Crowdfunding your Napa Valley Cab: is it tacky, or smart?
Nothing illustrates the entrepreneurial challenge of a cult Napa Cab staying relevant than Yao Ming’s turning to crowdfunding for his winery’s financial needs.
When his wines hit the market, I was as excited as anyone. I gave the 2009 Family Reserve 97 points—the highest of any critic I’ve yet seen (although only by a hair). It was a big, big score for stingy old me—and the next year, I was even more generous, with 98 points for the 2010. The wines were glorious examples of modern Napa Valley Cabernet, but the prices were absurd: $625 the bottle for both vintages. I figured Yao Ming figured he had a lock on the wealthy Chinese market, at a time when it was seemingly willing to spend anything on great wine, so why not go for the gold? After all, he was one of the biggest Chinese-American superstars of the decade, maybe ever.
Now here we are five years later, when the Wall Street Journal is reporting that “As China’s luxury wine market cools,” Mr. Yao is being forced to change his business model. “With Beijing’s anti-corruption campaign sapping demand for expensive wines,” the paper says, “Yao Family Wines is shifting its focus from Chinese banquet tables to US steak houses.”
Wow. That’s quite a radical change in business model. Do you think that $625 retail bottle price can survive the transition to steak houses? I don’t. Who’s going to pay $1,000 for a bottle of Napa Valley Cabernet Sauvignon to drink with the rib eye and baked potato? Perhaps the wine Yao Ming is aiming at American steakhouses is their second-label Napa Crest brand that retails for $48. It’s a solid wine: I gave the 2010 91 points, and my successor in Napa Valley reviewing, Virginie Boone, gave the 2011 90 points. But I think they’re talking about the Yao Family Cab. Whatever the case, the crowdfunding suggests that Mr. Yao is having some difficulties earning enough money to keep his business going through sales alone and is turning to this new, promising but largely unexplored area of crowdfunding to raise money from the masses.
Is there any shame about crowdfunding? I’m undecided. It may well be a wave of the future type thing. After all, we think nothing of a startup Silicon Valley firm taking venture capital from wealthy angels; in fact, it’s a source of pride that a smart, rich investor would think highly enough of a company’s prospects to put her money into it. I suppose that crowdfunding, of the sort Mr. Yao is engaging in (“as little as $US5,000 per person,” the Wall Street Journal says), is simply venture capital for the hoi polloi.
Still, it does make one wonder. What would we think if, say, Screaming Eagle, Araujo, Harlan, Bryant Family or Colgin announced they were crowdfunding? I think there would be a lot of raised eyebrows, and even, perhaps, some upset people on their mailing lists, who might feel that turning the reins over to “the crowd” was impinging on their notion of exclusivity.
Perhaps this is the way to expand an empire that’s already flourishing and can flourish even more. Yao Ming says he wants the money to (in the Wall Street Journal’s reporting) “build a visitor center in Napa Valley and a tasting room in Shanghai.” Given the current blowback from wine country residents against new tourist facilities, Mr. Yao may have some ‘splainin’ to do in Napa Valley. But I suspect that hundreds, if not thousands, of people will want to send him their money, to be connected with his brand, to get whatever perks or discounts they’re entitled to on the wines, and to just have the feeling that you don’t need to be a multi-gazillionaire to have a little bit of ownership in a Napa Valley winery.
