“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 entrepeneurs. 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.

“What’s past is prologue” … Antonio, The Tempest, Act 2, Scene 1 – by William Shakespeare

The Doors of Perception

As I rub my eyes, to clear the fog of time, I can’t believe that we’re at the end of the first decade of the 21st Century. Wow! Just wow! It seems like I’m caught on this infinite loop of Einstein’s time-space continuum, no longer trapped by a third- dimensional existence, but wandering aimlessly through the strings of the stream, moving across the universe. Here’s yesterday, there’s tomorrow, but where’s today? Oops! Gone. Transitory. But it did exist? Right? It did. It does exist – however fleeting? Transitory like the existence of photons, neutrinos and muons created in the Farm’s particle accelerator. The fundamental particles in the standard model being the past, the particle zoo the present and the still undiscovered Higgs boson, the future.

Party Like It’s 1999

As my mind’s eye clears, I start to recall many of the events leading up to the final days of 1999, both in wine and tech.  Behind this is the story of Y2K and the largely unnecessary BIOS updates, and all of the smoke being blown into the peak of the dot-com bubble, there was a perfect storm brewing behind the marriage of winery sales and marketing and tech that was launched with the release of the personal desktop computer by Apple and then IBM in the late 1970‘s early 1980‘s. The introduction and adoption of which led to some intended, but for the most part unintended outcomes. Although within the computer biz there are some of the largest market cap companies in the world, they all started as bootstrappers. HP started in a garage in Palo Alto, Fairchild Semiconductor as part of Stanford lab experiment, Microsoft by to Harvard drop-outs who bought a disk operating system from a Seattle computer shop and then licensed the software to IBM helping to launch the PC . Two more dropouts who met in a computer club  developed the Mac, based on concepts and designs originally developed at the Park by Xerox with no intention of ever releasing a consumer usable computer. In 1985 Quantum Computer Services, under the direction of Steve Case, launched Q-Link for the Commodore 64. And, by 1988 launched Apple-Link online services, and then PC-Link. In 1991 the name was changed to America Online, merging the two separate services.  AOL quickly became the dominant ISP generating significant income through their monthly consumer subscription model. By 1999 Time Warner’s Jerry Levin was in merger talks with AOL, and in January 2000 the historic $164 billion merger was completed. This all took place against the background of rapidly improving and innovative computer technology, and with the development of ISPs and telecommunication tools that allowed web access for increasing numbers of consumers, helping to transform what had been utilized primarily as  a research tools of loosely connected, disparate networks, originally known as the ARPANET, into what we now know as the Internet.

During this period, most of the Bay Area development in tech had geographically taken place on the Peninsula, South of San Francisco, along stretches of Hwy. 237, Zanker Road, Page Mill Road, Stevens Creek Blvd., DeAnza Blvd., the Lawrence Expressway and Homestead Road, not far from Stanford, aka-the (brain) Farm. However, in 1999, in an area in San Francisco known as China Basin, a then backwater area of empty warehouses, and now the site of AT&T Park, the home of the San Francisco Giants, offered cheap rents for start-ups in an area known as South Park. Just up Townsend Street, was Pyra Labs, where Ev Williams and Paul Bausch wrote the script for Blogger, and in buildings surrounding the China Basin area was Salon and a host of other web-tech companies in what was then a grim neighborhood. I remember going to a 1999 pre-opening Giants event at the under construction ball park, and noting the names of now long gone (i.e. Pets.com) tech start-ups on the sides of warehouses, and thinking that this would be a thriving community again. And it now is, with the development of biotech research centers, living spaces, retail development and restaurants. Twitter HQ is now located near South Park, and the neighborhood is once again the center of a new slate of start-ups.

WineShopper.com

With the development of virtual retail technology and the introduction of secure payment systems, and in a spate of healthy competition, the online ecommerce channel floodgate had been opened by Amazon.com and others, including many bricks and mortar companies. Margins in the ecommerce channel were lean for books, CDs, videos and electronics – from 9%-14%. Research and a few existing online wine sites revealed net margins of approximately 30%. College educated, affluent urban buyers were already buying a significant amount of goods online, matching the demographics of targeted wine consumers . On the surface this seemed like a natural line expansion for Amazon and others. Amazon partnering with the Kleiner Perkins Caufield & Byers invested $46 million (Amazon at $30M, and the Sand Hill Road boys $16M) in the online wine ecommerce marketing agent, WineShopper.com. But the task at hand was daunting. WineShopper had developed the Naxon Network, an automated distribution system meant to link and track the inventories of 250 major wine wholesalers. This was revolutionary at the time. The idea of online sales might have been on the radar for the few wineries left in Silicon Valley, but it was geek speak for most of the other wineries’ sales and marketing technology adverse late adopters. Adapting Naxon to this arcane and unconnected data field, obtuse due to the complete balkanization of state beverage practices, became a task that CEO Peter Sisson eventually found to be undoable. Wine, unlike books with uniform ISBN numbers without regard to the individual point of distribution, stocked by each distributor in each market had unique proprietary product coding systems identifying individual wine SKUs. A system that along with the arcane and fragmented State by State beverage laws eventually proved to be the undoing of WineShoper, even with what would later be identified as a talent laden start-up, including a name that in the next 10 years would become synonymous with digital initiatives for wine business ecommerce, Paul Mabray.

Virtual Vineyards, oops Wine.com, oops Wine.com/WineShopper.com, oops Wine.com by eVineyard, oops Wine.com

Peter Granoff and Robert Olsen had been operating the wine ecommerce site Virtual Vineyards for three years when in 1998 they partnered with Lionstone International out of Lake Forest, IL to increase their reach and points of distribution in the US wine market. A speed bump was hit in March of 1999 when the State of Massachusetts sued both Virtual Vineyards and their shipper FedEx. Although the suit was eventually dismissed, the points presented in the suit have in fact as yet been resolved.  In June of 1999 a combination of VC-financing was sourced from New Millennium Partners LP, GE Capital and MediaOne Ventures. Three months later in September of 1999, Virtual Vineyards acquired the name wine.com from the by then struggling online retailer. Bill Newlands was brought in as the new CEO as co-founder Robert Olson took a step back from day to day leadership. Co-Founder Peter Granoff continued as the public face of the wine.com. With the rapid evolution of the company, the now named wine.com announces TheWineyShops@wine.com, greatly increasing their selection of imports and mico production wines from California. A influx of $50 million represented at the time the largest capital infusion into any online wine ecommerce platform. A series of quick partnerships were announced, signing agreements with Bloomberg.com and Microsoft eShop. However, expenses greatly outweighed revenues as sales of just $9 million resulted in a 1999 operating loss of $20 million. In these halcyon days of the dot-com bubble, this was a company with a business model, reasonable burn rates and, my god, revenues. All was well. Or so we all thought.

Merger, Merger, Takeover

As the decade turns, wine.com continues to sign on partner affiliations, first with WeddingChannel.com and as the exclusive online wine merchant for PBS cooking programs. And here you thought that the current KQED wine club was a new idea. Wine.com also announced an agreement to be the ecommerce channel for Gallo of Sonoma. In June 2000 wine.com and the Wall Street Journal announce an exclusive strategic alliance with wine.com functioning as the exclusive ecommerce merchant for the WSJ’s firstonline wine offerings at wine.wsj.com. By August WineShoper.com recognized the futility of their model and merged with wine.com, operating under the name of the latter. Rounding out FY 2000 wine.com partners with Realbeer.com to offer beer through the wine.com portal. Then in October 2000 acquires the European Wine Exchange (EWX) a German based B2B-B2C ecommerce site. In December wine.com launched  possibly the first mobile wine ecommerce site on the AvantGo ISP. However, all was not well. The burn rate approached unsustainable levels, and the by now bridge loan investor, Menlo-Park based Sand Hill Capital pulled the plug and negotiated the sale in April 2001 of the merged entity wine.com/WineShopper.com to eVineyard, which then relaunched wine.com  as ‘wine.com by eVineyard.’ (to be continued)

What the Point?

There are, for sure, lessons to be learned. It’s great to be a pioneer in any industry or business segment, that is if you can duck the “slings and arrows of outrageous fortune.” While the rewards may be potentially great, so are the risks. It has been said that timing is life, but that the right timing = success. Some of the ideas introduced more than 10 years ago were perhaps, based on limited infrastructure build and low bandwidth strictures creating a then clogged pipeline which limited wide consumer adoption, then too early too succeed they are now being refined and reintroduced. The wine ecommerce effort, in spite of the ruling coming out of the landmark Granholm v. Heald case, still has an uphill but not sisyphean climb. Byzantine state regulations and protectionist legislation fueled by short sighted, intransigent three-tier wholesalers continually block significant progress. However, a new field of visionaries (and a few pioneers) dot the wine ecommerce universe these days. There has never been a deeper concentration of experienced talent at the top of the wine ecommerce pyramid. Some of the battles have been won, but talent and experience alone will not win out. Each individual player in our highly independent and fragmented wine industry must at some point pick up their ecommerce tool kits and travel the digital pipeline and ensure their brand(s)’ success through the strategy of channel diversity and  chose to ‘make wine work online.’

