Annual SVB/WBM Direct Consumer Sales Videocast

      Lots of Shades and Few Patterns

When I wrote the business plan for Silicon Valley Bank's entrance to the wine industry in 1992, I did so largely from a researchers perspective, as I had only modest prior industry experience, and by the time I authored the plan, the industry had completely changed.

I discovered in the process that there were conflicting industry opinions from many of the experts and little research available to support those opinions. The research that was being done was being created by researchers in Chicago and New York; far from wine country. There was almost almost zero street-level intelligence, with the exception of the work done by Motto Kryla and Fisher and Gomberg, Fredrikson & Associates.

As an analyst back then, deciphering the wine business was like trying to see patterns in the lead picture: Plenty of pop and thousands of brands, all trying to find their way in a crowded landscape. Every winery's nozzle was aimed in different directions - region, varietal, wine style, consumer, path to market, consumer segment - because strategy was too often supported by guess work.

That induced me to research and produce my own information for our customers - and the wine community as a whole. The upcoming videocast: Insights for Successful Consumer Wine sales is one such example. --> [signup here] <-- 

      What's the Greatest Risk Today?

The wine business is far more complex than people think. It's a maze of complexities with different models, varying paths to the consumer, pressure from federal, local, and state regulations, a lack of good information, controlling power in a small numbers of hands and changing consumer demand. Oftentime decisions are made with the love of the product in mind, versus a business decision being made with financial returns in mind.

Perhaps the greatest risk we should all be most worried about is our tendency to continue on on a path that's successful. If it works, we keep riding the trend as far as we can, until the strategy fails. In an industry that takes 5 years to get a fully mature yield, shouldn't we be making decisions with a view to meeting the future instead of reacting to the present? Where will things be in 5 years? I guarantee the industry 5 years from now will look very different than it does right now, so the strategies that are starting to wobble today, will be on life support five years from today.

With that in mind and the new SVB DtC Survey now complete, there are many things we'd like to bring out and discuss, including current insights from the survey as well as marketing solutions to consider. This is a time where we need people to grasp the issues, and participate in the evolution of the business and consumer. Getting out ahead of this evolution is where you will find opportunity for growth. 

      Understanding is the Beginning of Change

What are some of the changes we are seeing in this year's survey?

There are more tasting rooms being opened today versus wineries, as a result of the shift to direct to consumer sales, but since 2013, there are fewer of both being opened.

Tasting fees which have been increasing for years are now leveling off; a sign that tasting fees have reached the point where they may be discouraging good/new customers.

After years of seeing increases in by-appointment tastings, the percentage of pure by-appointment has dropped in favor of a mixed model, accepting both walk-in and those with appointments, with respondents suggesting the mix of tastings is also going more of a blend of formal and casual, reflecting consumers with split preferences - some preferring casual and others formal.

  Live Direct to Consumer Videocast

I hope that's enough of a teaser to get you to sign up for the annual SVB/Wine Business Monthly Live Videocast, where we will offer more dialogue on many new findings, along with a lively discussion of solutions and strategy.

In addition to myself and Cyril Penn, included as new guests this year are Tammy Boatright; a person with more than 20 years in direct marketing and winery management and Lisa Kislak with decades of experience in white table cloth restaurants applying data to drive marketing decisions.

Please [register] for this year's live telecast which will take place May 22nd at 9:30 Pacific Time. Joining live gets you into the chat room where you can ask questions of the panel, and discuss with wine people from across the globe. 

Even if you can't make this time, registering will get you the link to the videocast replay when that's available.

This year's panel will include:

        Tammy Boatright - President, VingDirect

        Lisa Kislak - Chief Marketing Officer of Crimson Wine Group

        Cyril Penn, Editor in Chief, Wine Business Monthly.

Date:   May 22nd, 2019

Time:  9:30 am - 10:30 AM Pacific Time

Louis Vuitton: A Story in Brand Destruction

 

Rome: The Eternal City

My fiance Jackie and I just got back from a spectacular 2 week wine cruise with Darioush Winery that started in Lisbon and ended in Rome. 

I've never been to Rome so we tagged on an extra 5 days at the end of the cruise to see the sights. 

There is a problem in going that extra week though. I don't care how big your suitcase is. By the time you've lived out of it for 2 weeks you are flat out of clean clothes so selecting something to wear becomes a challenge.

What I underestimated is just how that challenge could impact our shopping experience at one of the world's top luxury retailers. Ask yourself as you read though, 'could this happen at my winery?'

