openings, book launches, corporate events, warm prosecco and a plastic flute under strip lighting. So wine can be a drink in its own right. The question is, is whether it's. Whether it has made that role desirable or distinctive or contemporary enough.
[00:50:20] Speaker A: Yeah, sure. Of course, you're right. You know, wine is drunk without food constantly. We've all had the one glass of Prescott.
[00:50:25] Speaker B: Again, personal experience there.
[00:50:28] Speaker A: This comes back to what the wine industry kept saying about itself. Wine's entire cultural positioning and retail advice is structured around food pairing. You know, the whole category has been built around the meal. So when you try and convince consumers to drink drink outside that context, you're actually undermining everything the category has trained them to expect. So, and that's why I say even rose and prosecco attached in some way to a quasi food occasion rather than escaping food altogether.
[00:50:54] Speaker B: So your view is that wine's relationship with food, which was historically its greatest strength, has become effectively its structural trap.
[00:51:02] Speaker A: Yeah, and I mean, people have tried really hard to make wine into just a beverage. But again, you know, you're up against beer and spirits, which if you want a beverage, is often, you know, cheaper, less hassle, all of that, those things. So the more occasions contracted around food, the more wine contracted with them.
And, you know, spirits went with the drinking occasion wherever it went, and wine couldn't because of this problem, that every time you put wine in a truly non food context, it tends to lose to what else you've got on offer.
[00:51:28] Speaker B: And then comes, of course, the cost of living crisis in our history here. So your conclusion is that it's now too late for the middle market.
I've heard you say many times that the number one problem with wine is the cost living crisis, which is why I just mentioned it. So affordability really matters and wine, particularly in the on trade that you say is critical, has become unaffordable.
[00:51:54] Speaker A: Yeah, but one of the, you know, one of the peculiar things about this moment is cost of living crises don't usually destroy essential categories. So if wine was essential, what you would expect to see is People trading down, not vanishing from the categories into RTDs. Now that's happening because wine has already moved from being a habit to into being a discretionary purchase.
[00:52:13] Speaker B: Okay, first up, I would say wine is most definitely an essential category. But that's just my personal opinion.
[00:52:20] Speaker A: Sorry.
Do you know, as we're talking, I'm thinking, oh, what am I going to have tonight? Should I have a rice?
[00:52:26] Speaker B: Exactly. So let's move beyond that one, Felicity. Anyway, and your economist friend actually suggests a way out of this trap.
[00:52:34] Speaker A: He does. Do you want to tell you what it is?
[00:52:36] Speaker B: Okay. Indeed. Thank you. So, yes, he would say that the wine trade keeps asking the wrong questions. So it asks questions like how do we get young people to drink wine? Which is the fear based volume question. He would say the right question is what are we uniquely positioned to offer that nothing else can?
But that brings us, does that bring us back to terroir and vintage and heritage again?
[00:53:00] Speaker A: Look, I don't think it means pushing the old hierarchies of labels and scores, but I do think maybe it means making an emotional connection to what's real and tangible. And the world of AI is exactly the right time to make that case. Because everybody's getting sick of the fake
[00:53:15] Speaker B: digital world, which I guess is we could say then for. Is where wine tourism comes in. So wine tourism is the one area where the industry has an asset that no other drinks category really has. Maybe a bit of whiskey, but primarily it's owned under wine. Certainly be able to replicate at scale. And what I'm talking about here is the physical place, the landscape, you know, the table under the vines.
[00:53:39] Speaker A: Yes, in general, not always, but in general the. The industry has massively underinvested in the idea that the experience of going somewhere is a really powerful recruitment tool available to wine. Except of course in places like Napa, where they, they have followed the prestige logic, which worked until it didn't.
[00:53:56] Speaker B: Are you talking about tasting room pricing here, Felicity?
[00:53:58] Speaker A: Yeah, yeah. And that's. And that's just premiumization on steroids.
[00:54:02] Speaker B: Yeah, yeah. So give us your prediction for wine wines future.
[00:54:08] Speaker A: Okay, so wine is 8,000 years old. It's not going anywhere. Absolutely. You know, but I think the rise of the mass market, which is what we're talking about from the 1980s onwards, was because of a particular demographic reality, which was you had a large cohort of the population, the baby boomers, they were interested in wine, they were interested in food, they had more money, they had rising prosperity. So they had the money to spend on both. But the wine world hung on to the things that got them interested. The scores, the OK red wines, the chasing of prestige, long after they should have moved on.
[00:54:38] Speaker B: And so, wise sage Felicity, what happens now that the baby boomers are retiring?
[00:54:44] Speaker A: I think wine's going to revert to the mean. Not because the industry failed. I think it did make some avoidable mistakes, but because the conditions that created mass wine consumption were always going to be temporary. So the sigmoid curve explains what the industry might have done better at its peak. But I think the boomer thesis explains why the peak was always going to end. End.
[00:55:03] Speaker B: Okay, but your argument falls down in one key area that we haven't actually touched on so far. Your argument assumes those conditions have disappeared everywhere but in some emerging markets. So India, for example. We could take Brazil. We could. Others are available. Clearly, some of the conditions that supported the last great wave of wine growth are only just starting to come into existence in those emerging emerging markets. So what if wine's mass market opportunity hasn't vanished, it's just moved?
[00:55:35] Speaker A: Oh, well, that's a whole new episode now. Brazil, Brazil, I'm going to agree with you about. All right, But I am very skeptical of the idea of India in particular. And other emerging markets are going to be a savior. So the thing that made wine into a mass market product in Western countries was that it was already part of the culture, so the signal got amplified. Now, that is not true of India. And honestly, even if, if India were to embrace wine widely, it wouldn't be enough to soak up the massive oversupply.
