I asked it six years ago, five years ago, four, three and two years ago, and I’m asking it now. And it’s not just me: That bastion of U.S. capitalism itself, the Wall Street Journal, is asking the same question. Under a five-column headline in last Monday’s Marketplace section, they wondered “What is all that data worth?” (The online version of the article has a slightly different headline.)
The “data” they’re referring to comes from “companies [that] traffic in information and use big-data analytic tools to find ways to generate revenue.” If that sounds familiar, it’s because it’s been the underlying theme of every conversation about the revenue-generating possibilities of using social media.
We know beyond a doubt that the metrics of social media use are huge. Everybody is Facebooking, tweeting, Instagramming, pinning and so on. They’re liking and following and retweeting each other like crazy. For this reason, wine companies feel, with “the fierce urgency of now,” that they have to get onboard, before the train leaves the station. And indeed, as I’ve argued for many years, wineries should board that train. As I’ve suggested to anyone who’s ever asked (and quite a few who haven’t), winery personnel should engage in social media to the extent they feel capable of doing it.
But what I’ve wondered since Day One is what all these metrics, which are easy enough to obtain, mean. Reach, followers, friends, engagement, acquisitions, referrals, hits, unique visitors, bounce rates, click-through rates, conversions and all other ways to track activity—companies, including wineries, are pursuing them with a vengeance. Yet “The problem is that no one really knows what all that information is worth,” says the Wall Street Journal article.
Such data is called an “intangible asset” because, unlike real estate, durable equipment and money in the bank, it has no objective value. This is not to suggest that data is valueless. As the article explains, data has value because “it allows [companies] to tailor their products and marketing to consumer preferences.” For wineries, though, what does this mean? It’s not at all clear that counting your Twitter followers, or measuring your online engagement rate, suggests anything at all in terms of strategy. “The squishy world of intangibles,” writes the Wall Street Journal, means that “Data is worthless if you don’t know how to use it to make money.”
That statement is patently true on its face. But there’s a more fundamental question: What if social media data, in and of itself, is incapable of being used to make money? Even if real-time data gives you some true insight into your (potential) customer’s online behavior, “Information on individual users loses value over time as they move or their tastes change,” making data “a perishable commodity.” Data looks real and solid enough: after all, what can seem more representative of reality than numbers on a page or screen?
But as we all know, statistics can be slippery or, to use the Journal’s word, “squishy.” I used to get in trouble with some of social media’s adherents by asking them how they “knew” that engaging in social media made money. The answer always was a form of “We can’t prove it, but we somehow believe it.” Occasionally, someone would cite a winery that was doing social media bigtime and whose sales were rising. But even if the connection between doing social media and selling cases could be established directly (which it couldn’t), I always wondered if the winery’s success had legs—if it could be replicated over time, because, after all, any winery can have a good quarter, but wind up on the butcher’s block.
Lest any of this be interpreted to suggest that I don’t think social media has value, or that every winery shouldn’t be exploring it, let me go on the record: If you’re a wine company, you should be doing social media. Period. End of story. What I am saying—or, really, asking—is the same question I’ve posed since 2008: What is all that data worth? If you don’t like the question don’t blame me, blame the Wall Street Journal’s headline writers for coming up with it in the business paper of record.
Nobody asked, but here’s my two cents on “top Golden State vintners [express] concern about the future of the $23.1 billion industry, especially among the discerning millennial market.”
That’s from Tuesday’s Santa Rosa Press Democrat, which reported on “a UC Davis survey of 26 senior executives” in the state, and found that “Everyone was a little bit worried.” Those execs included Joseph Gallo, from you know who, Jay Wright (Constellation) and my own boss, several levels up, Rick Tigner.
Seems the chief worry is “the intrusion into the wine category of spirits and craft beers,” according to the guy who conducted the survey, the well-known emeritus of Davis’s Graduate School of Management, Robert Smiley (who I had the pleasure of interviewing numerous times during my magazine days).
