Fraud In the Wine Business: A Repeating Story

Is Anyone Looking?

The wine business is filled with hard-working owners who are passionate about their craft. Never has there been an industry who's owners are more willing to work for almost nothing, just to be in the winery club. No matter if you came in as a farmer, financier, film-maker, or from family money - if you are in the wine business you are accepted with open arms into the brother/sisterhood of the business. Everyone is willing to share and trust their neighbor. It is a hospitality industry and all our instincts are open and accepting, really as a normal reflex to see the wine business as we all want.

All those thoughts seem wrapped up in the romance and feel of our business and makes this such a cool place in which to work. Then this past week I saw the following news report:

• Xandria Roxanne Neal, 44, of Hidden Valley Lake, CA plead not guilty today to 29 counts of embezzlement of more than $300,000 from from St. Helena's Rutherford Wine Company, where she had been an accounting clerk since 2009. The incidents occurred between September 2011 and January 2014. She allegedly used gift cards with a company credit card and used the money for personal purchases. 

The Most Important Factor In Wine Club Success

The psychology and dynamics of consumer choice is complex. Economists can make it even more complex but one of the theories that I've always liked is the concept of marginal utility, and if you can hang with me a bit, I want to use it as a backdrop in discussing the single most important metric to track and drive wine club success.

How Much is Your Winery Worth Today?

The Alcohol Beverage Market

Probably once a week someone asks me, what are multiples doing. What they are really asking is "are sales prices going up or down." As a banker I love that question because it means there might be a financing opportunity and a way I can help in an acquisition (...yes I do have a day job making loans as boring as that might sound.)  If you understand valuation theory and want to go straight to the answer to the question, skip down the page to the Current Public Company Multiples section.

Still with me? The answer for alcohol beverage companies is that multiples for craft breweries are at the top of the list, large breweries are at the bottom and wine multiples are in the middle. That makes sense because craft brew is the rage with strong growth. Both spirit producers and craft brewers are cutting into the market share of the traditional beer producers. That reflects in the valuation growth of publicly traded companies as seen in the chart following.

How does the growth rate in an industry segment impact the value of a company? A buyer of any company wants to be in a high demand-driven market because that spells opportunity. If you are buying a stock, you are betting that will go up in value and its the same thing with the buyer of a company. Wineries have been in a strong growth phase for more than 20 years now but we don't see public companies gobbling up wineries and driving up valuations.

Are Standing Tasting Bars Better than Seated?

“Today, our bodies are breaking down from obesity, high blood pressure, diabetes, cancer, depression and the cascade of health ills and everyday malaise that come from what scientists have named sitting disease.”~ James Levine, MD, PhD

The votes are in and the reality is even with exercise and moderate wine consumption, the cumulative negative impacts of sitting behind a computer or gaming station can't be overcome by drinking more wine or with normal exercise regimens. That is really scary for people like me who work in an office. On the other hand, there is growing agreement that employees who work standing are not only more healthy, but they are more productive and creative than those who sit. That being the case, you would all of course naturally conclude that retail room sales people working in a standing bar should have a higher success rate converting visitors to buyers compared to sales people working in a seated venue. Of course you would conclude that ....

What Percent of Tasting Room Visitors Buy Nothing?

Ridding the World of Melon Squeezers

One dark and stormy night (yes I used that one) ...early in my banking career in Mendocino County, I attended an internal banking event where Jim Miscol; one of our senior executives would speak. He told us what a great a job we were all doing then asked us to help change the culture of the Bank. He said we needed to "get rid of melon squeezers." What in the heck was he talking about? I had no idea where he was going but my mind started racing to possibilities.

He went on to explain his comment by talking about a grocery store he banked in a retirement community. The store was carrying too large a waste/spoilage factor in the produce section. As it turned out, the store had evolved into a social gathering place for seniors who would walk the isles with an RC Cola, freely sampling grapes and nuts like it was a smorgasbord, and squeezing melons and peaches while talking to friends. It was the analog prequel to SeniorMatch.com. The store owner was at a loss how to address the problem without chasing away his customers. How would you handle that situation?

2014 SVB Wine Report Producers Cut

Another year of the SVB Wine Conditions Survey, the Annual State of the Industry Report, and the live video cast is complete. For those of us involved in the production - from my St. Helena Banking Team, the SVB Marketing & PR folks and the Video crew, it’s a labor of love but its also a real grind.

The report starts in late October with planning for the survey, and finishing in middle January with the release of the report and live video cast. The final piece of the report is publishing the transcript from the videocast chat, and answering some of the questions posed which we are doing below. At the end of the transcript, I have posted answers to many of the questions. You are welcome to comment here on anyone's post by logging in and noting the time of the post. You are also welcome to ask new questions and I will do my best to get you the answers. Please forgive transcript errors and double posts which appear often. That’s part of the chat landscape.

Questions You want Answered

 

The Annual State of the Industry report that Silicon Valley Bank produces takes a shrimp load of work to pull off and a lot more assistance than First Mate Dan. That’s why I stop writing the weekly blog in November. I have to dedicate my copious free time to research, composition, then production. Fortunately I have great people around me or I would drive my customers financial ships straight into the dock without their help.

 

I've been done writing since before Christmas, but the draft at this point has gone through 12 iterations. I know there are still going to be some tie-pos, ghrammaer and speeling mistakes in the 34 page report but all the read-throughs make me want to make me gouge out my eyes at this point. That's a clear sign that its ready for release.