[00:55:59] Speaker B: Look, I do agree, but if those producers and distributors focus on, back to my favorite topic, sparkling white as prestige, for example, I'm kind of wondering, perhaps that could change the direction of travel potentially. If these conditions are emerging elsewhere, so parts of Asia, parts of Africa, then the question becomes, well, whether wine exports the old prestige model that you've been describing on the episode, or perhaps builds a more modern contemporary occasion led one from the start.
[00:56:34] Speaker A: Oh, maybe. I tend to think that some of that is wishful thinking for a couple of reasons. One is that regulators in emerging markets are very, very conscious that big multinationals want to use them as a dumping ground for oversupply.
Also, what we've seen again and again and again is that whenever people go into, into these emerging markets, they do the same thing. They just, you know, they get rid of their oversupply. So I think for, I think for lots. And also, it's not, it's not part of the culture. It would take A long time. So I think, for lots of reasons, I think that hope, you know, that we can go and sell it somewhere else is wishful thinking.
[00:57:07] Speaker B: Yeah. Harsh but fair.
I think so. The wine market as a whole might be facing hard times, but let's be more chirpy, Felicity. There's still plenty of opportunity.
Um, if you want to talk economics, I should bring up the fact that brands that grow during downturns are the ones that maintain mental and physical availability when the competitors retreat. So there is still opportunity for brands.
[00:57:33] Speaker A: Look, there's always opportunity. Always, Always. I'm not saying the entire sector is doomed from top to bottom. There are segments that are doing really well. And for everybody else, there is a saying for situations like this. When times are good, you should advertise. Advertise. When times are bad, you must advertise.
[00:57:47] Speaker B: Yeah. And advertise more. That's right. And our old friend Byron Sharp from the Ehrenberg Bass Institute, can't have an episode without talking about them.
Have found that when the category shrinks, the weaker players retreat, so the brands that stay end up proportionally with a higher market share.
[00:58:06] Speaker A: Yeah, look, wine is always going to survive, particularly fine wine and particularly artisanal local wine. I actually think that this is a time for wineries to be really, really ambitious, particularly around their terroir and, you know, those. What you might call their distinctive assets. And it's true that wineries that are going down that authenticity road are doing really, really well. But I want to say this again. The mass market as we've experienced the last 30, 40 years won't come back, just as the world of 1961 didn't.
[00:58:33] Speaker B: Yeah. And my challenge is that fading conditions are not the same as no opportunity, as I said before. So the question is, is whether. Is more about whether wine can stop mourning the lost dinner table and start sharper roles for people connecting with occasions that actually matter.
[00:58:52] Speaker A: Do you know, it's funny you said that word, mourning, because the thing that changed, you know, my personal career trajectory as a. As a wine journalist is, is in 2018, I was at a. A talk about media in New York, and they actually said to us, they said, it's time to stop crying. It's not never coming back. You have to adapt. Like, get out or adapt. Get off the floor and stop crying and accept that that world has gone. And actually, that really changed my life. And I did change what I was doing. So as somebody who's lived through the collapse of the media, yes, you do have to stop mourning. And you have to deal with the conditions as they are.
[00:59:23] Speaker B: Okay, on that chirpy note, that was Felicity's bleak but beautiful footnoted Dune thesis.
Old chirpy over there. So next time, let's try and be happier when I get to make the commercial case for the opportunity for wine.
[00:59:44] Speaker A: So listen in, because that's where you hear about how not to go under.
As I'm saying in this episode. Yes. So the fireworks are already gathering.
[00:59:53] Speaker B: They are. They're not gathering, they're sharpening.
[00:59:56] Speaker A: That's a mixed metaphor.
[00:59:57] Speaker B: Yes. Okay.
[00:59:57] Speaker A: The knives are gathering.
[00:59:58] Speaker B: Yes. Pulled myself together. So look, looking forward to round two on this one where, as I say, we'll be more cheerful Charlie and less doom, gloom Felicity.
But it's, it's.
And. And I've been holding back, would you believe, on this episode, quite a few of my views. So I'm looking forward to airing.
[01:00:17] Speaker A: Have you? Yes, it's always fun to go head to head.
[01:00:21] Speaker B: Oh, thank you, Felicity. So, to our lovely listeners, you've listened, hopefully all the way through this episode, and in a fortnight, it's my turn to frame our discussion, as I say, in a slightly more positive way. Opportunistic. Looking to the future and really looking at the case for more for wine, how it can remain relevant.
So we would love to hear your feedback.
[01:00:46] Speaker A: Yes, we would really like your feedback on these episodes so we can improve the podcast. Except don't write and say, just let Luly run the whole show.
[01:00:53] Speaker B: I don't want to hear that because it's more chirpy. If you want to get in touch with us, reach out to us on LinkedIn or you can email us at aquestionofdrinksmail.com you've been listening to A Question of Drinks, the podcast that explores why we drink, what we do.
[01:01:11] Speaker A: And we're here to answer your questions. If you want to know more about anything drinks, from the marketing history to the economic underpinnings to why this drink is popular and not that one. Send us an email, send us any
[01:01:23] Speaker B: questions you'd like us to discuss. And quite frankly, the more random niche, the better, and we'll have a go at answering them. We can be reached on a questionofdrinksmail.com that's a question of drinks, all one wordmail.com and we would hugely appreciate you
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