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As consumers turn against Big Box stores, supermarkets feel the heat

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The death of the Big Box store (think Wal-Mart) has been widely predicted, as for instance here, here and here.

Just about every major trend we’re following right now bodes poorly for power center retail,” says the Business Insider article. Those trends include the facts that “Americans are driving less than they have in decades. Populations are flocking to smaller, urban communities over sprawling suburbs. And consumers in their 20s and 30s increasingly prefer small, local shops to big-box retail.”

It took a little longer for this rejection of the Big Box concept to spread to the big supermarket, but now, it has. The U.K. last year saw its first decline in supermarket sales in two decades, and America isn’t immune: “U.S. supermarkets are stuck in time-warp,” USA.com announced, adding, “The bland midmarket, hi-lo, be-all-things-to-all-men strategy is not working.”

Speaking of Mid-Market and supermarkets, today’s San Francisco Chronicle has a front page article, “Trying to mimic Ferry Building on Mid-Market” [link not yet available], that tells the story of how a big supermarket, Market on Market, faltered, precisely because it tried to “be-all-things-to-all-men.” A little background: The Mid-Market stretch of S.F.’s Market Street has for years been a sorry spectacle of homelessness, drug dealing, prostitution and low-end stores. That all began to change when San Francisco persuaded Twitter to headquarter there (in exchange for controversial tax benefits). Now, Mid-Market is becoming a yuppie haven: rents there are going up as fast as anywhere in the city. Mid-Market had never had a nice supermarket. So the owners of Market on Market thought the time was ripe to open one.

Turns out their assumptions were wrong. Those young tech workers don’t want a big supermarket. They want what Whole Foods offers: ready-to-eat food, often impulse-driven, and small, specialty cubicles run by independent purveyors: a pizzeria, ramen shop, créperie, sushi bar, fish monger, tea shop, microbrewery and so on. They want, in other words, to feel as though they’re in the marketplace of some old European village. So that’s what Market on Market will now offer them: similar to what famous Ferry Plaza has been offering shoppers for many years.

San Francisco being the trend-setter it is, this movement likely will spread around the country, first to other urban areas and then to hipper suburbs. It’s reflective of the same yearning for authenticity and quality we see in the wine industry and the consumer’s preference for wines of terroir, connected to the land and owned by a family—wines with stories that make people feel more human. I know that, speaking for myself, it’s almost unbearable to shop at Safeway anymore. The place just seems like, well, it’s stuck in a time-warp from 1965. Whole Foods is much more in my comfort zone (although it’s more uncomfortable from a dollar point of view); and Rockridge Market Hall is even more of a trip for me: I can’t exactly explain the exaltation I feel when shopping there, but where Safeway feels pedestrian, Market Hall feels like a trip to the Marché International de Rungis without leaving Oakland.

It always surprises me to see so many young people thronging my local Whole Foods: I wonder where they get the money. But they do, and whatever their financial situation maybe, it’s clear that they’re voting with the wallets for higher quality food, the feeling of being philosophically and organically connected to what they put into their bodies, and a more welcoming shopping experience. The wine industry could learn from this example.


Wine, beer and spirits for Millennials: which is cooler? (Hint: It’s not wine)

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If you’ve been reading this blog for any length of time, you know I’m interested to the point of obsession with industry issues, such as who’s buying wine, how it’s doing with Millennials, price points and so on. One thing I’ve been keeping my eye on is restaurants. Everybody loves to eat out, but what are they drinking with their food?

The conventional wisdom of the past few years is that wine is losing ground to craft beer and cocktails. I’ve tended to agree: Beer and mixed drinks are getting a lot of love from the media, with all those tattooed mixologists and craft brewers grabbing the headlines (and spotlights; layout editors know exactly who looks good on the page or screen). Wine by contrast seems stodgy. It’s not, of course, and never has been, and remains my favorite; but for some reason, wine seems less hip lately than beer and mixed drinks.

