Millennials and Napa Cabernet: An uneasy relationship
The most interesting part of Silicon Valley Bank’s new report on the future of the wine industry concerns its predictions about Millennials. As Baby Boomers age and die off, Millennials will become the U.S.’s dominant wine purchasers, but “The big issue with millennials is they’re the largest buyers of international wines. They’re also really good with buying the discounted bottles,” said the bank’s founder, Rob McMillan.
International wines and discounted bottles. Hmm. That’s good news for South America, Australia and old Europe, and also good news for California companies like Cameron Hughes, Gallo, Bronco, The Wine Group and others who sell inexpensive wines. But what are the implications for high-end wine, particularly Napa Valley Cabernet Sauvignon?
They can’t be good. Millennials didn’t grow up worshiping at the shrine of Bordeaux, which is the model that Napa Valley mimics, and so far they [Millennials] haven’t given any indication they’re in the thrall of the cults. And why should they be? Millennials pride themselves on their independence. They’re not as hidebound as their parents, and they’re a lot more open to new experiences. Nor are they as hung up with matters of prestige and conspicuous consumption, which are two phenomena that–like it or not–are associated with the allure of cult Cabernet Sauvignon.
There are so many anecdotes about high-end Napa wineries having difficulty unloading product. Like the old saying goes, where there’s smoke, there’s fire. Triple-digit Cabs took a real hit during the Recession, and there’s no evidence that they’re recovering now. What I hear through the grapevine is remarkably consistent: retailers who traditionally dealt with expensive Napa wine tell me they can’t even give it away anymore.
Here’s a bullet quote from the Silicon Valley Bank report: “Today we find ourselves at a crossroads, one in which the younger consumer is being trained to believe luxury purchases should come with a discount, and wine is as good or even better coming from foreign sources. With Boomers hitting retirement age, we have a real question about the ability to increase wine sales when older generations who are willing to pay for a good bottle simply can’t consume the volumes they used to, and younger generations can’t afford a good bottle but could consume more.”
That’s an uh-oh moment for the cults. But there is a potential bright spot: “But as Millennials age if they develop the capacity (income) to buy wine, and if their appreciation for wine is strong as reported in the press, they will be the long-term growth opportunity we can anticipate in the business out past 2020,” McMillan writes.
That’s a big “if.” Actually, two big “ifs.” It means that a generation that grew up on Madonna, Pixar movies, Friends and the Internet is suddenly going to turn 40 (starting around 2022) and then develop an infatuation with Screaming Eagle, Colgin and Bryant. Exactly how is that supposed to happen? Why? Isn’t it easier to think it won’t? Besides, even if their income rises so high that they can afford triple digits for wine, why should Millennals restrict their appetites to Napa Valley? McMillan repeatedly stresses the “international” orientation of Millennials. They would look abroad for prestige wines, further eroding the market for high-end domestic wine.
Ever since I started visiting Napa Valley, in the late 1970s, it’s been clear to me that the vintners up there, who are a smart bunch, looked to Bordeaux as their model and inspiration. They wanted their wines to have the worldwide prestige of Bordeaux–and they also wanted Bordeaux prices. That tendency only grew more pronounced in the 1980s and 1990s. Today, it’s the prevailing model in Napa Valley.
But could it be based on a false assumption? That assumption was, if Bordeaux could do it, Napa can, too. However, history (and markets) are replete with singularities. Bordeaux came of age when good wine was scarce. Because the Bordelaise, and the Englishmen who drank their wines, were masters of the export trade, which was then a virtual monopoly of the English by the 18th and 19th centuries, Bordeaux became the lingua franca of great wine, for the wealthy white landowners who could afford it,
Do any of those conditions exist today? There is no monopoly of trade. Instead, we have free trade across the world, making it much more difficult for any one product or region to dominate the market. A few gatekeepers can no longer influence whatt everybody else drinks. And good wine is no longer scarce. It’s ubiquitous. You can’t swing a dead chicken without hitting a bottle of something tasty. Nor are most consumers any longer wealthy, white, or landed gentry. There also is the problem, in Napa Valley (to which I alluded the other day in this post) that Napa is not proving to be adept at new forms of communication. There’s a growing hideboundness affecting the culture up there. Of course, we do hear from the “Next Gen” of Napa winery families that they’re concerned about this or that, and intend to craft a message that relates better to average people. But this article, which appeared last week in the San Francisco Chronicle (and has been widely ridiculed, even in Napa Valley), suggests that the Napans may have an uphill battle in their quest for Millennial credibility
Have a great weekend!