Changing Patterns: You're Mad if you Don't React.
The wine industry is made of family owned companies. Family owned companies seldom last past the 3rd generation in part because the family and business conditions that support the start of a business evolve over the years. Watching the clip above from MADMEN, you see the founder ask the question, "Why can't I just build on what I have?" The answer is a reminder that your customers needs and wants evolve, and you have to recognize and predict those pattern changes.
To survive and adapt, a leader has to get out from behind the day to day world of running the business and ask tough questions about change. Today whether you are first or 4th generation, it's time to review the horizon because while the business continues to rebound, its not and wont continue in the same way it did in past recoveries as we discussed in Part I: The Long Term Future of US Wine Sales last week.
Just what specifically will be different in this recovery for the wine business? Its too long of a topic to discuss on a Blog so much of this I'll reserve for the State of the Industry Report due out in January of 2013. But for now lets just start with one segment: planting .... and maybe a little on pricing because they are related.
Since we've already ceded the lowest priced wine segments to imports now, there will be no plantings in those Districts compared to what we saw in the 1990's. Jon Fredrikson explained the situation about the high production regions in part when he said in his June report:
It's not just the current supply shortage that is fostering the growing bulk imports as Jon mentions here. It's a structural change as well that is caused by better access to foreign bulk today combined with favorable exchange rates. The importation of bulk wine will continue unabated as long as there is the ability to buy cheaper generic bulk wines that are perfect generic substitutes for Central Valley grapes. Planting will be restrained versus what we've previously seen in the past 20 years in the US."A major consequence of the short California supply has been the tremendous growth of bulk table wine imports into Northern California, amounting to a staggering 36 million cases over the past 12 months."
discussed in a prior blog is educating the consumer about the quality of California production wines to make them less prone to direct substitution from off-shore. Our farmers have more expensive land so the way to get a premium for the grapes is promoting the differences in US wine. I guarantee we aren't going to see a change in the pricing mechanism or obstructive and protectionist trade legislation. We can still influence buying patterns of our consumer and the emerging Millennials but leadership of that effort is going to have to come from within the growing community, most likely from the Central Valley.
Please log in to the community and offer your opinion. What do you think? Too gloomy? What should a winery do armed with the vision of changing patterns? This week your guest moderators for the discussion will be that hard-working duo of Suzann Russell and Sara Chrisman from Silicon Valley Bank. Lets see how they deal with the heat? Please log in and fire away.