THREE TIER SYSTEM IN THE US: US DRINKS CONFERENCE

Wines of Chile recently held the “U.S. Drinks Conference in Chile.” The initiative has been one of the most sensible and useful discourses in the wine industry since the financial crisis of 2008.

John Beaudette, Mike Ginley and Steve Ray, the first round of speakers, provided a foundation for understanding the U.S. market. They talked about the history of wine and the consumer, based on hard numbers about the growth, strengths and challenges within today’s market. In the afternoon, a group of five different North American importers—Sarah Lanzen, Johann Meissenheimer, Glenn Albright, Brad Ish and Cesar Bistue—shared their experiences and what they had learned during their time in Chile. They called for all those in the industry to write a story of success, together.

The complex story of U.S. legislation concerning wine, alcohol and tobacco began in 1933 after a series of regulatory laws. The government established a federal regulation entity, now known by the acronym TTB. This group established the precedent of having only three to four main players in wine marketing. Today, the most important thing to note about regulation is that, because of the large cuts expected in the government’s budget, all export formalities should be cautiously completed in advance. The change in label approval procedures will be particularly significant.

It’s crucial to understand there are three types of states in the U.S where wine regulation is concerned. While designing and export plan of action, a company must understand clearly the requirements of every state where they’re sending their wine and what steps they must follow. It’s because of this that the choice of and relationship with the importer is so important. The importer is the guide who helps foreign companies understand the regulations of each specific market. The importer becomes the vineyard’s eyes, ears and hands. Working together and, above all, continuity is what will make for a fruitful relationship.

One of the biggest lessons of the financial crisis has been the large number of vineyards that abandoned their importers and closed their commercial offices in the U.S. This has translated into an interruption in the continuity of the market exposure of many brands. The saying “out of sight, out of mind” has proved itself true, not only in relation to the consumer but also the strength of a brand’s sales. A Brand Ambassador can absorb these changes by establishing links to both sales channels and consumers.

The U.S. is the number one country in consumption (though the Vatican is still holding out as the leader of consumption per capita.) Yet being the leading market in consumption and concentrating 25% of the wine consumers throughout the world doesn’t necessarily mean you are the leader in average price or sophistication. The highest-selling wine in the U.S. is boxed Franzia. Santa Margherita, too, is noteworthy: thanks to a millionaire media investment, profits grew 52.3% from 2009 to 2010.

The countries that lead in importing are: Italy, Australia, Chile, France, Argentina and Spain. The year 2010 saw 137 new imported wines. During the first quarter of 2011, Chile has shown a growth of 20% in volume and 25% in value.

The question we’re all asking is: what is the consumer looking for right now? If we base our answer on both retail and restaurant sales, the answer is, in this order: price, variety and origin.

The current consumer in the U.S. breaks down into one percent that are well-educated in wine, and another 99% that may attempt to read the label correctly. Only 50% of U.S. citizens have a passport, which brings us to the small percentage that will ever visit South America or Chile. To talk about origin today is a luxury. The focus is instead on the critical mass. How are we going to invest our time and money in this market, open a dialogue about wine and—ideally—build loyalty to our brands?

The message of the importers was very clear. They sell the first bottle, but they need the vineyard-supplier to sell the second. How to achieve this? Market presence, which will involve tastings, educating consumers and, finally, building a brand. How we invest, who runs the company, how we get returns and how much we get: these are all valid questions. And it’s been proven that working with a Brand Ambassador facilitates the growth and strengthening of the brand, which will aid in all aspects of building a loyal consumer base.

Today’s consumer looks for luxury brands and products and a fun new experience. Despite country and varietal trends, Chile’s prevailing benefit is the level of confidence it inspires. Our greatest difference from our neighboring country is the consumer’s confidence in us. An uncertain future influenced by changing price structures and the concentration of large wine groups, as well as the troubling volatility of the stock market, has not yet shown its colors. Careful preparation is more useful than panic.

What is certain is that today, when we want to participate in the largest market in the world—and therefore the most competitive—we need a clear strategy and a steady direction. This is one of the oldest businesses in the world. Just as always, it’s crucial to be accurate, authentic and committed, not only to the product but also to all those involved in the marketing chain. Today, the industry looks for capable professionals who can generate elite-level messages and links to the wine’s turnover in its major sales outlets.

Written by
Pamela Villablanca
International Director

Translated by Erin Becker
Research and Innovation
AndesWines.com

Andes Wines
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