2020 us wine currents washington winegrowers convention · market share of dtc ($$) average british...
TRANSCRIPT
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2020 US Wine CurrentsWashington Winegrowers Convention
Rob McMillan, EVPSilicon Valley Bank
Presented March 3rd 2020
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Washington Centric
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-12.2
8 8
39
-12
0 0
-4
-47
-20
-100
-50
0
50
100
150
Economy ConsumerDemand
SalesChannels
Grape Supply Labor Alcohol Laws Capital ForeignCompetition
Substitutes Overall
Net S
enti
men
t Ind
ex
2015 2016 *2017 2018 2019
Change in Washington Industry Sentiment:Successful, but Negative Sentiment – Business is Getting Harder
3Source: 2020 SVB State of the Wine Industry Survey
Overall Industry
Sentiment
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Trend of Washington Winery Financial HealthGood, But Getting Weaker as a Trend
4Source: 2020 SVB State of the Wine Industry Survey
6%
8%
31%
19%
31%
6%
0%
5%
16%
29%
34%
16%
1%
6%
22%
36%
23%
12%
3%
8%
28%
43%
13%
8%
2%
6%
10%
29%27%
20%
6%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Dead Very Weak Slightly Weak Good Strong Very Strong Rock Solid
2015 2016 *2017 2018 2019
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Growth of Washington DTC as a Percent of Sales
5Source: SVB State of the Wine Industry Survey
49%
51%
52%53%
59% 58% 57%
65%
45%
50%
55%
60%
65%
70%
2012 2013 2014 2015 2016 *2017 2018 2019
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Washington: 2019 Direct to Consumer Stats are respectable
Source: Wines & Vines, Savos 2020 Report
2.90%
12.80%
16.10%
5.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
Price Per Bottle Volume Growth Value Growth Market Share of DtC ($$)
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Average BritishColumbia Napa County New York OregonSonomaCounty Virginia Washington
2015 1237 1644 2507 527 1288 1096 7892016 1297 1369 2776 587 1099 1644 6562017 1114 1159 1497 2051 716 1039 2075 6182018 1160 1261 1453 712 1004 1482 8082019 1520 1815 1372 2729 1079 1098 1464 942
0
500
1000
1500
2000
2500
30002015 2016 2017 2018 2019
Average Monthly Visitors To the Tasting RoomWashington Taking from California?
7
*Only three years worth of information for British Columbia.*2017 New York did not have a significant number of responses to calculate average in 2018
Silicon Valley Bank and Wine Business Monthly 2019 Insights to Successful Consumer Wines Sales Survey
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Above Avg. Results Today,But Washington is part of the Wine Industry and …
… the Industry is Hitting a Ceiling
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Total US Table Wine Consumption is Flat … at BestLong Term Wine Trends 1980 to the Present
300
400
500
600
700
800
90019
8019
8119
8219
8319
8419
8519
8619
8719
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
1020
1120
1220
1320
1420
1520
1620
1720
18*2
019
Mill
ions
of G
allo
ns
Source: California Wine Institute, Gomberg-Fredrikson, SVB
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155,000,000
156,000,000
157,000,000
158,000,000
159,000,000
160,000,000
161,000,000
162,000,000
163,000,000
164,000,000
165,000,000
$12,000,000,000
$12,500,000,000
$13,000,000,000
$13,500,000,000
$14,000,000,000
$14,500,000,000
$15,000,000,000
Dollars Cases
Current US Off-Premise Wine Sales Trends 2014 - PresentVolume Turned Negative 2017. Value has flattened. Some Channel Shifting.
