Ep. 1247 The Challenging US Market | wine2wine Business Forum 2021

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This hybrid edition of the business forum was jam packed with the most info speakers discussing some of the hottest topics in the wine industry today. For more information, please visit wine to wine dot net and tune in every Thursday at two pm central European time for more episodes recorded during this latest edition of wine to wine business forum. Hi, everyone. Thank you. For joining us today for a session on the wine consumer in the challenging US market. My name is Sarah Trebnick, and I'll be your moderator for the session. Just as a quick introduction, I'm a restaurant owner from San Francisco. I operate a restaurant and wine retail shop in the city. I'm also the founder of a wine distribution company in New England. I've been working in the sales sector of the wine industry in the US for over a decade. So today's topic is definitely of particular interest to me. I'd like to introduce your speaker for today's session, Rob McMillan. Rob is best known as the author of Silicon Valley Banks, prestigious State of the wine industry annual report. His career spans thirty five plus years in banking and decades of experience researching the wine business. He provides much sought after views trusted by players at all levels of the value chain in the wine industry. He received his bachelor's degree in finance and economics from Sacramento State University at an MBA from Santa Clara's Levy School of Business, and he served in a variety of board capacities within the wine industry. In this session, Rob will be summarizing the changes in consumer behavior in the United States with respect to wine purchasing and consumption. As we all know, a number of factors have resulted in marked difficulty in selling wine in the US, including supply chain disruption, changing consumer preferences, and younger and very different consumers. Let's join Rob now for an in-depth discussion of the wine consumer in the challenging US market. If you have any questions, please type them into the chat. We'll do our best to answer them throughout the presentation. Now I'd like to welcome Rob McMillan. Thanks, Sarah. Good morning, everybody. I hope you've had a a good show today. Thanks for staying in there. If you're you're you're late in the day and, I hope you're have hope you have a cocktail on your hand if you're doing this, from video. It's morning for me in, in California. I live in the Napa Valley. It's the Napa Valley sun rise you see out, outside. Let's let's move into the things we wanna talk about. I'm gonna just start by by giving a a short introduction about some of the things that I'm not gonna talk about, really. The, you know, the industry is in the in the United States. There is a a a channel that goes direct to the consumer. And then there's another that goes, through the three tier wholesale system, and and they're they're kinda separate. If you have to back up a little bit, and just to give you a little bit of a runway into where I'm going. Last year, we had a, tremendous level of channel shifting, wine that was quote sold, from in in the past, in restaurants, and, and in tasting rooms, for instance, all had to be sold through either online or through grocery. So actually tracking some of this stuff became quite difficult the the normal data that we're used to seeing was was pretty complex. It was it moved all over the place, and you see a lot of news reports about increasing consumption, of wine, But more or less people were looking at, the, the the information about the grocery store sales, which, spiked dramatically. And that's really where we're gonna pick up, pick up the stories. We're we're gonna pretty much leave off where we where we were in twenty twenty and move into twenty twenty one and and, and and hopefully past that. So let's go through first just some economics. Just to show you where everybody is, in in this cycle. Before I do, important to recognize that at United States, wine is sold primarily to, college graduates and families with over a hundred thousand dollars of of income. So, you know, reasonably, a healthy financial families. So that's an important thing to think about as we go through these slides. A very first thing, obviously, is, is pandemic without having this pandemic behind us, in some far fashion under control. It's much more difficult to sell wine both through normal channels. As you guys are aware that are exporting to the US, you know, getting your your your bottles on a on a ship to get over here become increasingly difficult. And so we we do have several supply chain issues. We still gotta work through finding glass, getting labels. Those are all issues that we had to but I'm not gonna spend a lot of time talking about that. This is a this is an important slide. It's gotta we gotta get to this point where we see decreasing, deaths, decreasing cases, and that's that's what we see in the United States right now. Things are starting to normalize. And it looks like that we're going to start, moving into a period where we have, better, better travel openings probably November. So that's goodness for all of us. Labor force participation rate, means the number of people that are actually, employed relative to the population. And you can see it's a little bit low lower than it, than it was. A lot