The warming glow of the corner fireplace, the plush seats on the banquets, and the damask covered table set with Haviland china, formal place settings of Rogers silverware and  Eisch stemware seemed so completely incongruous to Doctor Pinot, who days before was sitting in considerably more humble circumstances finishing his assessment of the situation on the ground. Having turned in his report, he hopped on the first transport headed stateside for the required debriefing, his letter of resignation in hand. He was going to let the House and Senate staffers fight this one out with the K Street boys over Cabernet and steaks at the Pennsylvania Avenue Capital Grille. He was exhausted but relieved to have put this thing behind him. The debriefing sessions, while never easy in the past, had taken their toll this time. Knowing that he had made the right choice, he walked out of the building without going back to clear out his desk, eyes forward all the way across the parking lot. Displaying a hard to suppress grin, he jumped into his Audi and drove without hesitation or regret to southwestern suburban Baltimore, now ready to enjoy an early Thanksgiving meal at his cousin’s restaurant.

Mondays were usually dark at the restaurant, except for the annual post Thanksgiving holiday party season, and this year was no different. The K Street consultants’ entertainment budgets were bigger than ever, and even being out of the Washington Post’s constant gaze, Doctor Pinot’s cousin’s culinary star had risen in these circles. The Chef had been smart enough to plan his space so that it was broken up into several small dinning rooms, allowing for the needed and frequently requested privacy for the ensuing policy discussions among Washington’s decision makers. But, Doctor Pinot and his cousin were the only dinners this mid-November Monday evening, in addition to his cousin acting as the lone chef. He put his elbows on the table, something he would only do now that his Mother was no longer here, having recently died close to her 101st birthday. Leaning forward the good Doctor pinched his eyes closed before reopening them to see that he was going to enjoy the most memorable Thanksgiving meal of his life.

The Chef ladled the butternut squash soup from the terrine into his bowl, topping it with a dash of nutmeg and Kendall Farms Crème Fraîche. As his mouth closed around the soup spoon, Doctor Pinot could taste the winter squash soups of his youth cooked in his Grandmother’s Indiana farm kitchen. One taste of the 2008 Navarro Dry Muscat quickly brought him back to the present with flavors that took him to his old backyard in California with tastes of Valencia oranges, Gold Nugget mandarins and Meyer lemons. The bright acidity was the perfect foil for the richness of the soup. There was no talking as both Doctor Pinot and the Chef were lost in the moment. The Chef cleared the bowls and headed back to the kitchen and soon reappeared with the next course.

Maryland Crab cakes cooked in the way that had made them the restaurant’s most popular dish. Fresh Chesapeake Bay Blue Crab Cakes, produced from hand picked lump meat, lightly spiced and bound together with egg whites and dusted with a panko coating. Crisp, light, even etherial. One could taste the bay in this dish. The 2008 Mahoney Las Brisas Carneros Vermentino, with the flavors of white peaches and ripe Bearss lemons and aromas of dried wild flowers and bay breezes all worked in concert with the crab cakes, each complementing the other. Doctor Pinot looked up at the Chef with pride. His cousin understood the simplicity of it all. That balance mattered more than volume. It was the quiet, simple things that were evocative, and holiday meals weren’t so much about the present but about the sum of our pasts.

The side dishes came out of the kitchen next, caramelized brussels spouts with pancetta, just like  the dish at Rose Pistola, then a fan of multi-colored yams, and of course the dressing – dressing started with dried sourdough, thrown in a deep saute pan on top of the mirepoix that had been cooked with a Pinot Noir reduction, mixed with Minnesota wild rice and craisins: oh, and enough butter to bring a smile to the face of the late Julia Child. Next came the turkey, and what a turkey. The Chef, a leader in the slow foods movement and a locavore of note, found a Maryland breeder of heritage turkeys and secured a Bourbon Red for the dinner, split open and slow roasted on a bed of carrots, celery and sweet onions. The smells were the smells of childhood, and the tastes were from the days of jumping into Dad’s wood paneled station wagon and driving to Langmeyer’s Farm out along the old creek road, and picking out the bird before quickly dispatching it. Old Mrs Langmeyer would wrap the turkey in newspaper, and within the hour Doctor Pinot and his brother were plucking the bird while their Mom warmed the oven. With the first bite, Doctor Pinot couldn’t help but think that those birds had flavor, but perhaps not as much as this turkey which continued to deepen with each full fork. The Chef had picked two wines to go with the Bourbon Red, both from Doctor Pinot’s friend Eric Sussman. First up was the 2007 Radio-Coteau Savoy Chardonnay. A wine grown for Eric by Paul Ardzrooni on Savoy’s south facing slopes in the North end of Mendocino’s Anderson Valley. Doctor Pinot grimaced. Eric was a good friend, but it had been years since he had a California Chardonnay that he enjoyed. The Chef had been flawless in his wine choices so far, so the worst case being that he would just drink the Pinot. Wow, was this Chardonnay? Couldn’t be. The balance was impeccable, and the flavors of Gravenstein apples and Ponderosa lemons melded into a seamless finish. No, his cousin wasn’t going to enjoy this gem all by himself. The Chef put down his glass and flashed a wry look at his cousin, a non verbal ‘I told you so.’ Pouring the Radio-Coteau 2005 Terra Neuma Sonoma Coast Pinot Noir, Doctor Pinot’s face lit-up like a Broadway theater marquee. He knew his Pinots and this was one of his all time favorites. Biodynamically farmed by Mike Benziger, on the bleeding edge of where you can ripen grapes between Freestone and Bodega, this wine tasted of both earth and ocean. Flavors of dried Cape Cod cranberries, Burgundian Cassis, with back notes of French train station expresso reconfirmed his prior taste memories of this wine, and transported him to the middle of the vineyard, feeling the wind from the nearby Pacific on his face as he lifted his glass to the fog. Doctor Pinot’s thoughts retuned to the table as he tipped his fingers to salute the Chef for a masterful job.

As he loosened his belt a notch or two, Doctor Pinot looked up to see the Chef deliver a slice of gingered Bartlett pear cake that could have graced the cover of  Gourmet Magazine’s annual holiday issue. The Chef pulled the short cork out of a brandy bottle, a single vineyard Russian River Pinot Noir alembic brandy, and poured two-fingers in each of the small, round snifters. Lifting and clinking the glasses, both men got out of their chairs for a long overdue hug. As he patted his cousin on his back, Doctor Pinot knew that ‘God, it was good to be home!’

Note: Copyright © 2009 Think Wine Marketing® All rights reserved.

“We make wine work online.” … Paul Mabray, VinTank Founder & Chief Strategy Officer

The Backstory

Against the background of the Wine Business Monthly lead story Tuesday, November 3rd, announcing ‘Wine Sales up 7% in October,’ is last weeks story of AmazonWine’s failure to launch. While the story of Amazon.com’s attempted entry into the online wine sales segment has been well documented, this quick summary will tend to facilitate the following discussion. The Financial Times reported on March 5th 2008 that Amazon.com planned to start selling wine online in the USA market. Amazon had in fact ventured down this path before, investing $30 million in return for a 45% equity stake in pioneer online wine marketer Wineshopper.com in 1999. But that investment evaporated as Wineshopper ceased operations within a year. And then continuing to keep their toes in the water through an association with the longstanding Wine.com selling gourmet food baskets without wine through Amazon.com. During the formative stages, AmazonWine chose New Vine Logistics as its fulfillment partner, but this arrangement was endangered when NVL abruptly ceased operations on May 29th, 2009. Inertia Beverage Group stepped in purchasing NVL’s debt obligation from Silicon Valley Bank, and then via auction on July 27th acquired the assets of the financially stressed NVL. IBG initiated an integration of the NVL fulfillment business into their existing operations. On October 23, 2009 both New Vine Logistics and AmazonWine.com made announcements. NVL filed for Chapter 7 in the US Bankruptcy Court in Northern California, winding down the closure of the corporate entity; and, Dini Rao, Senior Account Manager at AmazonWine, sent an email to potential winery partners stating, “ we have recently decided not to resume shipping. As you know we were excited to work with you to build the AmazonWine business. For that, this was a very tough choice for us.”

In light of an apparent wine market uptick, the subsequent gnashing of teeth, and what to me was an overly pessimistic take by journalists and bloggers alike rang as an overreaction to the actual events. The collective ennui displayed by many in the wine industry seemed more reflective of recent difficult financial times, and of hopes unfulfilled. And, many of the comments tended to be colored by the respondents particular points-of-view based on their involvement and specific roles in the wine industry. To get a clear picture of the effects of the AmazonWine decision not to move forward, I reached out to experienced digital wine marketer, Paul Mabray of VinTank for his take on the wine industry’s ecommerce marketplace. What follows are key bits of wisdom from this conversation covering digital marketing and the online sale of wine in the United States.

The Conversation

TWM: What was the genesis of VinTank?
PM: After Inertia Beverage, I was looking for a way to continue to contribute to the wine business, to continue to add value, and I wanted to help wineries adopt an agile business process. The key idea was to provide thought leadership on the synergistic future between wine and technology, to keep innovating in the wine industry.

TWM: You have a significant background as one of the pioneers in winery e-commerce.
PM: I was lucky to work with some of the pioneers in DTT and DTC efforts at WineShopper.com/Wine.com, as a Beverage Industry Consultant with Sumitomo Mitsui Banking, and as the Founder/CEO of Inertia Beverage Group, but as the saying goes, most of the pioneers died with arrows in their backs and those that survived became the guides to help settlers safely go westward.

