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Connecting the dots: It all happened yesterday

53 comments

Synchronicity: Coincidence of events that seem to be meaningfully related.

My mom used to tell me there are no coincidences, just things whose reasons we don’t understand. But sometimes, the reasons are all too clear.

First there’s this headline from yesterday:


Wine & Spirits Wholesalers spend $280K on lobbying

from Yahoo News. Taken into context, that number is “up from the $240,000 the group spent in the year-ago period and the $260,000 it spent in the third quarter of 2009.” So WSWA is upping the amount they spend on lobbying, even in this most difficult period.

Then there’s one, also from yesterday, courtesy of Beverage World:

US Wine Exports Fell 15 Percent in 2009

That’s not good for wineries struggling to get by, and who depended on overseas to stanch the bleeding domestically.

Also yesterday the L.A. Times reported on the collapse of three wineries I’ve known well:

After the fall: The stories of three niche wine makers

This is extraordinarily shocking stuff. Garretson Wines was a pioneer in Paso Robles, Sauvignon Republic was co-founded by former Fetzer star (and Wine Institute head) Paul Dolan, and what can you say about Havens Winery that hasn’t been said? I consistently gave their wines high scores over the years.

Okay, so we know three things (at least):

1. Wholesalers have had the bejeesus scared out of them. When an industry jacks up its lobbying in hard times, it’s because it wants to avoid even harder times.

2. Such wineries as there still are, are finding it harder to sell, not only in America, but overseas, which had been a great hope for many.

3. Wineries are starting to fall like dominoes.

My friend Scott Carpenter, who runs the website The Everyday Wine Guy and contributes to CNN Radio and CBS stations, reports that, according to his sources, “The general guess is 200 [California] wineries will go down this year, mostly smaller guys…The wineries-for-sale list is allegedly way up for Napa and Sonoma.  Now it’s 60 and 51, respectively.” I myself recently wrote that, if things really do head south, we’ll find out this summer, certainly by the end of the third quarter.

What can wineries do to survive this avalanche or tsunami of bad economic times? Part of the answer is marketing. But you’d be amazed at how uninformed some wineries are when it comes to the simplest aspects of how to sell wine. A professional marketing consultant commented on this blog yesterday that “…it is troubling to me that so many [wineries] have no communications plan or comprehensive marketing strategy, yet they want to jump on Twitter or Facebook because it’s the latest thing…It is really shocking to me the number of wineries that make no effort to collect email addresses from tasting room visitors and, further, even those that do seldom use them! I was recently visiting a high end ($50-100/bottle) Sonoma County winery; purchased a couple of bottles, but no one even asked for an email address! Wouldn’t they like to sell me more wine?”

That’s the tip of the iceberg. If I was running a tasting room and somebody walked in and bought a couple bottles of $50-plus wine, I’d certainly ask them, at the very least, to give me their email! Then I’d send them periodic email newsletters, or find out if they want to sign up for my blog, or whatever. But to let them just walk out the door? Insane.

Think it’s just here in California? Nope. From yesterday’s Oregon Business online:

Wine glut possible

“Oregon’s wine industry is raising concerns about oversupply, as the state continues to expand grape production while wine sales drop,” the article says.

Australia, anyone?

  1. Doc Holiday says:

    Steve,

    Your recent blogs and comments on wine marketing help us all through these difficult economic times.

    While reading your latest blog this morning something occurred to me that may be helpful to some of your readers.

    I always give up drinking wine (alcohol) for Lent. As a daily wine consumer, 40 days seems to last forever, and I yearn for a good bottle of wine come Easter time.

    I have mentioned this in passing and apparently quite a few folks follow this same practice.

    This week’s assignment is for a winery to come up with an ingenious way to capitalize on marketing wine to all of the folks coming off of Lent at Easter time.

    Back to wineries not collecting email addresses from tasting room customers. How much do you think it will cost a winery in marketing dollars to get that same customer back into their tasting room?

