Introduction
The wine market is an extremely promising industry in the United States. However, the industry has faced some challenges lately as it transitions from personal to online sales. In particular, there will be a need to keep the seasonal surge in demand for wine sold online shortly. Besides, the increased interest in online sales during the coronavirus can be used to attract a new group of shoppers who have not previously shown much interest in drinking wine – Gen-Zers. The industry is also experiencing a problem with highly conservative consumer preferences, who are usually reluctant to change the chosen brand or variety of wine. This study presents several optimal solutions to these problems and some general data on the wine industry in the United States.
Overview of the Situation
Wine sales in the United States are reasonably sound despite the coronavirus epidemic. Moreover, the epidemic has become an incentive to increase online sales, motivating new manufacturers, and buyers to online sales. However, since this rise in demand for wine sold online is seasonal, there may be a sharp decline in online sales after the end of the epidemic. Therefore, maintaining the pace of the development of online retail is one of the industry’s problems. Another problem is the difficulty in entering the market for new brands or variations of products, as buyers tend to remain committed to the brands and wines they have tested. Besides, online sales growth opens up the opportunity to increase sales for the previously under-covered segment of consumers – Gen-Zers. They prefer cheaper drinks like beer or low-alcohol products and status drinks like cocktails prepared by mixologists.
Industry Research
The U.S. is the wine export leader for many countries, including the E.U., and imports wine globally, including Australia, Italy, and Spain. The home wine market continues to grow, even though 21% of Americans declare they do not drink alcohol for health concerns (Briscoe, 2020). The most significant demand is in the Millennial and Baby Boomers groups, who collectively consume 68% of the United States’ wine (Thach, 2020). It can be said that Americans prefer domestic wines since about two-thirds of the wine they drink is made in the United States. Wine is produced and grown in all 50 states; however, California is the leader in production. The state leads not only in the volume of wine produced but also in its variety and quality due to its advantageous geographical location.
It is noteworthy that recently, the wine industry players have begun to master new ways of doing business. New retail methods have been adopted; online retailers such as Winc buy products directly from the manufacturer, thus shortening the manufacturer’s path to the final consumer (Briscoe, 2020). Other businesses, such as 90+ Cellars, use an alternative model, bringing in online retailers to sell their brand of wine. The most successful and outstanding in terms of sales was the model of Naked Wines. This company offers internet sales services to many local manufacturers. This division of responsibilities in the network is an alternative to the old model where the manufacturers distribute and sell their products. Experts believe this approach will help lower sales costs and increase customer satisfaction. Therefore, online wine sales have received a boost from the coronavirus epidemic. However, after the end of the epidemic, online sales can drop significantly, which is a problem for the industry.
Credibility of Research
The research data obtained from reliable sources will be used to make decisions on an existing problem. First, the research will use a study Pomarici et al. (2017) in which 504 residents of the New York MSA participated. This study is relevant as New York accounts for 8% of all national wine sales. The study used criteria recognized by other scientists and used in several other reviews evaluating the attractiveness of wine by consumers. The researchers concluded that segmentation of consumers, according to their buying behavior and personal preferences, will allow put them into groups that will be more acceptable for targeted marketing.
The scientists used 11 criteria, of which personal experience and recommendations were the most important, and the bright product label was the least important. These findings are consistent with those of previous similar studies. This study used quantitative methods, analyzing the responses of 504 participants selected based on a sample of age, gender, MSA, and other characteristics. Participants completed questionnaires with closed multivariate answers; the questions contained in the surveys helped define the participants’ buying features and segment them into groups.
The research also relies on data provided by wine industry expert Dr. Liz Thach, who posted an article on the state of the U.S. wine industry in 2020 on her blog. The author used 22 credible sources to write the report, including articles published in scientific journals and information from journalistic publications (Thach, 2020). The author has provided comprehensive statistics on the state of affairs in the industry. A careful analysis was given of how the coronavirus has affected the industry, including online sales growth.
Further, in the article by Briscoe (2020), the author assessed the industry development during the epidemic. New ways of selling wine, including online sales, and unique opportunities for the supply chain, were presented. The article was based on the interviews of various market players who successfully adapted particular supply schemes. Finally, as additional information, data from the U.S. Wine Institute were used, which provided comprehensive statistics on wine sales in the U.S. regions.
