On this week’s episode of the “VinePair Podcast,” hosts Adam Teeter, Joanna Sciarrino, and Zach Geballe take a look at how the premiumization of beverage alcohol brands is influencing the decisions people make about what they drink. These “premium mediocre” products are the middle class of purchase options — not items you buy when you’re penny-pinching, but not true luxury brands, either.
Premium mediocre brands are exploding across all facets of consumption, from drinks to clothes to personal care products and more. Teeter, Sciarrino, and Geballe reflect on how this trend has influenced the beverage alcohol market, why millennials are eager to buy these types of products, and how brands are adapting accordingly.
Tune in to learn more about the impact of premium mediocre brands on the beverage alcohol world.
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Adam Teeter: From VinePair’s New York City headquarters, I’m Adam Teeter.
Joanna Sciarrino: I’m Joanna Sciarrino.
Zach Geballe: And in Seattle, Washington, I’m Zach Geballe.
A: And this is the “VinePair Podcast.” Joanna, Zach, what’s going on?
Z: Doing pretty good. The kids are with their grandparents right now. It’s so quiet in our house. It’s amazing. l get to actually sleep until 8 a.m. We’re recording this on Thursday, Aug. 26, and my wife and I are going to our first baseball game since our son was born. Between the realities of trying to take a small child and Covid, it has not been a priority for a while. I’m going to sit in a baseball stadium, drink a beer, and it’s going to be cool. I haven’t been to a sporting event since Covid started. We’ve talked about drinking at sporting events before, but I’m unduly excited for it.
A: I’m going to make a statement that I don’t think is going to surprise you. I’m not that into baseball.
Z: This has come up before on the podcast.
A: I find it super boring.
Z: That’s what the beer’s for, Adam.
A: I do like the stadium, the drinking, and the stands. I like the experience. I think the food and drink selections at most stadiums around the country have gotten better and better. It’s always fun to be there, drink a few beers, and hang out. You’ll have a great time. That’s awesome.
Z: I’m looking forward to it.
A: What about you, Joanna? What’s been going on?
J: Recently, I went to dinner with a friend in Jersey City. I don’t really venture over there often. We went to a Brazilian spot. It was good, and I had a “Brazilian Margarita” there. I thought it was interesting because they made it with cachaça, which was good. Cachaça is not extraordinary to see at a Brazilian restaurant, but it made me think of Bar Convent Brooklyn and how we saw some interesting cachaça products there.
A: We did. I felt like there was a lot of cachaça at BCB.
Z: Isn’t a Brazilian Margarita made with cachaça just a Daiquiri?
A: Sort of.
J: A Brazilian Daiquiri.
Z: Or a Caipirinha?
A: I’m sure whoever makes it in the restaurant figured a Margarita was a much more accessible name for the cocktail than trying to explain to you what a Daiquiri was, especially if you’re not that into Daiquiris.
Z: Or, if you’re expecting it to come out of a slushy machine.
A: Totally. Well, Joanna, you also had some nice wine last night.
J: Yes, I did. I was lucky enough to have some wine sent over from Martha Stoumen in Sebastopol and last night I had a Vermentino that was excellent. Really delicious.
A: Very cool.
Z: There’s interesting Vermentino on the West Coast. I had a bottle not long ago from a winery in southern Oregon in the Applegate Valley. It was also super tasty. It’s a great variety for places like Sebastopol or Applegate Valley, where it’s very sunny. Vermentino is so good for a white grape that doesn’t go crazy ripe in all that sun and heat. It retains its acidity and tension better than a lot of other varieties. I think that’s why you’re seeing it a little bit in places like that. It’s why it’s grown so much in Italy and in the south of France. You can grow it without it being a fruit bomb mess.
J: Yeah. It was so good. What about you, Adam?
A: I have mostly abstained from drinking this last week, except for Saturday night when I went out with a friend that was visiting. It was actually Josh’s old roommate who was in town. I talk about the place we went to dinner too many times before to talk about it again.
Z: Maybe you need to add some new restaurants to your rotation, dude. I mean, New York City is famous for having very few restaurants.
A: I know. She’s from L.A. and it was on her list, so we took her. It was a lot of fun. I’m really saving up for this weekend. Joanna and I are going to the Wine & Culture Festival in Atlanta. I’m just getting prepared.
Z: You were warned, I believe, that it’s a bit of a bacchanal.
