Observations of a Wine Marketer – Taste Napa Valley

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

Thoughts & Observations

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

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

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

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

Taste Napa Valley

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

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

The Wrap

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

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

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

A conversation about marketing wine online with Paul Mabray of VinTank

“We make wine work online.” … Paul Mabray, VinTank Founder & Chief Strategy OfficerPaul Mabray at the 2009 Wine Bloggers Conference

The Backstory

WBM charting sales up 7%Against the background of the Wine Business Monthly lead story Tuesday, November 3rd, announcing ‘Wine Sales up 7% in October,’ is last week’s 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 formativeDini Rao of AmazonWine.com 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.”

1893 Edvard Munch, The ScreamIn 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

VinTank LogoTWM: 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.

VinTank's sign outside the Napa OfficeTWM: 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?ecommerce marketing solutions
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.

Focusing on ecommerceTWM: 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.ecommerce interface
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.

Thinking of the futureTWM: 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?Wine Library logo
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 Vinfolio Marketplacewine (both retailers and marketing agents like Vinfolio, Winelibrary.com, K&LWall 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 industryK&L Wine Merchants logo 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 by Seth GodinPurple Cow‘ and ‘Tribes‘ by Seth Godin

Free‘ and ‘The Long Tail‘ by Chris AndersonFree 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 ManifestoThe Cluetrain Manifesto‘ by Rick Levine, Christopher Locke, Doc Searls, David Wineberger and Mckee Jake

Trust Agents‘  by Chris Brogan

Crush It‘  by Gary VaynerchukCrush It by Gary Vaynerhuk

Wikinomics‘ by Don Tapscott and Anthony D. Williams

Good to Great‘ by Jim Collins

The Take Away

J. Smoke WallinFour 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 onlinePaul Mabray profile picture 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.

Revisiting Wine Marketing 101

Leo Burnett“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 aiDepression Bread Lines coming soon to your neighborhood 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 Paneri Watchesconsumer 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 Safeway Cut Case Wine Display w/Sale pricingChristmas. 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 The Economic Elevator's going SouthDepartment 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

San Francisco TrafficAs 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 Out the Door at the Westfield Center, San franciscodistrict 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 Inflection Point Graphdriven 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

Wine Business Monthly Top #0 US Wine CompaniesToday 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 oAbraham Maslowf 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.

Wine Consumers at Benziger WinerySo, 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 wineco 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.

Sale tags on all the winesAs 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

Twins beat Tigers in one game playoff 2009Without 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.

Wine Brand Building Focus

T. Boone Pickens“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 Inside the Actors Studiothat are sometimes extracted in this dance process. It is likely that if these conversations were to be viewed by an uninterested thirJohn dos Pasosd 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. Procter & Gambol Iconic CPG CompanyCalled 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 througSummers Estate Wines Discount Couponh 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, Bernie Madoffproduction) 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 developinPaul Mabray of VinTankg 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

Vintner Jess jackson on the cover of the Wine SpectatorMost 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 significanBarney Fetzert 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 Jed SteeleChardonnay 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. JesJess Jacksons 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 Kendal-Jackson Chardonnayand 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

FocusBased 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.

Think Different

Pablo Picasso, Think Different“Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.” … according to Apple legend, written by Steve Jobs

The News

No doubt that there’s been little in the way of positive news in print, on radio or via telemedia in the last 18 months. If we were tCA Lotto Ticketo give credence to all the naysayers, then I’m thinking that we would all be building underground bunkers in our backyards. But clearly that’s not the case. In fact a few of my friends with large holes behind their homes insist that’s just for their new pools. Umm hun! I just ran into a friend at the local 7-11. He was buying a couple of quick pick Lotto tickets, and after the purchase he held them up and said, ‘this is my new 401 K. Yikes! And he’s the CEO of a very successful wine business. Well here’s how the eyes of a ‘seasoned wine veteran’ see this world in these transformative times.

