Observations of a Wine Marketer – Taste Napa Valley

“If all of us acted in unison as I act individually there would be no wars and no poverty. I have made myself personally responsible for the fate of every human being who has come my way.”
….Anais Nin

Thoughts & Observations

The events that started in October 2008 seemed like the start of trip down the wormhole. As the economy spun out of control due to the hubris, fraud and greed of a few in whose hands the future of financial markets rested, our wine industry started to take on water in the ensuing world financial turbulence as outlined by Michael Lewis in The Big Short,” As brands attempted to gain traction, the strategic and tactical marketing sins that were ignored in the halcyon days of the apparent financial boom of the post 9/11 world, were now acting like anchors helping to sink a lot of wine boats. Wineries found that they were facing non-existent or greatly constricted credit-markets. Bulk & case goods values were realistically lowered as the rate of depletions declined, and inventories started to back-up, crowding distributor and winery warehouses. Brand margins were squeezed as significant discounting became the de rigueur marketing tactic to move lazy inventories. In this fabric of the late first decade of the new millenium’s space time continuum, results were at best mixed. The market disequilibrium lacked known values, resulting in a confusing set of solutions; and not ones satisfying the given equation. It seemed that in the singularity of the broad market no one solution existed to pull our industry out of the gravitational force of this financial black hole.

However, conventional wisdom and the popular press tends to focus our view of market trends through the lens of our largest or enterprise winecos, or through those wineries with the most visible profiles. This prismatic look exhibits the logical fallacy of ‘argumentum ad numerum,’ (i.e., the number of followers sways the argument, arguing noise over signal) and on closer view leads us down a path of absurdity. Most USA wineries are family wineries, producing less than 10,000 cases with a significant number producing less than 5,000 cases on an annual basis. We don’t need Stephen Hawking to solve this apparent size dichotomy; but, we just have to observe what it was that allowed some agile family winecos to escape the event horizon and to have thrived in these trying times.

  • market research
  • a passion for wine
  • sharp pricing tactics
  • a laser-like focus on quality
  • significant channel diversity
  • client relationship development
  • a clear route to market strategy
  • key lighthouse account placement
  • indy and mid-chain grocery distribution
  • communicating real points of differentiation
  • incorporating a vibrant DTC & DTT sales plan
  • focus and delivery of superior customer service
  • website development that allows for intuitive eSales activity
  • utilizing regional and/or national restaurant account targeting
  • adopting integrated sales-focused drinks industry CRM technology

There has been an apparent turn-around in the wine market, starting in mid-August of 2009. This has been true especially for wines above $20/bottle. But, there will be bumps and plateaus in the road ahead. In the opinion of Think Wine Marketing the three-tier distribution system presents significant challenges for small family wineries, and the support of HR5034 by three-tier wholesalers is a serious affront to family winery/distributor relationships. So, those lessons adopted and/or observed during the Great Recession should not be shelved as we approach a brighter business climate. Let’s not do this time warp again.

Taste Napa Valley

As always events large and small hosted by the Napa Valley Vintners are events not to missed, and Taste Napa Valley 2010 exceeded all expectations. The air was heavy, almost tropical, and the skies were dark, but spirits were high and smiles were everywhere – on the faces of staff, volunteers, chefs, vintners and guests. The early start and the iconic winery location marked a change in the public face displayed by Napa Valley to guests from the four corners of the wine world. This was a return to the sprit that I remember that was in place back in the early days of the Napa Valley Vintner get-togethers, the ones hosted by Hans Kornell. While the food, wine and celebrity meter was off the hook, this was just a gathering of Napa Valley’s agribusiness business community shared with wine consumers for the benefit of numerable Napa County non-profits. If the positive results of this year’s earlier Napa Valley Vintners’ Annual Mid-Winter Barrel Auction for the Trade, were to replicated at the Auction Napa Valley 2010, a good indicator was the Friday June 4th Barrel/eAuction at the Rubicon Estate. There seemed to be a palpable excitement displayed by the more than 2,000 attendees at the grand courtyard food and wine tasting, and the active bidding for the Barrels by ballot or though the eAuction was robust. Incorporating a mix of technology for the eAuction was timely and displayed a recognition that eCommerce now plays a key role in the wine business and at contemporary wine auctions. But a large part of the auction was the interaction of guests with names or faces previously only seen by most visitors in print, on TV or on the web. Those who live here often forget that not only do we live in one of the most beautiful places in the world, but the people we see in our everyday work lives… the ones who work so hard in our restaurants and wineries are in fact celebrities. And these celebrities of the food and wine world were cranking out good times, good will, great food and great wines.

There were so many good wines to try, and so little time. I read recently somewhere that Napa Valley winemakers should forget about trying to make Sauvignon Blanc. Well,besides the ludicrous nature of those comments, two memorable Sauvignon Blancs that I had a chance to try were the Araujo Eisle, and Farella-Park . After sharing a Glass of the 2003 J Schram with my friends at Schramsberg, I headed to the caves with about 1,500 new friends for tastes of Blackbird, Cornerstone, COHO, J. Davies, Oberon, Rubicon, Shafer and on and on. My preliminary impression of the 2008 Napa Valley reds based on about 15 separate barrel samples, is that at this point in their evolution they’re displaying density of flavor, saturation of color and impeccable balance. Can’t wait until these wines hit the market.

The Wrap

What follows are some excerpts from Think Wine Marketing’s conversations with winemakers and vintners at Auction Napa Valley: Since the first of the year market conditions have improved significantly and that results have returned to a new normal. Consumers, ones who always had the ability to spend on affordable luxuries are now willing to do so. Encouraging news supporting a strong rebound for Napa Valley wines is that more than a few small family wineries reported being sold-out of their current releases. I was also told that lessons learned in the past 2 years will be incorporated into sales and marketing strategies going forward. I also heard that the stresses encountered in the marketplace brought home that we are all just farmers, growing, making and marketing wine to people on a one-on-one basis. Perhaps my favorite conversation was with a passionate vintner and member of the Auction Napa Valley steering committee. We talked about the journey through the Great Recession to the current recovery – “it was all about the journey, and not about the end-point.”

My take away from Taste Napa Valley and Auction Napa Valley 2010 is that those of us in the wine business should be proud to work with people who realize that involvement in the greater community in which they live and work is a privilege to be exercised. Auction Napa Valley 2010 proceeds are reported to be $8.51 million, a 49% increase over the 2009 results. Kudos to the efforts of the Napa Valley Vintners, Rubicon Estate, Meadowood, the volunteers, vintners, chefs and bidders for such spectacular results.

Copyright © 2010 Think Wine Marketing Blog® All rights reserved.

Who turned on the lights?

“Well we’re movin on up,
To the east side
To a deluxe apartment in the sky.
Movin on up
To the east side.
We finally got a piece of the pie.”

… ‘The Jeffersons’ … Lyrics by Jeff Barry & Ja’net Dubois

Moving on Up

In a conversation at the recent DBTA symposium at Ferry Plaza, Qupe winegrower Bob Lindquist (and many others) referred to 2009 as “a very tough year.” Well, even if US wine market conditions are still challenging, it seems as though a significant change in the direction in the US wine market has finally occurred, and that the lights in the marketplace have been turned-on. The dynamics of change are complex, and driven by multiple factors, including significant promotional spend and discounting. In addition, this uptick was aided by new wines entering new channels, and new route to market tactics being implemented by winecos who formerly relied on a few traditional channels, such as Tasting Room DTC efforts, and on-premises channel exclusivity. Some of the changes have happened due to innovation, sheer panic, or as a result of the ongoing recognition of wine market trends. But the evidence of a wine bull market is now unmistakeable.