    Marketing Wise…It’s a lot less expensive to keep a customer than it is to go out and find a new one.

  2. Wine is a commodity. Its supply is driven by decisions made years in advance and then by mother nature. Winegrape planting has always jumped in good times–as does production of any agricultural commodity. The results of those plantings are felt years later. It also happens in non-agricultural areas. You can see the same thing happening in the new housing market where the oversupply today is reflective of decisions made years ago. Some small builders that got overextended will go out of business. Others will hang on for a while.

    The number of wineries for sale always goes up in times of oversupply. One reason why there is a record number of wineries for sale is that there is a record number of wineries–something like 3,000 and growing just for bonded wineries plus wines being made in custom-crush facilities and negotiant labels. I counted over 5,000 possible entries for my new book (not nearly so many included thank goodness).

    The fifty or sixty wineries for sale in the Napa Valley include folks of all sizes and stripes. Way over half of them, I was told by someone who should know, are wineries that were started by wealthy folks seeking a retirement career and lifestyle. Most of that group, according to my informant, are for sale because their kids do not want to retire into being farmers. Then there are the inevitable overextended startups. They fail in every down economy and often in growing economies. While we may all feel badly for them, it was inevitable–and is probably good for the wine biz overall. It is, of course, not so good for them.

    But, let’s look at the three wineries that Steve has mentioned. Havens failed before the economy went south. Garretson was failing years ago because the wines were a mixed bag at best and downright unpleasant at times (in my opinion, of course) and the Sauvignon Republic failed because its business plan was just too bizarre for the marketplace–only Sauvignon Blanc and sourced from all over the world. It may have been a nice concept, but it ran into three problems. Its wines were inconsistent. NZ lost a lot of its buzz for Sauv Blc and South Africa never had much, especially out west. Nice idea, no sale.

    One of the things I learned in business school was that the reasons why businesses fail are never uniform. Each one has its own story. These three businesses shared their inability to sell wine (although, note please, that only one of them was a winery per se, Havens, while the other two were “labels”) but they failed for somewhat dissimilar reasons, and I would argue that both Havens and Garretson were on the critical list long before the economy tanked.

    Yes, there is an oversupply of grapes everywhere. And yes, there is today an oversupply of wineries relative ot the numbers of folks who want to own them. But, you can bet your bippy, your bottom dollar and the ranch that the situation will all turn around in a few years. That is how it works in the commodities business, and wine is a commodity business.

  3. Doc, I don’t know how much it costs to get a customer back into a tasting room. But it can’t be all that labor intensive to have all visitors voluntarily sign a log (or leave a business card) with their email address, then have someone enter the emails into a database everyday.

  4. Steve,

    Back in November you wrote a blog entitled “California is not the next Australia” and said that “Here in California, I’m pretty optimistic that things aren’t heading into the dumpster.”

    Has you opinion changed radically over the last 5 months?

    Thanks,

    Adam Lee
    Siduri Wines

  5. What happens to the wine when a winery fails? Does the new owner get it? Is it liquidated by the current owner before the sale?

  6. Dr. H., I think they usually dump it on a secondary market, e.g. a negociant, or maybe a chain store.

  7. Adam thanks for keeping up with my (sometimes contradictory) quotes. I am feeling more pessimistic these days than I was six months ago. Just reading the newspapers and watching the news on the telly. There are bad signs out there, not the least of which is the growing political disunion here in the U.S. I still think this summer and early Fall will tell us how bad — or not — things are.

  8. Steve,

    I really didn’t think your comments were contradictory – just remember that you seemed to be more optimistic – so was looking for insight into what signs you are seeing that has changed your opinion.

    I can promise you, that if any of us knew what was actually going to happen in the future, we’d be doing something else!

    Adam Lee
    SIduri Wines

  9. Here’s a marketing tip for wineries: Don’t do what someone once said is the definition of Spanish marketing: “Make the wine. Wait for the phone to ring” Completely untrue, of course, but no doubt some wineries do just that!

