The wine frontier

The annual wine2wine conference in Verona is one of the highlights of the wine calendar. Felicity Carter reports.

Wine2Wine takes place in Verona each December. Photo: wine2wine

The original concept behind Vinitaly’s Wine2Wine conference was to give Italian producers access to new ideas and best practices. While there’s still a strong Italian focus, the speaker line-up is international and the talks of value to producers everywhere. At the 2017 edition, speakers gave insights from China, the US, UK, Germany and Russia and more. 

If there was one overall message, it’s that producers — European producers in particular — have to get with the digital programme. No one was more hard-hitting and engaging on this topic as e-commerce guru Paul Mabray, whose presentation was electric. “While we each have different cultures,” he told the audience, “we are connected by one culture — digital culture.”

Consumers are the core of this new culture, he said, because consumers are driving everything. If they don’t find the exact product they want, a substitute is just a click away — and then they will tell the world about their experience. Because suppliers need to please them, this has led to better service, which in turn has led to higher expectations. One result has been the development of what Mabray calls “the subscription economy”, with a multitude of products now sold on subscription, from Netflix entertainment to hot sauce. Consumers don’t need to think about their choices any more, because everything just turns up. 

“What businesses have learned is that subscriptions are a predictable revenue stream,” said Mabray. “You can rely on monthly or annual revenue.” The irony, he said, is that one of the pioneers of the subscription model was the wine industry — which is now stuck in the tired old wine club model.

 Mabray swung to the doom-laden part of his speech and introduced what he called the “Four Horsemen of the Wine Apocalypse”. Wine producers in the US — and, increasingly, elsewhere — are facing four fearsome forces: market saturation (famine), intense struggles between retailers (war), the rise of private label wines (pestilence) and a failure to update the direct-to-consumer model (death).

“Customers want frictionless transactions, but wine is nothing but friction,” said Mabray, explaining there are only two reasons why customers remain in direct-to-consumer relationships: because they can get an exclusive price or product not found elsewhere, or because of an emotional connection.

Wine, said Mabray, is an omni-channel product, sold in multiple ways and discussed on social media, and all those channels need to be managed effectively. Customers need to be recognised when they walk into a tasting room and be included in the social media conversation after they’ve gone home. The tool that can make this happen is the customer journey map. Mabray advised producers to use software that identifies every point of contact with a customer, and offers a way to manage it. “We expect better customer experiences,” he finished.

The newsletter

Another speaker banging the customer connection drum was Logan Lee of Wine Awesomeness, an online wine club. “The wine business in the States is really focusing on men aged 45 to 55 and the real future is not there,” he said. “It’s women who run the internet. Every digital media company sees women making decisions on what is being bought — our customers are 55 percent female.”

For Lee, a major tool for connecting with consumers is the humble newsletter. “We’ve just passed 2.2m [subscribers] on our newsletter,” he said. “We know who opened it, who clicked through and where they are.” Newsletter software now delivers a wealth of information about readers, from what time of day they buy, to how their preferences are evolving. “The great thing about newsletters is that we know who’s most likely to cancel our wine club, so we can offer something special the day before we know they’re likely to cancel. We know what our marketing spend is, and what our return is.”  Facebook and the like, Lee said, were very good at turning “one dollar into 90 cents. That’s not a business. You have to turn one dollar into two dollars. You have to figure out the return on your investment — and that’s what data can tell you.”

He revealed that using a newsletter had led Wine Awesomeness to a key insight: “Our first lesson was how powerful an email address can be.” 

China syndrome

Ian Ford founded the distributor Summergate in China in 1999. By the time he sold it to Woolworths in 2014, Summergate had 13 offices around China and around 400 employees, selling through many different channels. That makes him one of the world’s premier experts on the Chinese wine market.

“There was a bit of a slowdown in 2012 and 2013 in total imports of wine to China,” he noted, adding it was because of China’s recent austerity campaign. “But you can see that, starting 2015 and 2016, there has been a very strong rebound. The latest estimates for 2017 is about 60m 9L cases — that’s another year of approximately 15 percent growth.” Ford said that China and Hong Kong combined import $4bn worth of wine and are now at parity with the UK market. Not only that, but the growth is set to continue, because the Chinese have yet to adopt in-home drinking. Once that happens, Ford believes the growth will be explosive.

He had some tough love for Italian producers, however; in 2011, Italy was the number three supplier to China. Today it does less than half the volume of Spain. One major problem, said Ford, is that Italians have been too willing to work with start-up importers. Such people register a wine import business — and a year later, disappear. “One and done,” Ford called them, saying those importers quickly realise they’re not cut out for wine and they dump their products on the market. “Of the total volume of wine in the two most recent years, 25 percent of all Italian wine was sold to one-and-done importers.”

France, he said, has been successful in China partly for historic reasons — it has long dominated China’s luxury sector — but also because major brands have been extremely active in the market. “Our leading heroes of the Italian wine industry have not established themselves in China,” said Ford. “You have Penfolds from Australia — they’re up to one million cases a year in China. You have Les Domaines Barons de Rothschild [France] and Concha y Toro [Chile]. They have done the hard work of building the market. Italy is lacking that strong leader.”

Worse, Italy’s messaging is too complex, thanks to the many consorzios and associations, each with its own message. “Everything is fragmented and there needs to be some consolidation of messaging,” he said. “You don’t have to do it the way other countries do it, but Wine Australia speaks with one voice.”

Ford also noted that Australian producers don’t make Australian restaurants their first port of call, unlike Italian producers, who head to China and talk to Italian restaurants, avoiding the mainstream market.
He said that anyone heading to China has to be “actively engaged, building your brand, working the market — but with partners.” Use professional translators. Trademark everything. Stay away from distributors that are just shipping and distributing — success will be found with agents who can also offer advice and discuss a brand plan. 

And, finally, in a conference that was so heavily tilted towards digital, he had what seemed a contradictoray message — don’t expect e-commerce to do all the work. But he urged the Italians to get together and work on the problem. After all, China is a growing, thriving, lucrative market. “The prize is big!”

By the end of Ford’s talk, the audience was buzzing. Indeed, judging by the conversations over food and coffee during the conference, all the speakers were inspiring attendees with new ideas. Which is exactly what makes wine2wine so stimulating.  

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