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.

Dispatches from the 2009 Wine Bloggers Conference

Grateful Dead

“Spent a little time on the mountain,
 Spent a little time on the hill,
 Things went down we don’t understand, 
but I think in time we will”
… “New Speedway Boogie” … Words by Robert Hunter; music by Jerry Garcia

***

Conferences are conferences are conferences, and it seems that the one-on-one conversations are often where the real ideas Hardy & Ashley at WBC09are exchanged. Discussing ideas and feedback on just what it is that we’re doing, what others are doing or have done will tend to make us all more proficient tomorrow. A lot of citizen wine writers are in factthe twitterai at WBC09 technology geeks.  Really smart technology geeks, like Doug Cook of Able Grape, who is now the director of search at Twitter, or founder organizer Joel Vincent, or Paul Mabray of VinTank, or Evan Cover of Cruvee, or Josh Hermsmeyer, or etc, etc. The Wine Bloggers Conference IQ meter has been off the charts. This active exchange of ideas with so many wicked smart people is really charging my batteries. The take-away is that I wish that more wineries would embrace this democratization of wine information. Oh, not just the social media side of this, but the energy and intelligence inherent in this citizen wine writer movement. I’m also shaking my head in disbelief that more wineries weren’t standing in line to talk to the candidates from the A Really Goode Job promotion. I had the chance at the conference to talk with Frank Gutierrez of Frank Loves Wine and one of the VinTank 4 + . With a nod to Malcom Gladwell’s Frank Gutierrez of Frank Loves Wine‘Blink’, I’ve always been good at recognizing talent in meetings or during interviews, and then in securing this talent. I alway wanted to surround myself with people that are smarter than I am. Have you noticed that your education doesn’t end the day that you get your diploma, that life is a process of observing, learning, and incorporating best practices until you’re boots-up. Frank is someone that I followed through the arcane process of ARGJ. Mostly because he reached out to engage me. Last night I had the chance to talk to Frank about his aspirations and his vision. I came away floored. I’m not prone to intemperate decisions, but if I were a winery in this economy, I would have extended an offer to Frank on-the -spot. So, out there in the winery world, I just want to know is this somebody that you want working for you competitors, or do you want your wine business to be the next success story?

***

CIA at Greystone, St Helena, CANapa Valley gets it. They’ve gotten it for quite awhile. The Napa Valley Vintners Association knows how to throw a party, and, at the same time, how to effectively communicate their message. Kudos to Terry Hall, Joel Coleman-Nakai, Kat Corcoran, et al. And special thanks to Paula Kornell. I first met her years ago during mBarry Schuler & Marc Lhormer discussing WBC09y tenure at Disney when visiting the Hans Kornell Winery to meet her Dad, Hans Kornell, one of my all time favorite Napa Valley vintners. Having met Paula as a small child, I’ve followed her career from the early days, through her ascension to the top of the Napa Valley wine industry. I know her dad is somewhere, smiling from ear to ear, a glass of sparkling wine in his hand thinking ‘I did a good job.’ Well, Hans, yes, you did a very good job indeed. What a start to the day. Talk about firepower, from the kick-off talk by Ms Kornell to the engaging and effective Charles Henning, ExecutiveEd Thralls, Rick Bakas, Paul MabrayDirector of the CIA (the original CIA) at Greystone, to how to be a better wine blogger/writer from the source that knows, Jim Gordon, Editor of Wines & Wines. But, please allow me a moment to go WOW!!! Barry Schuler, internet pioneer, owner of Meteor Vineyards and VC icon, and one of the great intellects of our time gave a speech that would likely fill the Moscone Center Herta Peju hosting bloggers at Peju Winery WBC09convention hall auditorium at Macworld . And this was just the start of the day. Back to the shuttles, and off to the real business of wine writing, meeting with the winemakers. It was my luck to have a chance to go to Peju Province Winery and to sit with the co-founder, the lovely Mrs Herta Peju herself. Then off to Spring Mountain Vineyard for what would turn out to be the Napa Valley Cabernet tasting of my lifetime.