  10. Charlie,

    A great deal of what you write makes sense and is undoubtedly correct. Seems to me that there are a couple of important things that are still out there that are going to really be telling as to how bad things get –

    1) Are the wineries that are for sale going to be able to find buyers? Certainly there is always an increase in wineries for sale in tough times – and usually wineries/labels are able to find buyers. The 3 wineries mentioned in the LATimes article were not purchased – they closed. If more wineries close, rather than sell, the effects on the wine economy will be more profound.

    2) The quote in the article on the Oregon wine business – which mentions that the average price of Pinot Noir fell from $3000 per ton in 2008 to $2000 per ton in 2009 is quite telling. How long can growers continue to sell grapes at what may well be a loss – especially when they purchased the land at record high prices? What happens to the land then?

    How these issues resolve themselves will tell a great deal about where the wine business heads from here.

    Adam Lee
    Siduri Wines

  11. Steve, I think it’s a bit of a stretched simile to say “wineries are starting to fall like dominoes.” First of all, they’d have to be connected in some meaningful way, other than simply being wineries. Second, they’d have to have some linkage on the reasons for failing, other than just “the poor economy.” As for the grape glut in Oregon, Bill Hatcher was predicting that more than two years ago, long before things really tanked. I think there’s far more good news than bad up this way, especially for consumers. Oregon pinot is better than ever and cheaper than it’s been in decades. What’s not to like about that? And Oregon vintners are moving well beyond just pinot in all corners of the state, becoming more Washington-like with quality across the board.

  12. Well-written response, Charlie. You captured the essence of my assessment of the CA wine industry, including the example of the 3 failed wineries.

    Anyone hoping to cash in and live a glamorous winery lifestyle should be ushered out of the industry. It’s very hard work, woven into agriculture, and a long-term play. Even without a sour economy, second generations were already a huge issue facing the selling or closure of wineries.

  13. The last two decades have seen an unprecedented amount of money printing and credit expansion. Wineries, as any other economic agent, interpreted this huge expansion of money supply as the outcome of an excess of savings; consumers postponing (deferring) consumption to some point in the future. As a consequence wineries (and capitalists) invested heavily, betting in the future expansion of their market.
    The problem is that all this credit was not created vis-à-vis savings. It was created out of thin air by the Fed, through money printing and leveraging. Therefore, every investment decision based on this credit expansion was destined to failure; for there is no sound wealth creation (savings) basis to support them.
    If we look at the grapegrowing/winemaking boom that took place in California, in the last decades, through the (Austrian Economic School) Theory of the Business Cycle, as we just did, we’ll come to the conclusion that the wealth (wineries) destruction process has not even started yet.

  14. Two facts many wineries ignore:

    1) The market determines the price of your wine. You can put any price tag you like on it, but “your” price is meaningless unless someone is willing to pay you that price.

    2) It’s a lot easier to make wine than to sell wine.

  15. Greg Brumley says:

    Steve,

    I do marketing & p.r. for small wineries. Based on that, let me flesh out your scenario….

    If you bought 2 bottles of $50+ wine from me, I’d certainly get your email address (and offer an incentive to give me your facebook & twitter).
    More importantly, I’d make some notes on things you like and any other personal information.
    Yes, I’d email you. I may well recognize you on facebook. I’d certainly tweet you — with messages which encourage you to retweet.
    The email might get an additional sale. The facebook and twitter activities won’t elicit a dime’s worth of sales.
    The most important thing I can do is call you at least twice a year, and keep information on each call in my database. Building a relationship through direct, person-to-person contact (in person, on the phone, email in order of impact) will directly generate sales.
    In two postings now, you’ve said or implied that emails and social media are the small winery’s path to increased sales. Emails are, to an extent. Social media are not.
    Small winery sales turn on relationships.
    Relationships are built on p-e-r-s-o-n-a-l c-o-n-t-a-c-t.

