Monday, January 13, 2014

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.

In conjunction with the report’s release, we also do a survey. This year we had 640 winery respondents and sliced up the data in as many ways as there is to make shrimp. Not all of that information is brought into the report but I thought I would put in a couple of those slides that were left on the deck, because they are interesting nonetheless.

Click on Chart for Better View
Here is one that is pretty interesting.  We asked wineries what they wanted to do with bottle pricing this year. Above is a slide that shows how wineries answered that question in both the 2012 and 2013 surveys. (The legend is noting the survey vintage so 2013 is referring to what intentions are for the 2014 year ahead.) When I look at this chart, I'm seeing expectations that were muted by the economy and sequestration in late 2012 when that survey was taken. Clearly more people this year want to take increases and I'm guessing, their answers reflect a bias steming from higher grape costs in conjunction with surging confidence resulting from an improving US economy. Like Forrest, wanting to be a captain and actually being one are two different things. Owners might want to take increases but can they?
Click on Chart for Better View
Another chart that was used for chum and left out of the report is the one above on labor shortages. We asked wineries to what extent labor shortages were causing issues. 35% said labor wasn't a problem at all and about the same number said it was just a small problem. The reports of the labor shortage while real - seem to be larger in the press than they were with wineries - at least thats how I read the chart. Another small bit of information: To the extent the problems were cited as being worse, they tended to center around lower price point wineries and larger producers.
Lieutenant Dan in the movie was seeking answers for why life didn't turn out as he thought it should, and I'll bet just like him, you might have some questions about the future that you want answered.... questions like:
·         What was the 2013 harvest tonnage?
·         Will sales growth be up in 2014 after 3 years of accurate predictions of decline?
·         When will Millennials make a difference in wine purchasing?
·         Whats the status and forecast of Luxury Markets?
·         What will be the strongest performing price points be this year?
·         Are we long, short, or balanced with supply?
·         What is happening with planting decisions? Are we short, balanced or long in planting?
·         Can bottle price increases be taken this year?
·         What do we expect to happen with grape contract pricing?
·         Will there be more M&A acquisitions and if so, who is for sale?
·         What’s our view of the US economy and how does that impact buying behavior?

If you're interested in those questions, we hope you join out panel Thursday morning for the Live WebEx Broadcast of the release of the Annual State of the Industry. You can register here:
What are your thoughts about the two charts above? Do you believe wineries can take bottle price increases this year? Do you think labor will be more or less of a problem in 2014?
Weigh anchor and log in to offer your thoughts to the community.





  1. Rob,

    Let me inaugurate the discussion with this question: What represents a "significant" selling price increase in the minds of respondent wineries?

    (Did they cite a percentage increase? A specific dollar range increase?)

    If they are thinking of increasing their prices on unreleased 2011s -- under attack by Steve Heimoff and James Laube for aromas and flavors attributed to mold -- then these wineries need to rethink their ambitions.

    ~~ Bob


    "An inconvenient truth about Pinot Noir" -- Steve Heimoff Wine Blog


    Excerpt: The problems I’ve encountered with rot, mold, green tannins and flavors and vegetal notes in Pinot Noirs from 2010 and 2011 are worse than anything in my previous experience. It’s been truly shocking. Erratic, too: wineries that bottle numerous vineyard-designated Pinots (as so many do nowadays) will have one that’s ripe, and another that’s green and moldy–often from the same appellation. There are some famous brands that, in my opinion, should have declassified their wines, especially the 2011s; but declassification is rare in California.

    The numbers express it interestingly:

    2011 Pinots I scored over 90 points: 127

    2009 Pinots I score over 90 points: 489

    "More on the troubling 2011 vintage" -- Steve Heimoff Wine Blog


    Excerpt: . . . “musty” and “moldy” aromas and accompanying bad flavors are exactly what plagues so many 2011s. That, and a generalized unripeness across the board.

    "The Curtain Is Dropping on California's 2011 Vintage" - James Laube Wine Blog


    Excerpt: 2011 is the first vintage I can recall where there are a significant number of wines marked by a high presence of musty and even moldy flavors.

  2. The pricing increases are a response to higher grape costs. Wineries are more in the modest increase view or hold prices as you can see above in the chart. Can they? We discuss that in the report.

  3. Anyone guess what the movie is backing up the report this year?


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