By Jeff Siegel
John’s Grocery in Iowa City is an upscale wine retailer whose customers include doctors and employees of the nearby University of Iowa Carver College of Medicine. As such, says wine buyer Wally Plahutnik, his customers are knowledgeable and service oriented, regardless of age and demographic.Except for one very intriguing thing. “I can’t get the older ones to use the camera on their phone to take a picture of the wine label,” he says. “The younger ones, no problem. But the older customers still come in and tell me they had a bottle of wine, but can’t remember the name. And when I ask them why they don’t use the camera, they just sort of look at me.”
In this, Plahutnik is in the middle of one of the biggest changes the wine business has ever seen—the revolution in consumer demographics, of which the role of new technology is just one small part. The Baby Boomers, born between 1948 and 1962 and widely regarded as the best friend that retailers and restaurateurs ever had, are becoming increasingly less important in the marketplace.
Their replacement? The Millennials, two generations behind them but already numerically more significant among core wine drinkers, according to the 2012 Wine Market Council report. Though the Boomers make up 38% of wine drinkers, they consume only 32% of the wine. The numbers for Millennials are 29% and 38%.
More broadly, Boomers will account for less than 20 percent of the U.S. population over the next eight years, and the number of Baby Boomers younger than 60 will fall by more than two-thirds, according to a 2012 study by Jeffries-Alix Partners. Meanwhile, Millennials (born between the early 1980s and the early 2000s) older than 25 will make up almost one-fifth of the country’s population. And that doesn’t take into account the 8 million Millennials who will turn 21 and start buying wine over the next three years.
“The Boomers are famous for consuming more stuff than anyone else in history,” says Dan Graham, a vice president with the Dechert-Hampe marketing consultancy in southern California. “The question is not so much whether the Millennials will be like them, but how to reach them, since they’re so different from the Boomers.”
The key is understanding—or, first, trying to identify—those differences. It’s one thing to market to Millennials with cute wine names or to approach them through social media because they use it, but that doesn’t mean it’s going to work. The Millennials may not be as jaundiced as their older cousins, the Gen Xers (born between born the mid-1960s and the early 1980s) about marketing, but they’re still more wary than the Boomers.
Also important, and often overlooked: Any discussion of the Millennials must take into account three things. First, that since the end of World War II, the U.S. economy experienced unprecedented growth. Will that continue? Many of the projections on Millennial spending assume they’ll have the same economic opportunities that the Boomers did, and that may not be the case given what appear to be major structural changes in the U.S. economy (to say nothing of ongoing wrangling about government spending).
Second, the Millennials are saddled with $1 trillion in college debt, which could limit their spending in a way that didn’t bother the two older demographics. One guess is that the Millennials’ penchant for low-cost social events like Wine Riot and the success of companies like Groupon represent evidence that they want to go out but can’t afford the bars and clubs that the Gen Xers and Boomers could.
Third, says John Gillespie, president of Wine Market Council, there appear to be some differences between younger Millennials, ages 21-28, and those 28 -36. The latter, he says, act more like Boomers—more willing to spend money, for instance. The younger group may change as it ages, too, but no one knows for sure.
Moving forward, every business looking to capture Millennial dollars needs to know what sets them apart from the Boomers—things that take into account not just demographic but economic and cultural differences:
- How they use technology. It’s not just that Millennials (and Gen Xers) are more tech savvy than Boomers, as Plahutnik has seen. It’s that the two demographics grew up with technology and see it as a normal part of their life. So it’s not unusual for them to Google a product while they’re shopping, or to text a friend for information. In this, they don’t see a need for traditional customer service (which they’ve never experienced anyway), since they do it themselves. In their world, warehouse stores like Costco are the rule and not the exception, and it shouldn’t be surprising that 75% of the customers at Wine.com, the biggest Internet wine retailer, are between 21 and 49.
- Where they shop. Millennials don’t shop at grocery stores the way Boomers do, something that has the national supermarket chains worried, according to the Alix Jeffries Partners study: “This transformation has the potential to create a chaotic marketplace that markedly changes where and how consumers shop for groceries, as well as what products they bring home.” Instead, says Graham, Millennials prefer retailers that are local and interesting, hence their fascination with stores like Trader Joe’s and Whole Foods.
- Local means local. Community matters, and a local retailer is not just someone who is located in the neighborhood, but is a part of the neighborhood, meaning the retailer sponsors events, participates in local fundraisers and works with neighborhood groups. If the retailer doesn’t meet their high standards, Millennials won’t shop there. Convenience is important, because they’re so pressed for time, but they also want products that are sourced and manufactured safely and humanely. They don’t pay lip service to green labels the way Boomers do.
- Who they trust. It’s not the traditional wine experts—critics, magazines and the like—that drive consumption among Boomers. Plahutnik says his younger customers are usually surprised when he shows them less expensive, quality wine; they’re not used to getting advice from someone like him. Rather, says Gillespie, they ask their friends and family; if their circle likes the wine, then it’s good enough to drink.
- Private labels. Millennials love them, says Graham, especially when they come from a trusted retailer like Trader Joe’s. This gives them an emotional connection to the product, so they’re buying on more than a cheap price. In addition, buying a private label from a trusted retailer makes the purchase decision easier.
- The interplay between price, value and status. “Millennials are at the cutting edge in the industry in getting away from statusy brands,” says August Sebastiani, the president of California producer The Other Guys. “They’ll spend money for quality, but they also want value. They won’t buy something just because it’s expensive.” This, he says, is a key difference between Boomers and Millennials. The former will serve a bottle of wine because it got 98 points and they want to impress their friends. The latter, on the other hand, will serve wine they like, and they don’t really care about scores, if it cost a lot, or if anyone else has ever heard of it (one reason why Millennials are at the forefront of the local wine movement). They like making discoveries, says Sebastiani, and they want their friends to like what they find as well. Then word of mouth takes over, and texts, posts and tweets follow about the wine.
BRINGING GEN X INTO FOCUS
Gen Xers, the demographic between the Baby Boomers and the Millennials, are often overlooked. One reason is that there aren’t as many of them—only 50 million or so, about two-thirds of the Millennials. They’re also among the most difficult to reach, more cynical about marketing and less trusting than the Boomers. B ut they’re entering their peak earning years, and the 2012 Wine Market Council report notes that they are playing a crucial role in the wine business:
- They account for one-fifth of the study’s core wine drinkers—those that drink wine at least once a week.
- Annual household incomes were significantly higher among Gen Xers than the other demographics—$81,900 vs. $73,700 for Millennials and $78,700 for Boomers.
- Almost two-fifths of Gen Xers said they were drinking more wine today than they did a few years ago, the second highest number after the Millennials.
- Core Gen X wine drinkers are more confident than Millennials—only 28% said they worry about making a mistake when they buy wine, compared to 38% of Millennials.
Read more facts and stats: Charts.