of, older Americans have decided to retire. Others have just not come back into the labor force for various reasons. If we move into, to job openings, obviously, We have a a lot of of openings these days. And, we have a, the hires that are are are not really being being, we don't have as many hires right now as Java. So that we see that split right now. Another good thing that happened this last year, personal savings rate, really hit record highs. We've never seen that in the United States. People didn't have anywhere to go. And their money just piled up in their pocket. So full pockets ready to spend on experiences and things is a good thing for the wine industry that tends toward more wealthy consumers. There we go. GDP, we down thirty two, up thirty three, in the, in the, in the, in the pandemic. And now you can see if you look at that past that double line, we're at three point five, five point two, expected the end, to be in March of twenty twenty two at three point four. Those are very healthy numbers compared to the number that you see at the left side, the one point nine. That's, that's where we were. This is where we are. So the economy is doing quite well in the United States. US stock market's an indicator of that. People that do have wealth have seen that increase from the bottom to the top, almost a doubling off the low. Actually, it it has a hundred percent growth. So doubling off the low. That's pretty impressive. Restaurants, one of the main channels that we we sell in now have fully recovered from two thousand nineteen pre pandemic, era things. And, and we're up to average unit sales seventy two thousand one ninety six. Now, the bad side of that is there there are fewer restaurants, which I'll show you in a second. Tell you a little story first. I do a lot of predictions in the, in the wine industry right speak, consistently, and, and I blog a little bit as well. And one of the things I was talking about early this year was my expectation that we were going to see a repeat of what we saw at World War two. In World War two, after all of the US service men and women came home, we had a massive party. And rightly so. We had gone through, so many, difficult periods, through the prior years, not only through over two, but but before that, with great depression, and, what we had the dust bowl in the United States, prior to that was World War one. I mean, it was a string of really negative events. And so in World War two is over, people were ready to party, and and they did. And that's that's what happened to wine consumption back in, nineteen forty five. And then interestingly enough, it it dropped like this, and I in a in an audience where I can see everybody, I asked the question who who knows why that was. It's always a fun question. And the reason the reason it dropped we drank everything there was pretty, pretty much. And you just, obviously, in our industry, we don't send a way to, to, like, China or Taiwan to get more, like, if it's a computer chip, you know, you can't do that. You drink what you have, and that's all you have. But after that, we returned to pretty normal levels. So I expected to see that. Same sort of thing happened that people would be in a celebratory move as the industry and tourism and such opened up. I thought people would be drinking pretty heavily. Mentioned prior, this is what's happened to the change in the number of restaurants, restaurants right now, are off about ten percent to pre COVID. So the the numbers that are out there really are expressing higher higher unit sales, but fewer units is, is an important distinction. So, restaurant costs are going up, and prices are going up that people are paying right now. There is, inflation. Some of it's as our fed calls it transitory, which means it'll go away post pandemic. Some of it's, I think, gonna be, what they would say is sticky, probably in terms of wages and, what we have to pay for people. And that will we'll see that post pandemic as well. So moving right into wine sales. Rob, can I interrupt just for a second? Please. Question about your slide, your previous slide. Yeah. So you noted that the restaurant accounts were down Based on what I've seen operating in San Francisco, a lot of the restaurants that didn't reopen or that are waiting to reopen are in cities. Is there any breakdown of those missing accounts where they are? Are they concentrated in urban areas? Or Yeah. I would I would say yes. It they are concentrated in chains. That's a that's an important thing to know because, chains actually survived this pandemic pretty well since they had the opportunity to raise money. The the places that got hurt the most were the white table cloths, you know, the fine dining establishment single unit, maybe double triple unit, sort of enterprises. So that's what got hurt most, and obviously since most restaurants are in population centers, you're it's gonna skew toward population density vis a vis, you know, the, cities, cities themselves. Moving on to, what we have in, just to show you what's going on with, with, wine sales right now. Spirits today are taking share from wine. This is this is a pretty interesting number and, just this is just restaurants now. And what you can see is that wine growth coming off the bottom, it's gone up, but it's still negative on a trailing twelve month basis. So, you know, today as of August anyways, this