Dollars
Cases
Source: Nielsen 12-2019
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ry. 16.7%
16.6%
17.1%
17.5%17.7%
2015 2016 2017 2018 52 we 9/28/2019
Private Label Wine Channel GrowingCategory Plays to Frugal Consumer’s Pocket Books
Source: Nielsen Retail Measurement Services, 2015, 2016, 2017, 2018, and 52 weeks ended 9/28/2019
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Origin $ $ CYA$ % Chg
YA 9L EQ 9L EQ CYA9L EQ % Chg YA
DOMESTIC 10,638,323,208 69,990,043 0.7 119,123,670 -2,748,337 -2.3IMPORTED 3,826,915,144 7,880,107 0.2 39,527,114 -808,870 -2.0CALIFORNIA 9,579,368,020 61,409,984 0.6 110,526,363 -2,612,746 -2.3WASHINGTON 608,937,551 -14,836,957 -2.4 5,038,221 -174,550 -3.3OREGON 219,134,411 24,091,075 12.4 1,114,914 121,110 12.2ITALY 1,213,754,152 18,509,681 1.5 10,407,186 -112,246 -1.1AUSTRALIA 717,867,363 -15,208,046 -2.1 11,730,989 -326,820 -2.7NEW ZEALAND 507,401,792 38,619,451 8.2 3,635,764 258,289 7.6FRANCE 485,741,469 12,401,969 2.6 2,921,598 -75,274 -2.5ARGENTINA 323,728,442 -21,833,939 -6.3 3,510,600 -294,756 -7.7CHILE 254,015,872 -4,423,065 -1.7 3,842,281 -2,201 -0.1
SPAIN 158,766,744 -9,992,295 -5.9 1,987,319 -110,564 -5.3
Off-Premise Sales By Area of Origin52 Weeks as of 12-28-2019
Source: Nielsen 12-28-2019
Cases - VolumeDollars-Value
TOC
Edit Data Selections
Table of Contents
Market : All Outlets • BA_SUBCATEGORY(C) : TABLE • Product Share Basis : TABLE
Report Name : Report ID : RB01Source : Nielsen AnswersData Context : MFG BevAl Suite WineRun Date : 10/11/18 3:58:13 PM PDT
Copyright © 2018 The Nielsen Company
ReportMeta
Edit Data Selections
https://answers.nielsen.com/portal/site/answers/menuitem.0d4f8dc7a5fb276424fd3c70685072a0/?job_id=A936ABD5BCA94D67A03212F676372C75&open_selector=true
Market : All Outlets • BA_SUBCATEGORY(C) : TABLE • Product Share Basis : TABLE
Report1
Origin$$ CYA$ % Chg YA9L EQ9L EQ CYA9L EQ % Chg YA
DOMESTIC10,638,323,20869,990,0430.7119,123,670-2,748,337-2.3
IMPORTED3,826,915,1447,880,1070.239,527,114-808,870-2.0
CALIFORNIA9,579,368,02061,409,9840.6110,526,363-2,612,746-2.3
WASHINGTON608,937,551-14,836,957-2.45,038,221-174,550-3.3
OREGON219,134,41124,091,07512.41,114,914121,11012.2
ITALY1,213,754,15218,509,6811.510,407,186-112,246-1.1
AUSTRALIA717,867,363-15,208,046-2.111,730,989-326,820-2.7
NEW ZEALAND507,401,79238,619,4518.23,635,764258,2897.6
FRANCE485,741,46912,401,9692.62,921,598-75,274-2.5
ARGENTINA323,728,442-21,833,939-6.33,510,600-294,756-7.7
CHILE254,015,872-4,423,065-1.73,842,281-2,201-0.1
SPAIN158,766,744-9,992,295-5.91,987,319-110,564-5.3
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Year-End Sales Growth for Smaller Wineries in Washington: SolidEstimates are normally about 2% High Though
13Source: SVB State of the Wine Industry Survey, October 2015 - 2019
17%
19%
16%
13% 13%12%
15%
13%
11%10%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2015 2016 *2017 2018 2019
Change in $ Sales Change in Case Sales
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Washington: Data and Marketing Analytics“Do you have an employee dedicated to analyzing your consumer data?”
14Source: SVB State of the Wine Industry Survey
Full-Time14%
No57%
Part-Time29%
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Who is the Current Wine Consumer?
