Without any major disruption or game-changing production methods, how is it that the historically traditional wine industry has doubled its profits in the US market from $30 to $60 billion in the last two decades alone? What makes a centuries old industry that has not experienced much change achieve abrupt growth on a massive scale?
Wine making methods have remained relatively the same for over 5,000 years and no other factors normally associated with such spikes in growth like faster and cheaper production have hit the market. So where is the driving force of economic movement and interest stemming from in the wine market today? The Harvard Business Journal addresses these questions in a nearly decade long study that focuses on the impacts of consumer influence in wine.
Spreading across the United States’ wine network of over 10,000 wineries – the largest in the world – the HBJ analysts looked to all sizes of firms from micro wineries to large, multinational ones to create a diversified view of those operating in the now all time high industry. Wineries of all ages were also considered in the study from those dating back many centuries, whose blends were enjoyed by distant ancestors, to those relatively new establishments created only a few decades back.
Touching each stage in the wine industry along with the individuals who influence it, the study worked to collect information from top executives to wine makers, consumers, critics and each role in between. No matter the point of production or different consumption vertical, all views possible were evaluated to get to the heart of the industry growth.
Starting back as early as 2002, analysts’ findings began highlighting an interconnected network of wineries, consumers and industry professionals that worked to create influence around purchasing decisions and a community heartbeat that has taken wine to a new level. Elite member of the wine community with an award-winning collection and record breaking wine auction with Sotherby’s, Marcus Hiles shares his experiences from the wine boom. “This is a marketplace that now thrives on community, education and connections more than ever. Prices and popular blends are directly driven from critic reviews and in most cases can hold a large grip on where the industry is headed next.”
Without technology on their side that is normally responsible for abrupt disruption in a dated market, firms leaned in on consumer influence methods that sought to change taste preferences and buying patterns. The study revealed the average wine consumer does not necessarily have the education and experience to make independent purchasing decisions. The wine available to us today is a direct result of this and is comprised of what winemakers want to make, not what consumers think they want. This is an interesting trait in an ultimately food and beverage market and highlights the level of influence businesses have on end users in this particular industry.
Knowing the role critics and consumers play in the industry’s growth potential is however a key aspect to the success of wine today. “A flooded market of options has many consumers overwhelmed and unable to make purchases without the information and reviews of industry professionals and critics backing up their decisions,” adds Marcus Hiles. “This stresses the need for a highly visible and mobile network of influencers who are equipped with a rating system understood universally that can educate and drive consumers buying patterns.”
The chain from business-driven production choices to a closely knit network of influencers and critic connections has allowed wine firms today to push products out to the market and into the hands of consumers without much need for innovation.
This new way of creating disruption is not the first of its kind. The same trend has played out in other industries including that of coffee where the Starbucks boom brought something unique and new to the table that influenced the consumption of coffee into a wider spread and more profitable market which has remained in place until present day.
It is no surprise businesses are looking to other avenues to stimulate competitive differentiation, and with this arguably a more sustainable method of growth it seems more industries who have become stagnant will do the same. As summarized by the Harvard Business Journal’s study recap, “Firms that gain advantage through simply responding to customers are vulnerable to disruption. Those that shape markets using social influence and education can endure.”