Who turned on the lights?

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

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

Moving on Up

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

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

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

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

A Sea Change

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

New Routes to Market

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

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

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

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

The Aspirational Consumer

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

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

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

The  Long View

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

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

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

Insights and Recommendations

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

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

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

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

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

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

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

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

Technology is not a Four Letter Word

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

The Challenge

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

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

The Solution

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

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

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

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

The Message

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

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

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

Reflections of a Wine Business Blogger

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

Charles M. Schultz

The Decision to Write

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

The Metric System

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

2009 Top Ten TWM Posts

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

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

That Was the Year That Was

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

Observable Lessons

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

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

Y2K10 – Part One: a brief look back to the pioneer days of wine ecommerce

“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 two 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 TheWineryShops@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.’

Note: Copyright © 2009 Think Wine Marketing® 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.

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.

Aquí Viene la Revolución

The White Album, The Beatles“You say you want a revolution
Well, you know
We all want to change the world
You tell me that it’s evolution
Well, you know
We all want to change the world
But when you talk about destruction
Don’t you know that you can count me out
Don’t you know it’s gonna be all right
all right, all right”

…. The Beatles

WBC 09

WBM_ad_outlines_bannerOn the immediate horizon, this week-end in fact, is the second annual three day Wine Bloggers’ Conference at the Flamingo Resort Hotel in Santa Rosa, CA, organized by the Open Wine Consortium, with the help of numerous citizen wine bloggers. Both Napa and Sonoma wineries and vintners’ associations are involved in the support and participation of this year’s conference. So, it seems as though at least in our backyard the Northern California contingent of the wine business has discovered that wine bloggers may matter. Given the general marketing conservatism that seems endemic in these circles, this is somewhat surprising, if not revolutionary, even in thisay everything by Scott Rosenbergs philosophically and politically progressive geography. However, what’s surprising, well not surprising perhaps but inducing a significant feeling of disappointment, is the raising tide of ad hominem attacks on the loosely confederated and decentralized wine blogger community from admired members of the traditional wine print media. As Scott Rosenberg writes in ‘say everything‘, a concise history of the blogging phenomena, “saying that ninety percent of blogs are crap‘ is way too close to implying that “ninety percent of people are crap.’ It seems a tad disingenuous to address the tired and the vapid, and then to paint the whole on the failings of the few.  S.I Hayakawa must be turning over in his grave.

Revolution or Evolution

The Tipping PointThe tipping point seems to be tied to technology. Anyone around for the infamous Rodney King citizen video, shot on a camcorder and seen almost immediately around the world and resulting in the tragic 1992 Los Angeles Riots, knew that the times had changed forever. All the major news networks immediately began requesting, and still request, citizen videos, now likely shot on video enabled smart phones. Mr. Rosenberg tracks the origins of blogging back to Swarthmore dropoutEvan Williams Justin Hall, who in the early 90’s began documenting the minutiae of his life, with links to points of interest found surfing online. Justin’s sharing his diary with his growing cult following lit the pilot light with a receptive online community. But the blogging avalanche seems to be tied squarely to the dot.bomb post millenium period, so familiar to many of us who lived in the various tech corridors around the country. Evan Williams, yes the Twitter guy, was a co-founder of Pyra Labs home to a program called ‘Blogger,’ who with some last ditch VC dollars, moved the company’s servers into his apartment keeping the service alive for the then 100,000+ registered users. Within a year’s time more than 700,000 citizen bloggers had a voice, their voice. This created significant buzz and attracted outside interest, Mr. Williams sold his company to Google in 2003 and went on to co-found Twitter in 2006.

The Braindead MegaphoneThe confluence of technology – the internet, word processing and graphic apps, moving to faster and faster broadband and increasingly cost effective wi-fi and wireless solutions and the rapid development of computer technology have all contributed to this democratization of information dissemination. And, please save the lectures on the sanctity of traditional journalism in this age of what Syracuse journalism professor George Saunders refers to as ‘The Braindead Megaphone’ That shark has long been jumped. So, please get off your high horses, bury that hubris under your tomatoes, and join the movement. Oh it might not be a revolution, more an evolutionary change, but it is a citizen movement and, well, you’re no longer in charge.

Some Last Words

Hardy Wallace wins a Really Goode JobOh, I know – a short post. Well there’s more to say and I’ll be blogging live daily from WBC 09. So, please stay tuned. I want to extend my kudos to Hardy Wallace on landing the Really Goode Job, to Rick Bakas, who was an earlAshley Bellviewy contributor to this blog, and hired to be the Director of Social Media Marketing at St Supery, and to Ashley Bellview, who was hired by someone for whom I have the greatest respect, Paul Mabray of VinTank. Good luck and best wishes to all. And wineries, there are still a number of very talented unattached Really Goode Job applicants. Don’t miss this opportunity to bring talent into your wine company.

Help A Winery OutAlso, kudos to Josh Hermsmeyer, aka Pinotblogger, founder of the Capozzi Winery, citizen wine blogger and the developer of the vineyard to cellar iPhone app Juice. Josh has now developed a second application, this time it’s hosted and called Help a Winery Out, similar to the established Help A Reporter Out, but for wine. So, if you’re a citizen wine blogger/reviewer check out helpawinery.com, take a look and sign up. The service is free, always will be, and is meant to bring citizen wine reviewers seeking wines to review together with wineries looking to target them. At press time I was unable to secure confirmation from the partner working on the winery interface, but be assured it’s a respected and valued member of the wine community. This program will help to professionalize the interface between citizen wine reviewers and wineries.

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