Forbes has written an interesting article along these lines, citing Paul Franson, of Wines & Vines, that Millennials [have] gravitated toward cocktails and craft beer,” and moreover, that when Millennials do drink wine in restaurants, the wines tend to be those that are “hot,” which I take to mean things like Muscat or orange wine, which have no lasting value at all.

This squares with my observations of my Millennial friends in Oakland, a very hip town, on the cutting edge of most cultural things, and thus an interesting case study. What happens in Oakland, from hip hop to fashion in clothing not to mention politics, often leapfrogs across the country.

And the truth is, my friends in their 20s and 30s like to drink; in fact they drink a lot, bless their little souls, but what they’re not drinking is wine. They are, as Forbes and Franson point out, downing cocktails and beer.

Why? The answer is important, but not simple. On one level they see wine as the alcoholic beverage of their parents if not their grandparents. Why is that? Because beer and cocktails don’t make a big deal about their intellectual components, the way wine does with notions of terroir, etc. Another is that beer and cocktails don’t pretend to be about anything else but getting buzzed. Wine tries to hide the impact of its alcohol. It always has, especially at the top levels, where it portrays itself as offering an experience that is intellectual, sensual, hedonistic, imaginative, fabulous—anything and everything but a liquid that makes you high. Wine seems almost embarrassed by its alcoholic content, which is why this entire argument against alcohol levels has arisen. Is vodka embarrassed by alcohol? Is tequila? Are IPAs? Of course not. But wine likes to pretend it has no alcohol.

I don’t know how we got into this situation. Possibly it’s because the intellectual conversation about wine got started a lot earlier than our conversations about beer and spirits. Between the Bible, the medieval references to wine, Thomas Jefferson and so on, wine has assumed an august place in the culture. Nobody was praising beer and spirits two and three hundred years ago. Maybe, back then, they were ashamed of wine’s alcoholic effects on the brain and body, so they avoided writing about them. We have inherited that tradition today.

I’m not suggesting we should brag about how high wine gets you. But the fact that beer and spirits tend to be grabbing Millennial attention strongly suggests a new approach to how we portray wine. We need to make wine cooler, sexier, and more relevant to a generation that instinctively recoils against canned messages and cheap advertising slogans. There is, in its essence, no reason why wine is less attractive than beer and spirits. But the way we’ve been communicating about wine hasn’t been enough to convince Millennials that it’s something they should feel cool about ordering in a restaurant. Can we change that?


From Mexico, a great wine and food pairing, and the perils of poorly-conceived advertising

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I’m down here in Mexico on the fabulous Maya Rivera, at the Karisma El Dorado resort, south of Cancun, where I’ll be doing a bunch of wine education classes and dinners, some of them with the chef/partner of San Francisco’s new Aaxte restaurant, Ryan Pollnow. This is a very exciting opportunity for me. The resort itself is huge, more like a good-sized village, so yesterday afternoon some of the staff toured me around in a little shuttle cart so I’ll know where the various venues are located. The wines I’ll be talking about are from Jackson Family, representing a good cross-section of the portfolio.

In fact, we had our first wine dinner last night, and I must say it was really great. Chef Julio, of Karisma, prepared our food, creating wonderful Mexican dishes, and I found it thrilling. It was in one of Karisma’s food theaters; I was sitting with Chef Ryan, watching Chef Julio under the spotlights and in front of the cameras, which showed him on two big screen TVs, and when I suggested to Chef Ryan that the event had a certain theatricality about it, he said “Gastro-tainment.” That was a new one on me. I love it.

As soon as I got to Mexico I heard about a brouhaha concerning a Coca-Cola T.V. commercial that aired here that some people found culturally insulting, but that others thought was just fine. The commercial, which you can see here, keenly illustrates the potential mine fields companies must navigate in the images and messages their promotional materials convey.