A: When I was talking to the founder, Tahiirah Habibi, in an interview, it was clear that it’s going to be a lot of fun. I’m just trying to save up. I’m very excited about it.
J: Is that how alcohol works, Adam?
A: You know what, it’s not, but I’m telling myself it is. I banked some ability for drinks.
Z: Do you go to Atlanta regularly?
A: I haven’t been to Atlanta in a while. We had a huge party in Atlanta in the fall of 2019. That was the last time I was in Atlanta. Atlanta has changed so much and has continued to explode as this incredible food and drinking city. You could see it happening when I lived there, but it has just been growing at this furious pace and lots of really well-known bartenders and somms from New York have actually moved down there.
Z: Oh, cool.
A: There’s a lot of opportunity and it’s a way more affordable place to live. I’m curious if, with Covid, more people moved down there or not. The city is really exploding as the largest in the South. I’m excited. It’ll be fun to show some colleagues from VinePair around Atlanta, too.
Z: Have you been down there before, Joanna?
J: Only in the airport on a layover. So, no.
Z: I also have not been, besides to the airport. Maybe next year.
A: It’s going to be fun. Get ready, Joanna. I hope you bring some coffee. You’re going to need it. So, I’m excited for this week’s topic. We’ll be talking about the premiumization in alcohol. It’s this trend that we’ve been seeing that accelerated through Covid, which is, consumers trading up and buying nicer bottles and nicer wines. It’s a trend that had been predicted for a while, but has finally come into its own. These middle tiers, $15 to $25 bottles of wine, are growing really fast. You’re seeing Cognac explode as well as high-end bourbons. People are really spending more for better drinks. The conversation we want to have today is: Why is that? What do we think is fueling that? One of the ways I wanted to look at it is through the lens of premiumization across the country. It’s something that I think alcohol doesn’t do enough of, which is looking at what’s happening in the rest of the world and what could be influencing premiumization in our own sector. Premiumization, in terms of consumer habits, has been happening for the last five to 10 years. We’ve seen a lot of startups that are creating premium versions of products we use on a daily basis, especially among the millennial demographic. I think premiumization can be confusing to people. When we say premiumization, we mean trading up for better, but not necessarily trading up for luxury products. When we say premiumization, we mean going from the deodorant on the shelf, like a Gillette, to a Native. It feels more high-end and bespoke. It’s that idea of buying a little bit nicer product, but not going up to buy the Gucci deodorant. I don’t know if Gucci makes a deodorant but you get what I’m saying. It’s the same idea with luggage, for example. You trade up from the bag you bought at TJ Maxx to an Away suitcase or luggage startup, but you’re not trading up to Tumi or, further than that, a Louis Vuitton.
Z: I’m so impressed at your command of the various brands at different levels of these various industries, Adam.
A: Come on, man. I have an MBA.
Z: That was a completely sincere compliment. I don’t know what half of these brands are, but that’s cool.
A: I think what’s interesting here is that it gets confusing when we’re talking about premiumization. In the alcohol industry, we assume premiumization must mean that everyone is going out and buying Krug. Those markets have stayed pretty constant. What’s growing is this middle tier. What’s interesting about this middle tier that I want to have a conversation about is: What is it? How do we define it? I wanted to look at it through the lens of this term that was coined in 2017 by Venkatesh Rao. He’s a management consultant. He calls it “premium mediocre.” That’s not meant to be a negative term. It’s this idea that you take a product, make it feel craft and special, give it a story, and you’re able to charge a higher price point for it. Examples of this would be, in our current culture on the alcohol side, a brand like Haus.
Z: Yep.
A: It’s a big social product that’s a premiumization brand. If you actually look at its price point, it’s $40. It’s not a luxury brand, but it’s an accessible luxury product. In fashion, you look at brands like Everlane or Cuyana. They’re premium luxury products but are not actually “luxury.” They’re not brands like Bottega Veneta. They’re accessible. We can generally afford them, but they still feel high quality. In cookware, which Joanna has a lot of experience with, brands like Great Jones and Misen knives are considered premium mediocre. That brings us to the question: How does premiumization fit into the world of alcohol? How has it influenced alcohol in general? Have you guys seen this trend in the same way that I have?