Sign of the Times

NYSE Market Chart August 20, 2009Yes, the times and consumer behaviors have indeed changed. Millennials seem to be still experimenting with their beverage choices, and have recently migrated back to gastropubs and craft beers, and are driving a movement to more casual dinning. Boomers have seen a tsunami-like movement in their retirementWorried Boomer Reviewing Finances account charts, a devaluation of their housing assets, and a lowering of their credit lines, and as a result their rate of savings has increased from less than 1% to more than 5% of income. Credit card debt is being retired at record rates, and credit use has declined significantly. Eating-in Donald Trump 'You're Fired'has become the new cool, as white table cloth restaurant rethink their formulas and presentations. Businesses are enacting what my UK friends refer to as redundancies and T&E budgets have been slashed, all impacting the sale of wines above $50. So, just what are you the winery’s chief marketing officer to do? Actually, all is not lost. Yes, the economic thermostat has been reset. Reset to perhaps a more realistic temperature. The case for the return of the great depression has been somewhat overstated as we focus on the greed and hubris of the worst in the financial marketplace. The rebound seems to have started even as we assess our individual spending behaviors.

1934 Chateau LatourToday’s conspicuous consumption may be met with significant societal approbation, but perhaps there is identifiable pent-up demand in the marketplace. Some signs point to this. Even though the restaurant segment of the fine wine market has been in decline in this period, data seems to support the continueSonoma Market Wine Displayd consumption of fine wines, albeit at home with wine purchased in a local wine store or where legal in a grocery, at price points obviously lower than wine list pricing. Smart sommeliers are constructing more diversified lists with wines from lesser known varietals and/or regions, creating opportunity for new brands by engendering consumer exposure and trial. This idea of creating trial has been around for quite sometime. One of the primary tactics was to participate in wine tastings. But as the wine marketplace has become brand saturated and wine tastings have indeed become grand, what is the best way to now engage potential wine consumers, and to convert them to customers and then to be loyal clients. It’s time to rethink this experience, and to now, as Steve Jobs once compelled us, think different.

Open Your Eyes

Steve Jobs 'Think Different'Like the young girl at the end of the Apple ‘Think Different” television commercials, are you ready to open your eyes and see the possibilities, to lead and create change for your brand(s)? While there may be political motivation behind the participation of wineries in large tastings that attract crowds in the thousands, the question remains, ‘what’s in it for your winery.’ In these challenging times, the need to imbue your events calendar with a healthy dose of pragmatism seems obvious, and the necessity to ask just this question – ‘what’s my desired outcome for 2009 Pinot Days at Fort Mason, San Franciscomy participation in this event?’ Awareness could be an answer, but is that possible at a tasting with hundreds of wineries multiplied by 3, 4 or more wines per table? Your interaction is minimized. Your ability to capture names rendered impractical by the crowds and short interaction intervals. And, if a consumer has difficulty remembering the name of that wine they had at La Toque in Napa for their anniversary while shopping just down the street at JV’s, do you expect them to remember your wine days later after a 30 second tasting? Marketing research tells us that the average Quintessa Napa Valley Grand Tasting for WBC09wine consumer has a limited set of brands in their personal brand set, somewhere between 5-7 unique brands. More often than not this preference is overridden by merchandizing techniques within the store. So, Don Sebastiani or David Mirassou spending a Saturday standing in a store somewhere in America signing bottles from an end-cap display while talking to customers on a one-to-one basis, forming an emotional bond between vintner and end consumer, seems to be a more efficacious use of resources and time, then standing in a pavilion at San Francisco’s Fort Mason Center with 250+ other wineries. Well, an end-cap display was sold into the store in advance of the tasting. Lift and velocity (increased sales/depletions) over normal shelf placement was achieved, leading to future display activity and perhaps additional shelf facings.

