Final SVB Annual Survey Participation Update

 

Survey Results as of 10/17 at noon

The SVB Annual State of the Wine Industry Survey closes this coming Sunday evening, October 17th. 

The great news is there has been a strong response rate this year, and we will close with a statistically significant response size above 500 total responses. The AVAs in seven regions will receive their own comps to compare performance against the other regions. 

A special thanks to Paso Robles for their record participation this year. Napa will again cross the 100-participant mark, so once again, thank you, Napa!  

I'd still love additional responses from wineries in Oregon, Washington, Lodi/Clarksburg, New York, Santa Cruz/Monterey, and Texas. With another seven to ten responses, each of the last four named regions will have sufficient responses to have their own regional comps too.

Please promote this post on your favorite social media to get the word out for the last push!

Adding your data to this annual industry event will only take about 20 minutes. 

Here are the survey questions that you can use to prepare: Link. 

Here is the survey itself: Link.

Is this a correction, or a small road bump?

Are the industry headwinds part of a secular correction or just part of a normal business cycle?

The answer to the last sentence is essential to grasp because it helps answer another question many are asking today: "How long will this instability last?" History can provide some guidance.

The 90s were a period of rapid industry growth that encouraged growers to plant more acres to catch up with demand. When those vines hit full maturity simultaneously with The Tech Recession, we were out of balance with demand.  

The excess supply of the early 2000s was erased quickly because the Tech Bubble was one of the shortest recessions on record, the demand for premium wine was increasing broadly, and some vine acres were removed from regions growing for lower-priced wine. 

That was an example of an inventory-driven imbalance. Within a few years, the industry adjusted as part of an ordinary course, mainly due to the strong demand for wine that drew down inventory stocks. With that setup, patience is a valid strategy.

    Over the past 25 years, periods of oversupply have always occurred concurrently with increasing demand.

There have been several periods since 2000 when we were close to being balanced, but a large harvest tipped the scale unfavorably. Looking at the nearby chart, examples include 2005, which blurred into the 2008 Financial Crisis. 2018 was another large harvest that coincided with the beginning of the current slowing consumption pattern.

All of the imbalances we've experienced since the mid-1990s have primarily been caused by overplanting or large harvests, and the industry has developed solutions to cope with periods of imbalance that might not work in our current situation.

    All we have to do is wait.

I was at lunch with industry friends in the spring when we debated this question: Is this just a normal cycle that we can wait out, or is it a secular demand shift that needs new solutions? 

My friends held strong views that this was just a cycle and everything would right itself in due course if we were patient. That belief is only partially right, in my opinion. 

All market imbalances eventually correct themselves, so that portion of their view was correct. However, patience doesn't always produce the desired outcomes. That's the part they missed that day. 

For at least a decade, I've been told that we just need to wait until younger consumers mature, and at that point, they will adopt wine like the boomers did before. That strategy has yet to correct declining demand. 

I've also been told that wine always goes better with food than other alcoholic beverages. While I agree, taking it as an unchangeable attribute has helped shape beverage lists that creatively include alcoholic beverages other than wine. 

In the 1990s, wine received a great gift in science: science proved that moderate consumption has some health benefits. We reacted as if the science was settled and did nothing as an industry to protect that gift. In contrast, the anti-alcohol movement did everything it could to chip away at that uncomfortable truth.

If we wait, supply will certainly adjust on its own. We've already seen that happen with some winegrapes going unpicked in every AVA on the West Coast this harvest. We all know what happens when grapes aren't contracted. The grower will lower the price to find a buyer, or they will remove the vines. Waiting, once again, isn't the right strategy.

    What we're experiencing today is different from past supply imbalances. 

This is not a small road bump. We are experiencing the first demand-based correction since the 1980s, the underlying trends of which were called out in the 2018 SVB State of the Wine Industry Report. 

Inventory imbalances can be corrected quickly when there is increasing demand like we've had for the past 25 years. Today however, demand for wine is declining - not for everything at every price point, but there are better strategies than waiting. This secular correction will take longer to rebalance compared to past imbalances unless we collaborate as an industry to regain our foothold with consumers.

Will there be a Silicon Valley Bank DTC Report this year? It's looking doubtful.

Without greater participation this last week, there will be no SVB Direct to Consumer Report produced this year.

It's always difficult to get survey participants. This year the effort had a higher degree of difficulty because the bank failed. I'm sure you heard that news. 

Three weeks later though, we were purchased by First Citizens Bank, and we are today operating as Silicon Valley Bank, a division of First Citizens Bank. 

During that dark period when we were being run by the FDIC, we literally had hundreds of people encouraging us to find a way to continue producing the gratis information we've done for more than 20 years. Because of that encouragement, with the ownership question behind, we decided to produce the Direct to Consumer survey and report, a month later than usual. It was the industry encouragement that was the deciding factor. 