is a a slide from SIP source, which is the wholesalers. We're off four percent, and yet spirits are up seventeen percent on a trailing twelve months basis. So we're we're not keeping up with spirits, certainly in restaurants, and that's one of the things that we'll see in a second. Here is, grocery and drug, as you would suspect, because we had that channel shifting before, both spirits and wine are, in a, declining mode. Spirits, pardon me, wine now has moved negative into negative growth in a trailing twelve month basis. Spirit's still positive, though. So that tells you something. Now let's put put those slides together. I think this is probably the most important slide that you can take a look at. So this is restaurants and grocery, packed together over this over this time sequence. January twenty first, is you can see that basically, you know, prior to let me turn on my if you look at if you look at prior to January twenty first, you can see that that, wine as a spirits, and then wine down here, they tracked about the same when we when we got to reopening, wine fell off and spirits soared. And, you know, why is that? Well, it's because there's a difference between wine and spirits in the consumer's mind in the United States right now. We have, you know, a situation is particularly in restaurants that shows up. Wine is about twice as expensive per serving. Versus, spirits. And so it ends up being, you know, pretty obvious to a consumer when they walk in and they see a, on a on a wine list or a a beverage list now as they they're called, because wine has taken a, smaller share of that, that list. What happens is you have something that says two thousand seventeen Soviet and Blanc Napa Valley. That's it. And then you have another thing that's craft cocktails, and it says, you know, gin source from wherever, you know, combined with natural and organic ingredients and the bartender takes some stuff and he puts it over it and makes fire and it's, you know, it's it's all but they're the same price. And what's the consumer gonna do? Oh, well, you know, if they're looking for a buzz for the dollar, they're probably gonna go spirits. If they're looking for excitement for the dollar, they're probably gonna go spirits. So that's that's what we're seeing right now in the reopening trade. We're not seeing wine participate. Wine wasn't really invited to this reopening party. So that was that was something I didn't see coming, but it's something that is I probably should have and is now pretty obvious, I think, to, to most of us. So spirits versus wine, when we look at it regionally, This is this is a twelve month rolling through August. You can see spirits volume up, pretty much everywhere, year to year, both in grocery and restaurants with wine off. It's it's not really great news. I hate to say, but it is the news. Imports important to talk about that, I think, for you guys. This is by Verizon. And if you look across the varietals, chardonnay, is up a little bit in import, bizarre red blends, and Subblanc mostly out of New Zealand, and Rosay, out of Italy. So there's some some minor growth there when you look at some, some of the varietals, but but not much. It's not really going that great. Total imported table volume down two point three percent. Total domestic growth is down six point six percent. So your less import importers are less bad than the United States right now in terms of performance. One of the things that I missed, I I I knew was there, but I I thought it would go away with the reopening trade with some of the long term trends that were already sitting on the industry. So let's look at a a few of those in a couple of different charts. So this is a source from the National Institute of Alcohol abuse, and, beer has had a a difficult time, probably since the seventies when it rolled over. We we consolidated all of our beer manufacturers to just a few. Trying to effectively, keep up with a prior generation, the people who came back from World War two who were very frugal. They they had survived the great depression. And, and so the beer manufacturers consolidated to lower production prices and, and, try to deliver a a a lower unit cost, and that and that worked. Because the that old consumer bought on buzz for the dollar. It was ethanol per dollar is what they the way they shopped. You know, if you look at wine, wine had an interesting, growth period through the eighties, as the those older consumers started to move over to wine and then and then, and then moved off. So here's wine. Wine, as as I said, you know, had a had a growth for it. And now you see it trailing off. Spirits on the other hand, bottomed out in in the in the nineties, late nineties, and then they started going on a premiumization trend, which, it shows up in pretty much all of the data at this point. Two total US table wine consumption. This is, an obvious pattern shift that you see, you know, throughout, throughout the data. And, you know, particularly, through this period, you can see neo prohibition. So we had a a lot of anti alcohol people, pointing out all the negative impacts of wine. Mothers against drunk driving. Just a whole whole group of different people. It it bottomed out in nineteen ninety four as the boomers started to take over, and really wine was the only good thing at that point that was made, beers. Quite frankly sucked, and we didn't have