Potential Solutions
Increased sales can be facilitated by broader market coverage – that is, reaching previously unreached audiences. For example, there is potential for Gen-Zers to start consuming more wine after many retailers have switched to online sales. Besides, since the younger generation tends to favor cocktails, beer, or spirits over wine, wine producers could develop products to meet those preferences (Briscoe, 2020). Noteworthy, the researchers emphasize that most consumers prefer lability in package sizes – a large volume of sales comes from packages of 3 liters, 187, and 375 ml (Thach, 2020). Besides, producers could experiment with flavors, given that the demand for sangria and flavored wines continues to grow steadily.
Creating new marketing strategies will help increase the percentage of sales in the core consumer groups. According to a quantitative study by Pomarici et al. (2017) involving 504 New Yorkers who completed surveys, four types of consumers can be distinguished: experienced, connoisseurs, risk minimizers, and price-sensitive. The first two groups rely on their own experience and recommendations when deciding whether to make a purchase. Both groups pay significant attention to the brand of the producer. Besides, the first two groups have the quality of innovators, as they are ready to experiment with the purchase of new brands and sorts of wine. The latter two groups are more inclined to pay attention to the promotions carried out by the shops and the price of wine. By using diversified marketing strategies, wine producers will be able to increase sales.
Preferred Solution for the Industry Businesses within the Geographic Region
The wine industry in the United States is promising and generates large profits every year for producers and retailers. Wine is produced in all states, but California is the recognized leader with more than 4 521 wineries out of 10 276 (Wine statistics, 2020). The most common wines grown on California hills are Chardonnay, Cabernet Sauvignon, Red Blends, Pinot Gris, Pinot Noir, and Sauvignon Blanc (Thach, 2020). Simultaneously, Chardonnay and Cabernet Sauvignon are in great demand, with a significant gap from other sorts. Other notable wines made in California are California Muscat, California Riesling, California Sparkling Wine, California Rose, California Merlot, California Syrah, and California Zinfandel (Wine statistics, 2020). These wines are grown and produced within the state on various plantations in different MSA regions.
These wines are not inferior in taste and flavor qualities and are often even better than more popular sorts, but do not have such a demand level. However, the promotion of new Californian wines could be a success, especially given that $ 49.7 billion of the $ 72.4 billion total wine revenue in 2019 came from domestic wine (Thach, 2020). Due to the coronavirus, online sales have grown significantly in the sector, up 225% in March 2020 compared to February 2020 (Thach, 2020). This dramatic shift suggests that the industry has met a new market opening, and both manufacturers and retailers must find a way to carve out a niche in it. Gen-Zers are the most under-reached group among wine consumers, consuming 7%, while Millenials consume 34%, Gen-Xers 21%, Boomers 34%, and Matures 5% of all production (Thach, 2020). Therefore, new marketing strategies can be focused on developing new market segments and on the retention and expansion of already mastered ones.
Businesses can use a targeted marketing strategy based on customer segmentation to retain existing customers. It will help promote new wines to generate strong demand among the ‘experienced’ and ‘connoisseurs’ groups. Simultaneously, the other two groups, ‘risk minimizers’ and ‘price-sensitive,’ which are also inclined to innovation and ready to choose new types of products, will most likely be interested in changes in price and volume of packaging. These latter groups can be attracted by promotions, which should be developed following the preferences of the given group.
Conclusions and Future Research Needed to Support Business Decisions
Thus, possible solutions were presented to maintain the seasonal demand for online wine sales, introduce new types of products to the market, and attract more buyers. Maintaining seasonal or holiday demand is impossible since, with the end of the event that triggered the need, its root cause disappears. However, there is an opportunity to increase demand compared to the level recorded before seasonal growth. The solution to this problem must be comprehensive and build on a range of strategies that address more specific issues. In particular, the launch of new sorts of wine on the market will help attract and retain customers, including in the field of online sales. Optimally, this can be done with a targeted marketing strategy based on correct customer segmentation. Then, attracting the youngest consumer group, Gen-Zers, will be very timely while online wine sales are at their peak. To gain acceptance from this group, manufacturers can experiment with package sizes and create products that can line up with cocktails or low alcohol drinks. Therefore, an integrated approach will help solve the problems existing in the industry. However, to consolidate the success, further research is needed to explore online promotion methods, including social media advertisement.
References
Briscoe, S. (2020). Digital wine sales are booming, and some wonder if they’ll last. Web.
Pomarici, E., Lerro, M., Chrysochou, P., Vecchio, R., & Krystallis, A. (2017). One size does (obviously not) fit all: Using product attributes for wine market segmentation. Wine Economics and Policy, 6(2), 98-106.
Thach, L. The US wine industry in 2020 – slowing sales, but opportunities still present (with COVID-19 Update). Web.
Wine statistics. (2020). Web.