The Annual SVB Wine Report and the Live Broadcast is complete. For those that missed either one, the replay and report can now be accessed here: LINK.
For those who are looking for some power point slides to use in their own presentations, we've also posted 86 slides at the bottom of the page. Most of them were used in research but not used in either the Report or the Videocast. You are welcome to use the information there - with attribution of course.
The last duty I have for the year is to post the Q&A from the live videocast. This year as seems is always the case, we had participation both Nationally and from about a dozen countries. There seems to be world interest in the US Wine Industry for some reason?
The chat follows and I've littered it this year with the labels of random participants. Feel free to contact me if you have any other questions and I'll get back to you as I'm able.
SVB State of the Wine Industry Videocast
January 21, 2015
- THANKS AND FAREWELL
- Finally to the questions Rob? The answer is it depends on what you are talking about.
- Rebecca and Kelly - that growth is going to come from both domestic and foreign wines. The EU and traditional importing countries have a currency advantage but have a large obstacle getting through the distribution channels and to the consumer.
- In recessions, we see trading down. As markets recover, people trade up. For lower cost wines to see growth, marketing and promotion needs to take place to remove the product from a commodity class. Its been said Millennials are looking for "authenticity." Perhaps, but I think everyone wants an emotional connection with any product. Without marketing and promotion of lower cost wines, I don't believe we will see lower priced wines grow.
- The information about the above $20 category is sketchy. I pick $20 and above because there are several data bases that I can use to support my beliefs and theory. At times I can get a better instinct on higher segments, such as that we obtain from the Annual Wine Conditions Survey but there is very limited information that's useful otherwise.
- There is no evidence to support that comment. That said, Millennials will someday be the dominant consuming cohort when they fall between the 35 - 55 age range. Today they represent about 15% of wine consumption. Lower priced producers should be spending time and money marketing to the cohort today. Higher priced producers are best advised to work on Gen X today.
- Exports have always been a small part of US production. Larger wineries have been more effective at exports. Smaller wineries can sell all of their production in the US so making an argument to export is difficult.
- The Government of Argentina has made it difficult for their domestic businesses to do business anywhere. With more debt defaults than any country on the globe, and provocative actions like taking over their JV oil company with the Spanish, they will never get world investment. That said, they make very good wines and if their government ever gets their acts together, they can be a formidable importer - more so than they are today.
- Agreed in the short term. Longer term there has to be something more take place for exports to make sense even if we ignore exchange rates.
- We'll see where it goes. This country has long been a country of immigrants and they have always supported the economic health of the country. Nothing is changed now except the politics.
- The most important one is Rob McMillan. You can read his blog right here. The other supporting actors look better, but Rob is more important. That is all you need to know.
- Totally region dependent. I believe economically its more effective to plant in Oregon and Washington today for higher priced wines, and to import lower priced wines. We are ripping tens of thousands of acres in the Central Valley right now. I wouldn't predict the same for the coastal AVAs or the PNW.
- And the most important person is Rob McMillan who you left out.
- Thanks Patrick.
9:58 AM SVB_Maria: Panel includes:Amy Hoopes, Chief Marketing Officer at Wente Family Estates; Paul Mabray, Chief Strategy Officer of Vintank; Glenn Proctor, Partner in the Ciatti Company; and Rob McMillan of SVB
- Absolutely true. There will be some good values on the market in the next several years.
- Editors note: I am a fan of Lodi wines and believe they have upside in the fine wine side of the business.
- These are the kind of stats that are repeated without proper context or support and readers make their own minds up about what it means absent facts. Some of the largest brands when Boomers were Millennials were Mateus, Blue Nun, and Lancers. Millennials don't drink those brands but they are drinking lower priced foreign wines, just like their dads. The difference between then and now is information, availability, number of selections, national marketing and speed of delivery. I believe personally the next generation of wine drinkers will continue to have increased choice and that's a business challenge we as an industry need to consider whether domestic or foreign.
- That is a very relevant comment for non West Coast wineries. Every place I've ever traveled in the US and has a producer is proud of their local wine efforts. That is the way all the AVA's started and built themselves. Start local. Today, its also green which doesn't hurt.
- That means twice the amount of imports are Millennials I think?
Thanks for the comment Nat...... California is about as diverse a state as any country and can produce at virtually all price points, great quality wine. Wine that is fair from a price perspective is of course in the eyes of the consumer. Sometime, the consumer needs to have a product made top of mind and be reminded why its still a great value. California Wine has the opportunity to take that position for lower priced wines back - or at a minimum slow or stop the erosion, but the current dynamics create a situation where the lower cost wines are made by domestic producers who seem more agnostic about the country of origin than in years gone by. That's not a good setup to get cooperation to expect anything to change, but I hope it does.
- I wish we weren't so California focused. What we try to do each year is get survey information from all the West Coast and present that information in the slides. The information of course is representative of the wine industry locations. Idaho hasn't yet surfaced in our survey information despite their growing reputation for quality wine. Maybe you can help get their AVAs interested in participating in the surveys?
- While there is an overall return to urban living for younger folks as I understand it, I have a suspicion one of the reasons to return to the cities has to do with a social life. If wine is part of socializing, I'm guessing we'll see cost effective solutions to wine storage evolve. That said, I'm not certain the personal cellar ever left. If a wine is going to be consumed in a few years, there are many apartment living solutions without working too hard at it, that should still work.