    Regards,

    Greg Brumley
    mail@brumleygroup.com

  16. Peter: Scary. I don’t understand the intricacies of economics, but your message sounds correct.

  17. Paul, maybe “falling like dominoes” wasn’t the best metaphor (or is it a simile?). I hope you’re right that things aren’t as bad as they seem. From the comments I get on this blog, more people seem to think they are bad than that they’re okay. We’ll just have to wait and see. I can tell you that I’ve been traveling a lot this month and I ask every winemaker I meet “How’s business?” I usually get one of these two answers: (1) “I’ve gotta tell you the truth, things are pretty tough out there.” (2) “Great!” I tend to believe (1) and disbelieve (2), although I’m certain that there are individual wineries that are doing well, especially those with “cult” followings and in-demand mailing lists.

  18. Adam: Ready PaulG’s comment in this string, where he says “Oregon pinot is better than ever and cheaper than it’s been in decades. What’s not to like about that?” It seems to me there’s an inherent tension between what Paul says and your question #2. Can both be true?

  19. Steve, Stop connecting the dots, it will just give you a headache and they never make a complete picture anyway.
    - The lobby upswing is about denying American citizens their right to have wine shipped direct and reflects the increased cost of politicians.
    - US Exports suffer because wineries see export markets as “dumping grounds” for unsalable wines, not realizing that other nationals have taste buds too.
    - Wineries fail for many reasons, mostly because they fail at actual marketing, you know, where first they identify a market with expansion room and then they build a product that addresses that market. Gathering emails is the other marketing, where because someone bought a sympathy bottle in the tasting room they feel that if they bombard the customer’s in-box they will buy more.
    In our tasting room we refuse to take email addresses for anyone but wine club members. It may cost us business but it does keep us focused and it guarantees us that any one-time customers who came back for more, did so because of the wine. I think that brings us back to point 3, and by the way, a lot of Charlies comments are correct but wine is not a commodity, only poor quality, cheap wine is a commodity.

  20. Adam, everything is so confusing these days. Nothing would surprise me at this point. The U.S. could rebound the way we did in the 1990s following that recession, and the way we rebounded following the 2001-02 dot com collapse. Or we could have a double-dip recession after a “dead cat bounce.” Who the heck knows? We now know not to trust “experts” anymore, including economists, the Federal Reserve, the SEC (which allowed Madoff to happen), or even “journalists,” none of whom saw this catastrophe coming.

  21. Bill: Wow. Lots of food for thought in your comment. But maybe I should take your advice and stop thinking.

  22. Steve,

    I think marketing has to have that “human touch.” Joaine Hudson of Santa Barbara Winery, just blogged about that. I wrote a short piece on http://www.ebacchus.com entitled, An Act of Civility. Most wine drinkers are everyday people and I think wineries forget that sometimes in their marketing approach.

  23. A few additional points.

    –The analysis that all wealth accumulation of the last quarter century was simply created by printing money is a singular, unique point of view, and one which is not endorsed by the majority of economists. Steve, you may not know much about economics, and I may know too much for my own good but not enough to be an expert, but there is zero proof or belief that wine wealth and all other wealth is about to collapse.

    –The rate of winery failures will increase even as the economy starts to improve because profitability will lag until demand catches up with supply. That will take time. But, even the fact that the three wineries in the LA Times piece closed does not make this into a depression era for wineries. Folks, we have just lived through the worst recession in fifty years or more, and it is not unusual or unexpected that some marginal wineries would close. There have been far more winery formations in the last three years than closures.

    –All wine, even high priced wine is a commodity, and its pricing reflects supply and demand much more than just production cost. Things like automobiles are also commodities, but their supply is controlled from day to day based on the amount of demand at prices that make financial sense. We do not have larger or smaller crops of autos. We do have that in wine, and the crops keep on coming, by and large, because it is hard to pull the plug on vineyards. Sure, some crops go unpicked. A lot gets picked and then offloaded somehow. The point is that even Napa Valley Cab is a commodity, as shown by fluctuations in the prices for grapes and for wine (especially for behind the scenes discounting that we do not see).