What do the execs base their impressions on? One of them said more “people are starting out with craft beers and then as dinner goes they switch over to wine.” I suppose this does “rob” the industry of that extra glass of sold wine. I like to start the evening out with a cold IPA, especially when the weather is warm, but that doesn’t stop me from consuming my share of wine. Still, I can see that if the theoretical consumer used to drink three glasses of wine at night, and is now drinking just two, with a bottle of beer making up the difference, that represents a 33% decrease in consumption.
Another exec wrote that he and his wife “have been having more cocktails than we’ve ever had in the past…”. That too, the exec speculated, “is maybe taking a little bit of the wine-by-the-glass business away.”
Then there’s the liquor store owner who said,“Ten years ago we were about 70 percent wine. Now we are down in the 60s.” Even with increased wine sales in the U.S., the execs are troubled by this nibbling away at the margins.
I have several reactions. One is that, after following this industry for more than 30 years, I’ve seen multiple times when winery execs were afraid that the sky was falling. It never did. Here in California, we’re coming off several boom production years (despite the drought) and quality has never been higher. Profits seem to be up everywhere at well-run companies, the mood is optimistic among employees, and with all the bashing California wine gets from certain quarters, it remains the best seller in America. Prices continue to rise, and where wineries are holding the line, they’re feeling pressure to increase—if only slightly—the cost of cases. That wouldn’t be happening if wineries felt truly threatened.
It is true that beer and spirits consumption is on the rise, but my feeling is that we’re becoming more of an alcohol-drinking country, so a rising tide lifts all boats. It’s also true, as I’ve insisted for years, that wine is fundamentally different from beer and spirits. Wine signifies aspiration. Beer never did; it signified only getting drunk. Neither did spirits signify anything, except a quick buzz at the end of the work day. Now, that is changing, because the craft beer and spirits producers have stolen from wine the concepts of lifestyle and aspiration that have always fueled wine. It is now possible to drink (as I do) great craft beer and spirits and appreciate them, not only for alcoholic punch, but for complexity, deliciousness and even (dare I say it?) intellectual interest. But I still believe aspiration goes along more with wine than any other drink. And America is an aspirational country.
What then for the wine industry? It can’t become complacent. It has to continue to appeal to its existing consumers, and not alienate them, as it learns how to reach out to younger Millennials. The messages and the products therefore must be extremely well-thought out and crafted with precision. But successful wine companies know how to do that. Believe me, they’re working overtime figuring this stuff out. If I were a betting man, which I’m not, I’d put my chips on the wine industry. Spirits seem to come and go in America; their fundamental problem is that they’re simply too strong for millions of people to drink on a regular basis, throughout the meal, for the rest of their lives. Beer always stays popular, but it’s craft beer that’s got all the excitement now, and craft breweries are small; they do not, I think, represent a threat to the wine industry in the long run, although some stores are giving them increased shelf space.
Wine, by contrast, has staying power. There’s a reason it’s been top beverage in the western world all these centuries, and is now becoming top beverage in the developing world, too. Human nature doesn’t change; wine is more consonant with human nature’s aspirational elements than either beer or spirits. It’s the Goldilocks of alcoholic beverages: not too strong, not too weak, just right. Am I an admitted booster? You bet. But that doesn’t make me wrong.
“Wines delivered to your door” has been the business theme of direct-to-consumer entrepreneurs since as long as I can remember.
I used to be a member of one of these subscription services, back in the early 1980s. I can’t remember the name (I’m sure someone out there will remind me), but they sold German wines that “arrived at your door” on a monthly basis. I didn’t continue, because I eventually reached the point where I preferred shopping for wine myself, in a store, especially if I could taste it or see a recommendation—and that is the point of this post.
There’s now another “delivered to your door” service, Club W, and while I wish them well, I don’t see how they overcome the challenges that led to failure of almost every one of these ventures.
They all promise the ease and convenience of having pre-selected wines that arrive at your door once a month. They all say the wines are “curated” by experts or, in this case, actually produced for Club W “by noteworthy winemakers who develop their ‘juice’ for Club W exclusively.” And they all make claims that they offer lower prices [even with shipping?] than traditional outlets.