***

Spring Mt. HouseI’ve been around wine a long time. I’ve attended so many tastings, and thought that I had seen it all. Don’t get me wrong, I am as passionate as ever about wine and the wine business, but how much more new is there? Well, I soon found out, sitting at rounds in the living room of Tuburcio Parrott’s old Victorian, and tasting wines from the mid-90’s and the current or future releases from a list of storied Napa Valley vintners: Jac Cole of SprinThe tasting Panel at Sring Mt, for the Napa Valley cabernet Sauvignon bloggers tasting at WBC09g Mountain, Ted Edwards of Freemark Abbey, Jeffery Stambor of Beaulieu Vineyards, and Paula Kornell of Oakville Ranch Vineyards. Not only did I come away impressed by the overall quality, but by the openness, the frankness and the transparency of the conversation. Yes, times and communications have changed, and they’ve changed for the better. Also, isn’t it about time that we now refer to Sauvignon Blanc, Cabernet Sauvignon and associated varietals as Napa Valley varietals and drop the anachronistic use of the term Bordeaux varietals? Just saying….

***

The grand napa Valley tasting at Quintessa for WBC09Recovering from a day of wine tasting in Napa, after a grand tasting at Quintessa that went by in a flash,IMG_0762 and a great dinner with old friends at Franciscan Vineyards hosted by Jay Turnipseed, Aaron Potts, Efrain Barragan, and Cathy Corison, it was back to the Flamingo trenches, and a morning of shared education. Thanks to Tim Lemke, who gave a tutorial on how to monetize blogs, and to Doug Cook, Director of Search at Twitter, who conducted a discussion on just how search actually works. And then of course back to the busses and off to the Russian River Chris Donatiello conducting a bloggers wine tasting at the WBC09and Dry Creek Valleys for more on-site interaction with our sources. I was lucky enough to be invited to C.Donatiello on Westside Road. Chris, Web, Robert and Vanessa get it. Because they get it they’ll be one of the thrivers as the economy rebounds. Oh, and the C.Donatiello Chardonnays and Pinots are fab. Next time you’re in the Healdsburg area, head over and treat yourself to one of our area’s top winery hospitality experiences. And, don’t miss the summer Sunday concerts. Can’t think of a better way to send a day in wine country.

***

Tim Lemke at WBC09There is some significant wattage of talented, professional and intellectual firepower residing in the citizen wine blogger community. Most of the resources in this community are just an email, a text message or a phone call away. As a group we’re always looking for ideas, so don’t be afraid to pitch us. Oh, I have the scoop that I promised in my last post: Evan Cover CEO at Cruvee is pairing with Josh Hermsmeyer in development of the winery interface for helpawineryout.com, facilitating the targeting and interaction between wineries and citizenDoug Cook, Twitter Director of Search at WBC09 wine reviewers. More to come as this story fleshes-out. Also, note that there is new media, creative talent out there looking for work. And, not just because they’re looking for work, but because they’re passionate about your (our) business, the wine business. Be counterintuitive and hire the best talent in these tough times to maximize your rise out of the morass, as the economy bounces forward and upward. Adopt and incorporate the appropriate technologies for your wine businesses. Recognize that the game has changed, and we’re all in this with shared responsibility for (re)inventing the future. The bus of wine biz marcom is leaving the station and picking-up speed. Get on-board as soon as you can, or risk being left out of the conversation. Identify and mirror those companies that get it, such as: Hahn, St. Supery, Murphy-Goode, C.Donatiello, Judd’s Hill, Gunlach Bundschu, the NVVA, or Wilson Daniels. Observe, study and then incorporate their best practices into your winery’s marketing/communications operations. Sink or swim, we’re in this together. We do this thing because we must. We are a community driven by passion and talent, and fueled by a burning intellectual curiosity. We are not so different from you. Oh, we may be the early adopters, but the door on the bus is still open. So, come on-board. It’s going to be a fun ride.

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