craft beer in the United States. We didn't have, individual people making making beer. So that that wasn't around quite yet. Get that, started more in the late eighties. And so, you know, we had an opportunity, you know, we had something just that worked out pretty well. For a number of years, wine just took off. And we had a lot of wine consumers, you know, being very happy. And and the wineries, themselves grew and, growth you know, the rising tide, took all those hires, they said. But then we hit this period, and we have to say, you know, why? That's an important thing. So here, here's a slide about, this is just a a data point from, September eleventh twenty twenty one, and it's, what you can see is what's happening in the US right now. The lower priced wines just aren't doing well. So the this the part this is dollars. And these are bottle prices over here. And, dollar percent change versus a year ago here. And so you can see on a dollar basis, you know, I put a heat map in here so you can kinda see what's not going very well and what is so the kind of the more expensive wines, the more more expensive, the better, you know, the better it's selling, the less expensive wines just aren't doing well. If you look at in volume, it's it's really the same thing. So, you know, that's that's a major problem that the industry has got to address. And, yeah, let's go to the next slide. Here is a slide by, that shows you what happening in varietals that are eleven dollars, and greater by volume. So they're doing pretty well. And it's this is a little bit complex slide, but this is share. So when you look at, cabernet sauvignon, that has the largest market share. But the trend is only a two point six percent growth. It's positive, but it's just two point six percent. Are you enjoying this podcast? There is so much more high quality wine content available for mama jumbo shrimp. Check out our new wine study maps. Our books on Italian wine including Italian wine unplugged, the jumbo shrimp guide to Italian wine, Sangiovese Lambrusco and other stories, and much, much more. On our website, mama jumbo shrimp dot com. Now back to the show. Chardonnay is the next one at this point, point seven. And, that's point seven growth, but the second largest. So red blends really are the ones that, right now, are doing the best on a share, both a share, in a trend basis, up eighteen percent. You can see the premium vials are greater than eleven dollars. The look is a little bit different. Right? We we have positive growth, across most everything except for Zinfandel and, and Malbec. Total table wines, less than eleven dollars, just not doing well. So This is a white wine. It's got thirty six percent of the of the, the share, and it's a negative five point eight percent. Thirty four percent share for red table wine, down thirteen point five percent. Those aren't good trends. And, that's something that, I think everybody has to be aware of is when you start to shoot under eleven dollars, the consumer's not buying. So you have to think about what you're, selling in the in the stores. Let's look about let's diagnose now what we're seeing. So those are the those are the data that we're looking at, but, you know, you you gotta ask yourself why. Well, part of the reason is, in the in the nineties, when wine consumption really took off in the United States. We had wine consumers. They didn't drink spirits. They didn't drink, beer. And we had, you know, pretty much wine consumers that were drinking a hundred percent wine. Today, fifth fifteen percent of drinkers are exclusive to wine. They drink across categories. So they're they're less, they're less committed to wine than than the prior generation. So that's part of the explanation. Here's another data point I think that that starts to get into the real issue. So this is a share of legal adults. So if you add up twenty five seventeen, these orange kind of are seventeen, seventeen, twenty two, the this is the the share of population. And then if you look at the purple, that's the share of consumption, in in these age groups. So, you know, we expect younger consumers in the left, the twenty one to thirty four to probably not be wondering because yet, it's expensive. Thirty five to forty four, we'd like to see something a little bit better than this because the the most most retail, spending is done between the ages of of thirty five to fifty five. And, you know, here we have a situation where the forty five to fifty four, isn't really engaged yet. And you would think by, you know, this this age group, this thirty forty five to fifty four age group, you would think by that point, would be engaged with the line, and they're and they're just not. Still to this day, it's it's boomers, just older, Americans that are still, holding the dominant chair. And we're gonna look at a couple of other slides from that. But just another important thing to to mention that it's pre not predominantly, but a large a larger percentage of the the population. Here's, again, total adults. And the green is total wine drinkers. And you can see it's it's prominently white. And so we're missing out on the Hispanic black and Asians, which, not coincidentally, make up a larger part of the younger, population base. Here is, something, this is a survey that I run-in the United States. I run two of them a year. I just finished with another one. And, this