SVB Direct to Consumer Live VideoCast

 

Live Video Conference:

 

Tuesday, May 12, 2015

9:30 a.m. – 10:30 a.m. Pacific Time

 

Please join us for an interactive video discussion of Silicon Valley Bank's 2015 Tasting Room Survey. This promises to be a lively conversation as SVB's Rob McMillan reviews survey results and interprets industry trends in the Tasting Room and the larger Direct To Consumer chanel along with a panel of experts.
 
Sign up for the presentation and receive a link to the replay and the complete results of the Silicon Valley Bank 2015 Tasting Room Survey after the webinar.

Speakers:

• Sonyia Grabski   Vice President of Sales & Marketing, Sullivan Vineyards
• Rob McMillan   EVP & Founder, SVB Wine Division
• Cyril Penn  Editor in Chief, Wine Business Monthly 
• Craig Root  Founder, Craig Root and Associates 

Join Us On Twitter:

Follow Rob (@SVBWine) on Twitter and join the conversation before, during, and after the webinar by using #SVBWine.



Should You Ever Discount Your Wine?

 

I'm betting nobody knows who Thorstein Veblen is. Like this picture, you have to be a little cockeyed to know him; be a Jeopardy Champion, enjoy thumbing through pictures of people who look like axe murderers, or maybe you are an economist with little to do with your free time except refresh your memory about a Veblen good?

 

One on-going debate in the wine business where Veblen's theories play a role is price discounts. Should you discount, and if so when and by how much? To get at an answer we'll review some economic basics. (... I know how exciting that sounds but stick with it. I won't kill you with math.)

Should You Enforce Your Wine Club Contract?

 

On occasion I get suggestions about something on which to blog. I really appreciate the ideas and use them when I can. This past week I got an email from a follower who suggested I post on their experience with a disgruntled wine club member. The review they got in YELP is a good place to start:

"The wine club is a total scam! I only wanted the wines that weren't in stores so I was told I had to join their club. I didn't want to but I got a discount on the wine. Once I got my first shipment which had all the wines I wanted, I just cancelled the club. Then the as*****s charged my credit card without even telling me! I was like, WTF? and was told by some bitchy tasting room person that I signed a contract that said I had to give back the discounts if I didn't take both shipments! Like who reads contracts? And just because I quit their winery, they didn't send me concert tickets they said they would."

ACME Winery

For the second week in a row I'm asked to anonymize the winery. So we officially have a trend keeping the semi-innocent anonymous to protect the wicked. But in this case, there are some things I can tell you about this winery to give you a flavor of their business model and their side of the situation:

• They are 100% direct to consumer - nothing is sold wholesale
• They sell less than 7,000 cases
• Their average wine sells for $60 per bottle up to almost $400 per bottle
• Half of their wines are completely allocated and in very high demand - selling for double the retail room price on the secondary market.
• Their wine club contract requires a one-year commitment and if cancelled in the first year, the discounts have to be repaid to the winery. That part reminds me a little but like the old CD clubs.
• They include concert tickets for new wine club sign ups but in this case the shipment was made and the customer quit before tickets could be sent.

 

Business Would Be Fine Except for the Employees and Customers

 

So how do you handle a consumer like this who games your wine club agreement? My response is to change your system.

Over the years I've talked to numerous wineries who tried to sell a wine in lower demand in exchange for a consumer getting their hands on an allocated or high scoring wine that was in high demand.

To my thinking in brand building, you really want to make wines that are in demand, and build demand for all your SKUs. Getting a consumer to take a wine they don't really want doesn't build demand for that wine. It may even have a negative impact on how your overall brand is perceived.

Think of this analogy: You find a really awesome pair of custom made Italian shoes in your size, but to get them from the manufacturer, you have to buy a second pair of shoes that are ugly and don't fit.

If you are the buyer, you give zero value to the ugly shoes that don't fit. That means for you to feel like you received fair value for the purchase, you had to feel the price you paid for the package of shoes would be fair either with or without the second pair of shoes.

To go a step further, you may feel that the second pair of shoes has negative value because you now have to go find someone who likes the style of the second pair and has the right size foot. That's going to cost time and effort. If you are making those shoes, what you really want to do is identify a consumer who values ugly shoes in that size. ( .... hope that didn't take analogy too far ... )

 

Is the Contract Legal?

 

I can totally relate to this frustrated winery owner. I didn't mention it, but they did in fact send the concert tickets to the consumer too. So they totally lived up to their side of the deal and got hammered in a review for their trouble. Was their contract legal? Could they charge back the customers credit card for the discounts?

A wine club contract can be a legally binding agreement but that's really a red herring. The practical reality is if you are talking about contract rights to a wine consumer, you are well past building your brand and off topic.

