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Wine brand heritage doesn’t matter: Glossing the Rex Goliath effect

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By Ben Bouckley+

04-Aug-2014
Last updated on 04-Aug-2014 at 15:30 GMT

Yvonne Esperanza/Flickr
Yvonne Esperanza/Flickr

The success of newer US wine brands such as Rex Goliath and Barefoot suggests a new generation places less value on provenance and heritage than on what the drinks say about them.

Rabobank draws this conclusion in its latest Wine Quarterly report, penned by analysts Stephen Rannekleiv, Marc Soccio and Elena Saputo, which includes IRI data showing falling sales of Yellow Tail and Gallo Twin Valley in 2013, while Barefoot and Rex Goliath again made strong gains.

“In recent years, some companies have stolen the ascendancy in key markets as they have become more attuned to the preferences and needs of consumers, and in the process have challenged traditional notions of wine styles, branding and marketing” Rannekleiv et al write.

“Looking ahead, this consumer-centric approach will indeed be the key to drawing in – and remaining relevant to – new generations of wine drinkers as the influence of the baby boomers gradually declines,” they add.

In 2013 the US took over the No.1 spot from the UK in terms of wine imports by value – the market there was worth $3.947bn versus $3.732bn in the UK, and Rabobank say this shift also marks US millennial growth.

“In non-traditional wine drinking countries, millennials are drinking more wine than any of the previous generations did at their age, while in traditional wine drinking countries, they are drinking less but better wine,” Rannekleiv et al write, while cultural diversity (e.g. Hispanic populations in the US) is also rising.

Diluting well-established brands can be a mistake

Such a shift has presented wine companies with a challenge, they said – sticking with ‘tried and tested formulas’ for baby boomers or tailoring products to suit milennials.

Over the past few years, Rabobank’s analyst write, the success of some wine companies in the US market suggest the answer may indeed lie somewhere in between.

“Rather than diluting well-established brands in a muddled attempt to be all things to all people, bold and progressive companies have developed contemporary brands with a fresh look and feel, aimed squarely at wine consumers looking to engage with the category in different ways,” Rannekleiv et al. write.

Millennials still value, and will pay for, quality, but “often place less value on provenance and brand heritage and more on what the brand says about them and the occasions on which they consume it,” they add.

Astonishing US growth for the likes of Rex Goliath and Barefoot in contrast to more critically acclaimed, staid brands of the past proves this point, the analysts maintain.

IRI’s 2014 stats supplied by Rabobank tell the story – in 2013 Rex Goliath grew 12.4% to 12.1m 750ml bottles sold while Barefoot grew 14.3% to 63.2m.

Brand proliferation is a problem in the wine world

This contrasts with Yellow Tail, a more esteemed brand traditionally, which sold 33.1mn bottles in 2013 – but sales have been flat from 2012; sales of Gallo’s Twin Valley also fell 7.7% in 2013 to 40.8m bottles.

“Older brands in mainstream consumer markets routinely require revitalisation…however, attempts to reposition a brand within a market can prove to be a much more challenging and questionable process,” Rabobank’s analysts write.

“Many wine companies are finding that it can be more effective to launch a new brand that better responds to evolving market dynamics, rather than trying to reposition an old brand,” they add, with the caveat that the wine industry is prone to “brand proliferation” that makes it increasingly hard to position new brands.

Alternatively, Rabobank says older brands losing their luster can find a new lease of life in emerging markets – with the analysts pointing to the success of E&J Gallo’s Carlo Rossi brand in Poland.

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2 comments

Spigots and Labels

I agree with the author, as it would appear that the shrewd “label & spigoteers” are teaching us a thing or two...

Orin Swift, Vintage Point, Slo Down Wines, Joel Gott and the like are sharp-shooting with dazzling artwork and branding like Palermo, If You See Kay, Sexual Chocolate and Shatter that minimize or are absent of place or pedigree just like Rex. It's working, and it’s not just the Millennials who are buying into this idea. Boomers seemingly continue to flinch at the escalating prices of “blue chip” Napa pioneer brands, and are trying on these “costume” labels, with increasing numbers finding them to be enjoyable alternatives to players from the The Judgement of Paris era. Perception is reality, and we've seen it elsewhere…

“Harley Davidson doesn't sell motorcycles. Harley sells the ability for a 43 year-old accountant to dress in black leather, ride through small towns, and have people be afraid of him. It’s an experience that Harley calls the “rebel lifestyle”. –Tom Peters

Since 1856 the wine world has tried to evolve beyond the Napoleonic codification of Bordeaux with little success. Almost 40 years have passed since Steven Spurriers’ famous Franco-American shoot-out, and the signs (read consumers) are beginning to indicate that the tectonic plates are beginning to shift.

If the Reign of Terroir does begin to tumble, what will the new breed of MW and MS study?

“If you don't like change, you're going to like irrelevance even less.” –General Eric Shinsike, US Army Chief of Staff ret.

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Posted by Bernier
06 August 2014 | 15h25

Not so sure...

Kind of a broad-stroke analysis, no? Both Rex Goliath and Barefoot are value brands playing in the sub-$6 segment. Would be curious to know if the conclusions could be said for brands in the premium $8+ price points. BTW - Barefoot was started in 1986, and bought by Gallo in 2005. Rex Goliath was introduced in 2002, and purchased by Constellation in 2005. Yellow Tail, on the other hand, was always under the W.J. Deutsch group. I wonder if someone could also make the argument that a relatively small brand, purchased & given an infusion of capital / marketing focus, is the real key ingredient to success? At the end of the day, I think it's authenticity & fun that resonate with Millies, not just the "new vs. old."

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Posted by Robert
05 August 2014 | 00h46

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