I make a distinction between a storage space needed for storing wine for current consumption and one needed for proper cellaring and aging of luxury and collectable wine. I took a lot of joy keeping a small wine cellar with the right wines to share. It was in my closet in the dark and it worked great for years until I could build something more substantial.
- Thus far the business of cellaring with the attendant costs of storage, personnel and electrical has been a difficult proposition - even with bottle price increases. One also has to remember from a cash flow perspective, cellaring means getting no revenue up front while wine is cellared. The model has been tried before, but inventory control and care is a major cost to deal with and as a business, I'm not certain the risks of the business can be supported by the returns.
10:05 AM Jameson McFadden: Do you have to launch a new brand to move into a more premium category?
- I might agree with that, except I don't think the term 'sustainable' is very well defined. It means different things to different people. I remember hearing a chef say shell fish were sustainable because they were caught in the ocean. (Tell that to the whales.) Some people think it means 'green' and others think it means longevity.
- This was a new one for me too. Here is what I found: Dark social is a term coined by Alexis C. Madrigal, a senior editor at The Atlantic, to refer to the social sharing of content that occurs outside of what can be measured by Web analytics programs. This mostly occurs when a link is sent via online chat or email, rather than shared over a social media platform, from which referrals can be measured..... So I think what this means is the impact of social sharing when it comes to direct sharing isn't fully captured. That would be relevant in particular because that direct peer to peer sharing is probably the most powerful.
- You will be happy to know that after being abused for my old school thriftiness, I have last week purchases a Galaxy 5, the first smartphone that has more options than my intelligence can process. I will now have the same excuse as everyone for typos. "No ... I didn't say you were a jerk. I said you were a good person. It was the predictive text."
- Editors note: About this time the other panelists started taking over and the participants began this chat to entertain themselves between the time I .... Rob McMillan .... would speak again.
- That's a business that continues to grow and evolve from a niche to mainline business. Its still in the early stages but has great promise. For the right price ..... a keg in my cellar .... I'd be willing to say it has astounding promise.
- I'd say maybe 50,000 cases, but am guessing yours was a typo.
- That's a big debate in the trade. Check out the post in SVB on Wine for some of my recent thoughts.
- Granholm v. Heald had a different finding.
- Apparently the pot smokers have started their own chat room and have all the answers now. We are just glad to facilitate discussion.
- Drync, Vivino, Delectable, and I think the last one Paul Mabray mentioned was Cellar Tracker but I could be wrong on the last one.
- Its a large question that is being discussed in several AVA's today. I'm hopeful we find an answer to effective planning to both protect the wine regions unique atmosphere, and at the same time allow for commerce. Its a balance because you can't attract tourists to a warehouse... not interesting. And you can't sell grapes without wine consumers. The key to that is getting good unbiased information and hopefully recognizing whether grape growers, employees, or wineries - its in our best interest to align on the desire to protect to golden goose - which is the environment which produces our West Coast wines.
- Hospitality is by its definition, not snooty. That said, there was a period when Lifestyles of the Rich and Famous was the vision promoted. Totally agree that doesn't fly today and if you ask me, never really did.
- Pretty much. Here is a PDF I found that expresses the AVA's: http://california-vineyards.com/pdfs/North_Coast_Fact_Sheet.pdf
- Heather - I couldn't agree more.
- Proof positive Paul was right.
- Regions outside the West Coast are evolving each year and wines being sold in those regions improving. I don't consider emerging wine regions a threat to the West Coast. In fact, I believe its easier to find free advice and council from West Coast producers. If someone in your region wants a West Coast wine, that's what they will buy. But it doesn't preclude a local from being proud of the regions wines. Even in VA which is a larger producing area, the vast majority of wines are sold within the state. Keep up the faith!
- I think the question was mentioned already but its region specific. The Central Valley is pulling tens of thousands of grapes. I don't expect the same to be the case in Coastal regions and the PNW.
- Start with information about why there is traffic then we can find solutions. At this point, there are no good studies that have been done. The one that has recently been done included 13 wineries and observation and determined that the vast majority of traffic in the Napa Valley comes from employees versus non-local traffic. That fact should change the discussion to different solutions than the anti-tourism diatribe that has surfaced.
- Yes. I was a little slow this year because of banking business .... yes I am really a banker and this other stuff is what I do in my copious free time.
- Totally agree. I asked the same question to a group of Distributors to whom I was speaking last year. Half felt tasting rooms were a help and the others saw them as competition.
- All studies show at this point that Millennials in fact barely show up in on-line sales. In direct and club studies, they are showing up in greater numbers. Here's an interesting article you may appreciate: http://www.sanluisobispo.com/2015/01/21/3453060/milennials-wine-purchase-study.html
- I wonder if we could ask that on a survey? ....... maybe not. Seriously though, today the percentage who do ship illegally are much smaller because there are legal solutions. More likely there are consumers who use shipping to ship to themselves, wines they can't get in their states when they visit the wineries.
- I'd suggest the small family winery is a "craft beverage" and the spirits, beer and cider businesses are following in the footsteps. All are welcome I believe.
- My greatest fear is just that Nat. Our North Coast small producers aren't going to find success selling sub $10 wines but that is a fantastic place to educate a palate and experiment. If all the wine consumed is from foreign sources, will tomorrows consumer care about US wines?
- Thanks for the props Nicholas.
- You are all welcome!! Thanks for tuning in. We we all look forward to seeing you at Silicon Valley Bank in person at some point.
- Feel free to contact me for other questions at this address: Rob McMillan.
- Please join the site at the upper right side of the page, log in and offer your thoughts for the benefit of the wine community.