Predicting Higher Demand for Wine in 2021. Part II of the SVB Videocast

    The Case to be Made for a Party 

At the end of Prohibition in the U.S. the consumption of wine as measured, slowly grew until war was declared in 1941 and rationing took over everyday lives. Whiskey distilleries were repurposed to produce grain alcohol for torpedo fuel, which interestingly created unintended consequences of new cocktails for sailors and higher rum consumption in the U.S. Fifteen percent of total beer production was allocated to servicemen and while wine wasn't rationed, prices of alcohol increased during the war making it difficult to afford a bottle of anything, so wine consumption fell. 

Imagine the exuberance at the end of 1945 when WWII came to an end, completing a fifteen-year period that spanned the 1929 Market Crash exacerbated by the Dust Bowl, leading to the Great Depression, food lines, increased poverty and homelessness, and high levels of unemployment. 

On August 15th, 1945 with Japan's surrender and acceptance of the terms of the Potsdam Declaration, there was hope those unhappy times would soon be behind the country. The sacrifice of the Greatest Generation had paid off and the men and women in the military would soon be coming home! Life would eventually return to an altered normal - but a much better one full of peace and hopefulness.

As the soldiers were brought home starting in 1945 with those in the European Theatre under Operation Magic Carpet, a rolling party broke out on the homefront. It is estimated that 1946 per-capita consumption of alcohol reached pre-prohibition levels of 2 liters per capita. Wine became a beverage of interest for many of the returning service members who had experienced European wine.

SVB Annual State of the Industry Report and Videocast is Wednesday. Sign up!

 

    We're All Glad that Year is Over

2020 will go down as the year in which we answered the heretofore rhetorical question - What else can go wrong? That is the opening line from the 2021 SVB State of the Industry Report that will come out Wednesday the 13th. 

Throughout 2020 many of us experienced the same run of emotions from disbelief, fear, acceptance, determination, and occasionally even a bit of joy through one of the most difficult times in history. As we went through the year, we would think to ourselves - this has to be the worst of it. It has to get better from here? 

We all fought through a series of events, increasing our vocabulary along the way: Coronavirus, COVID, S.I.P. Orders, social distancing, Zoom meetings, herd immunity, PPE, and pandemic - which I thought only happened in bad science fiction movies before last March.

    Will 2021 Be Better than 2020?

I can say with absolute confidence that 2021 will be better than 2020, but I can also say that “normal,” when we get there, will be different from what we left. But we have lives to live and businesses to run so let's get to it! 

Despite the headwinds and distractions, there are opportunities we need to consider and take advantage of and consumers who will be looking to buy your wine. 

We need information and the right tools to be able to plan. While we have to talk about the past for context, this coming Wednesday, I hope to give everyone the benefit of a look forward.

Start with the headline slide for a teaser. Despite the gloomy events of the past year, luxury wine sales held their own, particularly when you consider this performance in context with the last recession. The last recession featured trading down. This recession has given a breath of life to trading up again! Aren't you curious why?

The Annual SVB State of the Industry Report is Arriving January 13th. Sign up for the Webinar and Report!

 

This is the opening photo from the 20th Annual SVB State of the Industry Report where we begin with a reflection; not on our industry, but on how we each as individuals adapted and prevailed during the most unique business conditions in our lifetimes. 

It's important to celebrate this victory but now that vaccines are being given and we can see an end in sight, what's next? Will business conditions return to normal? 

If we answer that question truthfully, the answer is no. That means doing nothing and hoping for a good year will produce poor outcomes. Change is needed and will require all wine businesses to apply the learnings from 2020 and evolve to find the unique prescription for your individual winey's success.

Early Results / Last Chance: SVB Survey Closes Sunday Night

This year will be remembered as the year when we actually discovered the answer to the question: "What else can go wrong?" 

I can safely speak for humanity and say that nobody wants to repeat this year. There is so much we had no control over, and what we experienced wasn't always the result of our action or inaction. Still ... here we are; moving into 2021 with increasing and record numbers of  COVID cases in the US and more solutions needed for the pandemic and for our wine business. We clearly need to look for more solutions to our problems.

But I have no doubt we will survive and rebound as an industry - maybe even thrive if we make some adaptations that I will discuss again in the Annual State of the Industry Report. But all of that starts by understanding where we are. That is the beginning point. For me, understanding the business starts with the Annual Winery Conditions Survey. 

    Last Chance

The 2020 Wine Industry Survey will close Sunday night, and as of this moment we have almost 550 wineries responding versus our typical 800. For us to understand and get to the beginning point we need good tesponse rates. With weaker response rates, your 15 minutes investment in the survey has never been more critical. 

For you that have yet to respond, there is still time. We will leave the survey open until late Sunday night. Here is a link to the questions in PDF, QUESTIONS, and here is a link to the actual survey, SURVEY. 

If you are curious, here is what the regional participation looks like weighted by the number of wineries in the given region

(Click To Enlarge)

Special thanks to all the AVA's for participating and sending out encouragement to their constituents to participate. In particular, Washington, Oregon and Paso Robles each sent stand-alone emails from their Executive Directors in the past 36 hours and the numbers in those regions have come up. I've seen some movement from other areas particularly in San Luis Obispo, Napa, Sonoma, and Santa Barbara but don't always see what's happening in the background.

Thank you all for your efforts in this partnership without which, there can be no SVB State of the Industry Report - so thank you!!

What is the Industry Reporting for 2020 Results? The SVB Survey Has Early Returns [Still Open]

While the unprecedented impacts of the Pandemic and wildfires have rightfully absorbed the attention of the media and industry participants, the basic marketplace challenges I've reported in the 2020 State of the Industry Report are still alive and confronting the industry.

Data and information has never been more important than today. Changes to consumer behavior emanating from shelter in place orders, a recession, and the ruination of restaurants in America among other factors, are creating new changes for wineries, and yes - new opportunities as well if you listen and plan.

The Twentieth Silicon Valley Bank Winery Conditions Survey presents a view of business conditions sorted by region, average bottle price, time in business, and other filters, all to give participants an accurate read of the current industry, and all gratis to participants. The Survey is drawing to a close next week. If you haven't yet participated in this study, I encourage you to do so. Only participants get the complete set of anonymized data and analysis back, at no cost to participants for an investment of 15 minutes of your time. 

PLEASE - will you personally support the wine industry by committing to participate this year? 

Here is a link to a PDF file of the questions to prepare, and here is a link to the survey itself.

OPEN: SVB Annual State of the Industry Survey

Spring, Summer, Fall, Planning 

Winter is a time for planning - and do we ever need to plan! But where do we start? 

Are we oversupplied still? Do we even know if wine sales are higher or lower? How should we position next year when we put our business plans together? Should we forecast for higher or lower sales? What do we know now? 

BW166 has concluded wine volume entering the wholesale channel is up 4% as of August 2020. SipSource, a database using wholesale depletions has wine volume combining both on and off premise down 1.3% year over year though June. Wines & Vines Analytics concluded that Direct Shipments through June were 29% higher in volume. 

Where is the consumer in all of this? What is driving demand? Are we up or down? The reality is - the future is not yet clear, but I hope to change that. 

The Real Threat to Wine Sales is Being Ignored

 

While we've been fighting the Pandemic, another public policy battle surrounding health has been quietly fought in the shadows, the goal of which is to reduce or eliminate wine consumption by painting it as cancerous and unhealthy. This battle has been going on for a very long time, but the wine business hasn't responded or pushed back on the subject for 20 years.