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0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100
Male Female
MatureBoomerGen XMillennial
Gen
Z
Population is Hitting Milestones. The Current Wine Consumer is Aging.The New Consumer Opportunity is Younger than Today
Source: U.S. Census Bureau
Num
ber o
f Peo
ple
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2.3%
16.2%
32.2%
35.9%
13.4%
2.1%
18.0%
32.9%
40.8%
6.0%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Gen Z (21-22) Millennials (23 - 38) Gen X (39 - 54) Boomers (55 - 73) Mature (74+)
2014 2015 2016 *2017 2018 2019
Which Consumers does Washington Attract?Washington is Attracting the Same Age Consumers as Other Regions
17
Source: SVB Winery Conditions Survey, 2019
This is a Problem
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Exclusive Beer18% People/7% $
Exclusive Spirits6% People/2% $ Vol
Wine & Beer19% People/17% $
Wine & Spirits7% people/7% $
Beer & Spirits8% people/9% $
Exclusive Wine15% People/4% $
Most Wine Consumers Drink Across CategoriesOnly 15% of Drinkers Are Exclusive to Wine. Competition is from Spirits, Seltzer & Craft Beer
Source: Nielsen Homescan Panel, Total US: 52 weeks ending 06/29/19 Wine includes Still & Sparkling; Beer includes FMB and Ciders
WineBeerSpirits
Wine/Beer/Spirits27% People/55% $
Wine Beer
Spirits
-
More Alc. Bev. Consumers Are Selecting SpiritsSpirit Producers Are Better at Marketing Compared to the Wine Community
Source: Nielsen Syndicated Bev Al Databases 52 weeks ending 11-2-2019
2.8
1.31.7
2.1
5.8
2.6
BEER WINE SPIRITS
Wine is 2X more expensive than Beer or Spirits per serving
-
0
50
100
150
200
250
$-
$2,000.0
$4,000.0
$6,000.0
$8,000.0
$10,000.0
$12,000.0
$14,000.0
$16,000.0
4 Yr Ago 3 Yr Ago 2 Yr Ago 1 Yr Ago Lat. 52 weeks
Num
ber o
f Bra
nds
Mill
ions
of D
olla
rsDollar Sales Number of Brands
Spiked Seltzers: Economic Substitute or Gateway?20% - 40% of Spiked Seltzer Growth is Coming From Wine Occasions
Source: Nielsen, 11-16-2019
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More Young Consumers Drinking Wine in Cans – Occasion Driven?Ready to Drink Sizes Break Down Price Barriers for Frugal Consumers
Source: Nielsen Total U.S. 52 weeks ended 11-2-2019
0
100
200
300
400
500
600
$-
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
4 Yr Ago 3 Yr Ago 2 Yr Ago 1 Yr Ago Lat 52 weeks
# of
Item
s Se
lling
Dolla
r Sal
es
Dollar Sales # of Items
Led by …• White and Pink• 375 ml; 250 ml; 187ml
About 1% of dollars
-
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
187 ML 375 ML 500 ML 750 ML 1.5 L 3 L 4 & 5 L
Shar
e of
For
mat
Gro
wth
Rat
e
Growth Rate Share
Growth and Share of FormatsSmaller and Alternative Formats Growing – Supports Old & Younger Drinkers
22Source: Sip Source, 9-19Tetra Pak in 500ml
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2.1%
0.9%
-0.3% -0.9%
-2.3%
3.4%3.0% 3.0%
2.8%2.3%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
Wine On Premise Spirits On Premise
Wine Consumers Opting out of Restaurants: Alc. Bev. is SufferingBy-The-Glass Programs Suffer in Restaurants Today
Source: SipSource, 2019
Spirits
Wine
-
Younger Consumers Fingerprints on Varietal GrowthBubbles and Rosé Leading Growth – Both Skew to Younger Drinkers
24
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
Shar
e of
Mar
ket
Gro
wth
Rat
e
Growth Rate Share of Market
Source: SipSource, 12M rolling Sept 2019
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Younger Consumers Are Spirits and Beer ConsumersWill Younger Consumers Continue to Move to Wine as they Age?
Sources: Scarborough Research, SVB Analysis
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
Millennials (22 - 37) Gen X (38 - 53) Boomers (54 - 72) Matures (73+)
Inde
x Ba
se =
100
Recent Beer Recent Liquor Recent Wine Recent Cannabis
-
Young Consumers Drink Less AlcoholWhat Happened to the French Paradox and the Mediterranean Diet?
• Source: Nielsen Beverage
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5%5%
9%10%
13%14%
15%17%
18%19%
21%24%
32%
0% 10% 20% 30% 40%
I/my partner is expecting or recently had a child
Other
Friends/family are drinking less
More interested in Cannabis
Consuming more non alcoholic beverages
Want to maintain clarity/control
Can't afford to drink as much
Don't want to be hungover
Health related reasons
Don't go out as much as I used to
Consuming more of a different Alcohol beverage
Lost interest in drinking alcohol in general
Opting for healthier lifestyle
Why Are Younger Consumers Cutting Back?Sixty-Three Percent Cited Health as the Main Reason
Survey conducted online by The Harris Poll in partnership with Nielsen (January 7-9, 2019); n=1,964U.S. adults21+
-
$-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
$200.00
White Hispanic AfricanAmerican
Asian
Young Consumers Are More Ethnically DiverseEven More Opportunity with Hispanic, African American and Asian Consumers
• Source: Nielsen Syndicated Bev Al Databases
Annual Wine Purchases by Ethnicity
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Millennials Aren’t BoomersIf You Want to Sell to Someone, Sell Features they Care About
Value Boomer Millennial Action
Support Group Family Friends Drive Club Socialization
Choice in Food Don't eat if it's bad for you Only eat if it's good for you Ingredients, Calories, "Better for You"
Business Capitalism is the path to individual wealth Wealth comes with social responsibility Define Social Reason You Exist
Diversity Civil Rights Movement drove change Social and ethnic diversity drives change Staffing, tasting room diversity, advertising
Landfills and Waste Disposable culture Green, reuse and repurpose culture Packaging, Carbon Footprint, Sustainability
Spending Conspicuously On important things Improve Wine Value by selling on important personal values
Fun Work Before Fun With Everything! Embed into Events, Tasting Room, Marketing & Communications
• Source: Silicon Valley Bank
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Changing the Message
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The Mixologist, Experience & Fun
Curling lanes …Entertainment
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More Fun Social Venues Popping Up Daily
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The Experience Is Social. Leverage Community
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Alcohol Occasions are Increasingly ActiveIs Wine Something that is Routinely Shared in These Types of Environments?