shows you what's happening with those younger consumers. The younger consumers are are just simply stagnating here. They're they're not really buying in. We had a little bit little bit of amounts in twenty twenty. I think it had a lot to do with the fact that those younger consumers were actually getting out and, going to tasting rooms in the United States and, and, you know, looking for ways to celebrate they were less concerned about, about the virus versus older Americans. And so you see a a relative change here between boomers and, and millennials. It's still, at thirty six percent. Still today, boomers again show as the, the largest consuming, cohort for wine. And, you know, obviously, it's not gonna it's you know, when you have a a consumer base, it's fifty it's fifty seven to seventy five, you know, they're not gonna all be around forever. I will. But but not everybody will. So why are they cutting back? So this is a slide from Nielsen. And I think it's it's an excellent slide. Sixty three percent say they're help healthier lifestyle, health related reasons, consuming more nonalcoholic beverages. You know, you add them all up, and it's sixty three percent that are talking about health issues. Another important, chart from, BLS consumer, Bureau labor statistics consumer expenditure survey. This is alcohol, spending. And it's by you know, you can see it at the bottom. This is this is for consumers that are legal drinking age to age twenty five. So it's the very youngest. It's the it's the gym. Is that gen z, I think? And you can see increasingly over the years since the nineties, that youngest group is gen z over here, it it is, you know, millennial in here, and something is gen x in here. So it's that it's that consistent a period of time carried over on the sequence. And you can see that younger generation as it's moved in is it continues to spend less and less, and that's not a good sign. Looking at the rest, this is alcohol twenty five to thirty four, and it's it's kind of it went up and then it flattened. And, you know, the rest of them, you know, kind of, look pretty much the same, maybe, more of an increasing trend throughout. But again, it shows you that we're not hitting that young consumer. We're we're missing that younger. And that's a a critical thing. Just look at the headlines that we see. This is a little bit of a data slide now is from last year, but, this is the kind of stuff that you see in in our press. So the actually, this was from BBC. How many cigarettes in a bottle of wine? And so ten cigarettes a week, is equal to one bottle of wine. That's in theory, it's a scientific study, and the scientific study was crap. If I can be so bold. You know, the design of that study was to try to link cancer and wine to to decrease because I'm just part of the al anti alkyl movement. Another one, relationship between recent alcohol use and sexual behaviors, you know, here, they have a six hundred and seventy one, patients that they that they looked at. It's not good science, but they're they're trying to link, you know, mortality and, and disease to wine. Another one that I think probably many in this group have heard, no level of alcohol consumption improves health. That, you know, that ignores a lot of the data that's been out there for a very long time about improved cardiovascular in particular, and wine's component in a healthy lifestyle. The wine is bad for you, friends, health minister warrants. That was quite a, a a row as I as I understand it. Particularly in France when, you know, and the French health minister says, don't drink wine. That's not gonna go or well. I I can understand why. And then this in the New York Times in the middle of this last year, should we be drinking less? Those same anti health people were trying to push toward, reducing in the US or USDA dietary guidelines and just they didn't have the science to do it. Unfortunately, the way it ended up is, is government pushed back. And so it's still viewed is healthy to have, moderate consumption to glasses for men, one glass for women. But this is, you know, when you have a a a younger consumer, who's very health conscious, and they're, and they're, say that they're declining in their consumption for health reasons, you gotta look at the root cause. And a a lot of the anti health messages are are getting through now. Where do those come from? World Health Organization's a big component of it. World Health Organization, this is from their own site. So know, you can see exactly what they've what they are are trying to do. You know, they try to, take statistics that are questionable at best. And, you can see here, as an example, five percent of breast cancer, seven per ten you know, anybody with a brain can think through how do you how do you end up thinking that that seven percent of hypertensive heart disease? How do you how do you come up with that math? It's just not, it's not sensible, but, you know, this is the kind of stuff that's put out. It's not science. But they're they're trying to to draw a link between the two. Now they after they vilify one, and they have a coordinated tack on it, So the the what they wanna do is regulate alcohol distribution, restrictor bin advertising Europe, as I understand, is already, dealing with that. Increased prices is another way through, you know, higher tax. That sometimes that gets a lot of, interest