TWM: This history is somewhat mirrored by your VinTank partners/team members.
PM: Having assembled a very strong team with collectively over 50 years experience in the wine and tech industries most notably eSkye, BevAccess, Inertia and Wine Trade Network, Vintank is now the recognized leader in online sales strategies and execution. The partners include Eric Hsu/Director, Creative Strategy, Patrick Angeles/Technology Strategy, Clay Wallin/Business Development/Operations and Ashley Bellview/Marketing and Social Media Associate.

TWM: Looking at the Wine Industry today what do you see?
PM: Now, looking at the wine industry VinTank sees a product category mired by antiquated laws, complex distribution paradigms, unique product qualifications and innumerable complexities. Through technology and innovative strategies, we are dedicated to finding solutions.

TWM: So, what are the challenges facing wine marketers?
PM: The wine industry is tremendously fragmented and insular. It also suffers from one of the most antiquated, regulated and complicated distribution paradigms. It is an extremely long tail product with approximately 250,000 individual SKUs entering the market annually with many remaining in the market from 3-10 years. Plus there has been a tremendous proliferation of brands with ever decreasing market access through traditional distribution channels. Mix this with technology and you have a lot of complicated puzzle pieces to cobble together to help make a frictionless transaction occur.

TWM: Is there a key to a successful ecommerce strategy?
PM: To be successful in the digital end of the wine business you have to focus on the right things, focus on a multi-channel strategy, focus on a direct business model, and make your strategy consumer centric.

TWM: I’m thinking that the disparity of compensation between traditional sales management and DTC sales management shows a lack of awareness by many wine businesses of the potential of online wine sales.
PM: The disparity in traditional sales management salaries and DTC management salaries is a sad reflection of the myopia of traditional wine beliefs. DIRECT in all its forms (marketing, consumer and B2B sales) is the most profitable and important channel for the majority of US wineries.

TWM: I’ve heard traditional marketers say sales is sales, so, is a different skill set required by ecommerce managers?
PM: Out of 6,000 plus wineries in the United States there are only 20 dedicated ecommerce managers. Wineries view their primary DTC efforts as their tasting room, or their wine club, but like the broad market with on and off-premises requiring different skill sets there are different segments in DTC. Tasting rooms are DTC’s on-premise and the Internet its off-premise, and they each require different skills. Ecommerce requires a new type of online sales channel expertise and relationships. It also requires a commitment to creating and growing online brand presence, and a dedicated online sales and marketing strategy.

TWM: Given the new construct, just who’s the most important customer at a winery?
PM: All customers are important but I’ve been told by most wineries that their most important customer is the one who visits the winery and buys wine during their visit. An important customer, but your winery’s most important customer is the one who Googles your wine and through your winery store, and inspite of paying what is most likely the highest MSRP, buys the wine.

TWM: The adoption and integration of DTC and DTT technology solutions for wineries seems to be slow and fragmented.
PM: The adoption and integration of applicable software technology including CRM/POS/Accounting is very clumsy. There are as many as 20 different systems that have to be integrated between hospitality, CRM, ecommerce, wine club, compliance and accounting. Unfortunately accounting system integration usually drives the process in a winery. My question is do you want an accounting centric system driving your business or a sales centric system…?

TWM: It seems that grape growing and production are years ahead of winery sales and marketing on the adoption of cutting edge technology solutions.
PM: We are a production centric industry. Viticulture and winery production departments utilize bleeding-edge technology and software. However software vendors for other functions have to deal with such a fragmented industry and slow technology adoption that they have to struggle to support themselves with such a small market share to divide (6K US wineries) that it causes lesser investment in R&D and artificially helps to create friction for innovation.

TWM: Can you identify the various DTC market segments?
PM: Online retailers, marketing agents, consumer marketing portals and direct to trade.

TWM: What does VinTank see as future trends in the wine industry?
PM: We think you’ll see more B2B marketplace attempts. The industry sorely needs alternative routes to market. We also think you’ll see more market agents explode once they get confident in understanding the ABC Regulatory Advisory. Finally we see mobile continuing to grow to be a stronger force that drives wine education and point of purchase decisions. Mind you all these items require wineries to lead the charge and adopt the alternative channels but in this current environment, they have all the advantages, they just need to commit the resources.

TWM: Do online wine sales have a future now that AmazonWine.com has failed to launch?
PM: We believe it does in a big way. Without demeaning the approach and choice of partners that Amazon made, it only saddens us that Amazon did not launch. Anything that would have help catalyze online wine buy activity we are 1000% behind.That being said there are many other companies succeeding online with wine (both retailers and marketing agents like Vinfolio, Winelibrary.com, K&L, Wall Street Journal Wine Club, Wine Tasting Network) despite sub-optimal conditions(regulatory environment and compliance especially). And yet we are still waiting for one of the giants to emerge that would make our industry comparable to other luxury good verticals. We think that time will be soon and there will be more than one winner (probably a few of the companies mentioned above). However, one of the key challenges is winery participation. Only by supporting and feeding an alternative channel can it become healthy and the rewards will benefit the industry. We believe in wine online and we hope wineries start believing too. The internet is the most powerful and ACCESSIBLE tool we have ever seen in our lifetime. We (the wine industry) should be using it better.

TWM: Can you recommend five must read books for digital wine marketers?
PM: Sorry, I couldn’t do just 5…

‘Purple Cow‘ and ‘Tribes‘ by Seth Godin

‘Free‘ and ‘The Long Tail‘ by Chris Anderson

‘Drilling Down‘ by Jim Nova

‘Wine Brands: Success Strategies for New Markets, New Consumers and New Trends‘ by Eve Resnick

‘The Cluetrain Manifesto‘ by Rick Levine, Christopher Locke, Doc Searls, David Wineberger and Mckee Jake

‘Trust Agents‘  by Chris Brogan

‘Crush It‘  by Gary Vaynerchuk

‘Wikinomics‘ by Don Tapscott and Anthony D. Williams

‘Good to Great‘ by Jim Collins

The Take Away

Four years ago, Smoke Wallin in his 2005 Wine Industry Technology Symposium keynote address said “The time is right for each of us in the industry to take a strategic review of our business practices and make sure we are optimizing the business using the most appropriate technology tools and strategies available.” Well, four years later that time is now. Paul Mabray and VinTank are moving the digital online wine bar forward and upward. If your winery is not yet diversifying its channel strategies, and/or maximizing its execution within the ecommerce channel, then this should be part of your 2010 brand plan. However, the execution of your DTC and/or DTT strategy will require the allocation of resources, both human and capital towards the establishment of an ecommerce platform management position, either as a direct hire or through a digital business development partnership. Contacts matter, relationships matter, and experience matters. The skill set required for online sales and marketing efforts, while exhibiting some crossover capabilities, are unique to the channel and should be valued as such. As Paul Mabray recently tweeted “Twitter is not a strategy. Facebook is not a strategy. Customer service and communications need to be core to your strategy.” So, while it is laudable that some winecos are now developing social capital and evolving into savvy communicators by incorporating Social Media Management into their core tactics, what may be necessary for long term wine brand success is the establishment and execution by your wineco of a viable online ecommerce sales and marketing program.

Note: Copyright © 2009 Think Wine Marketing® All rights reserved.

“There are eight million stories, in the Naked City. This..has been one of them.” … Stirling Silliphant (The Naked City ABC TV series 1958-63)

The Rain

The sound of rain, and just not the sound of rain falling, but the sound of people talking about the rain at the end of what had may just have been the perfect vintage, seemed to divert attention away from the economy, at least for the time being. While the rain, and all the wine country conversations that the rain started, provided a welcome relief from the constant drone that it’s hard out there. It’s really not the time to take your eye off the ball and to forget the market challenges inherent since the onset of the ‘Great Recession.’ For each winery and each winegrower or vineyard owner there’s an unique story. The folks on the flats in mid-Napa Valley likely had a different take on this year’s growing season weather than the folks in Calistoga, Carneros, the Vaca or Mayacamas ranges, or in Western Sonoma County, Mendocino, the Willamette Valley, Walla Walla or in Santa Barbara. While each unique story suggest a similar outcome, this is a vintage that will unfold over the next several years. Perhaps the critics will pronounce estimates of Vintage of the Century or speculate that the rain has dashed all hopes for a positive result. Perhaps I lack the prescience or the hubris to judge the future of an entire vintage during harvest and crush, but I do have an understanding that a vintage is the sum of the individual experiences of each participant. And, I have an understanding that it’s in the telling of your story that will connect you to your customers.

The Bounce

In this brave new world of permission marketing, and in this time of growing consumer detachment and cynicism driven by the perceived systemic failure of our financial and governmental institutions, a review of your traditional marketing message methods has been necessitated, even as the mixed message on the state of the economy is being delivered by traditional mass media. A mention of the names Paulson, Geithner, and AIG tend to initiate a gag reflex in even the most jaded observer. However, today the Dow Jones Market Index reached a 12 month high and once again climbed above 10,000, in part driven by reports that Goldman Sachs made record profits in Q3. Also noted as a sign that the climb from the bottom is underway are stories in Ad Age Talent Works that Google is Hiring again; and The New York Times reporting that Apple profits are up 47% on Strong Mac Sales. The story on the state of the wine business is even more mixed. Like the citizens of the Naked City, each wine business has its own story, some up by 10%, some flat, and some down 30%. Many wineries are going through an extended period of stress. Vic Motto, Co-Founder, Chaiman and CEO of Global Wine Partners, a St Helena, CA wine industry iBank recognizes the industry wide stress; but, doesn’t see a significant long term dislocation in wine consumer’s buying behavior. Having heard the sea change story before, most recently with the prediction that Two Buck Chuck would drive consumers permanently away from luxury wines. Didn’t happen. It’s Mr Motto analysis that the American wine consumer is ‘aspirational’ and that wine is and will be viewed as an ‘affordable luxury.’ I’m also in the camp that believes wineries that survive this very tough period will likely, at some point, see a return to the pre-recessionary trends in buying patterns. In an October 15th Associated Press interview, Safeway CEO, Steve Burd sees signs of the turnaround in an uptick in the coffee sales mix and a move back to growth in the premium wines segment.