Sometime in mid to late August 2009, an inflection point in the US market had been reached, as domestic wines sales took an upturn in both value and volume. As reported by Rachel Nichols in Wine Business Monthly on January 15, 2010, The Nielsen Company reported that “wine sales for October were up 2.3%” year/year. And in the rolling 52 week report dollar sales were up 3.5%, and for the same period case goods volume was up 1.7%, possibly reflecting higher price point wines entering the US Food & Drug channel tracked by Nielsen, and the concomitant significant promotional across the board spend for this period.

In a November 10th WBM article, Liza B. Zimmerman noted that “retailers, restauranteurs and wholesales” had expressed optimism that wines sales were indeed moving in a positive direction. But the YTD market seemed to be driven by the value segment; and, as noted by Suzanne Gannon in the November 2009 issue of Wines & Vines, by wines in alternative and environmentally friendly alternative packaging, with dynamic growth being shown by wines in Tetra Pak and bag-in-box formats.

The March 2010 Wine Business Monthly Retail Sales Analysis headline on page 56, reads “Retail Wine Sales See 6 Percent Holiday Bump, Signs of Life for $20 Sales,” with sales increasing in value by 6.3% and volume gaining 5.6%, with wine above $20 gaining almost 10% in both value and volume. This represented a dramatic change of events in a market that has been referred to as the toughest in years. A change in the trend line that not even CNBC‘s Jim Cramer or Danny Brager, Vice President of Client Services for The Nielsen Co. had forecasted.

A Sea Change

Consumer and market confidence seem to have returned with sustainable results now, not only possible, but probable for the remainder of 2010. The major sign beyond the US Food & Drug wine sales increase trends tracked by Nielsen, as seen by Think Wine Marketing, was the February 20, 2010 Premiere Napa Valley Barrel-Futures Auction. The Napa Valley Vintners reported that the auction raised $1.9 million, a figure that is a 30% increase over the 2009 results and represents the 3rd best revenue total in the Premiere Napa Valley’s fourteen year history. According to the Napa Vintners, the top-selling lot of the day was from Shafer Vineyards, a five-case offering of Sunspot Vineyard Cabernet Sauvignon sold to Napa-based Winebid.com for $37,000, or $616 a bottle. In response to the winning bid, Doug Shafer, President of Shafer Vineyards remarked that “It was exciting to see the support and enthusiasm for our wine, but it was just as good to sense the cautious optimism in members of the wine trade that things have turned a corner economically.” The sales at the NVV Premiere event marked a sea change in market sentiment by those close to consumers, the wine trade. Gary Fisch of New Jersey’s Gary’s Wines noted that his customers were “starting to drink more premium wines, and they’re calling for us to bring these kind of wines home.” And, JP Richard of Cache Road Liquors in Oklahoma observed that “you can feel that the energy is springing back.”

New Routes to Market

Nielsen trend analysis and auction results alone are not the whole story. A recent Think Wine Marketing survey of wine e-commerce sites revealed vigorous market activity and enviable revenue accretion in 2009. In response to my inquiry Shaun Bishop co-founder and President of wine e-commerce pioneer WineCommune and JJBuckley.com stated that “at JJ Buckley, revenues grew 19% in 2009 vs 2008. We focused on product selection, pricing and service – and customers responded. People are spending, but they want to be smarter about how they spend and are focusing their purchases with retailers they trust. We tried to make it easy for them to save money and get the wines they wanted.”

George Studdert of wine.woot! remarked that “my controller tells me that 4th Qtr numbers aren’t quite in yet, but conservative numbers indicate a 50% increase again this year over last making it three consecutive years of 50% or greater growth.  We can also say that we shipped out in excess of 75,000 packages on behalf of wineries direct to the consumer.”

While both of these businesses are wine e-commerce sites, their individual models are significantly differentiated from one another. Of the two businesses, JJ Buckley is the longer standing e-commerce site (as WineCommune founded in 1999) with an established and recurring revenue base offering a dynamic selection of products on a daily basis, while functioning as a virtual bricks & mortar retailer. While wine.woot! is a newer business launching in 2006 offering 3 individual wines per week from selected wineries, allowing the featured winery to interact directly with clients, and functions as a marketing agent for each offer. Interaction seems to be the key to the success of both companies. The idea that relationships with customer and clients is paramount and that customer service is the driver that builds trust and sales. These are but two of the more than 250+ wine e-commerce sites available to US winecos, albeit two of the more successful operators in the space. In the long-tail, fast product cycle wine industry, and in this saturated market JJ Buckley and wine.woot! offer winecos a voice that seems to transform the “noise to signal” (<– term via VinTank’s Paul Mabray).

Wine e-commerce is a solution that many wineries have discovered, and one, that as broadband infrastructure buildout occurs, will become more popular with wine consumers. In the recent survey results of ‘Affluents,’ households with more than $100,000 net income, Ipsos Mendelsohn revealed that 98% of these households have a broadband connection and frequently shop online. However, e-commerce availability doesn’t appear to be the lone motivator, but selection, service and relationship development are the prime movers of purchase behaviors. With a 72% growth in worldwide mobile broadband data bandwidth usage in H2 of 2009, and the announcement by the FCC that “the goal is to bring super-fast broadband to every corner of the U.S. over the next 10 years, giving the country the fastest and most extensive wireless networks of any nation,” the trend of adoption of the wine e-commerce channel by a wide segment of US consumers will tend to accelerate.

The Aspirational Consumer

The idea of aspiration and the American consumer is a long discussed concept by psychologists, organizational sociologists, and economists, and defined as “being ambitious” and/or “desiring success.” And the idea of aspirational consumer behavior as defined in the ‘Business Dictionary‘ is that ”Consumer motives or goals can be represented by the values they hold. Values are people’s broad life goals that symbolize a preferred mode of behaving (e.g., independent, compassionate, honest) or a preferred end-state of being (e.g., sense of accomplishment, love and affection, social recognition). Consumers buy products that will help them achieve desired values; they see product attributes as a means to an end.”

Susan Hader in a MarketingProfs article notes that ‘aspirational consumers – (are) affluent and middle income consumers willing to pay more for high-end goods and services.” Purchasing these brands “provides aspirationals with feelings of success and status.”

Dr. Issac Mostovicz, a consulting academic with insights into drivers of human behavior in practical business situations, reports in the current issue of ‘Janus Thinking’ that he sees that the US is seeing the return of the ‘aspirational consumer.” “Trends happening in places such as Silicon Valley suggest that American’s with expendable income are regaining the confidence to spend it.” This conclusion is based on January 2010 retail sales figures. “The monthly sales numbers offered further indications of returning demand for prestige and luxury goods, with Saks and Neiman Marcus, the luxury fashion department stores, reporting increases of 6.8 per cent and 7 per cent, respectively.”

The  Long View

In his article ‘Wine in a Downturn,’ Vic Motto, Chairman, CEO and Co-Founder of Global Wine Partners tracks the wine market through it’s ups & downs from 1973 on. An article worthy of review. Mr. Motto has on several occasions referred to the aspirational American wine consumer. Wondering if this observation has changed, I asked the following:

TWM: You’ve often said that the American wine consumer is aspirational; so, in light of the challenges facing the US wine market in the last year what’s your current view?

VM: “Hit by the shock of the recession, we all feel and are a little poorer, so our spending patterns reflect that.  But, we don’t give up. As we recover financially, we always revert to our normal spending patterns. Old habits are hard to break. There are centuries of history that demonstrates this – including the post-recovery of the great depression, which went from the lowest low in U.S. history to the highest high. There are many reasons that premium wine sales will recover, including very important and ongoing long-term drivers of industry growth and premium trends with over 25 years of momentum behind them.  But the core reason that premium sales are already beginning to recover is that we humans are aspirational. We always seek to improve our lives and quality of life, and we don’t give up on that – no matter what our status. People really do want quality, and they appreciate the difference. So, I wouldn’t bet against the American consumer, or the U.S. economy. I just don’t think that’s a good bet.  The time for hunkering down is passing. It’s a good time to go long.  I’m already buying better wine than last year.  How about you?”