  24. 111 wineries for sale? You sure couldn’t tell it from the internet. All must be secretly for sale because i run a daily notice with Google for wineries for sale. The only thing that comes up is articles about wineries for sale – like this post. I think Paul G. tried to find the same information and found one for sale in Washington. So, other than the three you mentioned, no one can seem to find any even if they were dumb enough to buy a winery.

    If they are serious about selling, maybe they should use social media. Just kidding.

  25. Re winery failures. We also know that Martin & Weyrich and York Mountain went belly up this year.

    And if the reason for wineries being for sale is related to lack of tranisition plans for rich-person wineries, then those places are probably very quietly for sale. The owners would move them if the prices were right, but are probably under no pressure to sell in a down market in most cases.

  26. Charlie, I know of more wineries that have failed. I can’t keep track of them. People privately email me to let me know.

  27. Steve (and Paul),

    Certainly the quality of Oregon Pinot Noir is great – and the prices lower that ever before. What’s not to like about that? Perhaps a couple of things –

    1) Is it sustainable? Can Growers and Wineries make a living at the prices they are charging? If not, then a lot of folks will be hurt – and growers and winemakers will start cutting corners to make it – and the quality will eventually fall.

    2) CALPERS – the California Retirement System inexplicably invested in and planted a great deal of vineyard land in Oregon. Lower prices on grapes will not help the already overly stressed CA retirement system.

    Those are my concerns.

    Adam Lee
    Siduri Wines

  28. Mr. Gregutt: Your input?

  29. These things are not coincidence Steve, like some previous commenters stated. We are seeing the fallout of poor decisions that happend a while ago. I am sure that some of these smaller labels will be consolidated be the larger ones. I know of a large producer in SB county that is cutting out some of their labels that do not have good traction in the market. They are just going to roll that production into their more successfull brands. Mom and pop wineries do not have that luxury.
    In my opinion, the wineries that came into the market between today and 2005 will have the most difficult time staying afloat. They are the ones that purchased property or signed commitments at their highest and therefore have the largest liabilities. They will have the least flexibility to lower prices to their demanded levels.
    It is unfortunate but common in business. Remember, this type of process is typically good for the consumer. California wine makers will have to learn to make wine less expensively without compromising quality.

  30. Brett, your statement that “the wineries that came into the market between today and 2005 will have the most difficult time staying afloat” really resonates with me. Although I had not thought about it, that was the period when many people with some extra cash blow bought into the lifestyle. Granted, many of them had a lot of money to begin with, but what happened to their fortunes after the 4t quarter of 2008? How much more money can they sink into their ventures, especially if they’re not getting good scores from people like me, but even if they are? There are too many good scores chasing after too few dollars.

  31. I agree with Brett Krausse’s observation regarding wineries that came to market between 2005 and the present will have the greatest difficulty staying afloat. This is not limited to the wine business – it’s universally true across the entire business spectrum.

    Many businesses that were started over the past five years, have had the luxury of low capital costs combined with what many believed to be an ever expanding revenue line. These two factors, when running at the same time, can cover a multitude of ills. Pick any business – it can be a winery or a metal fabrication shop. You’re doing greater volume every quarter but you don’t notice your gross margin is shrinking.

    George Soros wrote a book some time ago titled “The Alchemy of Finance.” The basic premise is that collateral values are priced at the inverse of the cost of capital. Money’s cheap so you can borrow more in nominal terms. Unfortunately, it’s hard to remember that this can go in the opposite direction as well.

    Every financial “construct” – a winery, a metal fabrication shop or an esoteric CDO instrument will move to extremes, both to the upside and to the downside. It really takes an equally disciplined approach to manage your business when the trend is moving in either direction.