The Coca-Cola commercial shows a group of young people (they look like American tourists to me)—good-looking hunky guys and long-haired young women in tight jeans and T-shirts—who seem to be on a Habitat-for-Humanity-style mission to build a giant Christmas tree in an indigenous Mexican town. To the saccharine strains of orchestral music, they paint and labor, high-fiving each other with white-toothed smiles, while the natives look on wondrously and gratefully. And, of course, there are coolers of Coca-Cola everywhere.

The style of the commercial is straight out of Coke’s 1971 “I’d like to teach the world to sing” post-hippie playbook: inspirational Kumbaya love. But some people didn’t get the good vibes. “Outrageous” and “racist,” they called it. Somebody tweeted, “When a company as big as Coca-Cola is saying #AbreTuCorazon [Open Your Heart] by giving Coca-Cola to indigenous ppl. what they are really doing is using them.” On the other hand, lots of the comments on the YouTube video either praised Coca-Cola for a sincere desire to help poor people, or wondered what the big deal was. “Couldn’t care less,” one person said; another pointed out a certain political correctness at work: “I love to laugh at freaking crybabies getting offended over nothing.”

At any rate, things got so hot that Coca-Cola issued a “rare apology” and pulled the ad, but versions it can still be found all over the Internet, as for example here, where it’s been retitled “The White Savior Ad.”

The take-home lesson for companies is that they really have to have culturally tuned-in people on their marketing and P.R. staffs. You can’t just let creative call the shots: you have to ask yourself how your images and messages will be perceived, not just by the people you think you’re talking to, but by everybody. Nobody thinks the Coca-Cola ad was intentionally racist or derogatory; no doubt the people who created it, and the managers who approved it, felt they were doing something lovely, in the spirit of Christmas. And perhaps, after all is said and done, that is exactly what the commercial is: a salute to cross-cultural brotherhood, good will and mutual respect.

Alas, in our world, even the most well-intended message can be wrongly interpreted.


Is it possible to create a new cult wine?

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Some years ago (and I quoted her in New Classic Winemakers of California), Heidi Barrett told me that the success of Screaming Eagle surprised even her, the winemaker. It was like a “prairie fire,” she said: lightning struck ready ground, and the winery became a legend.

Recent developments and discussions have led to me inquire about the possibility of creating a new cult wine in California. A “cult wine,” of course, is one that is of relatively low production, that amasses, not jus good, but ecstatic reviews from the most influential critics, that has a “story,” and—bottom line—fetches the highest prices. The sanctum sanctorum of cult wines is a situation where the wine doesn’t even appear in retail contexts. In order to buy it, you must get on a waiting list for a mailing list.

Before analyzing how a cult wine might be created, let’s look at a few that already exist and see how they happened. I spoke of Screaming Eagle: before it became Screaming Eagle, it was just another Napa Valley Cabernet Sauvignon. Heidi Barrett was not then the ultra-famous consulting winemaker she has since become. Screaming Eagle’s location, off the Silverado Trail in east Oakville, was not considered the best. There was indeed a “lightning strikes” serendipity to the process that is very hard to explain.

Another cult winery is Saxum, which I also wrote about in New Classic Winemakers. Rhône blends from Paso Robles weren’t exactly cult darlings when young Justin Smith began his West Side project. It took some stellar reviews from top critics to launch him to the top. Ditto for Helen Turley at Marcassin, Williams Selyem and Rochioli, Manfred Krankl at Sine Qua Non, John Alban and, up in Washington State, Charles Smith and Cayuse. They would not be where they are today without the help of famous wine critics.

On the other hand, there are wineries that have spent tens of millions of dollars to produce quite respectable wines that, while very good, have not launched into cult status. They hired the most famous flying winemakers, the hardest-to-get viticulturalists and the most expensive P.R. firms, and still they remain on the almost-cult list. Napa Valley is replete with such examples. Could it be that the era of the cult winery is over—that it’s not possible to make a new one from scratch?