The Conversation

Technology has provisioned wine industry CMOs with a whole new marketing tool kit. Technology is a tool to be used and appreciated, but not one to be viewed as the long hoped for silver bullet. How we now communicate with our customers has dramatically changed with the development of the web, email, texting, blogs, video, Facebook and Twitter. And in this new paradigm there are three words that have become the mantra of this new technological world in which we all now communicate our stories: transparency, authenticity, credibility. I’d like to add one word, human. This commonsense point was first made in ‘The Cluetrain Manifesto,’ by Rick Levine, Christopher Locke, Doc Searls and David Wineberger, first online in 1999 then in print in 2001, Copyright © by Basic Books. BTW: a 10th Anniversary edition of this must read biz book is now available. While the 10 year timeframe has dated some of the jargon, the core concepts of the treatise remain, especially those listed in the seminal 95 THESES:

1. Markets are conversations
2. Markets consist of human beings, not demographic sectors
3. Conversations among human beings sound human. They are conducted in a human voice.
4. Whether delivering information, opinions, perspectives, dissenting arguments or humorous asides, the human voice is typically open, natural, uncontrived
5. People recognize each other as such from the sound of this voice

The first five points in the “Cluetrain’ 95 THESES are a construct that is now an unavoidable communications directive for your consumer facing business. People grow your grapes. People make your wine. People sell your wine, and people buy your wine. Your story, while sharing traits with almost all others in wine’s corner of the CPG market, is unique to your circumstances.

The Case Study

It was harvest time in the fall of 1994. Mike Benziger came out of the winery office to check on the grapes to judge when to start picking on the Family’s Estate Vineyard, located in a collapsed caldera on the Sonoma Valley side of the old dormant Sonoma Mountain volcano. Times were good. The vineyard was always busy from the days of the Glen Ellen Winery start-up through the launch of the premium value tiered Benziger Family Winery. Wines that always over delivered. Mike should have been smiling, but instead he looked troubled. He cocked his head as he stood on the edge of the vineyard, puzzled that he heard nothing. Nothing at all. Just up the hill at his home in Jack London State Park, he remembered hearing birds chirping madly as the sun broke through the morning fog. But as he looked down the neatly groomed rows of vines, he noticed that there wasn’t a wild flower, a weed or a blade of grass on the bare dirt underneath the vines. As he walked the rows, Mike noticed that there were no bugs on the vines or flying through the air, no dragonflies, no butterflies. Stopping and reflecting he knew what was bothering him, the vineyard was no longer a living space. Mike thought a moment and considered his options. He knew that this wasn’t the way things should be. At that moment in time he vowed to change the way things had been done, to change the conventional wisdom of how things had always been done. This ancient bowl had supported life for millions of years, and in just a decade of intensive modern farming that had all changed. But, it wasn’t working any longer, and the Benziger farming practices needed to revert to the old ways, to the ways defined by closed system agriculture. Benziger Vineyards needed significant cultural change to recreate a new living farm. And change they did, after 3 years of concentrated study, a sustainable, biodynamic vineyard started to take shape. The first step was to establish biodiversity. So island gardens were established within the vineyard space to help support beneficial insects; and between every 10th vine row a bed of host plants and flowers were seeded to support a vineyard population of the good guys. Sheep and cows were introduced as natural lawn mowers, with their waste the base of a closed system compost program, so that no chemical fertilizers would ever be needed or would ever be used. Land that was dead just ten years ago was, in less than a decade, now a classic biodynamic closed system living farm. Earth, nature and man came together in a special place that happens to be in my backyard, just north of the town of Sonoma.

On Saturday, October 3, 2009 I had the opportunity, along with a group of wine blogger colleagues, to hit the Benziger Biodynamic Trail at the Benziger Family Winery on Jack London Ranch Rd, just up the hill from the village of Glen Ellen. Our tour group had the opportunity to interface with Mike Benziger, Kathy Benziger Threkeld, Colby Eirman, Director of Gardens, and Winemaker, Rodrigo Sotto. The passion in the delivery, even from the well practiced folks at Benziger, was  impressive, especially in close quarters over 3 hours. This was a one-on-one conversation and the telling of the story, starting with that moment of enlightenment in 1994. There wasn’t any ducking questions in the active exchange of ideas. We weren’t being sold on a story. We were being invited into an experience. This was a conversation between humans. A few points really stuck with me. The first was that ‘the wines weren’t necessarily better, but that they were different.’ That they reflected this place. The second point that hit a nerve with me was that ‘each year the wine was a time stamp of the vintage.’ Not once were scores mentioned as a descriptor of any of the Benziger grown and produced wines that we tasted that day, although the Rodrigo Sotto’s wines have gotten rave reviews and scores in the traditional wine press. My take away from the day with the Benziger Family and team members was one of transparency, authenticity, and credibility. A team that understood that their plan, in a world now dominated by pull marketing, was that by communicating in this human voice missionaries were created, replicating the message and influencing friends.

The grandchildren of the founder of Park Benziger & Company, and the children of the founder of Glen Ellen Winery, Bruno Benziger are well versed in the finer points of wine marketing. But, change must be in their DNA. First selling Glen Ellen, then converting a 200,000+ value brand to a slightly more than 110,000 case sustainable, biodynamic super-premium/luxury brand, while changing their farming practice as stewards of the land. In a time of declining circulation numbers and disappearing newspapers, an effort has been made to maintain contacts with the traditional press, in both the wine and consumer lifestyle focused print media arenas. The Benziger marketing team has fully embraced new media, including Twitter, and wine bloggers. Benziger POS is also available as an online deliverable, further enhancing the green story, while insuring the timely delivery of product sheets, neckers, sell sheets and cut case cards on an as needed by market basis. If you go to the Trade/Media section of the Benziger web site, you can download the Chris Benziger narrated video sales presentation which is a masters class in wine brand marketing. And, if you ever find yourself near Glen Ellen, stop-in and take the tour. As a small family wine marketer, you need to identify and mirror the success stories. The Benzigers have successfully differentiated their wine brands in this difficult, brand saturated market. And, by the way, their wines just aren’t different, the Benziger wines exhibit a specific point of view and IMHO are damn good.

The Story

The Benziger family and team recognized that their best path to the market was through their authentic story told in a human voice to groups of consumers, members of the trade, and to traditional and new media writers. A story that has been replicated to the point that in 2008 almost 175 million media impressions were created. Even though the Benzigers produce in their Demeter Certified Winery 1.32 million bottles of wine, the consumer impressions and strong word of mouth campaign along with a vibrant visitor center program help to create demand beyond the produced supply.  Through their objective mastery of pull marketing tactics, tactics based on an authentic and credible story, the Benzigers have been able to not only create an awareness envied by any enterprise wineco, but a model for any family wine business. The question that now begs to be answered: what’s your story and what are your winery’s marketing plans to maximize brand awareness and sales in what continues, even as the turnaround starts, to be a challenging marketplace?

Note: Copyright © 2009 Think Wine Marketing® All rights reserved.

“If you don’t get noticed, you don’t have anything. You just have to be noticed, but the art is in getting noticed naturally, without screaming or without tricks.” … Leo Burnett

Chicken Little

Yes indeed, the sky may be falling. The Great Recession, which in the 6 months from September 2008 through March 2009 stripped in excess of $6.6 trillion from USA personal wealth, may be with us for awhile. The access to credit that drove US consumer spending behavior and the economy has largely evaporated. Although consumers have paid down debt at a record pace, banks continue to reduce credit availability, expecting to retract an additional $1.5 trillion by lowering home equity loan access, consumer credit card limits and commercial lines of credit, restricting the ability of the US economy to recover recent spending patterns. Something lost in the swirl of marketing images from luxury consumer brands such as Panerai Watches, Hasselblad, Hermes, Ferrari, Tom Ford, Christian Louboutin, Michael Kors, et alia, is that under the aura of glitz America has been on sale for quite sometime. Just like disco, to many consumers the idea of the luxury brand may be dead, at least for the foreseeable future. Value has coexisted with the concept of brand as long as brand has existed. It’s the yin and yang of the retail continuum. Walmart created explosive growth in the 1990’s with the concept of everyday low prices, and then created significant competition to chain grocers with the introduction of consumables in both Walmart and Sam’s Club stores. Costco has been in the game for awhile, and has become a major factor in wine sales. Target introduced the idea of designer products at value pricing, and now will match Walmart pricing toy for toy this Christmas. And then there’s Amazon. Amazon is no longer just your bookstore, but now a major online retailer across several categories of consumer goods and electronics. And, as soon as the compliance situation, delayed by the well documented situation at New Vine Logistics, can be sorted Amazon will be a major factor in wine sales. Trader Joe’s introduced the concept of healthful foods at value pricing back in the 1970’s. With the latest US Labor Department statistics pegging the jobless rate at 9.8%, this is a dramatic understatement of the now real number that’s closer to 17% including people no longer actively looking for work and those now underemployed and working non-benefited minimum wage part-time jobs. It’s not surprising to see major retailers and grocers follow a strategy of value pricing. For anyone in this neck of the woods if you’ve been in Safeway recently the major merchandising theme is SAVE, and the yellow sale tags are inescapable. Lucky stores are following their philosophy of everyday low prices. And overriding this is a spirit of the new consumerism. It’s now cool to be frugal and save money.

