How The Wine Trade Can Stem Declining Sales

Wine’s downturn is cyclical believes Gallo CCO, Britt West, but – in an exclusive interview with db this week – he stressed that the trade needs to make changes right now to turn the tide.

West, who once managed Grey Goose vodka at Bacardi, has risen to the position of chief commercial officer at Gallo Wines and Spirits over the past seven years, having joined the US-based company in 2018. As a result of such experience, he has strong views on what the wine trade needs to do if it is to prevent an economic-driven drop in demand turning into something more structural. While he believes that the entire industry needs to work together to stem the decline, starting now, initially, he is at pains to point out that he’s positive about the future for the drink, having witnessed downturns before, and trade-driven turnarounds, although they concerned spirits, his former area of focus. At the start of our discussion on Wednesday, West also told db that his upbeat outlook was in contrast to others in wine business who seems to think “the sky is falling”, before commenting that such over-reactions to current trends are likely to occur when “big companies are making decisions off quarterly reports” – rather than a longer-term view, which tends to be adopted by family-owned businesses, such as Gallo. Furthermore, when turning his attention to the causes of declining wine sales, he sees the post-Covid correction in wine consumption, which he dubs a “reset following the highs of the global pandemic”, as a “minor discussion” compared to the “major discussion the wine industry needs to have”. Indeed, for West, the fall-off in wine sales seen in the past couple of years relates to a long-running industry-wide focus to encourage existing wine drinkers to spend more, rather than attempting to entice potential new consumers. “Over the past 30 years the trade has followed a trend and strategy of premiumisation, and it has been largely successful,” he recorded, adding, “But what we have not been concerned about as an industry was the coming demographic shifts.” Considering the US market specifically, he told db that each year as many as four million people reach the legal drinking age, however, currently, “the boomers are ageing out of wine at the rate of two million per year, and that increases to 4.6m a year by 2030.” According to West, what should concern everyone in the wine business is the fact that such a section of the population, who are aged over 60 years old, “control 70% of the disposable income [in the US] and have been very good wine consumers: they heard the 60-minute segment [in 1991] on the French paradox and adopted Mediterranean cuisines, with wine as part of that, and embraced wine tourism too, and this is the group that is ageing out.” Continuing he said, “And because we followed a premiumisation strategy, no-one was heavily focused on recruitment, no-one was trying to bring younger consumers into wines in ways that felt inviting to them – hence we find ourselves in position we are in now.” That position of course being that more people leaving the wine category than are coming into it, and, as a result, West’s “single biggest mission for my team and the industry is to get serious and focus on bringing new consumers into wine”. This endeavour doesn’t just concern suppliers, he stresses, “but also importers, wholesalers, retailers and sommeliers”.

A positive outlook

So why his positive outlook? That relates to the fact he has seen an industry turn itself around before. He said, “In the US, spirits consumption bottomed out in the mid-90s, and the spirits companies got focused on the issue, and started speaking to consumers; advertising on TV; visiting new locations, and educating bartenders: in the mid 90s drinks were pre-mixed and now we have 5-6 ingredient cocktails – that is a journey, and education was a big piece of it.” Summing up, he says, “So it [turning around a drinks category] is not without precedent.” Furthermore, “When you talk about gen Z's relationship with alcohol, I’m more positive than most.” He’s also realistic about the challenges, particularly the economic realities facing the younger consumer. In particular, he acknowledges that there is more competition for drinks spend than in the 90s, citing online gambling among 21-29 year-old males, as well as “the $7-a-day Starbucks habit that many have, which means that by the time they get to happy hour, they might not have any money left in their pocket.” Add to that the issue of student debt, “And people are staying at home”. It’s also why he says that the decline in wine sales right now is also “very much related to the economic reality, so it is very much cyclical.” And the problem is that wine has become more expensive. By way of example, he says that on visiting a restaurant recently in New York city, the cheapest glass of wine was $18, “when a nice IPA was $8”, commenting: “What are you telling the consumer in this pinched economic environment about where you want them to spend their money?” Continuing he said, “It’s part of a self-inflicted wound in wine: it does not feel inviting to most consumers: you are not trying to get me to order glass of wine when you are $10 above a beer.” Consequently, although West takes no issue with outlets offering high-end wines by the glass, he feels strongly that such outlets “should also offer something that is less expensive to welcome people into wine.”

The need to educate

Alongside this, he said that the sellers of wine in restaurants need to be educated by the trade, noting that many of the younger generation working in hospitality, who may have had a good knowledge of wine, left the sector during the pandemic, and never came back. “We need the staff to know about wine so they can communicate to their customers about their wine programmes,” he said. As for retailers, he said that it was vital that they offered shoppers “wines across a string of price points.” And then he mentioned formats. “We need to understand gen Z and younger consumers’ relationship with total beverage alcohol and meet them where they are.” In Gallo’s case, this has seen the company invest in “200ml tetra as a serving vehicle,” which he says “has a fresher delivery than aluminium cans and allows someone to have one glass on a Monday night, when they might be rejecting wine because they don’t want a whole bottle.” Continuing he said, “We need wines that are priced accessibly and provide a way for consumers to come into the category.” He added, “It wasn’t that long ago that finding the best value was a sport in wine – people wanted to surprise and delight their friends with an amazing wine that was only $10; somehow we have lost that delight.” His solution? “In the aisles of a grocery store, we should promote wine at all price points, not just those wines that drive premiumization – because that says to those entering category that you are not welcome.” With such changes, however, West can see a turnaround. “We know that consumers in good numbers are coming in to beverage alcohol and with new technology and formats we are able to be relevant to what they want at the times they want it,” he said. He adds, “Particularly in the US, there are large swathes of consumers that engage in beverage alcohol but have a low engagement with wine, such as the Hispanic populations, who are very high indexing in beer and distilled spirits and very low in wine - and they represent an enormous percentage of the population now – for example, they are the majority in Texas and California – and these are consumer groups we have largely ignored.” This could be altered, believes West, by “changing the way we describe wine, so we use terms that might feel more relevant to them – because our descriptors of wine are largely based on western European culinary connections.”

Barefoot recruits

Finally, he stressed that “Gallo is prepared to do our part in this,” referring to bringing new consumers into wine. As just one example, he said, “We have invested in Barefoot [wine], and from our own data, we have brought 2.6 million people in to the wine category last year.” This saw Barefoot wine become the official wine sponsor of the National Football League NFL in the US in 2022, which has meant, according to West, that people are now thinking, “Maybe wine is ok during an American football match; maybe wine is ok at a tailgate party?”. At the same time, Gallo has “updated and modernised the packaging,” and, as a result of such changes, West told db, “Barefoot has increase velocity in 2024 despite the doom and gloom deadlines and will contiue that momentum this year.” Concluding he said, “So there are brands and connection points in the wine industry that are working; we need to fuel and find more of those, because if we don’t, wine could become a model of obsolescence and a niche category, which is not in anyone’s interest for something that’s been around for millennia. "Let’s invite people into the category.”