That is a plausible theory. The field is so crowded that it hardly seems to have room for yet another cult wine. A younger generation is not as interested in them as were their parents and grandparents. A meme has swept the country, along the lines of “Just because it’s expensive and gets high scores doesn’t make it better.” In fact, people, especially below the age of 30, understand that to some extent the system is rigged. They may not know the details, but their cynicism has been sharpened by exposure to a U.S. media that seems to advance people and things for its own purposes, rather than for the general well-being. In this sense, it would be very, very difficult if not impossible to make a new cult wine.

On the other hand are a couple of traits of human nature. One is that we seek novelty. Even cult wines gradually lose their appeal; I could name several that have over the last twenty years. Wine people are notoriously fickle. They are also are notoriously insecure, which is why wine critics are so easily able to influence them. Since we still have wine critics—and are likely to into the future—there is the distinct possibility that “the critics” (whoever they are) could anoint a new cult wine anytime they choose to do so. Yes, the Baby Boomer critics are leaving the scene but, as I have long predicted, they’re being replaced by a younger generation (Galloni is the prime example) that’s as influential as ever. Meanwhile, the most important wine magazines and newsletters maintain their critical power; even if their newer writers aren’t as well-known as Parker or Laube, they retain the power of the Score. So we still have the infrastructure in place to create new cult brands.

What varieties are most likely to be the new cult wines? Pinot Noir for sure. In my opinion, its future is unlimited; someone, somewhere, is going to make a single-vineyard Pinot Noir that rockets to the top. Cabernet and red Bordeaux blends are more problematic. There are so many; the market is so saturated. I suppose if a First Growth started a new Napa Valley winery (the way Petrus, or rather Christian Moueix, did at Dominus), the media at least would be waiting with baited breath for the first release, and if they universally praised it, it could soar to the top. But that’s unlikely. Nor is it likely that there will be a cult Chardonnay or Zinfandel. What about Syrah? It’s poised for a comeback. Growers are putting in new plantings in the best coastal locations, especially along the Central Coast. Prices for grapes are up. In selected locales, Syrah and red Rhône blends are doing very well, hand-sold by gatekeepers to audiences who don’t seem to be aware of, or care about, the conventional wisdom that red Rhônes are dead. So, of all the varieties, I think Syrah, or a Syrah-based Rhône blend, is in the best position to give birth to that rarest baby in the wine world, a cult wine.


The struggle of small wineries

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This is a sad story, told by the Vancouver Sun, about a small British Columbia winery’s legitimate fear that it may get squeezed out of the market. It’s the same old story: Getting harder and harder to compete with the big wineries in shelf space, distribution and price.

When I read a tale like this, my heart goes out to the proprietors. It’s never been easy to sell wine (in either Canada or the U.S.), but it’s getting more difficult. I can’t imagine how emotionally upsetting it must be to put your heart and mind into building a small family winery, then find yourself in danger of losing everything, through no fault of your own.

There are a couple ways small wineries can fight back. One is, obviously, to focus on direct sales. Everybody I know is doing that, but it’s an uphill battle. DTC is trickier than it sounds. You can’t just build a website, start tweeting and Facebooking, and expect customers to flock to your door. It takes years of continuous effort, and even then, there are no guarantees. Of course, if you’re located on a busy road in a popular wine region, you can sell a lot of wine out the door. But not everyone is, especially in a place like British Columbia.

Nor is getting shelf space any easier, particularly in smaller cities and towns and more rural parts of the country. I suppose there’s some motive for a store to sell the local wines, but there’s probably more profit for them to sell distributor’s wines from large wine companies. Here in California wine country, I know that local markets do try to stock the local stuff. But the fact is that small family wineries generally have to charge more for their wine than a big wine company.

Here’s a shocking statement from the Vancouver Sun article: it costs [small wineries] somewhere between $10 and $12 to produce a bottle of wine. If the price point drops below $17, a lot of them are going to be squeezed out of business.” It’s not clear to me if that “below $17” price point is wholesale or retail, but either way, those little wineries up in B.C. seem like they’re facing almost insurmountable odds against them.