Insights and Recommendations

The just released qualitative and quantitative research study on today’s American consumer By Ogilvy & Mather Chicago in partnership with consumer insight company Communispace has revealed the emergence of a radically individualistic consumer who is re-imagining a more sustainable future for themselves. This post-recession consumer wants fewer, but still high quality consumables. “We are finding (that) consumers make very interesting trade-offs across seemingly unrelated categories in order to get their lives into balance while still feeling like they are treating themselves to those things that make them feel normal and well taken care of,” As discussed in ‘world tea news,’ the concept of ‘affordable luxury’ seems to be well applied to wine: “It seems that the next big buzz word for consumables is affordable luxury. The trends of consumers trading down their purchases due to the economy while staying at-home to re-connect and enjoy the finer things in life are fueling a new perspective in Americana. Add the fact that consumers are demanding higher quality products, faster without added cost or complexities; affordable luxuries seem to have found the perfect storm in the late 2000’s.” Another key attribute of the new consumer exacerbated by recent economics is the idea of ‘cocooning’ introduced in the 1990’s by trend forecaster/marketing consultant Faith Popcorn. Consumer cocooning is being redefined and actualized by this new consumer, who is eating out less, and socializing more at home, necessitating new route to market strategies by wine companies. The forecast by Ms Popcorn that cocooning would lead to stay at home electronic shopping, has in fact come true. So, as wine marketers, it is our job to identify consumer movement and consumer keys and develop a plan to create commerce.

Please note the following suggested steps to enact as part of your post recession marketing action plan:

Ramp-up your customer service: Pete Blackshaw, EVP of Digital Strategic Services at Nielsen Online, in his 2009 WITS keynote address said it all – “Service is the new marketing. It’s the most important activity.”

Route to market: Consider a diversification of your channel strategy and consider multiple market touchpoints, to include e-commerce. Note that single channel marketing strategies are no longer viable.

Talk to your customers: The idea of customer relationship management (CRM) may have morphed into the concept of “Social CRM.” But regardless of platform, understand that every consumer touchpoint matters. Develop, nurture and build a relationship with each and every customer. Make your customers your clients.

Ask your customers to talk to you: Today with so many ways to connect to your customers via social media (which you should monitor via Cruvee), don’t forget the basics, like the ‘contact us’ button on your web site, the basic 1-800 #, and those one-on-one conversations (remember talking to your customers) that you can have in person. And don’t forget those capture/feedback forms in your tasting rooms or at tasting events. Oh, and hand out a lot of business cards with your contact info.

Reevaluate your promotional spend: According to Olgivy’s Graceann Bennett “The consumer is moving forward, but many marketers are projecting the stresses of the economy in their marketing and are not connecting with the new consumer mindset…” “It’s time for marketers to reflect the new positive self reliance of today’s consumer and to tap into building relationships with more one-on-one marketing efforts” … “it is important for marketers to tread carefully into the discount space, because brands that are associated with deprivation and the recession may conjure up less than positive associations once consumers have a bit more cash to spend.”

Copyright © 2010 Think Wine Marketing Blog® All rights reserved.

Technology is not a Four Letter Word

‘If you can’t measure it, then you can’t manage it’ … classic B-School value proposition

The Challenge

Back in 1997 when I first started working and living in San Jose for Mirassou Vineyards as the National Sales Manager, I found myself in Silicon Valley in the middle of a revolution in science and technology based on a platform laid down by a post World War II generation of scientist and engineers. These were frenetic times in the South Bay, and the structure of today’s technological achievements was being built in a series of fits and starts. At the time consumer access to the internet was really only a few years old, and broadband was just a dream in a small lab in Telecom Valley. The Mirassou family had gone down some several dead-ends strategically in the development of their brand. A significant challenge was at hand. I faced a similar challenge years earlier at Walt Disney World when I was assigned the role as the supervisor for all of the food & beverage receiving clerks. Significant waste occurred on a daily basis as a result of over ordering limited shelf life foods. Ordering was based on a minimum/maximum par inventory level. A system that, even in the early days of an open and functioning Magic Kingdom, was already dated. Disney had a top line research department, and we had a monthly calendar of predicted guest counts. Decision on revenue budgets, levels of staffing and even operating hours were based on these forecast which were accurate within .5%. So, I did a 30 day research trial of food, item by item, usage versus actual guest counts. From there a specific relationship between traffic and usage was discovered, and a ratio or factor was assigned to the ordering system and quickly implemented by all food & beverage outlets. Food waste as a percentage of Park food service revenues was reduced from around 2% to .2%. The answer was in the math, and then in getting the system to accept the change. But the challenge at Mirassou was more daunting.

David Mirassou, who had gone to work for Fred Franzia, after College, became a star in Bronco’s chain grocery division. After a few years he returned to the family business, but was relegated to a role selling to and merchandising groceries in Northern California. I shared an office with David, and after implementing some necessary field staff changes, David became the Western Division Manager. At the same time I hired Michael Stedman as our sales analyst. Both David and Michael were very sharp in viewing and conceiving new ways of looking at the sales process. David built a detailed, sophisticated  Access data base, and then gained permission to login to his distributors’ AS400 data files. Importing the data in the form of a .cvs file, he created pivot tables to populate the data, and then used this information to manage his distributors by providing goals and monthly feedback on not only a macro level, but on a micro level, salesperson by salesperson. Michael Stedman built a national key account list for multiple channels, and then implemented a version of this system to target and track performance within this targeted set. A lot of work. The industry took note, and the Gallo Wine Company started tracking our performance. Gallo purchased the Mirassou brand a few years later; and, David is still driving sales leading to the continued dynamic growth for the Mirassou brand. Michael Stedman, after years in New York has returned to California to lead the marketing efforts at Domaine Chandon. Once again the truth was and is in the math.

The Solution

So you can imagine my interest when I read that on Tuesday February 9th, 2010 VinTank and Brixiom Systems announced a new strategic partnership. VinTank is the well known Napa, CA based strategic digital think tank. Brixiom Systems, is an Atlanta, GA based technology company that has developed SaaS (Software as a Service) based customer relationship management (CRM), sales force management (SFM) and warehouse management systems (WMS) designed specifically for the beverage industry. As such Brixiom Systems provides via the cloud, a product that incorporates wine and spirits product and business rules and integrates this unique design with traditional customer management resources. And this actionable CRM product is available anywhere that access to a browser is available – your desktop computer, your laptop, netbook or smartphone.

At the working demo today, Wednesday February 24, 2010 VinTank Founder and Chief Strategy Officer Paul Mabray kicked off the meeting with this on-point statement: “Sales is a science that requires sophisticated management tools, and surprisingly there has been a deep void in trade Customer Relationship Management (CRM) tools for wineries. Only now, with the introduction of Brixiom Systems, is there a product that truly understands the nuances of B2B wine sales management.  We are excited about the leaps and bounds this tool will give the wine industry for better visibility and business intelligence in managing the traditional sales channel.”