A Few Short Case Studies to Get You Thinking

Eric Sussman hosting the HBS group at Radio-CoteauEric Sussman of Radio-Coteau has a rustic facility (think Aloxe-Corton 30 years ago) on the edge of Sebastopol, in the Green Valley not quite guest ready. Eric’s artisan production Pinot Noir and Chardonnay is limited, and more than 50% of this production is sold on a DTC basis. Like all wines with retails in the $50 range, broad market sales, while still strong, have at times required more oeric Sussman of Radio-Coteauf Eric’s presence in the market. Eric has a good understanding of creating and forming relationships with key lighthouse accounts in the broad market. And he has an understanding that large wine events are not a good use of his small wine company’s resources. In an effort to maintain his visibility and to grow his relationship with Four Seasons Hotels he elected to participate in the Four Season San Francisco’s Second Wine Maker Series. On August 4th, supported by a Facebook post, and an email blast to Radio-Coteau’s local mailing list members, the Radio-Coteau event turned out to be the most successful tasting in this summer’s series. The relationship with the Four Seasons was solidified, revenue was created for the account, and depletions were created for Radio-Coteau. As a side-note, executives from Facebook HQ saw the Facebook post and drove up from the Peninsula, and are now new R-C mailing list members.

Chuck Hayward & Randall Graham at Hospice du Rhone Taste Live Event at Estate SonomaSomeone who’s mantra must be ‘think different’ is Randall Grahm of Bonny Doon Vineyards in Santa Cruz. Randall has been an innovator and an agent of change in the wine industry from day one. When I think of Randall, at least my first impression,  is his persona as wine’s philosopher king. He chose to make wine out of Rhone varietals, when only a few were and no real market existed for the wine. And then Reisling fromRandall Grahm of Bonny Doon Vineyard the Pacific Northwest, when the category was shrinking. He valued his customers and refused to talk down to them by elevating the conversation while attracting a loyal set of passionate clients. Randall and Bonny Doon have had many iterations, and I’m not sure what version this is, but I know it seems to be working. By chance I sat at Randall’s table for the Hospice du Rhone Taste Live Event at Estate Sonoma, where he talked about the necessity for his increased presence in the market. I next saw Randall at the Wine Bloggers Conference pouring his wines and conducting one on one conversations with those that could replicate his message. Randall is on Twitter, and I follow his in-market travels. His communications are a masters class in wine marketing. He gets it and holds conversations in the ether and engages those of us in the wine trade in meaningful dialog. Randall’s micro-posts also happen to be literate and quite funny. Randall is renewing old friendships and winning fans and clients one at a time. What’s old is now new again.

“I want to put a ding in the universe!” … Steve Jobs

Jeff Stai of Twisted oak Winery at Winery Collective, SFSo you’re not Don, David, Eric or Randall, but if it was ever time in our wine business lives to be creative innovators that time is now. Jeff Stai of Twisted Oak has found a way. Lisa de Bruin of Hahn Family Wines has found a way. Chris Donatiello at C. Donatiello has found a way. David Simpson aChris Donatiello conducting a wine tasting of C. Donatiello wines for WBC09 Bloggerst the Mendocino Wine Company has found a way, and so have many other of our peers. Find your own example and then mirror them, or better yet use your innate talent and think of new ways to identify and capture customers through an insightful strategic analysis of your event strategy. Spend your human and capital resources wisely, and with specific expectations of a tangible return on the investment of your time. The rote way of marketing your wines, engaging in group think, or repeating activities because ‘we’ve always done it this way’ no longer seems to be effective. Make your mark. Think Different.

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

The Wake-up Call

Niccolo Machiavelli“Whosoever desires constant success must change his conduct with the times.”

… Niccolo Machiavelli

The Cult

My wife’s friend, New York based designer Joe Macal, told her that this summer in the Hamptons the wine selection on the party circuit is no longer the envy of the wine cognoscenti. The cult wines have been locked in the basement wine cellars of the McMansions, and the famous hosts just don’t think ostentatious displays of conspicuous consumption are cool in this economyHamptons Summer Party. Or so opined a vintner friend over Racer 5‘s in Healdsburg last week . I’m guessing there has been a sort of a reverse Veblen good effect going on here. Well, no doubt the tide is out. Wall Street has sneezed, and it’s looking less like a cold and more like the financial flu. The question being asked in the hills and knolls of wine country is ‘are we in a luxury goods recess, or has long-term consumer, even the most affluent consumer, behavior been modified?’ The luxury category segment of the American wine business known as the cult wine market has been on anKinked Demand Curve Model unprecedented run since 1990. While the term is new the concept isn’t. There have always been wines, as long as wines have been produced and sold, that commanded more attention and higher prices. Although we look at absolute pricing as an identifier of value, pricing is relative to the times, and through the inverted kink in the demand/pricing graph made famous by the late Dr Paul Samuelson in ‘Economics,’ and codified by John Forbes Nash in ‘Equlibrium,’ we’ve come to understand that the stratospheric pricing of cult wines infers on the host and guest the psycho-social attributes, as described by Berkeley’s Erving Goffman, of being accepted as members of the club. However, just ask Silas Lapham, membership in the club may not be long term.

