Forecasting…

I last made New Year’s resolutions in January 2009 in WVN issue 74.

The reason was simple: I had absolutely no discipline when it came to fulfilling any of my pie-in-the-sky ambitions. To make matters worse I felt obliged to report on my performance a year after making my resolutions and it was a major embarrassment to publicly display my flawed lack of focus and discipline.

I may not be alone in this underachieving corner of the world. In fact, I don’t see many writers in any sphere spending much time any more on resolutions.  The new normal is to open the New Year with a forecast of what is going to happen over the next 12 months.  Depending on the wisdom and reputation of the pundit these forecasts can either be absolute jokes with not a hope of ever happening, or they can be carefully considered, reliable projections.

Earlier this week I read with some interest the forecast for 2014 published by Jamie Goode, the English wine blogger I wrote about when he attended the International Cool Climate Chardonnay Celebration last July.

Jamie Goode and Norman Hardie at i4C 2013
Jamie Goode (left) and Norman Hardie at i4C 2013

I will summarize Jamie’s eight predictions for 2014 as follows:

  • The commoditization of wine will continue apace
  • Wine will continue to lose market share; craft beer is on the rise
  • It’s going to be a good year for the Balkans and the ancient wine countries
  • It’s going to be a bad year for many wine writers
  • Many will wish they’d paid more attention to their established markets
  • 2014 will be the year of the niche
  • The rise of neo-prohibition will threaten the wine industry in many countries
  • We’ll finally see some real innovation in the wine category.

Jamie is well-established as an independent thinker and it’s hard to imagine a more unusual set of predictions and some need comment.

First, I do agree that commoditization is a growing trend.

As one industry player explained to a WSET Diploma class last night “there are no bad wines anymore, there are simply some wines that are better than others”. This is a telling admission but it recognizes that for most consumers wine is a commodity that comes in red, white, rosé and sparkling formats.  The wine industry is not a brand-driven sector, on any meaningful level, so there is not widespread attachment to individual wines the way there is to laundry detergents or luxury cars.

This is a challenge for the industry and it is a path that is well established among younger wine lovers – these people don’t have the aspirations to assemble large cellars of collectible wines; their interest is to enjoy a glass or bottle with friends in a social setting.

In other markets the major supermarket chains are leading the commoditization trend with walls of wines bottled under their own labels and sold at a fraction of the price of domaine-bottled appellation wines. The principle at play here is when you seek fun you will always go for the lower priced bottle.

This trend seems to be at odds with the situation in Australia where wines at the commodity end of the spectrum are the wines that have fallen in sales.  The comment I would make here is Australia grew its business at a rate that was unsustainable and reached a point where supply outstripped demand to the point that the market became saturated with Aussie wines while at the same time countries such as Chile and Argentina came to the fore.  Australia found itself the victim of a perfect storm that was to a large degree of its own making.

In Ontario the LCBO seeks to increase sales of premium-priced wines and is making some progress in this regard but General List sales showed higher growth in both value and volume than Vintages in the most recent fiscal year. More telling is the fact that International Canadian blends displayed high growth at the LCBO in 2012-13:  Bag-in-box sales grew by 12% and bottle sales increased by over 16%.

Jamie is on to something with the commoditization forecast.

The wine writer forecast is not a new one and it is linked in direction with his comment about the year of the niche.  The major writers and journals such as Robert Parker, Wine Spectator and Decanter have all lost share of mind as the blogger phenomenon has taken flight.

Many bloggers are unreliable and have no following.  Other bloggers launch their flight with great energy and lose interest quickly, quietly disappearing in the digital ether.

Despite this pattern there are over 1400 active bloggers extant today (see http://winebloggersconference.org/from-the-organizers/complete-list-of-wine-blogs/ for a set of links to different blogger communities around the world).

The issue at the heart of Jamie’s forecast is the fragmentation of the influencer community and the need for writers to carve a niche for their message. The fragmentation mirrors the fragmentation of the wine industry itself, with no one player dominating production, distribution or promotion of the sector. In such traffic writers need to find a place where they can specialize, build their reputation and attract a following – all in way that acknowledges that few if any readers share the passion for wine possessed by the writer.

This fragmentation and specialization leaves open the door for local influencers to play a role that would not be possible in almost any other consumer market and with the result that the commoditization trend described above has such strong momentum.

On top of it all there is very little revenue in this fragmented influencer market…

The forecast about wishing they paid more attention to their established markets is a reference to the growing investments made in China by many large Old – and New World makers.

It is Jamie’s opinion that the Chinese market is “proving to be a tricky and uncertain market at the moment”.  I would agree with his view: it will be a long while before grape wine will be mainstream in Chinese culture. For the Chinese, wine is a high-alcohol spirit made with rice and other sugar sources.

The concept of enjoying a bottle of table wine with a meal is foreign to Chinese consumers and yet there have been enormous direct investments and joint-venture projects established in China by a number of firms who seek new opportunities to grow profits, profits that are under pressure due to things like commoditization.

Recent events have demonstrated the fickle and uncertain nature of the Chinese market for western firms.  Austerity measures imposed by the government in the past year were aimed at putting a stop to the gifting to government officials of expensive wines, spirits and other luxury goods by firms seeking to curry favour and pursue their mercantile interests with public decision makers.  The effect of this was to dramatically affect local sales of Cognacs and Champagnes to the degree that the major companies selling these products have reported notable earnings decreases in recent quarters.

Beware.

The last comment I will make is one of anticipation.  This concerns the innovation forecast, one that recognizes there are players who will seek to differentiate themselves and their products on the wine walls of the world – the shelves where wines are displayed in stores around the world.

The innovation Jamie expects will be that which allows a producer to distinguish their products from all the other look-alikes in similar tall bottles.

Goode makes no forecast of what form this innovation might take.  So, let’s watch and see what happens.  Will it be a new package, a new way of distributing wine, say by subscription, sold at a kiosk in the store?

Stand by.

à bientôt…

Copyright© W. John Switzer 2003 – 2014.

 

Advertisements

Author: John Switzer

I am wine writer, educator and tour guide. From 2005 to June 2014 I published a bi-weekly newsletter, the Winesights Vintages Newsletter (WVN). This Newsletter was closed in July 2014 when the Government of Canada put in place the onerous administrative requirements of Canada's Anti-Spam Legislation. The legacy of WVN continues on this blog spot where I post wine-related articles as well as reviews of a small selection of best-value wines from each bi-weekly LCBO Vintages release. I hold the WSET Diploma, I am a WSET Certified Educator, I teach in the WSET program at the Independent Wine Education Guild in Toronto where I am the past Director of the WSET Diploma program. Since 2010 I have been a judge at Decanter World Wine Awards on the Rhône panel and I am a member of the Society of Wine Educators.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s