Mr Mabray introduced and then turned over the meeting to Andrew Suss, Founder and CEO of Brixiom Holdings. Mr. Suss, a Vanderbilt University Chemical Engineering graduate, started his first company The Charter Group while still a student. TCG provided software solutions and strategic IT consulting services for public and private companies and for educational and governmental agencies. Mr Suss went on to found Brixiom Holdings in the Spring of 2008 with the goal of providing online tools to the drinks industry. Mr Suss launched his presentation stating that “We are truly excited to Introduce Brixiom Systems solutions to the Wine and Spirits Community.  Our products allow for an unprecedented level of information visibility, and enable remote users to access corporate data from wherever they are, via the web and smart phone devices” As the demo progressed, I realized that in this seamless sales automation solution developed by Andy Suss, that rather than shoehorn an existing CRM solution to fit your business model, Brixiom Solutions provides a customizable, scalable, affordable and integrated sales relationship package with transactional, engagement and analytical features with a dedicated beverage industry interface.

VinTank Partner, in charge of Business Development & Operations, Clay Wallin, a Vanderbilt MBA who in early 1999 co-founded eSkye Solutions, discussed working on a similar product in the formative days of eSkye, but ran into a wall at the enduser level. Under Clay and Smoke Wallin’s leadership, eSkye developed market dominant eMarket Channel applications and sold to Orion Wine Software In 2008. Mr. Wallin noted that “Brixiom Systems is a unique tool for wineries, importers, and distributors to collaborate like never before. It enhances sales productivity, and the reporting is robust and customizable”

The Message

In October of 2009 Wine Business Monthly published my CRM product review, that focused on specific functional CRM solutions for sales force automation. While these are all superior products with specific applications within the Sales, Marketing and Operations departments of wineries, none have the level of integration that Brixiom Solutions offers to contemporary winecos. The beverage industry reporting functions (compliance, taxation, samples, bill-backs) alone will allow a level of efficiency and savings that will more than justify the modest cost.

I’ve often observed that the recommendation of the adoption of new technological solutions in the consumer facing segments of the beverage industry business is often met with the look of someone who would much rather be someplace else. The investment in new technologies is often avoided by wine companies who view their current non-integrated systems as adequate to their needs. Is that really working for you anymore in this saturated and hyper competitive market? If I was either an enterprise wineco, or a small family winery, I would want to grab the competitive advantage that Brixiom Solutions provides by improving information flow and program execution. Become the supplier of choice to your distributor partners by increasing channel communications and collaboration. Differentiate your wineco from the competition by being seen in your marketplace as technologically advanced. If you do, you will see improved trade and sales efficiencies resulting in reduced cost of sales (COS) reduced points of friction and improved targeted distribution.

Copyright © 2010 Think Wine Marketing Blog® All rights reserved.

Managing your wine brand message in a wired world

“Getting information off the Internet is like taking a drink from a fire hydrant.” … Mitchell Kapor

One of the strategic issues currently under discussion in wine marketing meetings is how to address the fact that winery CMOs and brand managers face significant points of friction in our wired world. A wired world where a winery’s brand message is often modified by users across the universe of sites including mobile apps, marketing agents, ecommerce portals, bricks & mortar retailers with an ecommerce presence, blogs, forums and social networks. The same passion that you put into the production of your wines is mirrored in the story inherent in your wine brand. However, user-generated content often retells this story in a way that obfuscates your unique, value added proposition that differentiates your wine products in a crowded and increasingly difficult market. This all too common outcome is not unlike the results achieved in the traditional dinner party game of ‘Telephone’, where a short story is whispered into the ear of the person next to you, and repeated through a chain of individuals until the final person in the chain is asked to then tell the story, often to the laughs of all involved. The facts have been so modified, having passed through the filter of each person, that the final story bears no resemblance to the original tale. But the act of having your winery’s product information modified in this manner is no laughing matter and tends to diminish brand identity, and will effectively, over time, erode brand image and value. But just how can a winery effectively standardize their brand message and brand image across this vast, fragmented information cloud without imposing an onerous work load and cumbersome time management restraints on staff?

The unintended consequences of Moore’s Law

The simple idea, in the late 1960’s, of migrating from germanium, or the by then the more common germanium/silicon mix as the primary material for solid state electronics, to silicon as the base material for integrated circuit design was the genesis of a movement that had significant unintended outcomes. By 1965 Gordon E. Moore at the time head of research at Fairchild Semiconductor and later co-founder in 1968 of Intel, predicted that the number of transistors on an integrated circuit would double every two years. This was likely based not only on his own observations but on earlier predictions including the pioneering work of Douglas Engelbart the co-inventor of the computer mouse. Moore’s paper was the foundation document used by the semiconductor industry as the targeting platform for future planning, research and business development. Caltech professor, Carver Mead coined the term ‘Moore’s Law‘ in the early 1970’s. Moore’s Law has driven innovation in ways never foreseen by these early Silicon Valley bootstrappers, from the exponential development of processing speed and memory capacity to new miniaturization technologies, impacting the development and the worldwide use of digital tools by both businesses and consumers. This rapid development of technology made possible by the research of the post WW II generation of scientist has led to the development of tools and products that reach and impact our lives daily, and not only in obvious ways. Integrated circuits are in our cars, our toasters our washing machines and refrigerators. Integrated circuits enable the technology that heat our home or allow municipalities to efficiently deliver utilities to end users. So many ways, that we now accept these developments without much fanfare or notice. They just are.

Old school goes new school

When I was in college in Morgantown, the campus was wired to an IBM 360 computer. As a student who wanted to make use of the computers, I had to take courses in the then evolving computer coding languages of BASIC, Fortran and COBOL. The WVU Computer Center’s IBM 360 was in a building a block square and 6 stories high. I now can hold that computing capacity in my hand, no longer waiting 24 hours for a 10 lb report printed on a daisy wheel printer. I’m now able to receive instant feedback to any inquiry or search. I can go down the wine aisle at JV’s in Napa and using an iPhone wine app take a picture of the UPC or the label, and get immediate information on that specific wine, 1-2-3, just like that. Smaller, faster, better seems to be the mantra driven by robust competition between large and emerging technology companies. We’ve been climbing this graph of technological development that has colored and shaped the current wine marketing landscape. One of the developments that has come on the scene is the introduction of user generated content into the brand conversation. Starting out with FTPs then BBSs which evolved into forums, then migrating to usenet, and then through a variety of ISP pipes such as Netscape, AOL, MSN and Yahoo. A movement that gained traction with the development of broadband availability and use, was topic specific blogging using services such as Blogger, WordPress or Tumblr. In 2006 Twitter introduced microblogging to the world, basically taking old school instant messaging meant to be used within a small group of friends or utilized as a business communications tool in lieu of e-mail and making it available to anyone with a computer and an internet connection. Facebook emerged as a college based IM service that allowed friends to communicate on a closed circuit basis. That was your dad’s Facebook. Facebook is now a marketing powerhouse platform for individuals and brands.

Modern wine communication modalities

As an example of how brand communications have evolved, on January 28, 2010, I took part in an online multi-media wine tasting experience featuring Walter Bressia who is a winemaker of note in Mendoza, Argentina. The tasting was a live, real-time online event with feeds on Twitter, USTREAM, and GoToMeeting. Invitations were initiated through the Vines of Mendoza Facebook Fan Page. The event included a number of wine and wine business bloggers who actively participated in the tasting of three of Walter Bressia’s wines. Conversations occurred between the tasters and the winemaker, and between each other. It was fun, informative, and a best practices use of technology. But, this wasn’t my first online interaction with winemakers. On Earth Day 2009, I was engaged in a beta test with Lisa Mattson and Wilson Daniels with Nigel Greening of Felton Road who was in his home office in Wanaka, NZ and Bernard Lacroute of WillaKenzie who was in his winery office in Yamhill, OR. So an online connection and conversation on sustainable faming practices occurred between St. Helena, Sonoma, Wanaka, NZ and Yamhill, OR, and a personal connection was forged between the winemakers and a wine business writer halfway around the world from each other.