from, legislators, raise, raise awareness, surveillance, and then, they they'd really liked it for everybody to show what's in a bottle of wine. There are some additives in in some even in the wine industry, don't wanna put that on. We don't have in the United States as probably everyone's aware, calories, and calories are something that is really linked to help. People wanna know what's going in their mouth these days, and how many calories are consuming. Something we're gonna have to to deal with. That's the the metric is they wanna take ten percent, harmful use is what they're saying. Their data is focused on harmful, but they're, their actual plans and strategies are focused on total wine consumption, total alcohol consumption, not harmful. A question, Rob? Sure. Yep. Shoot. So these coordinated attacks, would you say that they're focusing more on wine and less on spirits? Because the consumption of spirits is up. Would you say that wine is is in the bull's eye for some reason? No. I would say that, that it's it's all alcohol. And just because spirits are up, doesn't mean that it's not impacting spirits total alcohol consumption, it is is, you know, flattening, as we know. And, so spirits are doing better comparatively than wine. Beer is dropping through the roof. It's not because it's not because of any, work by the WHONS service because of, you know, their own, issues in beer and the way they, not met consumption transfer quite some time in the United States. So That that's a good question. A fair one too. But it's, it it's total alcohol, not just one. So this is one one slide that I tried to show to, you know, many groups, just to show you the difference between boomers and millennial. And then what you ought to do about it. So as an example, here's this is the support group. It's a value. This is a value. We're talking about consumer values. The the family is, you know, the way the boomers thought about it. In the United States, we've increased we kinda screwed the family up and have a more than fifty percent divorce rate now. And so young people have not really, had the same belief in a in a family system as my generation. And, and so friends are are the ones that they depend on more. And so your action now when you think about how you sell wine, now it starts to make more sense that you've gotta drive that social media, and communication laterally. You know, there's there's lots of different strategies you can you can come up with, but You know, the idea is you really don't wanna just have that top down, you know, megaphone from, from the, as the CEO, C. You wanna encourage that lateral communication. It's the recommendation from other consumers. That really helps, drive, drive sales and, an interest for sure. It's not so much scores anymore. It's it's, the the recommendations of other people that they do trust. Choice and food, I'm gonna skip through most of these, but, better if you look at the action, it's, you know, for well, let me back up. Boom. But, you know, we thought we just would need it if it's bad for you. The the current generation only is if it's good for you. It gets back to what's in the bottle. And, and better for you is the way we think about it. So what's better for you? You know, if you're gonna drink wine spirits or beer, what's better for you? And, we we do need to think about that. Thing. I'm gonna skip through a lot of these things. You guys can get this the slide deck if you want if you're interested in, you know, looking through these a little bit more might help you think about some of your, your strategies. But, you know, clearly when you look through the the the deck here, between Boomer and Millennials, they're very different. And we're still in this country, marketing to that older generation, you know, as lifestyles of the rich and famous, and you know, lifestyles are rich and famous as an an anathema to the young consumers. They wanna they, you know, they have a more, socially aware, viewpoint on their values. So just one more thing we've gotta think about. So, just some examples of the way other things are being sold. So serving size, calories, if you just look at, you know, the way, Coke is an example over here sold. You know, they Coke is an a great example because, sugars have been, you know, targeted as part of obesity and and diabetes in the United States. And so, Coke sales dropped off tremendously. One of the things they did is they they just shrunk the the size to seven and a half ounces from twelve ounces. And now they can say it's got lower sugar. And and this this thing is actually kinda taken off. If you look at other things, you know, the the term clean is used a lot. Whatever that means, it's a kind of nondescript, but that's that's what you used. Cause marketing is a big deal. Yeah. You know, over here, we we have a a lot of corporate snack rooms, you know, snacks are out, out out in there for everybody. Back in my day when I started banking, you know, we we had, a cup of noodles. And we had chocolate and coffee and soda, and that was it. And today, you know, this is pretty wide selection of foods. But, you know, if you're worried again about, about calories, you know, you shrink the the size, and everybody's trying to go for a hundred calories or less. That seems to be the number that that resonates with a lot of a lot of people. And these little things in the bottom, you know, it