The New Wine Consumer

As I worked my way to the Mission Street Garage traffic slowed to a crawl, in part due the rerouting of traffic away from Market Street. I was in the process of doing a NorCal broad market survey of grocery and independent package stores for a privately held family winery client, and it was time to break for lunch. Since my last two stops were in SoMa, I was headed to the food court in the Westfield Center, and to Charles Phan’s ‘Out the Door.’ Even though it was only 12:30 on an early October Friday, the joint was jumping. The food court was packed with shoppers, most holding multiple bags. The noise level sounded, well actually felt, like a low roar, creating a sense of excitement not present in the City’s shopping district for several years. One of my early retail lessons at Disney’s Lake Buena Vista Village, was to look for the bags in shoppers hands as an indicator of a good or bad day, and this looked like a good day. All of this economic activity seemed to be driven by the aggressive mark-downs and clearances in the stores in the Center. Pricing motivated by the need to make room for holiday merchandise, and these pricing strategies seemed to be working. Consumers have been on the sidelines, even during the recent back to school shopping period in August. But sharp advertising and in store media seemed effective at getting shoppers to reopen their wallets. The efficacy of the various campaigns will be reflected in each stores daily flash reports. The tide may be turning, however slowly, as consumer sentiment seems to be driven by value, with the economic thermostat having obviously been reset. An economy that now seems more driven by consumer needs rather than by wants. And the need for value seems to be paramount as a new inflection point in consumer purchasing behavior has been reached. So, in an age of cash for clunkers, extended unemployment benefits and tight credit what can we do as wine marketers to meet the contemporary challenges of the market. Let’s take a quick revisit to the basics of consumer packaged goods marketing (I’ll try not to be too wonky) by first asking the following questions:

• Who are the buyers?
• How much will the buyers pay for my wine?
• Where and how will the buyers purchase my wine?
• How do I create buying situations?
• Is the customer happy after purchasing my wine?

Marketing 101 Revisited

• Product - the want satisfying offering of your winery (branding, packaging, product features)
• Price – what you charge for your wines. Price is a measure of value. Price in the marketplace is a rough measure of how your consumers value your wines
• Promotion – the communication of information between your winery (the seller) and the potential buyer in a defined channel (Place) that tends to influence attitudes and behavior
• Place – making goods and services available in the right quantities and locations when your customers want them, resulting in the transfer of ownership from producer (your winery) to your customer/client, taking into account strategies and tactics applicable to any middlemen, brokers, marketing agents, wholesalers and retailers

Today most wineries are micro marketers. Even wineries in the WBM Top 30 approach the market on a segmented basis. Micro marketing is the ‘performance of activities that seek to accomplish an organization’s (your winery) objectives (selling your wine on a timely basis) by anticipating customer or client needs (marketing research) and directing a flow of need satisfying goods (your wines) from producer (you) to customers/clients’ (via DTC, DTT, broad market).

It is important to understand that we are no longer in a wants period of aspirational or conspicuous consumption, but in period of meeting the specific identifiable needs of your targeted audience. Without entering the maze of Abraham Mazlow’s ‘hierarchy of human needs,’ here are the basic definitions of wants and needs and demands:

• Wants - desires for specific satisfiers of deeper needs; i.e., the particular choices (including types of products/specific brands) that consumers aspire to buy to satisfy perceived needs.
• Needs – a state of felt or real depravation of some basic satisfaction (the difference between a consumers actual condition and their desired condition).
• Demands – wants for specific products that are backed by an ability and willingness to pay for them.

So, as wine marketers it is important to understand that we don’t create needs. Needs preexist marketers and their brands. A marketers function is to influence wants. A good marketer takes the initiative in stimulating and facilitating commerce. A key part of this function is understanding the market and your consumer. So, how can one identify the best possible markets, and then influence consumer purchasing behavior? Engage your marketing research resources and ask:

• Who are the people with identified wants?
• Where are these people?
• What’s their purchasing power?
• What’s their buying behavior?

Having asked and answered the above questions, what degree of market exposure do you want, or more importantly can support with your production, allocations and resources, human and capital?

• Intensive (ubiquitous distribution for large production, enterprise wine companies)
• Selective (by channel for mid-sized winecos, or for products within an enterprise winco where price dictates targeted distribution)
• Exclusive (small- family winecos with limited channel distribution, or luxury brands model)

Having now identified your market and your desired level of targeted distribution, what sort of consumer behavior response do you want to engender – routinized response behavior or adoptive response behavior?

Routinized Response Behavior – the regular selection of a particular way of satisfying a need. This is typical of low involvement purchases, generics or purchases motivated by price or perception of price.

Adoptive Response Behavior – the demand for a specific product that meets, on a regular basis, the hierarchy of needs of a buyer, and the continued ability to purchase your wine(s). This is typical of high involvement purchases, usually of products (wines) within a consumer’s brand set.

As a marketer, if you plan to sell your wines in a saturated market based only on price, in essence creating a commodity and not a brand, in what has to be by nature a rapid depletion exit strategy, then the idea of routinized response behavior is the way to go, and pricing and display allowances will be your primary marketing tactics. However, if you want to build a brand even in this challenging market, then engage in marketing tactics that create adoptive response behavior within your identified consumer set.

Wine Consumer Adoption Process

Awareness – comes to know your wine(s) through your brand awareness plan that may include category specific magazine reviews, scores, story placement, newspapers, blogs, forums, and social media.

Interest – the ease of finding information on your web site, forums, blogs and traditional wine press. Events like Twitter Taste Live, open that Bottle Night or Tweet-ups.

Evaluations – providing information and access to your wine. In addition to the traditional wine press new points of information such as Cellar Tracker, AbleGrape, and approximately 800 wine bloggers are a resource that you need to identify and utilize.

Trial – the chance to try before committing. Wine by the Glass, in-store sampling, winery tasting rooms, winemaker dinners.

Decision – to adopt or reject. A whole set of modifiers come into play, such as varietal, pricing, packaging, where and when available to purchase.

Confirmation – the reinforcement that the decision is good. This can be in the form of availability or rarity, appealing to cultural values (sustainable or biodynamic wines), based on acclaim, reviews or a wine blog, or on the affirmation from friends or family.

The Game

Without a thorough grounding in classic CPG marketing fundamentals and a clear understanding of wine brand marketing concerning human motivations in regards to purchasing behaviors, success in today’s highly competitive and product saturated marketplace is not likely for your winery. This somewhat academic take, a departure from my usual ‘how-to’ articles was written to encourage you, your winery’s marketing officer, to think about your current brand plan. Concerning your brand – what is it that you do and why do you do it? Is it working? What would you do differently? What are you doing to differentiate your wines? It’s not a time for indecision in your consumer facing wine business. Faced with declining sales in his collection line Michael Kors quickly introduced a consumer approachable ready to wear line and is thriving in a brutal retail market. Yes, times are tough, and consumer behavior has been reset, but commerce moves on. It is important to be in the game, so sharpen your pencils and fire up your synapses. Preparation and planning = performance.

Note: Copyright © 2009 Think Wine Marketing® All rights reserved.

“Once again, we come to the Holiday Season, a deeply religious time that each of us observes, in his own way, by going to the mall of his choice.”
… Dave Barry

The End of Innocence

Now that, according to Chairman Bernanke, we’re at the end of the recessionary crisis, don’t you feel like you’ve been a passenger on Ozzy Osbourne’s ‘Crazy Train,’ and at the end of the ride Axl Rose is welcoming you to the jungle. Well, if one’s to believe all the press, it has been a jungle out there. Consumer behavior has been difficult to predict, as trends in recent spending patterns have only now begun to make sense. Consumer credit card debt has been significantly reduced, and there’s been a concomitant raise in the rate of savings from less than 1% of income to more than 5% resulting in a noticeable drop in consumer spending. An example of the nationwide impact on dining-out is demonstrated in today’s Zagat Survey PR release ‘SF Bay Area Diners Adjust Habits in Response to Slow Economy.’ Wine sales and wine values as a result have been flat in the latest rolling 52 weeks report. Questions still remain as to the nature of any long term shifts in behavior, and if or when there will be a return to what was viewed as normal. Some of the analysis, even by those who’s insights we’ve come to value, of the situation have been somewhat myopic. Several of the changes in wine sales and marketing that we are now experiencing are fundamental structural shifts that were both exacerbated and accelerated by the recent hard times. There has been for some time a move from traditional white table cloth dinning to a more casual dinning environment, even with the increased sophistication of American cuisine . Guest check averages grew faster than the rate of inflation as business diners supported restaurants in urban MSAs. On-premises experiences have evolved and will continue to do so. Business expense accounts have been reigned-in as T&E budgets are rationalized to revenues. While its seems surprising that entertaining at home has increased, Faith Popcorn was talking about nesting for aging boomers a decade ago The effect that Chuck Williams, Julia Child, Jacques Pépin, Alice Waters, et alia had on the American domestic cook has now made home dining chic. The shift in sales channels for premium and artisan wines from on-sale to off-sale, while well documented, has been a shift that’s been occurring for some time. A change that in part has been driven by frequently changing (desktop publishing) and more focused wine lists, and a vibrant off sale market driven by groceries, chains, club stores and innovative independents.