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The Wine Industry's Idea of Fun is Dated
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The Solution For Wineries?…Just a Placeholder for a Larger Conversation
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Current Marketing for Consumer Goods
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Selling Features that Resonate with ConsumersServing Size, Calories, Low Sodium, Low Sugars, Green, Authentic, “Natural,” Causes
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The word “No,” Certification Badges, Plant-Based Products
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White Claw – Why?Question: Can
We Put Calories on Wine Bottles?
Yes!
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Moving Away from Long Days and Cool NightsNobody reads long back labels. We need to adjust to consumers with no time.
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Final Thoughts & Take-Aways
42
1. Old & Young: “Two lenses” on all projects, initiatives, strategies, changes and events
2. Be Brave: Sell to Young Consumer’s Values (Health/Pithy/Calories/Fun/Friends)
3. Use Data: Make Marketing & Sales More Effective & Efficient. Understand your Core
4. Internet sales: 3% of winery sales vs total Luxury at 17% on-line (Virtuous Loop)
5. Quality Last: Sell features, values, or a brand concept – and then, sell wine quality
6. Break the Tasting Room Bottleneck: Regional Focus. Take Experience on the Road.
7. Connect: Activate and encourage lateral communication in your Consumer Communities.
8. Wine… is the Beverage Young Consumers Want … THEY JUST DON’T KNOW IT!
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Thank You!
For questions and comments on this presentation, or about banking with SVB, contact:
Slide Number 1Slide Number 2Change in Washington Industry Sentiment:�Successful, but Negative Sentiment – Business is Getting HarderTrend of Washington Winery Financial Health� Good, But Getting Weaker as a TrendGrowth of Washington DTC as a Percent of SalesSlide Number 6Average Monthly Visitors To the Tasting Room�Washington Taking from California?Slide Number 8Total US Table Wine Consumption is Flat … at Best�Long Term Wine Trends 1980 to the PresentSlide Number 10Private Label Wine Channel Growing�Category Plays to Frugal Consumer’s Pocket BooksSlide Number 12Year-End Sales Growth for Smaller Wineries in Washington: Solid�Estimates are normally about 2% High ThoughWashington: Data and Marketing Analytics� “Do you have an employee dedicated to analyzing your consumer data?”Slide Number 15Slide Number 16Which Consumers does Washington Attract?�Washington is Attracting the Same Age Consumers as Other RegionsMost Wine Consumers Drink Across CategoriesMore Alc. Bev. Consumers Are Selecting Spirits�Spirit Producers Are Better at Marketing Compared to the Wine CommunitySlide Number 20More Young Consumers Drinking Wine in Cans – Occasion Driven?�Ready to Drink Sizes Break Down Price Barriers for Frugal ConsumersGrowth and Share of Formats�Smaller and Alternative Formats Growing – Supports Old & Younger DrinkersSlide Number 23Younger Consumers Fingerprints on Varietal Growth�Bubbles and Rosé Leading Growth – Both Skew to Younger DrinkersYounger Consumers Are Spirits and Beer Consumers� Will Younger Consumers Continue to Move to Wine as they Age?Slide Number 26Slide Number 27Slide Number 28Slide Number 29Slide Number 30The Mixologist, Experience & FunMore Fun Social Venues Popping Up DailyThe Experience Is Social. Leverage CommunityAlcohol Occasions are Increasingly Active�Is Wine Something that is Routinely Shared in These Types of Environments? The Wine Industry's Idea of Fun is DatedThe Solution For Wineries?�…Just a Placeholder for a Larger ConversationSlide Number 37Slide Number 38Slide Number 39Slide Number 40Slide Number 41Slide Number 42Slide Number 43