starts to talk about again what's in the what's in the the, the product. Here's a, you know, natural caffeine, whatever that is. But the term natural is is one that's used and somewhat abused. Zero calories. And we do see a lot of of, in the United States, we're seeing growth in, nonalcoholic, wines, beers, ready to drink spirits, etcetera. So zero calories, you wanna you wanna lower the the, number of calories, just take out alcohol. That's that's one way to do it. Another way, these these badges that you you see sometimes on. And by the way, I'm not suggesting we stick this all over our labels. We should be true to what we do. You know, it's we don't wanna I don't think we wanna go exactly this way, but we wanna think about it and and use these strategies that are that are successful. To to our benefit. Here's another one, cattle, cattle one that, you know, cattle one is a great story because they weren't doing very well until somebody got the idea to infuse botanicals. And and after that, they they did quite well. Why is that? Because it's plant based, which is just it's just funny to me because, and here's another one. Made with vodka distilled with real botanicals and infused with natural flavors. That that word again. I just think this one's a crack up to me because it references how we've missed the consumer, you know, because botanicals now are a thing. Plant based is a thing. And for god's sakes, wine is plant based, and the consumer doesn't seem to know to know that. It's, it's just crazy. Variety pack, white cloths done very well, you know, gluten free. You can see some again, some of the uses low carbs made pure, whatever pure means they actually trademark that term pure, you know, five percent alcohol. So that's, you know, obvious for them, a hundred calories. There's that hundred again. And that, you know, they're Maybe there's a way to do that by size, not quite. I don't think. But but smaller sizes do make sense. And I didn't cover that slide in here, but the things that are growing, right now in the United States, are smaller sizes and alternative pack. And Rob, a couple of questions have come in. Yep. One question. What about packaging should wine producers take into account the preferences of the new generation? Is that Yeah. So, and we I was just, actually getting I didn't I didn't cover it in the slide, but, but, yeah, I mean, you know, wine is heavy and and bottles are heavy. You know, you're you're able to see in in know, RTD is an example cans, aluminum cans, are, growing popularity in the wine industry, but, you know, it takes a lot of weight out of, out of shipments. And so that's that's one thing that that we could do, but there's all sorts of other packaging. There's packaging, paper packaging that's starting to come into play now. I was recently at a, a bar where I asked for a sake. So I'm drinking across categories too. As a it was a Japanese restaurant, and, the bartender was new. And, you know, in in keeping with this, difficulty in finding people in hospitality in the United States, but it made it made the bartender's shop very easy to reach in, you know, into a refrigerator and take out a a just a a milk carton. Basically, it was a, you know, a cardboard container. A sake that had, you know, all sorts of packaging. It looked like it was, you know, made for a, a twenty year old or something. The way I think about it, it just, you know, and it didn't have a, a, an estate or anything that that looked, the way we would think about normally branding. But the socket was quite good. And, there is another example of smaller size and packaging, and actually playing into the the more the difficulty in finding, help here. So definitely a a place to think about. I talk about again switching away from moving away from long days, cool nights and scores. So, nobody reads this. This is a, this could come from anything that's my friends from the central of the Tahago in in New Zealand, but, this is what we see in the back of winemaker, in the back of wine labels, and nobody reads this. So why why do we put it on here? Here's one that I think is pretty cool. It's, a small winery, and pastor Robles, and they're and they're using iconography to, to show people kind of what's in there. People can scan this really quick. There's all sorts of other things that can be pro can be popular. If you wanted to look at nineteen crimes, using VR is is very helpful with that, you know, kind of has organically grown as a as a label, you know, primarily because of the use of that QR codes are becoming more important again. Who thought that would ever happen, but that's another way to to help, you know, change the way you're marketing. So it's, final points, and then we're gonna have some time for questions. So the one of the really great things is that the US consumer isn't a really, strong spot. They're they're spending. They have cash in their spending. The US stock markets at a very high point And, you know, that's the the wealth effect when you have think you have a lot of money, even though it's paper money, you're more willing to spend. And again, wine skews toward, you know, people with money. Traveling tourism is about to reopening. It's gonna extend the opportunity for growth in the outbev segment. And, you know, let's hope wine takes advantage of that. Again, not not addressing the, the problems with supply chain. Most