Attracting 'New Luxury' Consumers
Workshop focuses on reaching modern upscale consumers
Panelists discussed this concept during a workshop called "Trading Up: The Sustainability of Luxury Brands," presented at the Wine Industry Financial Symposium on Sept. 17. Participants included William Amspacher, Ph.D., professor of agribusiness at Cal Poly; Taylor Bryant, executive VP/chief marketing officer, Mullen Agency; Chris Canning, director of Calistoga Beverage Company; and Russell Joy, president/GM of Patz & Hall Wine Co., who moderated the discussion.
When considering a price increase in the luxury category, Amspacher said, wine marketers should first consider how "elastic" the demand is for their product. Will customers respond to a price increase by buying less of the product, or by buying someone else's wine instead? It's important to steer consumers away from "substitutes" by differentiating your wine from others in the marketplace, he said.
One way to set your product apart from the competition is by establishing brand authenticity. Luxury consumers want to feel like the products they buy are made according to tradition, Amspacher said, using artisan methods. Often they are associated with a particular region.
New luxury consumers
Taylor Bryant, of Massachusetts-based Mullen Agency, also emphasized the importance of authenticity. "It's a huge ingredient in the luxury goods market," he said. Bryant spoke of "new luxury consumers" as an influential target for high-end wines. Not quite at the level of "affluent," these consumers have household incomes ranging from $80,000 to $125,000 and gravitate toward brands like BMW, Viking and Belvedere (vodka). "Old luxury consumers" prefer more traditional brands like Rolls Royce and Bombay Sapphire, he said.
Rather than choosing products for status reasons, "new luxury consumers" focus on pampering themselves with high-end experiences. "There has to be an intangible element of your brand" to connect with this consumer, Bryant said. It must make an emotional connection to the consumer, and have rational support to back it up.
This category of consumers doesn't shop according to price, and is more likely to spread the world about a brand or experience via the Internet--a characteristic that makes them particularly influential. Consumers in the "new luxury" category are also enthusiastic wine drinkers--a recent survey showed that 24% of participants consumed 4-9 glasses within the previous week.
"New luxury consumers do a lot of homework before buying," Bryant said. Therefore, your website should enhance the image of your wine.
Repositioning for the luxury market
While the image of a wine brand is important, it should be backed up by its production methods and company philosophy. Chris Canning, of Calistoga Beverage Co., illustrated this point with a case study of his brand's repositioning strategy. In 2007, the company launched a program to position the brand, which started as a bottler of mineral water, as "the premium beverage company for health-conscious adults."
It began by taking Calistoga out of Nestle's main portfolio and relocating the brand to Northern California. In order to appeal to health-minded, environmentally conscious consumers, Calistoga stopped using artificial flavorings and colors, began sourcing organic ingredients and started packaging its products in recycled glass bottles. The brand pulled out of Safeway and Costco stores, and focused on upscale natural food stores.
After three months of implementing this strategy, Canning said, revenues have dropped. However, he expects the brand to be profitable by the first quarter of 2008.