What the Wine Industry Understands About Connecting with Consumers
In the battle to gain an edge over competitors, companies spend millions of dollars to understand consumers through focus groups, surveys, and sophisticated analytics. But too often, because most people don’t really know what they want, these methods waste time and resources. There is a better way: educating consumers, rather than listening to them.
Consider, for example, three very different products: coffee, diamonds, and smartphones. Billions of people around the world have enjoyed coffee for over five centuries. But our understanding of the product has changed dramatically since Starbucks debuted in Seattle in 1971 and grew to a global powerhouse with more than 28,000 locations. Similarly, DeBeers took a luxury gemstone — diamonds — and created a broader market for it by associating it with romance and marriage. By 2013, diamond sales topped $70 billion, up from virtually nothing in 1932. The stones were the same, but consumers were taught that they had a new meaning — and value. Finally, in the case of smartphones, Steve Jobs famously argued against the traditional approach: “Some people say, ‘Give the customers what they want.’ But that’s not my approach. Our job is to figure out what they’re going to want before they do…People don’t know what they want until you show it to them.”
To better understand how firms succeed by educating consumers, we studied the U.S. wine industry. Winemaking has remained largely unchanged for 7,000 years, but the United States wine industry has ballooned from just over $30 billion in 2002 to more than $60 billion today, making it the largest in the world. The number of U.S. wineries has grown by 50% to nearly 10,000 just in the past decade. Some have redefined great wine, gained the loyalty of passionate consumers, and command extraordinary prices.
How did these firms achieve the benefits often associated with disruptive innovation in an industry in which the technology has remained largely unchanged for millenniums? To explore this question, we have since 2010 immersed ourselves in the wine industry, focusing primarily on U.S. producers but also studying a few from Italy and France for whom the U.S. market is important. These ranged from small, boutique wineries to large multinational firms; some were established in the last 30 years, while others date back to the 14th century. We met with winemakers, vineyard workers, marketing executives, CEOs, critics, writers, importers, and we observed and interviewed consumers in their homes and at wine shops, multi-vendor events, bars, restaurants, and wineries. From 58 interviews, we produced more than 2,300 pages of transcripts, field notes, documents, and photos. We found that, like Starbucks, DeBeers and Apple, wine producers shape markets through vision and social influence. Here’s how they do it.
Step 1: Envision something extraordinary
Wine producers see customers as having limited expertise and demonstrating inconsistent, difficult-to-predict preferences. This is why, rather than seeking and responding to consumer input, they seek to influence tastes.
Christian Moueix, best known for producing France’s legendary Château Petrus from Pomerol, offers an example. Moueix purchased a vineyard in Napa Valley, where vintners make rich, lush, wines that are high in alcohol. Industry professionals call these wines fruit bombs, and the most popular sell for hundreds of dollars. But Moueix told us that he “hates” this style of wine, and he rejects many common California practices. Instead, he prefers an approach he developed in Bordeaux, which includes no role for consumer input. “I make what pleases me,” he explained.
We heard versions of this sentiment again and again. One American winemaker told us that consumers “don’t respect the product … don’t understand wine … don’t care.” Another executive said: “I’m not going to be asking the market what it wants because they don’t know what they want until I show them.”
Some producers even wear their lack of interest in profit as a badge . “We are not here to break even, we are here to break the rules, break records, and break through,” one California winery owner proudly proclaimed.
Instead of responding to consumers or chasing financial returns, winemakers pursue a vision, much like an artist imagines a work. Constrained only by the vineyard and history, they aim to make a personal contribution.
Step 2: Mobilize those with influence
Even as wine producers dismiss customer input and the pursuit of profit, they value the opinions of peers and influential media and critics, including Karen MacNeil, Jancis Robinson, The Wine Spectator, Wine & Spirits, Vinuous Media, and The Wine Advocate’sRobert Parker.
Critics typically score wine on a 0-to-20 or 0-to-100 scale and provide tasting notes; an additional point from Parker generates €2.80, or $3.00, of revenue per bottle, according to one analysis, while a difference of ten points can mean millions of euros for a large-scale producer, and a perfect score of 100 can support a three- or fourfold price increase.
Some producers engineer wines to earn high scores, but those that shape markets are more subtle. They aim to build influential relationships with industry movers and shakers, rather than to please them. They educate these experts in their histories, winemakers, and visions for the future and thus gain some control over the stories that reach the public. They provide the language needed to help people “discover the soul” of their wines.
One producer we interviewed invites sommeliers, journalists, and others to experience the harvest at his vineyards in France each fall. A small group of five to six guests stay at the elegant home of the owner. Accompanied by the winemaker, the guests stroll through the vineyards, taste wines from previous vintages, and discuss their experience over dinner. The event is designed to make them feel connected to the brand and then advocate for it.
Through these kinds of experiences, a consensus emerges about which wines are excellent, and which are extraordinary, and ultimately this is what defines the winners and the losers in the industry. Moueix’s Dominus Estate offers a case in point. When he released the first vintage of Dominus Estate in 1988, it was neither a Napa Valley fruit bomb nor a Moueix wine from Bordeaux, which prompted debate: Was it more French or more Californian? Was it really worth $40? Moueix explained his vision to critics and journalists, as a songwriter might explain the meaning of a lyric. He wanted the wine to express its terroir — the soil, the weather, the sunshine, the natural environment — of its legendary Yountville, California vineyard. He also favored dry farming (no irrigation), thinning the crop, and harvesting grapes early. Thus, Dominus Estate became understood as a unique blend of “Napa terroir, Bordeaux spirit.” Over time, critics began describing it as a new benchmark for the region, and high scores followed. Parker awarded the 2001 vintage 98 points. Three critics awarded the 2013 vintage a rare 100 points—perfection.
Step 3: Let consumers react and share
Consumers looking to buy a bottle of wine confront thousands of choices. In fact, many of the shoppers we spoke to described the experience as stressful; they were fearful of making a poor choice and looking ignorant or of missing an opportunity to make an evening more special. To navigate, they invariably turn to those experts that the wineries have worked so hard to influence.
Despite questions about the objectivity of wine scores, critics still drive the behavior of retail and hospitality buyers and consumers. One retailer conducted an experiment in which he stacked two California Chardonnays next to each other and posted their Wine Advocate scores and tasting notes below the bottles. The bottle with a score of 92 outsold the bottle with a score 84 ten to one. When the same wines were displayed with tasting notes only, sales were roughly even. As another example, Moueix sold every case available from the 2013 Dominus Estate vintage and bottles that remain on retail shelves bear price tags of $300 or more.
The chain reaction is clear. Vision flows from producer to critic. Retailers stock wines critics and other experts praise, and sommeliers add their newest discoveries to wine lists. Retailers and sommeliers then share their favorite wines with consumers, who share what they’ve bought and enjoyed with their friends and families. The most dedicated visit celebrated wineries, join wine clubs, learn more, and share what they have learned with others. From beginning to end, the process is an educational one.
Producers of wines deemed extraordinary define categories and set benchmarks. Consumers become fans and pay premium prices, despite the availability of literally thousands of excellent alternatives. This ensures the financial success of those firms, even as they reject consumer input and feign the pursuit of profit.
From learning to educating
As products become more complex and consumers feel more pressed for time, we believe that firms in all industries will increasingly succeed by having a unique vision, cultivating expert advocates through authentic connections, driving expert consensus, and allowing consumers to react and share. Firms that gain advantage through simply responding to customers are vulnerable to disruption. Those that shape markets using social influence and education can endure.