Published on November 4, 2007
Wine is a people business (some thoughts based on Australian experience) Jim Fortune firstname.lastname@example.org 1
..we are not in the wine business serving people, but in the people business serving wine (to paraphrase Howard Schultz, Starbucks) Culture Commodities Products Services Experiences ? $.10 $.25 $1.00 $4.50 $???
Nuts & bolts • something about the scale of Australian wine • long tail • about disruption in markets • about the wine market • about people • about changes
Who loves Australian wine? number of Litres consumers (if all Export (million) l/person average) UK 274.3 17 16,136,734 US 228.2 10 22,816,171 rest 283.8 4 70,950,211 Domestic 437 28 15,607,143 Lots of people 125,510,259
Which one is your customer?
A disruptive world ..incumbents prevail because they have the motivation to protect their current business and the resources to fight for it …good companies are supposed to—cater to their most profitable customers and focus investments where profit margins are most attractive—and thus they leave themselves open for disruptive technologies to bury them. …disruptive innovations—which are typically cheaper, simpler to use versions of existing products that target low-end or entirely new customers— emerge, established companies are paralysed. After Christensen (1997), Innovators Dilemma
The real market – US example where about 50% of sales = 28 brands ( = no of brands in each category; yellow marker in large group ~ 14%) 28 ~7000 47 20 114 60 Impact data, 2005
Long tail ‐ a real feature of the wine market • democratise the tools of production • democratise the tools of distribution • connect supply and demand Anderson, C. (2006) The Long Tail: How endless choice is creating unlimited demand
Resource changes – the tools of production
Help! Matching supply & demand
What information or data do I want as a wine consumer? breadth of data depth of relevant data
Finding & relating Google's share of all searches was 64% in March 2007
All sorts of networks • incentives for provision of quality in markets where the quality level may be unknown to consumers • a complex network of social relationships is used by consumers for transmitting/ receiving information about quality
How likely is it that you would recommend wine to a friend? (& some do both vis Sideways) Pinot noir Merlot
Australian Brand personalities accessibility Brand Champions Wines that appeal to a broad market base through accessibility, ease of enjoyment and a strong premium brand message about product and country. innovation Generation Next Wines driven by innovation (marketing; product; packaging) that appeal to consumers who drink wine for social occasion and/or peer group affinity, rather than for wine attribute. interest Regional Heroes Wines from somewhere rather than wines from anywhere - adding and sustaining interest for consumers by fostering a clear association between region and variety and/or style. aspiration Landmark Australia High-profile, aspirational wines built on inherent quality and world-class reputation. Australian Wine & Brandy Corporation 2007
Consumer occasion & brand mapping – what does your distributor’s matrix look like Luxury Consumer Occasion Special Everyday Basic Pubs/Clubs Cafes Restaurant Fine Dining Location after Fine Wine Partners 2006
Where to now? Influence & change
Change is constant for the wine consumer • Closures • More wine by glass in restaurants • Casks becoming understood in Europe & US • PET bottles • New varietals • Imports fight back • What’s happening with demographics
Wine and life experience I am a hearty red from the wide open spaces of Australia I would like to join you with your meal this Look up flavonoids on evening Google,but while you wait join me and think flavour Nature Health Food (Inspired from Leo Burnett)
Supermarkets from Larson, Bradlow & Fader (2005)
Describing what you smell – when did you last hear that it smelled like a young or old riesling?
Simultaneous change – lines between culture, craft and modernity
Environmental footprint- consumer power or trade manipulation?
World arrivals – we move and learn (Source: UNWTO World Tourism Barometer Volume 5, No 1, January 2007) Arabian Travel Mart 2007
Internet is driving buyer behaviour *Comparison Shopping Engine From Channel Advisor 2007
Online shopping continues to grow – wine delivered to your door Virtual Surveys Ltd 2007
Opening doors – modern biology and genetics (examples from all directions, this one rice aroma) • SOMETHING MISSING • determined that fragrance in rice, a recessive trait, is due to a large deletion (8bp) and 3 SNP’s in a gene on chromosome 8 which encodes a putative betaine aldehyde dehydrogenase 2 (BAD2) • SOMETHING ACCUMULATES • this leads to an accumulation of the principal fragrant molecule, 2-acetyl-1-pyrroline AIM = SIMPLE DIAGNOSTICS & MEASUREMENT TOOLS Louis M. T. Bradbury et al 2005
Australian food and beverage exports by destination – sharing experience meat Pacific dairy grains & flour Europe fruit & vegetables seafood Americas wine Asia other food & beverages US$b 0 2 4 6 8 ABARE, 2007
To conclude: people are fickle, fast and fascinated • globalisation • changing demographics • changing consumption patterns • natural resource & environment • regulation and activism To keep pace, the wine sector needs to work with change from all of these people driven directions.
THANK YOU Jim Fortune email@example.com
0 10000000 20000000 30000000 40000000 50000000 60000000 1 E&J Gallo 2 Constellation 3 The Wine Group 4 Bronco Wine Company 5 Fosters Wine Estates 6 Trinchero Family Estates 7 Brown Forman Wines 8 Diageo Chateau 9 Jackson Family Wines St Michelle Wine Estates Beam Wine Estates F Korbel & Bros Delicato Vineyards 1 million cases or more Don Sebastiani & Sons C Mondavi & Sons Ironstone vineyards J Lohr Vineyards & Wines The Coppola Companies Bogle Vineyards Rodney Strong Vineyards The Hess Collection Precept Brands San Antonio Winery Top 30 US wine companies (2006) Purple Wine Company Domaine Chandon Winery Rutherford Wine company Castle Rock Winery 1 million – 285k cases Wente Vineyards Sebastiani Vineyards & Winery 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 585 Wine Partners Wine Business Online Feb 2007
ACKNOWLEDGMENTS • Ideas and thoughts tested on a range of patient wine industry people and interested consumers • Material and data acknowledged and sourced mainly from web searches • Images courtesy of web sites and more formal open access material such as FLICKR and SlideShare
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