The Wine Directory

A constant comment that I get from winery clients or winery friends is the amount of misinformation concerning their brands that they find in online searches. The old saying of garbage-in – garbage-out has never been truer. Incomplete or misconstrued information plagues the wine industry. And this has been exacerbated with the proliferation of consumer and ecommerce generated input. Real and false information alike is replicated in the blink of an eye. The methods of communication between brand owners and brand users has changed. Consumers now have access to tools that empower their input, and help create and influence brand discourse. The idea of brand while still evolving is essentially based on a set of attributes promised by you the brand owner to the end user. This is a basic concept that may be lost in an age of instant consumer input. But the fact remains that you are the brand owner, and an inherent attribute of ownership is your responsibility to factually shape the conversation concerning base information, also known as data, for you brand and products. This has been addressed by the team at Cruvee with OwnIt, changing the way your wine is viewed online. And now, 9 weeks into the launch and adoption cycle, of OwnIt,  as a member of the Cruvee Board of Advisors I had a chance last week to sit with the Cruvee team to do a dry run through the release of the Wine Directory. In explaining the Wine Directory, Cruvee CEO Evan Cover said “ the directory is intended to show you how your products and your winery are visually represented online. If your information is accurate here it will be accurate across all of our partner sites and applications. This means controlling your brand’s image with millions of customers visiting the biggest social networks, tons of mobile applications, online retailers and more.”

In conclusion

A first step in  regaining control of your brand message is registering your brand and inputing information into the OwnIt database, which is free other than the allocation of time to correctly input your wine brand and brand product data. James Jory, Cruvee VP of Technology sees OwnIt and the Wine Directory as “the chance to eliminate the Balkinization of your wine brand data within the online community.This is a solution with a low barrier to entry that enables you the brand owner to control your winery’s product information facts.” The idea of passively sitting by and letting others define any brand is a notion that is anathema to me, and it should also be unacceptable to you the brand owner. So, step up, sign-in and take control of your wineco’s brand information, and OwnIt!

Note: Copyright © 2010 Think Wine Marketing® All rights reserved

Haiti – Roshambo – The Winter Fancy Food Show – Wine Tastings

“Man should not consider his material possession his own, but as common to all, so as to share them without hesitation when others are in need.” … St Thomas Aquinas

Haiti

Referencing what is now a well publicized event, Palate Press Publisher David Honig announced the teaming of the online wine magazine with ‘Brother, Can You Spare a Bottle.’ Palate Press is asking the wine world to contribute that special bottle of wine from your cellar for an online wine auction, with 100% of all proceeds being contributed to the American Red Cross Haitian relief effort. The celebrity Hope for Haiti Telethon is over, and the star power of George Clooney and Brad Pitt have exited stage right. And, while the NFL has stepped up with a drive to raise funds for Haiti via cell phone texting, it’s now our industry’s turn to step up, and offer some of the best of our resources, as we often do.

Those of us who make our home on the west coast, know that but for luck, this could be us. We live with occasional shaky ground and the fortunately less frequent significant earthquake event. But unlike Haiti, which is the poorest of nations in the western hemisphere, those of us in the wine business know that sometimes part of our daily decision process is whether to have a Syrah or a Pinot with our roast Rocky Chicken, and not the Haitian’s constant plea of  ‘where can I find food or water today.’ It’s likely that, by the time this post is read, Think Wine Marketing’s donation of a 1.5L of 2004 Radio-Coteau Savoy Anderson Valley Pinot Noir will have been sold (and it has – thanks to Andy Demsky of Shafer Vineyards). So, thanks to those who not only bid at Palate Press on TWM’s lot #13, but on all of those who bid and to those who provided the most interesting selection of wine collectables for this unfortunately necessary outreach. However, there still are many terrific lots in the auction catalog for your consideration, and it’s not too late to submit your own bottle(s) for bid. TWM’s view is that this isn’t a hand-out, but a hand-up to those who are now most in need of assistance.

Roshambo

The Santa Rosa Press Democrat recently ran an article covering the closure of Rashambo Winery and the subsequent withdrawal of Naomi Brilliant from the wine business. It is an interesting read, but to me this is a story of the career redirection of one individual and not a symptom of a wider wine industry systemic financial failure. What follows is a comment by Think Wine Marketing made as part of the conversation at Alder Yarrow’s Vinography thoughtful analysis in his article “Marketing and Branding Do Not a Winery Make.”

TWM: “Thanks for the cogent POV re another wine business closure. I don’t see the Roshambo case to be an example of a canary in the coal mine. A wineco’s economic sustainability in today’s economic and cultural environment, in reality, requires a complex set of marketing and financial skills that go beyond the visuals of buildings, labels, and personalities. And it’s more than communications, pricing and promotions. Basics include, as part of a long skills list, the development of a diverse strategic channel model: Three-Tier distribution, DTC (bricks & mortar visits, winery iStore, wine-club, and ecommerce), and DTT; and, the implementation of a focused market model to answer the questions of who, what, when and where your wine can and should be sold. As a wine biz bootstrapper that means going out to targeted markets and shaking a lot of the right hands, the hands of consumers, buyers and decision makers with the express intent of revenue creation. For a variety of financial and personal reasons, many lifestyle wineries still exist , and yes a few of these will close, with Roshambo being the most recent example. It seems as though Ms Brilliant is now marching to the beat of a different drummer.”

The above comment and an additional comment made by TWM on Alder’s post reflects TWM’s take on the well documented change of direction for Ms Brilliant and the Roshambo Winery. Success and failure often travel down the same road, but from this perspective, one winery’s hiatus doesn’t a stampede make.

The Winter Fancy Food Show

I attended the NASFT Fancy Food Show this past Monday, January 18th, at the Moscone Center in San Francisco. The production and sale of food is not only part of my life/career experience, but part of my DNA. My varied background includes stints in Disney food & beverage management and as the buyer/operator of Walt Disney World’s grocery ops. Plus, my Grandfather D.M. Sears, a food scientist, worked for the H. J. Heinz Co. in Pittsburgh, and for a leading wholesale grocery concern Reid, Murdock & Company in Chicago, before founding his own branded food production company in Ft Wayne, Indiana, producing ketchup, mustard, sauerkraut, deviled ham, relishes and pickles. The pickle business still survives as Sechler Pickles, thanks to the acquisition by Ralph Sechler of my Grandfather’s St. Joe, Indiana pickling stations. But more than being part of my DNA, I always learn quite a bit from contemporary specialty food marketers re.:

  • trends
  • packaging
  • promotions
  • marketing communications
  • relationship and business development
  • positive examples of small biz bootstaping
  • channel models and channel strategy in a consolidating market

Having only one day to cover the multi-hall location of a show with more than 1,300 exhibitors, these are booths that grabbed my attention:

J&D Foods, the home of Bacon Salt, and Baconaise and now bacon popcorn
Nueske Applewood Smoked Meats…can you say bacon. This Wisconsn based producer is very well known and valued in food service. Also, a great consumer facing brand.
Mia’s Kitchen, a division of Don & Son’s. Not only my hometown friends (I once worked for Mia’s dad), but quality sauces in top drawer packaging.
Jelly Belly, always innovating with product and packaging. Did you know that they offer Jelly Belly wine pairing recipes?
The Craft Brewers Association booth. I’m guessing that you wouldn’t be surprised to hear that this was the busiest booth at the show on Monday. Not only were interesting beers available to taste, but they were being poured but an impressively knowledgeable, somewhat quirky group of passionate brewers.