J: Definitely. When we first started talking about this idea, I was thinking about how this started and where it came from. I thought about the organic food movement and how consumers really latched onto this idea in the early 2000s. My mom started to buy organic milk and produce back then. It’s given rise to me, as part of a younger generation of consumers, really caring about the quality and source of what I’m eating and drinking, but also these other facets of life. This premium mediocre idea is really interesting because, like you said, Adam, it’s not so expensive. It’s just expensive enough that a certain generation of consumers can participate and actually afford it. That’s really interesting. I own a lot of those brands.
A: Me too.
J: I definitely believe in this and see it as a trend across every facet of life.
Z: One thing that occurs to me is this notion of products which manage to convey a sense of craft while still being relatively affordable and available. In beverage alcohol, there are a lot of great examples of this. You mentioned Haus, Adam. I think about what we’ve seen with wine brands that are no longer positioning themselves in the under-$10 category. For our demographic and those that are slightly older, that was our first category we purchased. Understandably, when people are younger, they generally have less buying power, so that’s where people start out. It’s almost more interesting to me to think about where you see some of these aggregations of these brands. One thing we’ve talked about before, but haven’t looked at through this specific lens, is how subscription wine clubs and things like that play into this.
A: Yeah. 100 percent.
Z: That’s a lot of what they’re selling, whether it’s their own private label in some cases or wines that have a price point that is not super expensive, but also has a little bit higher price point. You’re paying $15 to $25 a bottle. Their whole selling point is that they are not huge-production wines. That is fascinating to me because, for so long, we’ve identified aspirational consumerism as being all about having the one product that everyone has to have. The one piece of clothing, accessory, knife, the Le Creuset pot. Are we now in this era where, what’s more important to a demographic is not the specific brand, but being in the category in the first place?
A: I think it’s being in the category. Not only that, but being in the category with a product that feels really premium or has the appearance of luxury. In reality, these products are based on the fact that you’re a millennial and may not have the buying power you would like to have. So, they aren’t at the price of a luxury good. Natural wine can be looked at as a premium mediocre sector. In terms of the way that it’s sold, it feels like a premium product. The price points are higher than what we’re used to seeing, but they’re not super high. Also, no one’s buying them to collect. No one’s laying down these wines for the longest time to hold and make a return on. These wines do say something about you, though, that you know about them and drink them. One of you mentioned the idea that these wines and liquors aren’t found in the grocery store. You get them either direct-to-consumer or in specialty stores.
J: We’re also seeing this with furniture quite a bit. This also feels like graduating from IKEA to the next direct-to-consumer before you potentially graduate to something in the luxury realm. I think it’s also interesting because there is this suggestion of quality and higher-quality that we’re getting with this tier. As we move away from excess, where we’re spending more but we’re drinking less, I think that applies here as well. You’re willing to spend more on a wine subscription, natural wine, or something similar because you’re not going to crush a whole case, necessarily. You’re going to keep it for a little bit longer. You may not have it long-term, but you’re going to spend more on it.
A: Totally. It says something about you, that you’re able to do that. It makes you feel like you have arrived at a certain place. Because of this premium mediocre category, we’ve come to accept that spending a little bit more means higher quality or that more thought has gone into it. I read this interesting article about how, when the Away luggage brand started, the suitcases were made at the same factory that was making all the other hardcovers that we already know and that you could ultimately find at TJ Maxx, right. The way that it was marketed, the branding, and the design made it feel like it was better and gave the brand a reputation of being higher-quality. That’s what we want to feel. We’re willing to spend more to give ourselves a feeling that we’re getting something of higher quality. That definitely exists in alcohol. I think that’s why there is this movement to spend more. You want to feel like you’re getting more than what we’ve come to think of as being “not good” — mass produced, highly marketed, Mega Purple, and things like that. We want to feel like we’re getting something a bit more artisanal. That’s where this tier, premium mediocre, exists. Venkatesh first saw that tier in food, in the fast casual world of Sweetgreen and Chipotle. He credits that as the start of this movement. It shifted very quickly into furniture, design, kitchenware, etc. Now, I think we’re seeing it coming to alcohol.
