Wine beyond normal

Wine by its very nature is a luxury item, but not all wines belong in the luxury category. How to untangle this paradox? Robert Joseph went to the Meininger’s Conference to find out.

Professor Jens Beckert of the Max Planck Institute for the Study of Societies focused on how wine value is created.
Professor Jens Beckert of the Max Planck Institute for the Study of Societies focused on how wine value is created.

For many professionals and commentators, the notion of placing “wine” and “luxury” in the same context has often been controversial. In their view, treating fermented grape juice as a food, or as a cultural or even artistic artefact, is entirely acceptable, but putting a top Bordeaux in the same basket as an Hermés scarf or a bottle of scent is not. When Jancis Robinson MW was asked in a 2012 Wine Searcher interview whether there was “any such thing as a luxury wine”, her curt response was: “That silly Penfolds Ampoule springs to mind.”

Robinson was far from alone in her views about the dozen glass containers of the Australian winery’s Kalimna Block 42 that were marketed at A$168,000 ($130,485) each. However, there are plenty of wine companies today that are openly embracing the potential of premium and super-premium “masstige” and “luxury” wines. Are they right to do so? And if so, is the wine industry going about it in the right way?

This essentially was the theme of the 2018 Meininger’s Industry Conference, which was entitled “Wine in Transition — from Consumer to Luxury Goods Marketing”. As event moderator Dr Hermann Pilz, editor of Weinwirtschaft, said in his introduction, judging by the record attendance, the subject that was of evidently of interest to many professionals.

What is luxury?

In setting the scene, Dr Pilz attempted to define luxury as a term. Using a definition by Professor Michael Jäckel, dean of the University of Trier, he began by saying that “in everyday life luxury is anything that goes beyond normality”, in the way it is produced and in its “precision” and its price. But luxuries do not have to be tangible. “Time, health and safety are now perceived by many as a luxury,” Dr Pilz went on. “Above all today, time seems to be a rare commodity and those who have time are now considered rich.” Wine, he concluded, is intimately linked to time, in the rewards it offers the consumer for their patience and attention.

Dr Pilz’s points were echoed by Petra-Anna Herhoffer, founder of the INLUX agency and publisher of the annual Luxury Business Report. “Luxury,” she said, “is no longer about ‘bling’. We’re moving from ‘old and material’ to ‘self-optimisation’.” As a Boston Consulting survey had revealed, people are looking for emotions and experiences rather than status symbols. The new mantra is “Lux c’est moi”. Even when the luxury does come in a tangible form, such as a bottle of wine or a car, the relationship is increasingly “customer-centric’”. BMW, she said, admits that that it’s no longer possible to “own” a customer.

While many businesses have begun to focus on Millennials, Herhoffer advised the audience not to forget the category that succeeds them, “Generation Z”. Born between the mid-1990s and the early 2000s, these new consumers are the first to grow up with tablets and smartphones, and the experience of being connected 24 hours per day. They are, she said, using a term that was almost certainly new to the audience, “phygitalists” — combining the physical with the digital — and they need to be addressed quite differently from their predecessors. 

They “understand” legacy brands like Chanel and Gucci but they are not really interested in them, said Herhoffer. They want uniqueness that relates directly to their lifestyles — ideally they prefer to “co-design” what they buy and they want it to remain fresh. “If it stops moving, they move on.” Of particular relevance to the wine industry, they expect real information — which they will go looking for themselves — and are very resistant to traditional marketing. For them, “the era of television advertising is long gone”.

Advertising can work on Millennials, however, explained Professor Dr Marcel Crisand of Heidelberg University, especially when it works on their emotional rather than rational responses. “There is too much information coming to our brain,” said Prof Crisand. “The behaviour that is based on rational thinking is only a small part.” He continued that while “we always believe that our consciousness is so important and we have to think and listen to facts and language” this is “the tip of the iceberg. What has the strongest influence is the limbic system, the lower part. Memory, perception, intuition, emotions. This is what is driving our behaviour.” 

The example he used was a video campaign for the cream liqueur Amarula, which was focused on the fight against ivory poaching in the region of Africa where the drink is produced and the fact that, for every bottle that is bought, there is a financial contribution towards conserving the elephants. The advertising provokes a deeply emotional response, not least because it gives consumers an emotional reason to buy; if they buy it, they will be contributing to the fight against poaching, while indulging their own pleasure.