Let’s Get it Started

It’s the last week in September marking the 1/3 point of the ’09 Crush. Now that some if not most of the Pinot and many of the white varietals are in-house, the seasonal harvest temperatures are starting to climb towards triple digits bringing smiles to the faces of vintners and growers throughout wine country. Most every year it’s a time of optimism, especially after what’s this year been referred to as an optimal growing season. Everybody at the winery seems busy in the pursuit of a zen-like perfection. Crews hovering over sorting tables that are now commonplace as all hands are on deck insuring that only optimal fruit makes it into the wine that you’ll be drinking in one to two years. Even if the hours are long and days-off are rare, it’s a vibrant time with midnight picking schedules, large farmer’s breakfasts, and plenty of beer at the end of the day. The economic panic of the last year, and the resulting decline in sales have been temporarily forgotten as all the physical and emotional energy is willingly put into the winemaking process . The intense process that is winemaking, as evidenced by the game faces displayed by winemakers, from Santa Barbara to Yakima and all the way to the North Fork of Long island, from the middle of August to the middle of December each year continues unabated until every lot is barreled down. The enthusiasm created by the annual wine grape harvest and the esprit de corps generated has often served as the launching vehicle for the important last quarter sales period. A period known within the beverage distribution industry as OND for the months of October, November and December.

Pump it Up

A late start to the upcoming holiday selling season has been forecasted by a number of beverage industry analysts. That may be the case, and we’ll all know soon enough. But hopefully, as the chief marketing officer your winery programing and promotions calendar is in place and ready to go on Thursday, October 1st. A reasoned look at the situation would seem to dictate that now is the time to get off your wallet and put on your seasonal game face. Differing sales channels will require unique tools structured to the idiosynchrocies of each. It will take innovative pricing structures to maximize your sales effort in Q4 of 2009. Christian Miller of Full Glass Research has shared that a recent survey of on-premises wine sales by the Wine Opinions Panel, revealed points of price sensitivity for list above $60/bottle, and $16/glass. So, depending on your resources it’s time to create programing for targeted restaurants accounts with this fact in mind. In addition to doing line-up tastings each working day at targeted restaurants, stick around for the early diners and offer an amuse bouches of a 1 oz pour of your listed or featured wine. As Chuck Willams said at the Maysonnave House this past week in Sonoma, ‘make the customer your friend.’ Also, spread your efforts across differing channels, hotels, catering, urban hot spots, large independents, ethnic cusine, entree specific and targeted lighthouse accounts. For off-sale, your POP materials, flow shelf talkers and back card should be pre-packed within the case. Provide high resolution, grabbable images on your winery web site for sell sheets, review talkers, labels bottle shots and tasting notes, etc. This will help to maximize ad placements and possible display activity. Discounting will be aggressive this OND, but you don’t have to compete with the big boys, be innovative in your tiered pricing, display allowances and use of coupons, including co-branding, non wine merchandise discounting, MIRs and occasional IRCs. Remember a basic rule in merchandising, hangers on 4-6 bottles, not on all 12 in a case. Oh, and Saturdays are great for in store tastings and/or bottle signings. If you’re relying on your tasting room and your wine club as your only DTC options, please consider the many other options available, such as third party wine clubs. This is a specific area in which sub-channel diversity will be the norm, but that’s not the case as yet. Assume the role this OND as a bleeding edge DTC leader.

Winter Song

I’ve been researching a series of articles written about the apparent market softness in the wine industry, and it seems that most of the noise is centered around the volumetric end of the business. As a small or mid-sized winery looking at flat as up, you can be much more innovative in your distribution strategy, and much more agile in the execution of your holiday marketing tactics. OND is your Crush time, so this selling season you should heed Warren Zevon’s words ‘I’ll Sleep When I’m Dead.’ The big boys aren’t sleeping at this time of year. Wineries in your competitive frame likely aren’t sleeping either. Go out there and shake a lot of hands, the hands of old and new friends. You can rest in January, at least for a few days.

Note: Copyright © 2009 Think Wine Marketing® All rights reserved.

“No-one gets an iron-clad guarantee of success. Certainly, factors like opportunity, luck and timing are important. But the backbone of success is usually found in old-fashioned, basic concepts like hard work, determination, good planning and perseverance.”
… Mia Hamm

The Panic

This week marked the anniversary of the start of the panic of ’08-’09. After listening to the morning news shows rehash the events of the meltdown in the financial markets, I finally reached the point where I decided that the talking heads on the financial news networks had little or no idea that the system was and is badly broken. I took no solace in this moment of discovery. It nice to know where we’ve been, well ‘past is prologue,’ however an awareness that the financial panic that started one year ago with the demise of Lehman Brothers, and the failure of AIG has started to abate, provided a brief moment of pragmatic optimism. Almost no one in the United States has been untouched by the recession. Boomers experienced the rapid decline in the value of their 401k’s, X Gens saw their career aspirations flatten like unleavened bread and millennials experienced an evaporating job market. But, at this point in time, the bounce seems sustained. True, the stock market is just a forward indicator of economic recovery, and jobs tend to be a trailing indicator, but recovery is here albeit with a significant hangover. As anyone in the wine business knows, seasoned wine veterans and newbies alike, that the one channel most impacted by the panic has been the fine dinning segment. If your wine field brand marketing strategy is tied to the orthodoxy of conventional wisdom, then you’re now avoiding the on-premise restaurant channel in the same way that you’re avoiding friends and business associates unlucky enough to have contracted the H1N1 virus.

The Opportunity

Although it’s been anecdotally reported that there’s been a seismic segment shift away from wines on wine list selling for more than $100, sales above this apparent point of price sensitivity have indeed slowed but have not ceased. The quote that ‘stories of my death have been greatly exaggerated’ could have emanated from that bottle of 2005 Brunel les Cailloux Chateauneuf du Pape on the Bern’s Steak House wine list. There are a number of factors leading to reduced guest check averages, some related to the general economic morass, and some related to long term trends. For example, when was the last time that you had tableside service with rechaud prepared Steak Diane. I hear this is actually making a comeback…what old is new, again. And diminished sales efforts in the on-premise channel or tactics that include reallocating winery resources leading to channel specific abandonment seems to be mistimed. The on-premise channel is a complex mix of evolving differing business models that tend to adapt to the needs and wants of their intended consumer audiences. The restaurant business is a dynamic business with a significant rate of failure, but also meaningful rewards to the successful. It is a business that requires significant resources, both human and capital. The food service segment includes many different models including theme parks, hotels, institutional, educational, catering, stadium, white table cloth, family, casual, bistro, wine bar, sports bar,gastropubs, ethnic cuisine – Greek, Italian, Mexican, Thai, New American, Californian, Pacific Rim, entree specific as in Burger Bars, Fish and/or Steak House, et al. Restaurants may be part of a multi-unit enterprise or chain group, or may be single unit independents. It seems based on activity at retail, a visual survey of grocery/supermarket shelves and Club Stores that there’s been a rush to off-premise as the on premise market becomes more difficult and saturated. Many winecos based their distribution models on either a straight DTC model – for example: Goosecross, or Screaming Eagle – or a dual model of DTC and limited market on-premise sales. Two prime examples of this model are Cakebread and Duckhorn. With the recent sale of the Duckhorn Wine Company to the private investment management firm GI Partners, distribution has recently been expanded into multiple sales channels.

The Process

As more of your competitors rethink their single track broad market strategy, and as a result move resources away from food service, be aware that opportunity awaits your wine brand(s). To take advantage of the various opportunities, specific targets must be identified, qualified and developed. The wine business is still a handshake business, and nowhere is this truer than in the on-premise channel. And nowhere in the wine universe is the business being professionalized more than in the restaurant arena. And this is good thing. But, it means that you also have to raise your game by identifying, targeting qualifying, presenting and closing. The days of the cold call are over. For example a past market sales day with Churchill Distributors in Baltimore, where the sales manager arranged for my work-with to be with a district manager. Twelve lighthouse restaurant accounts were on the call sheet, none of which were doing business at the time with Churchill. One by one each restaurant put Mirassou on the list or on a wine by the glass program. Although we only sold 36 cases that day, 12 new A on-premise accounts were opened for Churchill and Mirassou, and then as a result Mirassou Vineyards was the talk of the halls in suburban Baltimore for quite some time. But from that day forward I planned all of my calls in advance of a visit to the market. Here is an example from a memo written several years ago to the sales manager for my winery at the time (for illustration only):

“Thanks for your call today re. market work schedules. Please note the following: I need and want to be in the market, but on a planned basis, and with the following goals in mind:”

“National Accounts — i.e.: Mortons; Palm; PF Changs; Roy’s; Red Lobster; Daily Grill; California Cafes-Napa Valley Grill; Olives; B.R. Guest; Ritz Carlton; Starwood; Four Seasons; Hyatt; Sams; Costco

Regional Accounts — i.e.: Capitol Grille; Legal Seafoods; Clyde’s Group (Clyde’s; 1789); Disney World(CA Grill; Flying Fish); ABC Liquors; Specs; Richards; Majestic/Red Coleman’s; Seigels; Bev Mo; Cost Plus;  Red Carpet; Beltramo’s; K&L; Applejacks; Total Wine; Marty’s; Yankee; Esquin, Dorn’s; etc.