    The recent economic environment of the past two years, although at times causing a lot anxiety, certainly brings focus to both my own and my brother’s decision making. It’s an opportunity to stretch out of my comfort zone. Wow! I’m writing (or posting) to a blog for the first time.

    Gino
    Bartalotti Wine Company

  32. Charlie may be right about wine being a commodity in the strict economic sense, but a couple of posters above are more right when they talk about their wine clubs and about personal contact with their visitors and fans.

    There is no better, long-term wine sales model than to know the names of the folks who are buying your wine.

  33. I work in the industry and can’t believe how many still don’t realize that the way to sell wine is to let your customers meet the winemaker! People want to feel like they’re special and got something extra. They don’t care if the tasting room is filled with t-shirts, hats and CD’s and the staff is knowledgeable-THEY WANT TO MEET THE WINEMAKER! A friend of mine owns a 3000 case winery in California and despite the bad economy still sells out every year and 100% of his sales are through the tasting room and wine club. His success is based on 2 things-consistently good wine at affordable prices and personal contact. He makes a point of greeting every customer that comes through the door and I see very few people leave without making a purchase. Most walk out saying they can’t believe they got to meet the winemaker and he actually spoke to them. Yes, his days are longer because of it and no-he really can’t grow any bigger and still offer that level of personal contact but that’s not necessarily a bad thing. The tour guides love him and his client’s blog and tweet about how this was the best place to visit. When I have clients ask me how others are doing and I tell them about this guy, they all groan and say they hate being in the tasting room because they can’t get anything done or they can’t because ironically, they’re on the road trying to sell their wine.

  34. Hi Steve
    Paul dolans wine Sauvignon Republic is alive and well. It
    now going direct to retail and has never done better.
    It is the pressure of the 3 tier that is exaserbating the
    small guys.
    Best
    tim

  35. Carol Reber says:

    Dear Charlie,

    The moment we treat wine and speak of wine as a true commodity, we are dead as an industry. A commodity in a classic economic sense is some good for which there is demand, but which is supplied without qualitative differentiation across markets. Wine = commodity is the operating philosophy of Ceres Fred with which the industry has thankfully almost universal disagreement. People would not travel across the country and world to come to Napa Valley and Sonoma Valley to taste a commodity so let’s please not perpetuate that word. I once worked for a VP Marketing at Jackson and Perkins Roses who said that roses are a commidity (so funny because each rose on earch has its own gentically registered make-up) and it struck me the same way. Roses like wine, are the subjects of countless poems, songs, cherished gifts, memorable moments, and wine blogs! Wine is perhaps the most unique, complex beverage on earth and when cultivated and vinified right, is highly reflective of the terroir from which it came. As an industtry group, we need to make it accessible yet constantly communicate what is special about what’s in the bottle and what that bottle does: bring people together at the table of like like no other beverage on earth!

    Sincerely,

    Carol Reber

  36. Note to Steven M.

    My comments and yours are not mutually exclusive. They are, in fact, addressing different and complementary parts of the economic picture.

    There is a supply and demand model that works for the overall wine industry. Wineries on the supply side; consumers on the demand side. This big picture is called MACROECONOMICS.

    But within that larger picture are the situations of the players who make up the whole–such as wineries. Their situations are MICROECONOMICS.

    What you are describing, Steven, is the microeconomic model for any given winery. At that level, it is the job, the responsibility of the winery to do what it can do to improve its position within the overal picture. Concepts like market share, advertising, price structure, packaging, mailing lists, tasting rooms and the management, quality, friendliness, intelligence of the operations of that tasting room are all ways to improve a winery’s microeconomic condition.

    A single winery can do very little to change the industry’s overall MACROeconomic condition, but it can do, and should do, as Steve H. was talking about in his original piece, what it can to improve its MICROeconomic condition.