Most brand owners like to talk about their “what?” and “how?”, Crisand went on. But “the really successful ones focus on the ‘why?’. To be a successful brand, you have to know who you are and what you stand for and to be clear about your own values.” Values are translated into positioning which, in turn, is translated into a strategy that leads to consistent behaviour, wording and messages. “Everything that you see must be consistent.”

Looking at the wine industry, Crisand went on to say that “we have to differentiate ourselves, and things that worked well a few years ago are not differentiating today”. Ten years ago, he said, the young winemakers of the Pfalz were “coming up with black-and-white photos and talking about their yields and being honest”. The problem is that “product features” are interchangeable and marketing has to offer something more.

How is luxury created?

Professor Jens Beckert of the Max Planck Institute for the Study of Societies wanted to focus on how the “value systems” used to define luxury are created. Likening wine to contemporary art, he said that most people, if they were sent to an art gallery and asked how much the pictures were worth, would have no idea. For people “to understand why they should be putting this much money on the table”, he said, “a market for luxury commodities needs criteria. As an outsider, you have no idea what these criteria are. Consumers don’t have that kind of knowledge, in most cases.” 

With wine, he continued: “Intuitively you would say the quality is down to its taste, but there is quite a bit of research that has been done to show that in blind tastings the quality characteristics of wine are not uniformly recognised, neither among lay people nor experts.”

Indeed, when they don’t know the price, consumers have been shown to prefer lower-priced wines over more expensive ones, “possibly because these are wines that are easier to understand and less complex. An expensive wine is more likely to be an acquired taste.”

Price, he went on, is intrinsically linked to regions and classifications. After analysing the prices of nearly 2000 wines from the Rheingau and Rheinhessen, Beckert and his team established that the German wine classification system — based on the Wine Law of 1971, which focuses on the ripeness of the grapes — “has no correlation with prices”. Nor does the attribution of DLG (German Agricultural Society) awards. France’s terroir-based system, however, was linked to the relative final cost of a bottle. 

The terroir model, for Beckert, has another advantage: “Marketing activities are very expensive and it’s not a tool open to every producer, so the collective classifications are beneficial for everyone, particularly for the smaller producers.”

Where Beckert was less clear was about how Germany could switch to a more Gallic approach and, perhaps more importantly, how lesser-known terroirs could command those higher prices.

Perhaps the answer lay with the media. Beckert and his team at the Institute had conducted a study of wine journalism in the German publications Der Spiegel and Die Zeit, looking at how wine has been reported since 1945. They found an increase in editorial coverage of wine since 1947, but the coverage was initially limited to discussions of production and industrial techniques. Since the 1980s “the quality and flavour of that reporting changed: there was much more emphasis given to artisanal production and the craftsmanship that goes into wine that corresponds to the terroir system.” 

Today, he summarised, journalism is much more likely to focus on individual winegrowers and their production techniques, subjects that, in the early years, were “irrelevant” to the journalist. This “pretty enormous shift towards authenticity and individuality” represents “a profound change in the way we perceive and approach this product”.

What do we really know?

One of the more surprising presentations came from Professor Dr Simone Loose of Geisenheim University. She also had plenty of statistics about the German market to offer, but they came with a surprising question: how robust were they?

Most of the German industry, she explained, usually relies on data from GfK Global, Germany’s largest market research company, which works by getting consumers to report their own behaviour in return for a cash reward. According to the information they have provided, the average retail price of a bottle of wine in Germany is €2.19 ($2.70) and both volume and value are falling, by three percent in volume and five percent in value. Extrapolating from the GfK statistics, around 1m hectolitres is sold through specialty retailers and 1.38m hl directly from the producers.

When Professor Loose and her associate looked at their own data from 2,000 producers and the results of interviews they conducted themselves, however, they came to a figure of 1,67m hl at the cellar door, which is 20 percent higher than GfK. Their estimates of sales through specialty stores were also higher, by a huge 75 percent. Similarly, the results of checkout scanning by American market research company IRI seem to suggest a retail average price of €3.31, which is €1 more than GfK — though, as Dr Loose admitted, this figure could be higher because it excludes Tetra Paks. 

It might have been easy to become bogged down in these numbers, but Professor Loose made her point clearly: before even beginning to talk about luxury wine in Germany — and by extrapolation, elsewhere — it is necessary to be certain that the data is a lot more reliable than it seems to be today. Wine and time may both be luxuries in 2018, but accurate information is a necessity that the wine industry needs to be ready to demand — and pay for. 

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