I'll probably get kicked out of the Bankers Union for saying this, but I don't think contracts matter that much. You can have a legal right to something, but in the end what really matters is how you do business, no matter what a contract says.

 

If a social media review is unfair, shake it off. You wont please everyone. Some people are just unhappy and carry a chip on their shoulder. But negative truthful reviews are an opportunity to check on how your business is done and improve. Is compensation motivating the right things? In this case, is the tasting room staff messaging the club program effectively so their are no surprises.

 

Responding To YELP Reviews

 

I feel as though the question of what to do with a negative YELP review has been discussed sufficiently in the blogosphere, but the short treatment is: 1) You can respond as a business owner to a negative review. 2) You can't have a review removed unless the post was a violation of YELP's user agreement but good luck with that. 3) You have no right to have your brand removed from YELP. 4) Don't pay a company who says they can remove negative reviews. They can't.

 

If the reviewer seems crazy, ignore it but if the reviewer sounds reasonable respond to it and show you really do care about providing good service. Interestingly though, for some unknown reason most wineries I checked this week don't respond to reviews at all. You can also encourage people to write reviews which will push the negative review from the front page at least.

 

Finally - thanks to the anonymous winery for suggesting the topic. Hopefully they will get some good thoughts from the community.

 

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What are your thoughts about wine club contracts? What advice can you offer this winery regarding their approach? Do you have any similar customer service stories to share and if so, how did you handle it"

 

Please join this site at the top right of this page for updates and new posts, sign in and offer your perspectives for the benefit of the community.

 

If you think this information and discussion is valuable and want to spur additional discussion, please share this post on your favorite social media platform.

Should You Push Brand PR in a Natural Disaster?

The answer to the title this week is: It depends on how its done because the stakes are raised and if you screw up the message, there's a larger opportunity to end up with scrambled egg on your face.

 

This past week has been pretty hectic for me and all my neighbors who live near Hess Winery. Early Sunday morning I woke to my fiancée screaming in my ear and the bed jumping like ping pong balls in a bingo parlor. Pitch black since there was no moon, I jumped up but couldn't find shoes or a flashlight. No matter, I had to move alacritously to see if my mom was alive in the back 40. With nothing to illuminate my path, I slid barefooted through all my shattered Riedel stemware - brail style, then maneuvered my way through the maze of furniture which had moved around like Tetris blocks.

 

2014 Secrets of A Successful Tasting Room

 

 

Over the last couple of months we've discussed some of the results from the SVB/WBM tasting room survey. There have been some fascinating discoveries and the ensuing discussion has been equally rich and enlightening. Wine Business Monthly published an article in the May Edition of their publication discussing some of the findings.

 

To finish that up, On May 15th we presented a live video telecast from the SVB Studios in Santa Clara California discussing findings of the survey. To improve the dialogue and give it added color, in addition to me and Cyril Penn, Sr. Editor of Wine Business Monthly, we also included two front line people: Mary Jo "M.J." Dale, VP of Marketing and Consumer Sales at Crimson Wine Group, along with Lesley Berglund, Co-Founder and Chairwoman of WISE Academy.

 

While biased, I think you'll agree the added content of the live video chat presented a wealth of current information and advice for the direct wine business. If you're interested, a reply of that event is available by pressing play in the above widow.

 

There we're a lot of questions from the 650 people who tuned into the event. The chat also contained a lot of exchanges between people who attended the live event. As is common in the wine business, there was a lot of winery helping winery. The full version of that chat can be found [here].

 

As promised, the panel took on many of those questions in the following redacted transcript. We hope you find the Replay, Tasting Room Slide deck, and the follow up questions below helpful in developing your own club and direct programs.

Are Standing Tasting Bars Better than Seated?

“Today, our bodies are breaking down from obesity, high blood pressure, diabetes, cancer, depression and the cascade of health ills and everyday malaise that come from what scientists have named sitting disease.”~ James Levine, MD, PhD

The votes are in and the reality is even with exercise and moderate wine consumption, the cumulative negative impacts of sitting behind a computer or gaming station can't be overcome by drinking more wine or with normal exercise regimens. That is really scary for people like me who work in an office. On the other hand, there is growing agreement that employees who work standing are not only more healthy, but they are more productive and creative than those who sit. That being the case, you would all of course naturally conclude that retail room sales people working in a standing bar should have a higher success rate converting visitors to buyers compared to sales people working in a seated venue. Of course you would conclude that ....

What Percent of Tasting Room Visitors Buy Nothing?