That may well be true in Club W’s case. The claim that their “exclusive” winemakers “have great talent but may lack access to capital enough to get their wines made and into the market” certainly rings true. That is a common challenge for winemakers, especially younger ones, who may have access to interesting grapes, and are making interesting wines, but have no realistic way of getting them to far-flung customers.
What are those wines? I went to Club W’s website and tried it out. They ask you to answer a couple of (kind of silly) questions, and then, after you give them an email, Facebook or Twitter account, they “recommend” appropriate wines. For me, they suggested three brands I’ve never heard of: a Wonderful Wine Co. red blend from Paso Robles, a Black Market Cabernet-Petit Verdot blend from Livermore, and Casa de Lila Airén, a white wine from Spain. Beyond these three wines, there are others on the website I could buy. They all have attractive labels, and I wish I could go to a tasting and try them out, because at $13 a bottle, that’s pretty affordable. There’s also a “Curator’s Choice” menu for wines costing $14 and up.
Now, any and all of these might be wonderful wines. Or they might not. The problem is, even thought they’re just $13 a bottle, I don’t want to buy a pig in a poke: A wine I’m not familiar with. Under their “Tastemakers” dropdown menu they have the names and pictures of folks I guess are some of their winemakers: a fine-looking bunch of men and women, young and appealing. There’s also a cool recipes link. That’s all good.
So I have mixed feelings. A lot of thought obviously has gone into Club W. The website is really nice. But I just don’t see how they get around the fact that you can’t taste the wines before you buy, or even see what the critics have said, since they’re club exclusives and have never been professionally reviewed. (I do make an exception for winery wine clubs: people join them because they know and trust those wines, so even if they haven’t had the latest vintage, they possess plenty of prior evidence that they’re much more likely to enjoy the wine than not.)
Finally, although this isn’t Club W’s fault, I hate the way the Wall Street Journal portrayed Club W; their headline reads “Club W Raises $9.5 Million To Appeal to Wine Lovers, Not Snobs.” Can we please get over this “snobs vs. everybody else” nonsense? I mean, does Lettie Teague write for the “Snobs” in the WSJ? I have news for you: All wine writers write for the people who read them; all wineries produce wine for the people who buy them. There are indeed snobs in the world of wine, as there are in other arenas, but they are the exception to the rule, and to toss the word “snob” around so much is really misleading to young people, who may end up thinking that wine isn’t for them because they’re not snobs and don’t like being around snobs.
Instead, why can’t we talk about beginners, amateur wine lovers and experts? The experts aren’t “snobs,” they just have a lot of experience, nor are the beginners “idiots” because they have little experience. Some “beginners” will be “experts” someday; will that make them “snobs”? So really, anyone (writer, blogger, winery, ad agency) who throws around the snob word so insouciantly is just indulging in lazy language that moreover insults a significant number of wine lovers.
And then there are new wine companies targeting everybody: I got this blast email from one of them just this morming: I omit the winery’s name: “We here at ___ have created a wine that will capture thegrowing new generation of social media savvy, adventurous, health consciouswine drinkers as well as the seasoned, more experienced ones.” Talk about something for everyone! Beginners, Millennials, twitterers, greenies and granola munchers, Baby Boomers, old folks, and snobs. Sic semper, market segmentation!
With the first (light) rain of the season expected tomorrow (today, as you read this) north of the Golden Gate Bridge, I thought it was a good time to consider the 2014 vintage in California. So, as usual, I asked my loyal Facebook friends, who responded in force.
The story is this: short, compressed harvest. Record early, in many cases a month before normal. (This means that Autumn rains should not be a problem. If they actually come, which everyone is hoping they will.) A good crop, tonnage-wise, not a record, but then, it comes on the heels of two record-setting years (2012, 2013).
Quality? Overall, pretty good. The wines should be plump and approachable. Several people commented on soft acids, but that can be corrected in the winery. On the other hand, others remarked about high acidity, which also can be corrected, partially, through the malolactic fermentation. The exceptional drought has resulted in small berries but that should make for intense flavors.