people think that should be we should be caught up kind of, in the middle of next year, maybe q three at the worst, but we'll see. Wealthy consumers have fell, fared well through the pandemic. They had jobs. They worked from home. I'm working from home as you can tell. And, and so they're still, ready to spend. It's the the consumers that really don't have a lot of money or couldn't find employment or will let go from jobs a lot in hospitality, as an example, that, and they're not wine buyers anyways. I it's the we need them to be. We need them to engage in those lower priced wine category. Those are the entry level wines that we need them to engage with. But, you know, our normal consumer is still there. Just mentioning is below eleven dollars. That's that's a bad sign because unless you can engage that consumer, at an entry level. You're you're just not gonna get them to engage when they do have money at a higher level. So this is something that the, the industry in the United States, certainly is is just missing. Spirits continue to take share, and so we need to adopt some of their tactics. I showed some of those examples. And and it's just to get your I'm not saying again, that we change our labels to to you know, we've tried it before critter labels or whatever. We think that that's going to engage, a younger, emerging consumer. And maybe it did. Maybe it maybe it didn't. We've seen, you know, Muscado, boom. We've seen critter labels. We've seen red blends that are back again. And so there's reason to believe maybe there's some some, hopes anyways for some entry level pipelines, taking off again. But we we need to address some of the values and look at what's happening. With, spirits, in the way that you market as well. It's I think they they're kinda leading the way and we need to follow a bit. Oops. And the last one is connect your marketing, with, with young connect you marketing, should be your, marketing with young consumers. Somehow we've gotta identify with those values, and we we've got to reach them. And marketing means pro you know, promotion packaging, you know, across the board, but let's remember they're looking for plant based foods. And wine is plant based. So, with that, Sarah, if we have any other questions, we can take those and, or we can give people back some more time. What do you think? Yeah. We've got a couple of questions that have come in. One question is are smaller portions and lower calories an option for the wine industry? Would that be something that would potentially improve sales? Yeah. Oh, well, it is. That's you're seeing package growth in the United States on three seven fives, five hundred ml, and, most interestingly, smaller packaging, is doing quite well. Alternative packaging is doing well. And, you know, for a frugal consumer, you're seeing, an increase in sale, a boxwind. Again, boxwind took off during the pandemic. Kind of fell on some hard times for a few months, and now it seems to be coming back, private labels and other things that's quite strong. Again, the, the frugal consumer is looking at private label as being, a, a value play, a place to get in at the right, at the right price. And those consumers are frugal. So you've got we've got about a minute left. There's an interesting question. In a word, is alcohol going to go the way of tobacco in America? Well, that is certainly the way that, the anti alc movement is pushing You know, they they really had a hard time addressing the the French Paradox, the Mediterranean diet, work of Arthur Cancer that, talked about a j shaped curve with improved cardiovascular health, from moderate consumption of alcohol. And so rather than continue to fight against that, what they've really done is they've tried to link cancers, and what they call all health mortality. But cancer is is the one that they're they're they're focused on right now. And, and if they can figure out how to identify wine as being cancerous, and we've start putting cancer labels on our bottles, and I think some some regions are already doing that. It, you know, that'll certainly have an impact on a, on a, consumer that is health conscious, on any consumer. Right? If it says cancer, you know, it's it makes you pause. So, that's something the industry has to, to deal with. And for what it's worth, me and the United States. I'm working with, three other people, MJ Dale, Dale Stratton Danny. And we're we're trying to put together a, a marketing organization to help promote brand wine and defend against some of the bad science, more or less promote the the good science that's out there and and talks about the the benefits of of wide consumption. That's what we're that's what I'm doing personally and hope to see that come through in the next in the next couple of years. It takes a while to get there, but we're making quite quite good progress. Alright. I think we're out of time that this was very interesting, and I hope we all continue to talk about this. And, hopefully, we'll see some wine sales increasing over the next few years. Good deal. Thanks, Sarah. Thanks, everybody. You guys have a great evening over in verona. Hope to see you all live in person without masks one of these days. So take care. Listen to the Italian wine podcast wherever you get your podcasts. We're on SoundCloud, Apple Podcasts, Spotify, HimalIFM, and more. 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