In California, small wineries can get away with charging a higher price than they can in British Columbia, but even so they face a dilemma: Do they go up against the popular premium-priced wines from big wine companies (which is virtually impossible, and would probably mean they’d have to sacrifice quality)? Or do they produce a quality wine that costs more than a comparable wine from a big company? There will always be consumers that prefer to buy a wine from a smaller winery, even if it’s more expensive than they want to pay for, simply because it’s a small winery.

But the majority of American wine drinkers are looking for something affordable, and that’s exactly where the big wineries have the upper hand. With their economies of scale and ability to sink their profits into better farming and technology, the big wineries seem destined to grab more and more of the profits.

The only way out—and fortunately, it’s not a complete fantasy—is this current “artisanal” or “craft” movement we see that happened first in beer, then spread to spirits and, finally, wine. It’s wonderful that consumers, mainly younger ones, are committing themselves to products they sense are authentically made by smaller producers. This is not entirely a guarantee of quality, of course, but there is a sense in which small producers understand that the only way for them to compete with the majors is to make wines so good that consumers will happily pay a premium price for them. Of course, there’s an equivalent challenge for big wineries: they, too, have to be artisanal, or at least present the image of homegrown.


When Mohammed won’t come down from the mountain

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So I called up this winery the other day. It’s not too far away from Oakland. I’m putting together another tasting and asked if I could buy a bottle of their Cabernet Sauvignon and have it shipped to me. The guy—the owner-proprietor, I think—said no. He said it’s not worth his while to “drive down the mountain” to send a single bottle. If I wanted to buy a case, he explained, that would be a different story.

I thanked him and told him I wasn’t looking for an entire case, so goodbye. No $ale. But the incident bothered me and so I put it up on Facebook and asked my friends, “What kind of a business model is that?”

Lots of comments, as usual. I suppose I think more about these marketing and sales issues since I’ve worked at Jackson Family Wines than I would have when I was at Wine Enthusiast. I thought the winemaker’s attitude was pretty dumb (not that he was rude about it; he wasn’t. In fact, he couldn’t have been nicer. He simply explained that he was way up in the middle of nowhere). The bottle price, by the way, was $27.

What did my Facebook friends say? You can read all the comments here. Most of them roundly criticized the guy. Jeff Stai, from Twisted Oak, wrote I’m way up in the mountains and I’ll sell you a bottle. wink emoticon.” He added Today’s one bottle sale is next month’s five case sale.” Bill Smart said the guy’s business model is “One that is not going to last for very long?” (Bill did put it in the form of a question.) Chris Sawyer said the business model is a “case study [in] how to inflict bad mojo on your brand.” Sean Piper said “If you ever buy a bottle of my wine I’ll personally hand deliver it to you.”

And yet, the guy had his defenders. Neil Monnens wrote, “More power to him…Imagine you are his friend or family and he leaves you to go down the mountain to sell one bottle of wine to someone…it’s not worth it. Good for him.” Victoria Amato Kennedy wondered “What was the profit margin on the one bottle after factoring in gas/shipping costs/time?” I understand that, but I would have paid whatever shipping cost the guy charged me. The fact of the matter is, he was too lazy to drive down the mountain. As Patrick Connelly wrote, “Bad customer service = increasing selling difficulty.”

If I had a little family winery (which this was) I’d drive down the mountain! How hard can it be? It’s summertime, no rain, easy-breezy. Besides, even if it’s a 30-minute drive to the UPS Store, aren’t there other things the guy can do while he’s in town—buy groceries or supplies, call on an account, have a nice meal, see a friend? I’m sure that people who live up in the mountains always have lists of stuff to do when they’re in town.

As I’m constantly reminding people nowadays, you do what it takes to sell your wine. Establishing customer relationships is one of those things. Although I didn’t identify myself to the guy, how did he know I wasn’t buying the wine for a Parker tasting? I could have been some rich Silicon Valley venture capitalist looking for a house Cabernet. You never know. Sending somebody a bottle of wine can sometimes change your life in unexpected, great ways. But first, you have to be willing to come down from the mountain.


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