The Call

Screaming EagleRinggggg, ringggggg, ringggggg. Sitting bolt up-right in my desk chair, looking past the glare of the iMac screen in the darkened room, I couldn’t believe that at 5 AM my iPhone was vibrating off the edge of my desk. Quickly shaking my head back-and-forth to loose the remnants of the mind numbing long night’s work of pushing ouHarlan Estatet pricing structures for a client’s new label project, I answered my phone without first checking the caller-ID. At the sound of the click the sonorous voice at the other end of the connection jump started the conversation. “Hi, sorry to call you so early, but did you read today’s Wall Street Journal article on the luxury wine market? Well, it struck home. My sales, for the first time in 15 years aren’t so great, and well, I’d like to toss around a few ideas.”

“Not a problem, I’ve been up working on a project, but no, haven’t read any papers this morning. Ah, excuse me. Who is this?”

“I’m that small cult winery, ha, that you pitched last year about this time and I told you I didn’t need any help. But I just got off the Araujophone with a management contact at my Boston asset management firm and, well, I need it now.” “I’ve replanted about half of my vineyard, changing the potential final blend, and the grapes are in 4th leaf. I could bottle the young juice in my primary brand, but the overall quality would be diminished. And if there was ever a time to push the quality envelop, it’s now.” “I’m thinking about introducing another label, in a more popular tier, something that could be sold in other environments, other channels. I’ve always been at the luxury end of the market, but I do buy other wines all the time, and think it would be great to get this new wine in more hands.” “So, how do I do this?”

The Plan

Yes, it is possible for a luxury brand to execute a lower priced, more egalitarian brand strategy effectively. A clear focus is needed and a tier specific brand plan is necessary. There are key questions that need to be asked and answered.

  1. Theme – name, appearance, label, packaging
  2. Personality – place, product, pricing, promotion
  3. Tactical Plan – what, when, where, how, how much
  4. Reputation Engineering – the PR initiative
  5. Sales Effort – DTC, DTT, existing distributors?

Forts de LatourA great team is in place, and to dislocate them for a new project just wouldn’t make any sense. They are part of the positive story for your existing brands and lend credence to the new project. You’re current cult and luxury portfolio is based on Napa Valley mountain grown Bordeaux proprietary reds. Protect the image of the existing luxury/cult brands by reducing production by further defining selection and maintaining real rarity. Use the traditional Bordelais classified growth second label model. Think Forts de Latour from Chateau Latour, Pavillion Rouge from Chateau Margaux, or Le Petite Cheval from Chateau Cheval Blanc. Share the story of replanting with new clones and the early quality displayed by the young vines, whilimages-3e refining the cult winemaking process. Increase exposure and the positive press and/or wine blog buzz opportunities by providing value and access to wines which were formerly unavailable in the broad market from your winery. In a market in which Michelin star chef Daniel Boulud has decided to focus more on value with DBGB Kitchen & Bar, the idea of a cult brand providing a more value centric model is not only timely, but most likely necessary given the reality of today’s world financial markets.

The Wrap

drafting plansCreating any new brand in a rapidly consolidating and saturated broad market is not without risk. Manage your risk by utilizing research to target the best potential accounts. Work with key lighthouse accounts, both on and off-premises in limited geographic markets, who will provide support through newsletter, blog and/or web endorsements, while avoiding brand image diminishing discounting. Be sharp in your pricing to not only maximize profit but to achieve planned depletion velocity and consumer pick-up and repurchase. Your value proposition is leveraged on your existing reputation, built through hard work and a fidelity to your singular vision over the last 15-20 years. Don’t engage in any activity that will diminish the new brand or your existing brands. And, really only do this if you are totally committed to success, and not just as a short term liquidity fix.

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