The takeaway from this event that can be of value to smaller family businesses is that in this greater CPG segment consumer facing brands are experiencing the same consolidating channels and product rich fast product cycles as wine, the following strategic actions matter:

  • Focus
  • Quality
  • Innovation
  • Packaging
  • Sharp pricing
  • Know your product
  • Have an elevator pitch
  • Professional but friendly demeanor
  • Owner involvement in sales and marketing
  • Diversified channel strategy and implementation
  • Have a real, hands-on relationship with your market

Notable Upcoming Wine Tastings

This Thursday, January 28, 2010 The Vines of Mendoza is conducting an online wine tasting with Mendoza winemaker of note, Walter Bressia. Although there are two ways to participate in this tasting, either via a Webinar, or through a real time Twitter tasting, I’m going to participate on Twitter. I’ve been looking forward to this tasting since receiving my wines from Vines of Mendoza, last week, and it looks like atleast 2 of my wine blogging colleagues will be participating,  Frank Gutierrez of Frank Loves Wine and Ward Kadel, aka drXeNo. I’ve actively participated in prior online tasting events, previously on the Taste Live platform, such as

Open that Bottle Night at Back Room Wines

Hospice du Rhone 2009 at Estate Sonoma,

Pinot Noir tasting at Wilson Daniels organized by Lisa Mattson and Agent Red of The Wine Spies

Jordon Mackay’s “Passion for Pinot”  Taste Live Event at The Jug Shop. 

All the Taste Live and Twitter wine tasting events have been a blast, and more than informative, and effective in creating wine centric conversations, while also creating brand buzz. While I’m familiar with Argentinian wines, I’m not familiar with Argentinian wines at these price points. Last year, I picked up my friend and wine biz colleague Scott Becker at the San Jose Airport at the end of a long flight from Argentina, after his plane was diverted from SFO. All he could talk about was the quality of the top end wines now available from Argentina, especially those from the Vines of Mendoza. Now I’ll be able discover for myself. As a family winery, have you considered a wine tweet-up or the Taste Live format to create buzz and awareness for your wines? If not it should be on your brand promotions calendar for 2010.

On Saturday, January 30, it’s ZAP’s 19th annual Zinfandel Festival at San Francisco’s Ft. Mason, that’s on this wine marketer’s calendar. Zinfandel has been on my map since my earliest wine tasting experiences, and this is an event that if you’re a member of the press, trade or a consumer, should be on your bucket list. I’ve been to 10 ZAPs, and circumstances prevented me from attending last year. I’m not missing this year. Yes, I know it’s crowded, and the crowd likes to have a good time, but that’s part of the excitement. And it helps to create a positive buzz, and reinforce the role that Zinfandel plays in the culture of California’s wine industry. Word is that the 2007 Vintage is outstanding. So stay tuned for my take on the ’07 Zins in a future post. I’m also looking forward to saying hi to old and new friends. Also, ZAP is not only wine blogger friendly, but on the cutting edge of recognizing the contribution made to Zin awareness by this group of communicators. So, a special thanks to my colleague, Thea Dwelle, for her contribution in making this happen. If I don’t see you online Thursday afternoon for the Vines of Mendoza Taste Live event, hope to see your IRL at ZAP.

Note: Copyright © 2010 Think Wine Marketing® All rights reserved

Reflections of a Wine Business Blogger

“Sometimes I lie awake at night, and ask, ‘Where have I gone wrong?’ Then a voice says to me, ‘This is going to take more than one night.’”

Charles M. Schultz

The Decision to Write

As my eyes opened on the morning of January 1, 2010, I realized that I had survived what Time Magazine described as ‘The Decade from Hell.’ Oh, a bit beaten-up and feeling a little like one of John Stewart’s Black Pig Meats salumis at the end of the sausage making process. Yes, the economic events of the past 10 years have put most of us through the grinder, but here we are at the other end, having survived to make, market and sell wine another day. A little more than 9 months ago, I started writing the Think Wine Marketing blog. My timing coincided with the bottom of the business cycle. In short order the US stock market had lost more than half it’s value, ending March ’09 with a Dow Jones Market index below 6,500. Housing values, the base of asset wealth for most consumers continued to decline in all but a handful of smaller SMSA’s. Credit to small businesses had been so severely constricted as to be non-existent, especially for wineries with slow moving, devalued inventories. Times were tough for the wine industry. Before this recession, now called ‘The Great Recession,’ the wine industry has always been considered to be recession proof; but, this time at best our industry has proven to be recession resilient. Several cultural and structural changes were accelerated by the difficult economic times that had direct effects on wine sales. As consumers rushed to reduce credit card debit and increase their rate of savings , a significant downward segment shift hit wine pricing almost overnight. The pressures on pricing and the shift from fine dining to a more casual food experience with an emphasis on value, led to a rapid change in channel strategy for many wineries. The rapid movement from an on-premise focus to retail distribution had eviscerated any pricing leverage that formerly not sold at retail wineries had displayed, squeezing profits and/or creating negative margin sales. In light of the current times I decided to write a blog focused on wine marketing. A blog that in part told stories that would be of some help to smaller family wineries in these difficult times. I took a Socratic approach of creating a central narrative and then providing a workbook like ending. As I look back over the last 3 quarters of 2009, and look forward to 2010, I hope that I’ve helped provide some positive mentoring to at least a few family winecos out there in the ether.

The Metric System

While never concerned about gross numbers as the sole metric of success, as an experienced marketer I do track the number of hits and reads that the Think Wine Marketing blog receives. However, my primary concern is/and has been just who is it that reads my blog. It is specifically wine industry marketing centric. My readers for the most part, based on comments and emails are winery principals, GMs, CMOs, PR directors and brand managers. Based on blog originated emails, which have outpaced blog comments by a factor of 10, the TWM blog also has a demonstrable following in finance and in tech. I’ve written 33 blog post in nine months, that have received 149,117 hits of which 56,321 (37.8%) were a result of search engine crawlers, resulting in a net of 92,796 reads, numbers easily exceeded by experienced wine writer/bloggers like Tom Wark, Alder Yarrow and Steve Heimhoff in just a few months – with the following think pieces being the top 10 posts – re. close of business on 1/6/2010.

2009 Top Ten TWM Posts

  1. Nov 17            7,475   — Doctor Pinot’s Thanksgiving
  2. Oct 7               7,434   — Revisiting Marketing 101
  3. Nov 4              7,126   — A Conversation about marketing wine online w/Paul Mabray
  4. Sep 17             6,956  — Marketing by Pulling Corks
  5. Oct 20            6,334  — The Conversation
  6. Sep 24            6,165   — Does your winery have an effective OND plan?
  7. Aug 26           4,534   — Dispatches from Wine Country
  8. Dec 23           4,430   — Y2K10: Part Two: late 90’s tech effect on wine ecommerce
  9. Jul 27             4,259   — Dispatches from the 2009 Wine Bloggers Conference
  10. Sep 9              3,860  — Wine Brand Building Focus

Beyond noting that I have loyal readers, who have provided significant support, input and feed back, the fact that the Think Wine Marketing blog has received recognition from the wine industry and in the wine press is gratifying.