Independent, Wine Steward, or Natural Foods Grocery –i.e.: Dean & Deluca; Oakville Grocery; Oliver’s; Molly Stones; Whole Foods; Trader Joe’s; Fresh Fields; Treasure Island; Harris Teeter; Larry’s; QFC; Fred Meyer

Local Market Makers — i.e.: Top 10 chef driven, American cusine destination key accounts in the following markets: Boston (Olives; Mistral; 75 Chestnut; Aujourd’hui; Jasper White’s, 29 Newbury); New York (Tribeca Grill; Verbena; Blue Ribbon; Gramercy Tavern; Thalia; American Place; Mesa Grill): NJ (Park&Orchard; Bernards Inn; Ryland’s Inn; The Dinning Room) D.C. (Citronelle,Vidalia; Nora’s; Kinkeads; Sam & Harry’s; Sonoma; Sequoia; The Inn @ Little Washington); Atlanta (Bacchanalia; Buckhead Dinner (Buckhead Life Group); Restaurant Eugene); Miami (Chef Allen’s; Mark’s Place);  Orlando (Roy’s, Emril’s; Dexter’s; Maison et Jardin; Le Coq au Vin; Authur’s 27 — Disney — Flying Fish; Victoria & Alberts; California Grill); Tampa(Restaurant BT Bern’s; Side Bern’s; Mise en Place; Michael’s on East; Colony Resort; South Seas Plantation; Ritz Carlton Naples); Chicago (Charlie Trotter’s; Shaw’s; Gibson’s; Bob Chinn’s); New Orleans (Emril’s, Nola; Bayona; Brennen’s; Brigtsen’s) Houston (Rainbow Lodge; Sierra Grill; ; River Oaks Grill; Cafe Annie; Greenbriar Chophouse); Dallas ( Chaparal Club; Nick & Sam’s; The Green Room; The Riviera; Maguire’s; Papas Bros Steak House; ); Austin (Eastside Cafe; Star Canyon; Central Market); Denver (Bravo; Trios Enoteca; Kevin Taylor’s) Phoenix (The Phoenician; Bistro 24; Mastro’s; Wright’s; Rancho Pinot Grill); San Diego (Greystone; Rainwater on Kettner; The Fish Market; Donavan’s); LA (Mr. Stox; Michael’s; Grace; Saddle Peak Lodge; Lawry’s; One Pico; Providence; Tantra; Grill on the Alley); San Francisco (Boulevard; Gary Danko; Town Hall; Spruce; Quince; Aqua; Zuni Cafe;  –wine country —  zazu; Sassafras; Cyrus; Dry Creek Kitchen; Lark Creek; AKA Bistro; Bouchon; Bistro Jeanty; Cook; Go Fish; Mustards); Portland (Wildwood; Higgin’s; Heathman; Bluehour; Park Kitchen) Seattle (Ray’s Boathouse; Rover’s; Palace Kitchen; Wild Ginger; McCormick & Schmick’s; Metropolitan Grill)”

“The above short list of accounts is for bracketing purposes only, and meant to be illustrative of the type of account in which I should be utilized. Other markets adjacent to the listed markets are important, such as NJ-Philadelphia; D.C.- Baltimore-NVA; CA-NV; Chicago-MSP, Denver-Ski-Country and work in key adjacent markets can be planned at the same time as Key Market work.”

As a believer in a multi-channel sales and distribution strategy, with an emphasis on-premises, it seems obvious that planning beats out the old traditional flying by the seat of your pants marketing methods. As a focused wine business it is suggested that you develop a by market, by account target list appropriate to your price points and product mix. Understand that you don’t need to be everywhere, but you should target everywhere that counts. There are approximately 20 markets in the United States that will deliver the majority of even an enterprise wine company’s planned broad market sales targets. This is a cut of a targeted account list developed some time ago for the Colorado Market. For each geographic area of distribution (i.e., Seattle, Portland, San Francisco, LA, Phoenix, Denver, Chicago, Twin Cities, Chicago, Boston New York, etc.) you should develop a list of targeted accounts for each probable point of distribution utilizing your current CRM tool. List the Account name. Address, Gatekeeper, Contact #, Contact e-mail, Cuisine Type, Targeted Placement, Achieved Placement. Success can not be achieved without planning and execution.

The Plan – Marketing by Pulling Corks

While nothing beats the hands-on market knowledge gained from spending significant time on the streets, pulling corks and sampling gatekeepers at the best lighthouse restaurant accounts, significant low cost resources exist for identifying targeted restaurants within your winery’s areas of distribution. Wine & Spirits Magazine has published the results of its Restaurant Poll for 20 years. The Wine Spectator publishes the world wide results for the best restaurant wine lists annually. Zagat list the best wine restaurants by metropolitan area in the USA market. Restaurants & Institutions Magazine has just published the annual list of the 400 largest chain restaurants, and the 100 largest single unit independents by $ volume. If it’s within your brand marketing plan to generate national account on-premise business, I would suggest purchasing the Chain Store Guide. Once you’ve established a functional targeted list put approximately 65% of your broad market resources, time and energy into securing on-premises account placements by:

- Qualifying accounts according to needs and wants
- Planning your visits focused on the goal of a specific placement
- Communicate key points of differentiation and value
- Pull Corks
- Taste
- Secure WBTG or Wine Listing
- Close

Note: Copyright © 2009 Think Wine Marketing® All rights reserved.

“The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.” … T. Boone Pickens

The Conversation

A significant portion of my current business life is involved in managing the art of conversation. I’m often talking with someone that a casual reader of the Wine Spectator or the Wine Enthusiast might consider a star in the world of wine. I don’t see this as interactions with celebrities du vin, but tend to view them as talks with friends, colleagues and/or possible business associates. These conversations often take the form of a verbal dance with the initiating party trying to elicit at no cost a magic bullet that will help their business, and I’m trying to extract what I call the ‘essential truths.’ One of my clients referred to this process as ‘dancing with the stars.’ The stars in this case are the workable ideas and probable solutions that are sometimes extracted in this dance process. It is likely that if these conversations were to be viewed by an uninterested third party, they would possibly be seen as some sort of Dos Passosian stream of consciousness dialog exercise at the Actors Studio. But, in fact, these oral exchanges of ideas are neither arcane nor obtuse but a defined process that has long been codified in the halls of serious business. Go back to those late night college ‘bull sessions,’ but add two decades of experience and an identifiable targeted outcome, and you’ll get the idea.

I’m not the contact at the top of most wineries CRM vendor contact lists. I’m the person that’s often called a little late to the party. Called to the party after the steam has gone out of the celebration, and the party is headed south. I’m not the expert, I’m listed after the expert. By the way, a wine business contact had a great comment in regards to ‘experts:’ “If someone tells you that they’re an expert, run the other way.” I’m the person who has gone through several business cycles. The ups, downs and the exigencies inherent in our complex and brand saturated corner of the greater CPG universe. My current conversations seem to reflect these difficult times. Often it’s about a decline in general revenues or net contribution, that’s most often attributable to increased discounting and or promotional expenditures necessitated by a soft market or aggressive competition. But becoming more common are conversations relating to a specific line item. And this is usually about a line item that was previously in balance with market demand, but production was dramatically increased on an aspirational or preferential whim. In the recent, but now past, halcyon days of conspicuous consumption, this ersatz strategy often worked, but those days are now a vague memory. This all too common wine business story never conformed to Consumer Packaged Goods marketing best practices, and has resulted to a lake of unconsumed wines. What? You hadn’t noticed. Well, vintages are starting to back-up, and your winery’s SIP (sales, inventory, production) report is starting to read like the fiction of Bernie Madoff’s trade confirmations. And, well like it or not, this is the lake in which we all now all find ourselves. There are obvious steps that can be taken, such as the movement of unbottled wine to bulk sales, consideration of significantly reduced FOB sales to developing markets such as China, a reduction in the amount of wine produced in the near term, lowering domestic FOB prices and increasing promotional spend, diversifying distribution channels or calling Paul Mabray at VinTank for help in focusing on effective DTC initiatives. But, the real challenge in this broad marketplace, one not only figuratively but literally flooded with wine choices, is how to create and maintain a viable wine brand given the realities of today’s economy or the new outlook for a reshaped business world. Sound business decisions are based on good market intelligence and not on whim. The attributes of passion and vision can be the fuel to start a business, but a sound, flexible business plan is the basis for ongoing viability.

