How Will We Recover from the Fires?

    Was That Just Last Week?

Without full containment yet, many are already looking forward to begin the recovery, even with still blurry and red eyes.

When I think about the wildfires that scoured the North Coast of California this past week, I come up with a hodgepodge of visuals – waking up to the red glow out of my bedroom window on Sunday night when it all started, a bulldozer cutting a firebreak a half mile from my home Tuesday night and saving my block, watching the heartbreaking sight of a neighbor’s home burn to the ground on a ridge Monday morning, seeing blood red sunsets, the feeling of relief when power finally came back on, and being unable to sleep listening to my cellphone screaming out Nixle Alerts every half hour telling me about a new evacuation, wondering when it would be my turn.

There are so many stressful points from the past week from which I have a lot of new stories to tell, and lots of pictures that I’ve shared on social media. It was a week that seemed more like a month, reinforced by a blur of numbingly shocking scenes.

How Much Did Wineries Really Make in 2016?

     

One Big Happy Family

Unlike most of the business world, there's a sense in the wine business that your neighbor is part of your support mechanism. They are not a rival nor are they a competitor. Everyone freely offers support in the form of information and time. If you need a tractor because yours is mired in a soggy field, no problemo! Need a little welding and custom fabrication on a pump? I'll be right over with a welding rig. Stuck fermentation? I'll send over a portable heating unit.

Is Opening a Downtown Tasting Room Smart?

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The Regulatory Landscape

Falling on the heels of a growing anti-tourism movement, of late I've taken calls from officials in three particular cities that are now considering tightening regulations, or altogether banning the growth of downtown wine tasting rooms.

What else can officials do to make the wine business more difficult? That's what many are asking. Why are municipalities working so hard to hinder success of an industry that helps pull in millions in local occupancy taxes, and donates many more millions to charity? Answer: It's just politics.

The wine industry isn't sufficiently engaging in the debate so we have ourselves to blame in part. We have a fight on our hands but don't show up in force to planning commission meetings and support applications.

We make it harder on officials who only hear from their constituent nay-saying minority. To the credit of the officials, one thing they are doing is asking around for data and facts that might help balance the debate, but I'm wondering if opening a downtown or urban tasting room is even a good business decision in the first place?

Premium Wine Sales Decelerating

      The Big Short

It's easy to tell people what they want to hear. It's harder to tell them what they don't want to hear.

In 2007 I saw the above chart that tracked US home prices versus median family income. With other indicators in the market, I was convinced there was a real estate bubble already in the process of bursting and I started talking about it in speeches. The result of my prescience? I stopped getting speaking invitations and in one speech had the organizer ask if I could be a little more cheery. 

People don't want to consider the downside risk in business when things are going well. 

If I told you today what you wanted to hear, I would say that wine consumption is growing in both volume and dollars and consumers are continuing to trade up above $9.00. I would tell you that grape prices are at an all-time high and trending higher right along with land prices. 

That's true and might get me more important speaking engagements, but I'd rather you know about an underlying trend I'm seeing that's more than a little concerning. If I'm right, it's going to change the way you are thinking about business right now.

Podcast: An Industry View Through Rob McMillan's Wine Glass

 

I had the opportunity to visit Christian Oggenfuss and Geralyn Brostrom at the Napa Valley Wine Academy just after the release of the State of the Industry Report. We sat down to an open mic over a glass of wine and explored several of my perspectives on the business as well as the story of how the Wine Division of SVB was created, and why we started producing the State of the Industry Report.

After you get though the early part of the podcast which sounds a little like a This is Your Life show on your's truly, at about the 15:00 mark we start to get into some of the concepts discussed in the report. The questions I cover are:

Restaurant Wine Sales Collapsing for Small Wineries

      I will Always Love You

Every credible measure that I see regarding restaurant wine sales is trending negative for the small family run wineries. Why? What's behind the declining trend? Economics? Changing consumer attitudes? Conspiracies from wholesalers? Big wineries displacing the small ones? It's not due to a lack of desire from restaurant owners.

Restaurateurs love the wine business. The business is worthy of their love because it enhances the enjoyment of the food served to their customers. It's practical for the restaurant trade to love wine because restaurants themselves make better margins on bar sales compared to food sales. Wine for the restaurant trade is still an important part of success, but sales opportunities to restaurants are collapsing for small wineries.

Replay: SVB Direct to Consumer Survey

We had a good time on set delivering several perspectives on the SVB/WBM annual Direct to Consumer survey. For those aficionados of our surveys and telecasts, you might note a shift in the title but it's just reflective of how we've evolved the survey questions.

We used to call this survey the Tasting Room Survey but over time we started to realize tasting rooms were only part of the formula for success, so we started asking more questions about wine club metrics. Now we have several years of benchmarks from which we can determine trends in clubs and in tasting rooms.