Practical Winery
65 Mitchell Blvd, San Rafael, CA 94903
phone: 415-453-9700 ext 102
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Winter 2011
Return of the Boomer
Then Lehman Brothers declared bankruptcy on September 15, 2008. This began the total meltdown of the financial markets with many of the world stock exchanges experiencing their worst losses in history on October 24, 2008. I had been through four industry downturns before; including 9/11. I was convinced Cycles sales would benefit from trading down, and I was worried about our more expensive Hahn wines.
But this “downturn” was decidedly different. Everyone was affected. I don’t care how rich you were. A psychic shift occurred. Cycles sales stalled out, then started to decline. The way I described what happened to my owners of Hahn Family Wines is best depicted in the following scenarios, and most importantly in the values these images project:
Pre-September 2008 – “The Roaring Twenties”– Conspicuous consumption is the norm. There is money to be made; easy money. Bernie Madoff is a hero, everybody wants to be like him, contributing to philanthropies.
The sky is the limit: “Let’s party like it’s 1999.” In fact, it was 1999 when the party started to really take off, with deregulation of the banks, etc. Consumers expected at least a 14% to 15% return on stock investments; many of my friends expected more like a 20% to 25% return or they were not happy.
Post-September 2008 – “The Great Depression” – Maybe not bread lines, but massive unemployment; Conspicuous consumption is out! Authenticity is everything. Bernie Madoff goes to jail; nobody
wants to be like him. A 4% to 6% return on your investment feels very good. Just not bleeding money anymore feels good.
I believe this psychic shift has had a profound effect on all consumers, and therefore on the way we now need to market our wines.
I ask the question: Who has the money to buy my wine? I heard an intriguing report on National Public Radio and researched it. We are now ten years into the largest generational transfer of wealth in U.S. history. Between roughly 2000 and the year 2050 a minimum of $41 trillion will pass from one generation to the next. (I am thinking my Millennial children are never going to see any of my share of that — I am going to the Bahamas.) Even after the financial meltdown, economists still came up with between $40.4 trillion and $65.3 trillion.
Unemployment remains high and is going to remain high for some time, but it is not divided up equally. In fact, as stated in Rob McMillan’s Silicon Valley Bank 2010 State of the Industry Report, “The latest data show 16% unemployment for Millennials, 9% for Gen-Xer’s and only 7% for Boomers.”
Another report, from the Luminosity Marketing Study of “Boomerangers” (ages 20 to 29, many of whom moved back home) estimates Millennial unemployment at 37%. Who has the money now to buy my wine?
By coincidence my family seems to represent the perfect snapshot of American life. This fortuitous happenstance has been a major benefit to me throughout my career. My mother is 87 – part of the “Greatest Generation.” I am a “Boomer.” My daughter is 34 (Gen-X); my oldest son, 28 (leading edge of Millennials); my youngest son, 16 (the latter part of the Millennials).
My daughter is a CPA hired directly out of college by Arthur Andersen Company in October 1999, wanting security. She was wooed directly out of college by several companies. Companies were touting in-office massages on Fridays, child care, and unbelievable, countless bennies. Arthur Andersen won. But so much for the
security of a large company — she was one of the last ones to turn out the lights in the San Francisco office in 2002.
My oldest son recently graduated from UC Davis with a degree in Viticulture and Enology. This is his second degree; he received a Bachelor of Science at UC Santa Barbara. After graduation, it took him one year to find a job. No one wooed him. No massages. Many of his friends are still unemployed or employed part-time — “under-employed” is the term. They are just thankful to get a job. If they can make 6% return on investment in their retirement accounts – hallelujah!
My youngest son has no clue what is going on. He got me to buy him a new $500 bicycle. His general state of oblivion really got me thinking. Depending on how you determine it, the last Millennial to turn legal drinking age will do so in the year 2021. Today about half the Millennials can’t drink, at least not legally, and the older half is suffering massive unemployment.
It is true that the Millennials did not have any retirement savings to lose like the Boomers; but that also means they do not have any retirement savings to recover. I have gained back most of my retirement savings, though it seems to come and go these days pretty quickly.
I used to believe that we were undergoing an overarching 10-year shift; To quote Silicon Valley Bank again, “They [the Millennials] are unlikely to matter as much as the Boomers and gen-Ex-ers when purchasing luxury wines … probably for the next decade.” I now believe we are more likely in a 30+-year shift.
My youngest has no clue about recessions, mortgages, etc. He is largely unaffected. In 10 years, he’ll be 26 years old; in 20 years, he’ll be 36 years old. It is going to take 20 years before that segment of the population that was not traumatized by the meltdown gets to the prime demographic for wine consumers, 30 years before they are at peak earning potential.
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