Potential problems? Smoke taint tops the list. The Sierra Foothills have been hit heavy by wildfires. So has the extreme North Coast, but that smoke drifts down to the south. A second potential issue is that the warmth, combined with the drought, has resulted in fairly high sugars, especially in reds, but true phenolic ripeness lags a bit behind. I wouldn’t call this a statewide problem but it could result in some structural and balance problems. In a few cases, the crush rush could be a challenge for vintners running out of cellar space.
Several respondents commented on the inverted order of picking, with Cabernet coming in earlier than Pinot and some of the whites, a situation that has vintners scratching their heads, and which may be due to the drought.
Overall, the mood among vintners is positive. I’d call 2014 the third year in a row where there’s more cause to celebrate.
* * *
I must say I find this story disturbing. In brief, the State of California has fined a local winery for using volunteers. Seems the winery didn’t pay them wages, or worker’s comp, so Sacramento has cracked down with a fine so heavy, it looks like it will put this little family winery, in business since 1986, out of business.
The story was so preposterous, I called the winery to see if it’s true. I spoke with Westover Winery’s owner, Bill Smyth, who confirmed it. “The State is out of control,” he told me. What will happen now? “We’ll go out of business, 900 of our club members and thousands of customers will lose, and wineries all over California will be devastated.” Bill contacted his state assemblyman, who’s calling for hearings to “do something,” Bill says. But what exactly can be done isn’t clear.
What were the volunteers doing? “The same things as they do at all other wineries: work behind the bar, making wine,” Bill says. They’re friends of the winery who loved participating.
I’ve volunteered at wineries. I’ve punched down, cleaned tanks and worked in the vineyard, and enjoyed and learned from it. There’s something seriously wrong with this development. I hope things work out for Bill Smyth, and I hope that the California Legislature changes the law to allow volunteers to work at wineries. And how about Wine Institute? Guys, it’s time for you to use your clout in the State Capitol.
While we’re on the subject of Bill Harlan (and we have been lately), you may know that he’s a partner in something called The Napa Valley Reserve, an ultra-high end sort of wine club you have to buy your way into to get the wine. And we’re not talking about a small amount: When I first wrote about the project, back in 2005, for Wine Enthusiast, I headlined my article “Toys for (very rich) boys and girls,” and noted that it cost $125,000 to become a member, for which you got wine that you had a hand in making, under the guidance of Harlan’s winemaker, Bob Levy. The price per bottle was a bargain: $50, but of course, there was that entry fee.
Anyway, the price has apparently risen to $140,000 (a rise of 12% since 2005, not bad considering inflation), according to some political reporting done by the Chicago Tribune, which wrote about the current Republican candidate for Governor of Illinois, Bruce Rauner, who “admit[ed] he is a member of a wine club that costs $140,000 to join.” I got the story from the local Chicago NBC news affiliate, NBC5. NBC5 asked Rauner if he was a member of The Napa Valley Reserve, but “Rauner refused to confirm” it. When the reporter persisted, the most he got out of Rauner was a qualified, “I have many investments, I’m a member of many clubs.” The story went viral: The Washington Post yesterday picked up on it, reporting “Bruce Rauner spends more on wine than average Illinois households spend on everything,” Ouch! (Actually, I shouldn’t say WaPo “reported” the story; it appears in the paper’s snarky “The Fix” column, which is pretty opinionated. But nobody’s denying the facts.)
However, this is not a political rant on my part, but something more important, and that is to ask the question, Why are some people embarrassed by their wealth and how much they spend on wine? I suppose, in the case of a Republican candidate for Governor in a swing state that’s had its share of economic woes, it doesn’t look good for said candidate to have so much money for things that are the height of non-discretionary spending—especially snobby, elitist wine. Then, too, what first alerted reporters to Rauner’s free-spending ways was a photo of him and Rahm Emanuel, who was Obama’s very Democratic chief of staff and is currently Chicago Mayor. What the heck is a Republican doing running around drinking expensive wine with a liberal?