A Brief Wine Marketing Focus Case Study

Most large wineries have highly diversified product portfolios, but a few of the largest built a foundation over time by focusing on a specific niche or even a single varietal. In 1982 San Francisco based land use attorney and part time Lake County grape grower Jess Jackson found that his long time Chardonnay buyer Fetzer Vineyards had no need for his grapes. The US economy had been in decline since the 1979 energy crisis, and a significant drop in real estate values driven by a banking crisis in the saving & loan sector hit home in this time frame. Interest rates topped out at 22% driving down the value of the dollar and making imports cheeper than ever. On top of that the 1982 California wine grape crop came in at record levels, creating an instant oversupply. Jess had no home for his grapes. Lake County based winemaker Jed Steele was contracted to make 2,000 cases of Chardonnay, but there were problems and the fermentation was stuck at .5% RS. Jess liked the wine and decided to sell it. The Chardonnay market was small at the time. Most consumers had little experience with California Chardonnay, but Jess felt that he could sell the 2,000 cases and recoup his cost. He came up with the name Chateau du Lac, but found little interest with his presell efforts, Wine Marketer Dennis Canning was brought on board and decided to use the last names of Jess and his then wife, ergo Kendall-Jackson. In a stroke of marketing kismet the modifier ‘Vintner’s Reserve’, was added to the label. Dennis & Jess took the now labeled Kendall-Jackson Chardonnay to the market, store by store, restaurant by restaurant and quickly sold the 2,000 cases. Jess was now in the wine business selling Chardonnay. By 1987 the winery was selling 57,000 cases of Chardonnay  and Kendall Jackson was named the Wine & Spirits magazine Winery of the Year. By 1992 Kendall Jackson now one of Americas largest and most successful wine companies, sold more than one million cases of Chardonnay. The focus from the beginning was Chardonnay, and it remains the core of the current K-J driving acquisitions, growth, capital improvements line and brand expansions that were made possible by this laser-like focus on Chardonnay. This is a story that was preceded in time by Trinchero Family Estates basing it’s success on White Zinfandel, and Ridge, Ravenswood and Rosenblum’s focus on Zinfandel. Silver Oak set the mark with a focus on Cabernet Sauvignon, Dehlinger with Pinot Noir, Zaca Mesa with Syrah, ad infinitum. Focus works.

Order out of Chaos

“I don’t know the key to success, but the key to failure is trying to please everybody.” … Bill Cosby

Based on a significant number of wine business conversations over the last three months, permit me to suggest some topics for you to consider for your next management meeting. Some very difficult decisions likely have to be made by you and your team, now. These are decisions that will perhaps determine the long term viability of you wine business. It’s not the time to waffle. If you have to take a financial hit, take it now, and then stop the bleeding. First, a plan to move excess inventory should be developed and enacted. The wine business is now primarily a push market. The pull market that may have previously driven your brand no longer exists. General discount strategies employed by major regional and national retailers have put a semi-permanent kink in the idea of wine pricing elasticity, and removed the wine consumer’s sense of urgency in purchasing your brand now that every wine is on discount. Rethink your entire strategy. Rethink your varietal line-up. Understand the uniqueness of each channel. And don’t harbor the expectation that the broad market will absorb product from your softening DTC sales. And, look at what you do best. If you make really good Pinot Noir do you really need to make that Syrah? Build your brand strategy around a point of focus. Spend time in maximizing your brand reputation and sales around this varietal, and if you have the drive maybe, just maybe, you can be a financially successful wine business.

Note: Copyright © 2009 Think Wine Marketing® All rights reserved.

The Blessing of the Grapes

“God is in the details.” … Ludwig Miles van der Rohe

It’s late August in Northern California wine country, and the annual wine grape harvest has once again started. At most wineries in North America it’s long shifts and no days-off time for the next several months, as full attention to the details of wine production are the primary focus of each winemaking team. In spite of all the inevitable hard work ahead, the first load of wine grapes is always met with anticipation, and the arrival of the first bins are often celebrated by the staffs at the various winery. It’s a ritual that likely goes back to the historical agricultural origins of grape growing and winemaking in recognition of the cycles of nature, and the task of hand crafting what was once just sunlight on new plant growth into a wine that one day will be opened in celebration of some special moment in time. This past Tuesday, August 18th I had the opportunity to witness the ‘Blessing of the Grapes’ at Schramsberg Vineyards. The first load of Pinot Noir from the Napa/Carneros based Richburg Vineyard was pristine. Small berries on small clusters of deeply colored fruit on bright green, yet to lignify, stems. Based on the early returns, 2009 looks like a spectacular vintage, at least for Pinot Noir and Chardonnay. As a bonus I had the opportunity to meet iconic National Geographic and now famed wine country photographer Charles O’Rear, who’s work I’ve long admired. I also had the chance to meet Samantha Brown who was filming segments for her Travel Channel show. More importantly I got to meet and talk to Hugh Davies, his wife Monique and their childern, a few of the Schramsberg board members and a proud grandfather. This ceremony wasn’t just a celebration of Crush, but it was about heritage, continuity, and being a member of a wine making family. It was a seminal bonding experience for family, staff and crew. While Schramsberg Vineyards PR & Marketing Manager Matt Levy had the press bases covered, this was not a publicity event, but a timeless ceremony that for me reconfirmed Ben Franklin’s pantheistic beliefs that nature is god.

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Boot Scooting BBQ

“They paved paradise and put up a parking lot,
With a pink hotel, a boutique,
And a swinging hot spot.
Don’t it always seem to go
That you don’t know what you’ve got till it’s gone?
They paved paradise and put up a parking lot.”   …. Big Yellow Taxi by Joni Mitchell

With the smells of wine harvest filling the air in the flatlands and hillsides in the Napa Valley, and rising seasonal temperatures in what the locals refer to as Crush weather, it was time for the annual Land Trust of Napa County fundraiser. The great thing about attending a non-profit fundraiser in wine country is that you know that the wine and food are going to be something special, and the ‘Boot Scooting BBQ’ at the Scully Ranch on Mt. Veeder didn’t disappoint. The Land Trust of Napa County, like all non-profits in these challenging economic times is facing a funding crisis, and this event was an effort to refill their depleted coffers. The LTNC is permanently protecting more than 55,000 acres of agricultural and open space lands throughout Napa County. More acreage than currently planted to wine grapes. Protecting the natural lands, scenic and open spaces and the agricultural heritage benefits all the inhabitants of wine country – residents, visitors, businesses and wildlife alike. And through fundraisers, like the Saturday event at Scully Ranch, will continue to do so for future generations. Thanks to organizations like the Land Trust of Napa County, they haven’t ‘paved over paradise and put up a parking lot.’ BTW: The perfect smoked traditional Texas BBQ from world BBQ champion chef Ray Green was a smash hit. And my table rediscovered a fondness for Saintsbury’s Carneros Chardonnay and Carneros Garnett Pinot Noir, both the right weight and style for a warm evening and full plates of Ray Green’s BBQ. All of the volunteers worked so hard, and deserve a hand-up. So if you live here, visit here or sell wine from this area of the world, click on this link and send in a few bucks. It’s needed, it will be appreciated, and it will help to continue the preservation of this special corner of the wine world.

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So You Want to be a Wine Marketer?

“When you’re curious, you find lots of interesting things to do.” … Walt Disney

One of the attributes that I always look for in someone who tells me that they’re a wine marketeer or that they want to be a wine marketer is an unquenchable thirst for knowledge. Oh, not just being a wine geek. Truthfully, that’s not going to cut-it in these hyper competitive times. You really have to have an unrelenting curiosity about life, about culture, and about others. When I used to move around a lot a skill that I developed, one that has served me well in my career in wine marketing, is what they call in the armed services ‘living on the economy.’ This basically means immersing yourself wholeheartedly and without reservation in the circumstance of the culture in which you live. It’s dropping your fears and embracing life. It means reading newspapers, magazines, books, news feeds, and not just wine industry based materials. It means listening to music, seeing plays and movies, engaging and talking to people of all ages. Well, basically living life, but paying attention while you do. Really good actors are able to observe those around them in their daily lives for cues on perhaps a current or future performance. This is a necessary skill for any good marketer. Years ago while making a sales call at Duck Blind Liquors on Montana in Santa Monica, I noticed a small, unshaven and rather unkempt man intently watching me as I made my pitch to the store owner. Thinking that the man wanted to make a purchase I offered to step aside to facilitate a possible sale. The man demurred and said that he was writing something, and was just imagining a scene. After the man left, the store owner identified the customer as playwright David Mamet, who was drawing information from the encounter. Well, as wine marketers we should always be doing the same thing. Informing ourselves about the circumstances of our culture. Here are a few articles and links that I felt informed me as to what’s transpiring out there in the greater universe which will now tend to help shape my future marketing decisions.

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Please note that although the following links have good useable information, a few may require free registration or may time-out after being up for seven days:

‘Word-of-Mouth Gains Volume’ article from Brandweek re. contrary to other ad categories increased WOM ad spend

Better wines in groceries due to fine dinning slowdown now followed by availability of prime beef (may require free registration)

Timely WSJ article ‘The New, Faster Face of InnovationThanks to technology, change has never been so easy—or so cheap’

Interesting must read on ‘Wine and Global Warming: An Open Letter to the President’ (via environmental attorney, Charles Becker)

An article from Restaurants & Institution ‘Social-Media Marketing for Restaurants: 10 Tips’ – can apply to wineries

Interesting article re anonymity of food critics

A good read re. ‘New Orleans’ Chefs remembering Julia Child’ in context of Julie & Julia movie  BTW: Loved the movie!

Be involved and be aware. You never know when or where you’ll find that next big idea. Be inquisitive. Ask Questions, and then sit back and listen to the answers. Stay intellectually curious. It’s the engine that drives the effective, creative wine marketer. And that’s you, right? The innovative, creative, effective wine marketer?

Note: Copyright © 2009 Think Wine Marketing® All rights reserved.