Ridding the World of Melon Squeezers

Melon Squeeezers

One dark and stormy night (yes I used that one) ...early in my banking career in Mendocino County, I attended an internal banking event where Jim Miscol; one of our senior executives would speak. He told us what a great job we were all doing then asked us to help change the culture of the Bank. He said we needed to "get rid of melon squeezers." What in the heck was he talking about? I had no idea where he was going but my mind started racing to possibilities.

He went on to explain his comment by talking about a grocery store he banked in a retirement community. The store was carrying too large of a waste/spoilage factor in the produce section. As it turned out, the store had evolved into a social gathering place for seniors who would walk the isles with an RC Cola, freely sampling grapes and nuts like it was a smorgasbord, and squeezing melons and peaches while talking to friends. It was the analog prequel to SeniorMatch.com. The store owner was at a loss on how to address the problem without chasing away his customers. How would you handle that situation?

Bra-Burning Feminists Drive Wine Sales

The business world moves in cycles, and if you live long enough you start to see them repeat. Today the popular press is replete with articles hyping the Urban Millennial Myth.

It's the older tradition-loving Boomers who have become accustomed to Madison Avenue solving every need, want and desire - versus the edgy up-and-coming Next Generation. The Next-Gen is nothing like you've seen before and you need to get current with your marketing or you will end up on the losing end of the stick.... or so many would have you believe ... except its really a repeat of a cycle we've seen before and we can see the outcome.

Boomers today drive wine sales and its the women Boomers who are the primary wine buyers according to many studies. Those were the same bra-burning feminists that were labeled as radicals back in the 1960s and early 1970's when they were Millennials. They were nothing like we've ever seen before either .... well .... there was Susan B. Anthony in a prior cycle but that's another story.

If you decided to craft a label to attract Millennials today, what would that look like? The press tells us Millennials are adventuresome, irreverent and demand transparency, sustainability, and authenticity. What about their desired product attributes in a wine purchase? What do they want?

An article that came out last week says Millennials are looking for non-pretentious products, non-traditional packaging, simple wines at an affordable price that speak to them; each are reported solutions for cracking the Millennial Code and developing a successful wine marketing program to that untapped pot of gold at the end of the cohort marketing rainbow.

Rima Fakih (Photo courtesy of Miss Michigan USA)

A restaurateur who targets Millennials, answers the question within the article noted above by talking about how he decided to create wine lists that ...

"...flout the bureaucratic rules that dictate how wine should be made. It’s an eclectic, slightly subversive list with a decidedly anti-authoritarian bent."

The description of Millennials and what they like sound eerily familiar ... non-traditional packaging, simple wines at an affordable price.... transparency, authenticity, adventure, irreverent behavior.....

What's the Surest Way To Fail in Business?

This is my 50th post and I'm celebrating by taking a vacation and am writing this morning from my hotel balcony on Waikiki. That was an unabashed I'm-having-more-fun-than-you comment..... and I'm clearly warped to be writing on vacation... Anyway...

Going through graduate school I took a class in Organization Behavior. I liked the class because it was high-level and covered a number of important theories, and yet - the title of the course always bothered me. It seems like such a non sequitur. It's as if an organization has feelings or predictive behavior, and of course, it doesn't. Organizations and wine producers for that matter are made of people with feelings, perspectives, insecurities, and values. While marketing, sales, production, viticulture, and administration are all important parts of running any wine company, in the end without an established business culture used as a touchstone for behavior and decision-making, the other disciplines will struggle or even fail no matter how awesome the product or strategy. Leaving a company's values unclear or believing everyone just knows what you stand for without talking about it is the surest way to fail.

Are You Adjusting Your Marketing To Boomers?

Never Bet Against A Dog That Tells You They Can't Play Pool 

 

"If you aren't starting to make some adjustments in your current marketing strategy to Boomers, you will lose your most important current wine buyers sooner than you think, and another winery will pick that consumer up who will adapt to their changing preferences."

 

 

 

My mother plays pool, has an occasional nip, likes pink and is a dog. She's actually a wonderful person, but I've been trying to break her from nipping for years. Now it seems the years themselves are actually slowing down her nipping, which isn't good for the wine industry when considering her in terms of her Mature Cohort. A non-nipper wouldn't be the person a winery should try and attract. (Don't play pool with her either.) 

My mom can nurse a large bottle of moscato for a month. Obviously if she is representative of her generation, when it comes to developing a strategy to attack the geriatric set there are probably better places to invest your precious resources. But if you listen to many in the wine press, they will say its the Millennials. I believe if you sell fine wine and that's what you are going to do, I suggest you would be better off investing in my mom's cohort today because they can at least afford your wine, if you can convince them to buy it.