So maybe Rauner had that Gotcha! feeling deep down in his pockets, I don’t know. But why the mealy-mouthed dodging when asked directly if he was a Napa Valley Reserve member? Especially if he’s from the party of free enterprise and pull yourself up by your own bootstraps, why didn’t he just say, “Hell, yeah, I’m a member. I came by my money honestly, and I love wine. Say, what are you doing now? Wanna head over to my cellar and try some?” I remember when Ronald Reagan had his “Nashua moment”: in a 1980 Presidential debate he non-apologetically said, “I paid for this microphone!” Everybody loved it (me too), and it set candidate Reagan in motion to become President. Now, another Republican candidate in an election year seems embarrassed that he paid for something.
I don’t resent people for being successful, and I don’t really understand why anyone else does. But especially, I don’t understand why politicians try to hide their wealth by these squirmy non-denial denials. If I had a few extra tens of millions of dollars I too might join The Napa Valley Reserve. If the wines, which I’ve never had, are anything like Harlan Estate, BOND, The Maiden and The Matriarch, which I have reviewed over the years, they’re fabulous.
Brother Laube comes out swinging against In Pursuit of Balance, in the Sept. 30 issue of Wine Spectator. (Sorry, no link. The Spectator has one of the best firewalls in the business. No subscribe, no read.) I’d been wondering how long it would take him. After all, Jim is famous for giving high scores to ripe, plush wines that can be high in alcohol—which is exactly what IPOB is against. You might even say that IPOB is the anti-Laube (and anti-Parker) establishment. So Jim had to declare himself sooner or later. He’s a nice, modest man who doesn’t pick fights, but even shy folks fight back, if attacked enough.
This isn’t to say that Jim is merely defending his own reputation. For there is something fundamentally irrational about IPOB. Jim implies this when he says that IPOB “admittedly [is] unable to collectively arrive at a definition of balance,” which is true enough: Ask around, and you’ll find that the majority of wine critics, sommeliers and merchants believe that the rationale of IPOB is for wines to be under 14% alcohol by volume. But I’ve heard co-founder Raj Parr say, at an IPOB event, that that’s not at all what IPOB is about. So what is it? IPOB’s Manifesto defines “balance” in rather boilerplate language. It doesn’t say anything about alcohol levels, only that alcohol should “coexist” alongside fruit, acidity and structure “in a manner such that should any one aspect overwhelm or be diminished, then the fundamental nature of the wine would be changed.” But there’s something tautological about that statement, not to mention deeply subjective. Which leads back to the question, What is IPOB really about?
Well, publicity, for sure. There’s some real marketing genius at work with IPOB, which in the few short years of its existence has become something of an insurrectionist force rather like, well, another 4-letter acronym group: ISIS. I Googled “In Pursuit of Balance” and came up with 155,000 hits, but that doesn’t even begin to measure the impact IPOB has had in sommelier circles from San Francisco to New York and beyond. IPOB has, in effect, gone viral.
Jim also referenced the “contentious relationship [that] has developed between somms and producers,” and I’m glad he did, for his voice carries weight. His message—to somms—is that if they don’t put certain wines on their lists just because of “a number” (alcohol percent), they do a disservice to their customers, who may prefer those kinds of wines. Somms, of course, are famous for not liking wine magazines and wine reviewers, who are threats to their existence: If all you need is a famous critic’s score, then somms would be out of a job. So joining forces with IPOB is, for a somm, a way of fighting back against a media elite they never much cared for anyway.
Be that as it may, this is not a quarrel among equals. For Wine Spectator’s senior columnist—one of the most powerful wine critics in America, if not the world—to throw down the gantlet to IPOB is a significant gesture. Jim has presented his case cogently and respectfully, and mostly without snark. (Well, “dim somms” wasn’t his invention, it was Helen Turley’s.) I think In Pursuit of Balance must reply to the rather serious charge that it fundamentally doesn’t know what it’s talking about.
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