That Was the Year That Was

  1. The March 2009 acquisition of Scrugy by Cruvee in early March 2009 by CEO/Founder, Evan Cover. Scrugy Founder and Chief Technology Officer, James Jory joins Cruvee as V.P. of Technology.
  2. The Think Wine Marketing Blog is launched on March 26, 2009 with the post ‘Viral Marketing Strategies for Wine Businesses.’
  3. The State of the Wine Industry Social Media’, by VinTank, Derek Bromley and Tom Wark published 5/6/2009 and available for download on the VinTank web site. IMHO this is and will be considered the foundation document of the wine industry’s involvement in the social media movement.
  4. American Canyon based wine shipping and fulfillment company New Vine Logistics suspended business operations on May 29th, 2009. The story was broken on Twitter by Larry Chandler, aka LarrytheWineGuy.
  5. The 2009 Wine Bloggers Conference at the Flamingo Resort in Santa Rosa, CA the last week of July, 2009. This was not only a well planned and executed conference, but the opportunity to meet so many wicked, smart citizen bloggers was amazing. Kudos to Joel Vincent and the Open Wine Consortium.
  6. The August 13th appointment of Think Wine Marketing founder John Corcoran (that’s me) to the Board of Advisors at Cruvee.com, a wine business intelligence platform.
  7. On August 25th, Des Moines Iowa environmental attorney Charles Becker publishes ‘Wine and Global Warming: An open letter to the President.’
  8. RJ’s Wine Blog names the TWM blog of the Month for September 2009. If you’re not reading the frequent posts from Avenue A/Razorfish alum, R.J. Hilgers, please click on the link to check this A-List wine blog.
  9. On September 11th The Wine Spectator Senior Editor James Laube reports that cult Pinot Noir producer Kosta Browne sells for a reported $40 million.
  10. On September 28, Williams-Sonoma Founder Chuck Williams speaks on the lessons of customer service at Sonoma’s Maysonnave House.
  11. On September 29th, Wine Business Monthly publishes, as a cover lead, TWM author John Corcoran’s CRM, sales force automation article.
  12. On October 5th, the online wine magazine Palate Press published Paul Mabray’s article ‘New VinTank Research Analyses Wine iPhone Apps‘, winning praise for both wine consumers and the wine/tech segment of the wine industry.
  13. On October 25th Amazon suspends their on again off agin wine sales efforts. The demise of the Amazon.com wine store was laid at the feet of the arcane and balkinized labyrinth of state wine laws. Wine writer, W. Blake Gray wrote in the December 3rd post on his blog the Gray Market Report that Amazon withdrew because of taxation issues, “not just on wine but on everything.”
  14. On October 28th Cruvee & Vinfolio announce a partnership in which user generated reviews incorporated into Cruvee’s social media management platform. On November 24th Cruvee and Cellertracker announce a partnership giving Cruvee clients direct access to over 1.1 million wine reviews. This series of appointments/partnerships along with the subsequent December 3rd launch of The OwnIT movement helped to consolidate wine data and give wineries control over their brand communication. This innovative and free service from Cruvee.com was created to provide a platform “giving you control over how your wine is represented online.”
  15. On December 23rd the TWM blog received recognition from Dale Cruse and the Drinks Are On Me blog as one of the top new food and drink blogs of 2009. Bob Dwyer wrote a very nice review, which is not surprising given the quality of  writing on his blog, the Wellesley Wine Press.
  16. On December 28th Eric LeVine released a sneak peak demo of the new CellarTracker redesign.
  17. The TWM blog landed the #5 spot for the 10/7/09 post ‘Think Wine Marketing: Revisiting Wine Marketing 101′ on the 2009 Most Visited Blog Postings List on Winebusiness.com.

Observable Lessons

Dear Reader, I hope that my blog posts helped you to imagine ways to develop not only a sustainable wine business model but to envision more innovative route to market strategies and branding initiatives for 2010 and beyond. 2009 was a year that presented significant challenges to wine businesses regardless of size or location. It is my experience that out of chaos comes innovation. Observations that I’ve made over time that the Great Recession tended to reconfirm are: Identify your strengths and outsource functional areas in which you don’t do well; Hire and retain talent; Understand, even in an age of social media, that you own and are responsible for your brand(s) reputation; Understand that wine marketing is more than price reductions and promotions; Diversify your channel strategies; Rethink three tier distribution and investigate DTC (as more than tasting room sales) and DTT solutions to include digital distribution; Incorporate the appropriate sales and marketing focused technologies such as CRMs; Convert your wine business from a production centric culture to a sales and marketing focused culture. It’s now time to roll up your sleeves, and to focus efforts on driving your wine businesses to success in the new year, and in the new decade.

Note: Copyright © 2010 Think Wine Marketing® All rights reserved.

Y2K10: Part Two: late 90’s tech effect on wine ecommerce

“After studying the potential impact of Y2K on the telecommunications industry, health care, economy, and other vital sectors of our lives, I would like to warn that we have cause for fear. For the failure to address the millennium bug could be catastrophic” … Senator Daniel Patrick Moynihan

The Last Year of the Century

At the end of the 1990‘s the top story wasn’t about the significant advancements in technology but rather about a programing decision made decades before. Y2K was a hydra like story spreading its tentacles into all recesses of media throughout the word. It became the world’s most famous bug. It really wasn’t a bug, but a memory saving programing decision of using two digits instead of four for a date. The solution was a simple BIOS update, and by Jan 1, 2000, to a world-wide collective sigh of relief it was a non story. 1999 had been a very busy news year: President Bill Clinton had survived impeachment. John Elway won his second Super Bowl title in Denver then retired. Lance Armstrong came back from testicular cancer to win the Tour de France. J. K. Rowling, a Scot writer’s first novel ‘Harry Potter and the Sorcerer’s Stone’ hit the top of the New York Times best seller list. The US Women’s Soccer team won the world cup and Brandi Chastain’s picture made the covers of Time, Newsweek and Sports Illustrated. The New York Yankees won their second straight World Series title. Mark McGuire hit 65 home runs and Sammy Sosa hit 63. Tiger Woods won 8 tournaments including the PGA and was named AP Male Athlete of the year.

But the big stories, not withstanding Y2K, were still in tech. Both Nordstrom and auctioneer Sotheby’s decided to create unique ecommerce divisions, with significant investments from Benchmark Capital and Madrona Investment Group funding Nordstrom.com and Amazon as the primary investor in Sotheby’s. Merrill Lynch launched it’s online brokerage after Paine-Weber’s late summer launch and Morgan Stanley’s folding Discover Brokerage online trading unit in-house. In November Nike began to take orders for customized shoes, following this practice from P&G,  Levi’s and Maidenform. District Court Judge Thomas Penfield Jackson found that Microsoft used monopoly powers to stymie competition. The forecasted dotcom bubble didn’t pop, but just got bigger and bigger. 200 net businesses had IPOs in 1999, double the combined total of the previous four years. From April through August net stocks declined on street talk that the bubble wasn’t sustainable. But a end-of-the-year rally restored value to the stocks, and on the desk of federal regulators awaiting approval were 16 new internet mutual funds. The words IPO, burn rate and VC entered the everyday lexicon, and billionaires were created through mergers and IPOs. 29 year old Atlantan Jeffery Arnold became a paper billionaire when his then obscure website WebMD merged with Healtheon, an internet service that connects doctors, patients and insurers over the internet. With all this news, and all of the Y2K panic in the press, the late 90’s provided some key developments that either directly or indirectly provided the philosophical foundations for the movement towards wine business ecommerce.