    For many wineries, direct sales are critical parts of their business models because of the enormous margins available. Sure, there are costs. Your own operation has many people employed in a room that cost you a pretty penny to make look as if it had been there forever: it has a variety of products; it is not cheap; but it does turn you a good profit, I hope, on sale and if you sell enough out of the tasting room and if you use those sales to develop a direct mailing list, then you are taking the steps to improve the situation of your individual winery within the larger picture.

    The reason why I am right is that I am describing the zoo. You and others are equally right but you are talking about one elephant in the zoo and how that situation of that single elephant can be improved.

  37. Tim, I am glad to hear that.

  38. Carol–

    I make my living describing and recommending high quality wine that goes nowhere near King Freddy of Franzia. The use of the term “commodity” in a discussion of economics has no bearing on qualitative issues.

    But, wine, in the larger economic sense of the word is a commodity. It is a differentiated agricultural commodity whose economic situation, in toto, can be described in a complex economic model and understood for the changes that occur in supply and demand.

    I do not use the term as a value judgment that comes with conflating “commodity” with what King Freddy produces. In the Franzia context, “commodity” as you use it is another work for “plonk”. That is a wholly different meaning. Wine is not all plonk, especially for me who has a cellarful and a lifetime full of wine that does not operate at the Franzia level.

    At times like this, I wish I had not studied economics. At times like this, I realize how much I prefer being a wine writer to being an economist.

  39. Not only economists agree (I could spend a few pages quoting some of them) on America’s hedonistic nature, but facts too: Money Stock (MZM) is at US$ 9,6 trillion (12/2009) from US$ 2,2 trillion (12/1990), with a 336% increase; GDP is US$ 14,3 trillion (12/2009) from US$ 5,8 trillion (12/1990), with a 146% increase; Personal Income is at US$ 12,1 trillion (12/2009) from US$ 4,9 trillion (12/1990), with a 147% increase; and the Personal Savings Rate is at 3,9% (12/2009) from 6,8% (12/1990).
    Source: Federal Reserve Bank of St. Louis

  40. Good post with lots of good, valuable info nestled in between lots of random speculation. In my TR, I have a set of q’s and bits of info my staff conveys during nearly every visit. Some of the info was mentioned here and others were not. I agree that personal relationships built with clients on vacation (for example) is so key. It’s importnat to remember that many WC guests aren’t from CA and are probably visiting WC for the first time. Very impressionable period. It’s equally important to remember how mch work it took them to get to your TR door… Time off work, baby/pet sitters, not to mention they had to get on line and do research, make reservations, get to the airport, FLY here and then sit in crappy traffic in their rent a car just to get to WC. wineries are their “main attraction”, the reason why many are in WC to begin with.

    I find that keeping this in mind helps me understand my clients and also helps sell wine and memberships.

    Taking photo’s with a winery camera also helps cement relationships as these photos can be shared on line. Out winery software Vin Now has a section on the clients info area for a photo. KEY! When they take a photo with the grower or winemaker, they really react well. Having your grower or winemaker on site during the weekends is a must! Top up on Sunday night after TR is closed. Also, get a silver or gold colored pen and sign bottles! People LOVE signed bottles from the owner, grower or wineguy. I can’t tell you how many times a client adds a few more btls to the existing order when the btls are signed. This becomes infectious as other clients who are halfway through the tasting see others’ bottles signed and they start thinking about which btls THEy also want signed. Winemakers, ask their names and write on the btl the names and sign it! They will then go home and talk about their exp. with the wineguy referencing the signed btl, etc.

    If there’s time, step out of the TR and go for a quick three-five minute walk/tour. Our facility is small so it’s aquick one. Get them out of the sales room (TR) for a minute and get their hands on a vine or brl… they’ll be itchin’ to get back in the TR to taste and buy.

    When people are having fun in your TR, the WINES WILL TASTE BETTER! This is not too difficult to understand, but vitally important. WC still has a stigma of stiff wine pourers and pretentious environment (thanks Napa), so when folks enter a TR and hear laughter and see smiles greeting them, they’ll relax and have a good time too.