Z: I was thinking about how brands like this help reset consumer expectations for price points. I don’t know that we would necessarily throw this brand into the premium mediocre category, but think about what White Claw did. Prior to White Claw, if you were in your early 20s, the thing you were drinking to get drunk was a $1 beer. That $1 price point, for a lot of brands, was sacrosanct. That’s where they wanted to be, because they recognized that $11.99 for a 12-pack was going to be a more compelling price proposition than a higher cost in the retail setting. Now, it’s around $16 for a 12-pack of White Claw. Granted, they’re 16-ounce cans, so that’s a little bit of a difference. That brand is raising the floor for pricing. Then, the more artisanally-minded seltzers are aiming well above that. It is definitely a case where you are seeing peoples’ baselines being reset for the entry price for the category. It makes everything more palatable that’s above that price, too. If you’re spending $10 to $12 on a bottle of wine, a $17 bottle of wine doesn’t seem like that big of an extravagance. If you’re spending $6 for a bottle of wine, it probably does.
A: I think that’s really true. I hadn’t thought about it that way, but it’s very obvious. If we’re used to paying a little bit more for nice cooking pans, we’re probably also going to be willing to pay more for a nicer bottle of wine.
J: I also wanted to mention the ethical part of this, too. I feel like a lot of these brands market themselves as the more ethical decision or product to buy. That really plays into this as well. As consumers, you feel like you’re making the better decision for the world if you’re buying them.
A: It’s very true. You think you’re doing something that is making a difference through your purchase power, which is very new, especially when it comes to luxury products. For the longest time, no one tried to pretend like they were saving the world by buying Dior.
Z: I wonder if we need to look at fair trade coffee as being hugely influential. Those designations were a big deal. All these things combine together. To bring the conversation back to natural wine, it’s a product where you’re seeing a lot of these broader consumer trends collide. That’s why it’s been both successful and also controversial. Trends always create controversy. My theory is that people, especially people in the U.S., have become accustomed to the idea that perhaps our most impactful political tool is our wallet and not our ballot. I don’t want to get into whether that’s true or not. I think it’s hard to say. However, there’s definitely something to the notion that many people feel compelled to express their political, sociological, and other beliefs via their consumption. I don’t think that’s a bad thing. I don’t think there’s anything wrong with it. I think it’s good to be conscious about how and what you are spending your money on. It can leave you a little vulnerable to things like greenwashing, because it’s not that hard for a brand to claim they’re doing one thing and not actually be doing it or not be doing it to the extent that they seem to imply. It’s probably better for that to happen than to have an “I don’t care” attitude, though.
A: I completely agree. This is all fueling this movement and making us feel like it’s worth it to pay a little bit more. Venkatesh made a joke in his article about mediocre premium that the easiest way to think about premiumization is to think about avocado toast or putting truffle oil on everything. That’s what it is. It’s this idea that we want it a little bit fancier.
J: It’s truffle oil, not truffles.
A: Exactly. We don’t want the regular mac and cheese for $8, but we’ll be more than willing to pay $14 for the truffle oil mac and cheese. It’s a really interesting idea. It’s this trade up from what we were spending, maybe $12 to $15 for a bottle of wine, to $20 to $25. To get that $20 to $25 price point, we need to feel like that wine says something about us, makes a statement about who we are and what we stand for, and makes us feel like there’s a little bit higher quality inside the bottle. Again, we understand it’s not a much larger amount of quality. As Joanna just said, it’s truffle oil, not truffles. But it is enough that we feel like we have bettered ourselves through this purchase. It’s fascinating.
Z: Yeah, It’s a powerful motivator for people, for sure.
A: Totally. Well, this was really interesting. I’m curious: To listeners out there, if you have any thoughts on premiumization, shoot us an email at podcast@vinepair.com. Tell us some brands or movements inside wine, spirits, or seltzer that you feel are premiumization products. RTDs are really right for this. I’m very curious to hear what other people think, where you see this going, and where the opportunities are. Shoot us an email, and let us know what you think. We’ll talk to you next week.
J: Thanks, guys.
Z: Sounds great.
Thanks so much for listening to the “VinePair Podcast.” If you love this show as much as we love making it, then please give us a rating or review on iTunes, Spotify, Stitcher or wherever it is you get your podcasts. It really helps everyone else discover the show.
Now, for the credits. VinePair is produced and recorded in New York City and Seattle, Washington, by myself and Zach Geballe, who does all the editing and loves to get the credit. Also, I would love to give a special shout-out to my VinePair co-founder, Josh Malin, for helping make all this possible, and also to Keith Beavers, VinePair’s tastings director, who is additionally a producer on the show. I also want to, of course, thank every other member of the VinePair team who are instrumental in all of the ideas that go into making the show every week. Thanks so much for listening, and we’ll see you again.
Ed. note: This episode has been edited for length and clarity.
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