Google

In March of 1996, after meeting as Stanford computer science grad students, Larry Paige and Sergey Brin start to work on a web crawler called BackRub, developing a PageRank algorithm to convert backlink data as a measure of page importance. Search engines at the time ranked results on the number of times the search term appeared on the page. Paige & Brin were convinced that the pages with the most links to them from other relevant web pages would be the most relevant and produce better results. Inspite of impressive and innovative technology Brin and Page were grad students struggling for attention and financial support. In August 1998, cutting their pitch meeting short, Sun co-founder Andy Bechtolsheim wrote a $100,000 check made payable to Google Inc. The original BackRub had been renamed Google, based on a play-on-words in reference to the math term googol, and was registered and incorporated on September 4th, 1998. At the time Google was located in Susan Wojcicki’s garage in Menlo Park. By June of 1999 Google announced a $25 million dollar infusion of capital from Sequoia Capital and Kleiner Perkins Caufield & Byers. This idea of organizing the googol of information available on the web, making it universally accessible to users would have a profound impact on ecommerce and on the dissemination of wine product information.

craigslist

In 1995 former IBM and Charles Schwab computer programmer Craig Newmark decided to jump into the conversation with the community of users on the WELL and in the Usenet by contributing information about events in San Francisco to an email list of friends. Through word-of-mouth the increasing number of visits to the site became numerous enough to require a list server, majordomo, which required a name. Craig wanted to call the site ‘sf-events,’ but was persuaded by friends to call it ‘craigslist.’ The site was built on conventional open source LAMP architecture, and has changed little graphically since it’s inception, which even by 1996 standards is very basic, with the last visual upgrade completed in 2001. The idea behind ‘craigslist’ is that everyone is included…”the net is everyone’s printing press.” Because the volunteer managed list was user generated, people started listing for sale or help wanted ads. This started to become chaotic and Craig stepped in changed this from being a hobby to being a real company. By 1999 the site had been incorporated and Craig hired Jim Buckmaster to be the ‘dude.’ Craig is a believer in providing the list as a service to ‘a centerlized network of online communities, featuring free online classified advertisements.’ The idea of free classifieds has affected newspaper and news organizations by repurposing classified advertising that was a main source of print medias’ revenue stream. With the move of news, information and advertising to online media, newspaper have diminished power to influence or control consumer choice.

Amazon and eBay

As 1999 came to an end, ecommerce was being celebrated as the engine that would drive the economic boom of the new millenium. Amazon.com founder Jeff Bezos was named Time Magazine Person of the Year. He was 35 years old and as a result of the recent IPO was now worth $10 Billion. Not bad for a former Wall Street techie. In 1994 Jeff quit his day job, and drove across country stopping here and there to write his initial business plan, then launched a new retail business model out of his garage in Seattle. His vision of cyber commerce wasn’t singular, in fact it was a vision also held by eBay’s Pierre Omidyar, founding Auction Web in 1995, soon after rebranded as eBay. These were revolutionary times in the world of retail. Not since the 1890’s when Sears & Roebuck started as a mail order company and then grew into the largest retailer in the US by the mid-20th century had retail seen so much innovation. A tipping point towards a new channel, a new paradigm had been initiated. The entry and success of both Amazon and eBay gave credence to the ecommerce channel with consumers, and Amazon’s investment in Virtual Vineyards/Wine.com help to create an awareness of wine ecommerce with both wineries and consumers.

The Cloud

Prior to 1993 the only way to navigate the web was limited to FTP, Usenet and Gopher, excluding the technologically challenged. In 1993 Marc Andreessen and Eric Bina who as University of Illinois undergrads were funded by the High-Performance Computing and Communications Initiative to write the script for Mosaic, the web browser that made the web relevant to the public. It was the first killer application that took the web from a niche technical arena to mass market appeal. Mosaic made the web accessible to the general, non-scientific public for the first time. Although Mosaic was not the first browser for windows, that was Tom Bruce’s Cello, future additions of Internet Explorer were based on Mosaic code. The release of Mosaic resulted in a dramatic increase in the growth of web usage in a short period of time, expanding within the general populace and outside the closed corridors of academia and research institutions. By 1994 Marc Andreessen left NCSA and with Jim Clark the founder of Silicon Graphics founded Mosaic Communications which was rebranded as Netscape Communications. Just 4 years later in November of 1998, AOL initiated the purchase of Netscape for $4.2 Billion. In September of 1999 Andreessen and three associates from Netscape founded Loudcloud. By utilizing Opsware, Loudcloud introduced the idea to clients the idea of cloud computing. The term ‘cloud computing’ was first coined and defined by Emory University Goizueta Business School professor Ramnath Chellappa. In the jargon rich world of the computer industry the term cloud computing has become a phrase to describe information stored and processed in the ‘cloud’ world of the Internet. Cloud computing refers to remote scalable virtualized data or software programs available to authorized users over a computer connection, but for the most part it is a simplification of a complex infrastructure. Basically it’s information stored and processed on remote servers and delivered back to your computer screen through your web browser. As a user of cloud computing you don’t have to own the servers or grid functioning as host to your software programs. Cloud computing utilization billing usually follows the public utility model, pay for what you consume. This helped to change the idea of software from Software as a Product (SaaP) to the idea of Software as a Service (SaaS), as first experienced by most business in 1999 with the launch of the cloud based SalesForce.com CRM. Cloud computing rationalized the cost of entry for any company wanting to launch an ecommerce web site.

Blogger

Blogging started in a very basic form, dating back to CERN when Tim Berners-Lee began listing sites as they came online. Most digital communities in the early days of the internet took the form of user moderated newsgroups. The first single user moderated group was mod.ber. Netscape followed this practice by running the ‘What’s New’ list of sites in June of 1993. The first modern version of a widely read blog was by Swarthmore College student Justin Hall. Although the site was highly personal, it was primarily a list of links that Justin found to be cool. His site was called ‘Links from the Underground.’ Dave Winer launched ‘Scripting News’ in April 1997, another frequently updated links list. Blogs were still lists developed by nerds for nerds, and for the most part out of the mainsteam of public awareness. A prime example is ‘Slashdot, news for Nerds, launched in September of 1997. Jorn Barger in his December 1997 ‘robot wisdom weblog’ site coins the term weblog. The first open community of bloggers were diarist posting on Open Diary which was launched in October of 1998. Peter Merholz coined the term blog in early 1999, shortening the term weblog which he called ‘we blog,’ then shortened to blog. At about the same time Brigitte Eaton started the first portal devoted to blogs. Brad Fitzpatrick launched the first open source blogging site Live Journal. And in July Metafilter provided the earliest blog archives. Also that July, Pitas.com launched the first free build your own blog web tool. But what we in the wine world view as blogging started with the release of Ev Williams scripted Blogger, a product that like Mosaic opened the internet to less than tech savvy consumers by blurring the lines between web diaries and weblogs, a distinction only important to the cognoscenti. Blogger was launched in August 1999, with an upgrade released in November 1999. Blogger was an overnight success, putting stress on the frequently crashing Pyra Labs Blogger server. But the cat was out of the bag. This was the beginning of the democratization of information, and the real start of user generated content, lessening over time the influence of traditional wine print media. The first wine bloggers that came to my attention were Alder Yarrow of Vinography and Tom Wark of Fermentation. It should come as no surprise that these are two individuals with tech backgrounds. In fact many of today’s wine bloggers have a tech backgrounds. Wine blogs have and will continue to change how consumers receive and access information.

Glass Half-Full

The path to wine ecommerce development is closely tied to the historical path of technology. Most of the development was done initially by educational or research institutions, but then fleshed out by entrepreneurs, people who could grasp the implication of the large and small steps. Going all the way back to Thomas Watson of IBM who bet his Father’s office machine company on the future of computers; or, Marc Andreessen who based on the work at CERN by Breners-Lee predated by the hypertext theorist, developed the first contemporary web browser that featured a consumer friendly graphical user interface. Or perhaps Jeff Bezos who gazing on a server bank visualized Amazon. Or a disparate team of Larry Page and Sergy Brin who saw a better way to map search engine technology. When a piece of new technology is released with a particular intent, i.e., the internet as a research communications tool, it can never be fully utilized until one of these visionary bootstrappers has the opportunity to put another brick in the wall of progress. Build it and they will come. To have your own vision of the future as a wine ecommerce manager, study the past to discover a better path to the present.

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