  41. Steve,
    The above YouTube video was posted on twitter yesterday. Be advised the is some crude language. I believe it illustrates the idea that wine need not be run as a business… just a “build it and they will come” sort of attitude. Certainly, these ventures will be the first to falter in 2010.

  42. Let it be said that the King is an enlightened despot. He, his brother and his cousin, know that the subjects of his kingdom are struggling, except for a few fat bankers and wine writers who receive high priced wine for free. He has the wisdom to understand that most eating experiences do not involve romance and therefore the beverage he makes for his subjects must fall under $10 in order to be consumed with their Tuesday night dinners. The connoisseurs like to call his wine plonk while most others would call it quaffable, a vin de table which even with its humble origins makes a regular meal more enjoyable.

    As the nation becomes more impoverished, it citizens will increasingly appreciate these quaffers. And so the coffers of the King grow in wealth while others in the realm only scrape by.

  43. Steve, if you’ll allow me one more comment; I also believe it is incorrect to define wine, in general terms, as a commodity. Although common wines can be considered commodities, and respond quite well to the laws of supply and demand, high-end wines are “luxury goods” (goods for which demand increases more than proportionally as income rises), with a lower positive correlation with economic cycles. And “investment wines” are regarded by some economists as “Veblen (Thorstein) goods”— goods for which demand increases, instead of decreases, as its price rises.

  44. “Things like automobiles are also commodities, but their supply is controlled from day to day based on the amount of demand at prices that make financial sense. We do not have larger or smaller crops of autos.”

    Are you sure? Someone offered me a Hummer if I could close out a truckload of $60/bottle Pinot Noir the other day. Seriously, you are right, the stickiness and clumsiness of the supply chain for wine makes it uniquely vulnerable to temporary imbalances of supply and demand. One of the major buyers of “distressed” beverages told me the other day that his job is much more difficult for beer, even with all the microbreweries around, because they are able to rapidly adjust their production to keep inventories throughout the chain low.

    The interesting thing about the current supply-demand situation is that the changes in acreage for some varieties (Cab, Merlot) have lagged demand growth for several years now, implying that they are bound to run short within a few years. Whiplash, anyone?

  45. Charlie:

    I get it. I think everyone in the business who truly loves wine wants to see more people become interested in the thing that gives them so much joy. At least as much because of the intrinsic wonder of the product itself as its ability to provide one a living (hopefully).

    When the wine press talks about the quality of a vintage or health of the industry, it isn’t really describing the reality of the small – direct-to-consumer winery. Most of the fruit is estate-grown, the story being told is what is actually being sold…the wine is a convenient and delicious conveyor of that story…so much about the “transaction” isn’t governed by market economics.

  46. Steven–

    I knew that NYC education of yours would not go to waste. :-}

    At the winery level, wine is more than a commodity. Because guys like you and Randy (nice comments, Randy, btw) intervene and change the landscape for your products.

    But, when one starts talking about 50,000 acres of vines in the Napa Valley, of which about 60% or more are in the claret varieties, it is simply silly not to understand that the overall market for Napa Valley claret reds has a commodity like nature. The tap cannot be turned off–as if this were beer productio–to echo the instructive words of Christian Miller.

    Note to Peter O’Connor. Brother, you have just described elasticity of demand for certain expensive goods, and because you have done that, you have proven the commodity-like nature (in economic terms) of hundreds of thousands of gallons of very expensive juice.

  47. Simple Napa economics of buying grapes, some percent of French Oak, custom crush, winemaker and decent packaging put a retail bottle of Cab at $60-$65. Doable in a good economy. Tough in a slow economy without being special in some important way.

  48. Reply to Charlie Olken: according to Wikipedia a “commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is fungible, i.e. the same no matter who produces it”.

  49. I’m staying out of this commodity-economics thread because it gives me a headache. I can’t even balance my checkbook.

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