Does the secular decline of the wine business matter?

And 3 other questions I'm thinking about these days

The pleasure of pondering is not to be underestimated

Last week Rob McMillan of Silicon Valley Bank penned a missive exploring the shrinking wine market. McMillan wisely pointed out:

…the fact that still wine sales have been plagued by declining growth rates since 2017. Even before the Pandemic, growth was effectively zero for the category. The headwinds creating this demand issue haven't changed: 

1. Younger frugal consumers are consuming spirits over wine.

2. Aging consumers that drove the growth of wine sales are cutting back.

3. Alcohol is losing popularity in the face of a health movement that puts even moderate consumption in a position of being a questionable choice. 

4. In the 'better for you' contest, wine has lost its prior status as a beverage with health attributes due to our industry's inattention.

5. Spirits have adapted their marketing effectively for a new consumer, while the wine industry has not.

In addition to the cogent argument McMillan presents, there is plenty of other demographic data and anecdotal evidence that suggests that the wine business is (and has been) in secular decline.

Here’s something you won’t likely hear about this problem: it’s not one!

For all but the largest players, the secular decline of wine is not an immediate issue. If I’m running Gallo or Constellation Brands, it’s a concern.¹ However, most boutique and family wineries and small- to medium-sized importers and distributors operate at such a niche scale as to allow them to subvert macroeconomic trends.

Much like the physics of subatomic particles fails to explain gravity, a 20,000 case winery or $20 million distributor’s success or failure operates outside the forces of White Claw and changing consumer preferences.

While, collectively, stakeholders comprise the industry, no one player is the industry. This allows small- to medium-sized stakeholders to pivot without overly concerning themselves about shrinking populations. For producers, the growth in the DTC channel offers the ability to grow margins. For distributors, the ability to diversify both portfolios (to accommodate changing tastes) and sales geographies (to offset demographic trends) is key.

Of course, the successful execution of such pivots requires resources, thoughtful leadership, consistent messaging, and a bit of luck. Still, these are things—except for luck—that you can control. The secular decline of wine, on the other hand, isn’t.

Here are three other questions I’ve been mulling over as of late:

1. Why aren’t some/more/all salespeople trained to ask good questions?

   “What do you think of this gin?”

   “Do you want to pick up 3 cases of that Rioja I dropped off last week?”

   “Where were your sales last month?”

   Ugh. Put a dollar in the bad question jar.

   Most wine and spirits salespeople aren’t trained in asking questions. Why? Teachers are trained in how to ask questions to improve their pedagogy. Given a salesperson’s job is about solving problems, you’d think more emphasis would be placed on teaching them how to gain information and validate it. If you haven’t learned how to ask questions in sales, you’ll need to teach yourself.

2. Is it possible the best books for wine and spirit professionals aren’t about wine and spirits?

   I used to think reading books about wine and spirits made me a better wine and spirits professional.²

   It turns out that learning about being a better professional—really an extension of being a good human—is what has made all the difference.

   Here are some of my top non-wine and spirit books for wine and spirit professionals:

   • So You Want To Talk About Race? by Ijeoma Oluo

   • The Premonition by Michael Lewis

   • The Checklist Manifesto by Atul Gawande

   • Timefulness by Marcia Bjornerud

   • Where Good Ideas Come From by Steven Johnson

   • Thinking in Bets by Annie Duke

3. How will wine and/or spirit companies adjust their practices to leverage logistical risks, glass shortages, cancel culture, and the new realities of the wine and spirit business?

   I find it particularly strange that many of the wine and/or spirit companies of today look much the same as they did ten years ago. Sure, their offerings have changed. Yes, the company might be larger (or smaller) than it had been. It’s how these companies function that remains stuck in time. How they serve the needs and wants of their employees, vendors, and customers hasn’t really changed. It’s the companies that have sprung up around them that are dragging this industry forward, for better or worse. It the “intermediaries”—from ReserveBar to Pix to SevenFifty to Winc to Vinvovest to Speakeasy Company—that are picking up the slack of innovation. Some of these ventures will undoubtedly fizzle, but those that don’t will be writing the playbook for those companies that failed to take chances.

1. I’m not running those companies, but if you are and you’d like to pay me a pretty penny for my thoughts, feel free to reach out.

2. By that same naive logic, I should be a much better cook given the number of books I’ve read on food. I will admit to being both a studied and practiced eater.