SVB Annual Survey Extended 3 Days

 

We are so close to meeting the participation goal in the Annual SVB Wine Industry Survey but are still about 10% short of the responses we need to produce good results. We are extending the survey for three more days so we might reach our goal.

Annual wine industry survey results - one week left to participate!

There is one week remaining to participate in the Annual State of the Industry. This annual effort is an industry partnership. SVB provides all the work for free, but we have to have good participation to have useful results. 

Currently we are running about 30% behind last year's participation metrics, with all regions short of expectations. Here is a link to the questions and here is a link to the survey.

Here are some early high-level indications of results in a variety of areas:

• Financially wineries describe the 2022 year as "good year." (Not bad and not great)
• They describe their financial position as strong.
• Better than average grape quality
• Lower than average harvest yields
• The impact of the economy is described as having the largest negative impact 
• The Winery Confidence Index produced through the survey is running negative overall.
• Wineries expect to show a small bottle price increase when 2022 is wrapped up.
• Tourism is generally welcome in 'wine country' despite small vocal opposition that gets over-weight attention in the press
• Wineries are improving in the use and analysis of their own consumer data
• Tasting rooms have rebounded strongly since reopening
• There is moderate interest in acquiring new vineyards
• Four percent could not get insurance, while close to 50% saw rate increases, with a third of total respondents saying their rates increased and their coverage decreased
• Sixteen percent say the drought has reduced yields and they need to find new supply,
• Eighteen percent say they have the potential for a serious supply shortage without rain in the winter of 2022/23
• The supply chain problems have impacted most wineries, particularly for glass but across the board
• Regarding climate change, most say that "it's producing a moderate negative impact on operations causing notable fluctuations in business results but is survivable."

I'm looking forward to producing industry breakouts with better participation. At this stage that's not possible.

EXTENDED - The SVB DtC Survey

The 2022 Direct to Consumer Survey Has Been Extended

As of the scheduled closing date of Friday the 18th, we had a little over 400 responses, but 65 are from Canada. And while everyone loves Canadians and is happy for their success, the USA only has about 350 responses when we need 500 U.S. responses to get good statistical significance. 

To get beyond the 150 U.S. responses we still need to produce results, we are extending the survey a week. It will now close Friday, March 25th.

You can see how your region is performing thus far in the headline slide. (Please click on the chart to get a better view.) We need a minimum of 12 responses to break out your region's comps.

In a change - You Can't Get The Survey Results or Presentation Slides Without Participating

Only survey participants will get this information. It can't be purchased. At the end of May, we will broadcast a videocast to the industry and go over the new findings with other industry experts. But we will not be releasing the slides from the show - unless you participated in the survey.

All of our efforts are done on a gratis basis to help the industry make decisions, but it's a partnership with you. If we don't get survey responses, we can't produce this industry resource. 

Please make this a personal goal to participate this week. The choice you make regarding your participation in the survey will have an impact both on your operation and the industry as a whole.

This year the survey has between 24 and 33 questions, depending on your business model. It should take you between fifteen to twenty minutes to complete and even less if you are a little prepared. If you would like to see the questions in advance, you can download and print the questions here.

Are you ready to participate in the survey this year?

Please promote this post on your favorite social media platform, or even better - please forward [this link] to your winery colleagues and ask them to participate. It does take everyone's effort to make this outreach a success.

If you would like your AVA to participate, we will also send the participating AVAs free regional benchmarks for their own use, presuming we have a statistically significant sample size to analyze.

Why Am I so Optimistic about 2021

Opportunity Knocks

Ebullience! That's a word we haven't heard much in the past year. But I predict that's only the start. You might soon also hear such rare terms as buoyancy, vivacity, and euphoria bandied about. 

Count me in the camp that is exuberant for the opportunity presented to us in 2021 - 2022. I can't wait to work again in a group practicing social nearness sans masks as in the headline picture... though my vision of tomorrow has a nicer desk than the headline picture. Why so cheerful you ask?

I covered some of the information in this post when we announced the opening of the SVB 2021 Direct to Consumer survey. 

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. 

Is this the Last SVB Industry Survey?

Images from Pixabay

I am trying to put the pieces together to arrive at a decision to continue or discontinue the Annual SVB Industry Survey, and I need your help to decide.

Almost 20 years ago I recognized there was a severe lack of good data and benchmarks, so I came up with the idea to start an industry survey. It was a novel concept for the era and was immensely successful. For the first time, small wineries had real business information to help in decision-making.

We gave the complete set of information and analysis to respondents and also used it to formulate pieces of the SVB State of the Industry Report. We've been fully underwriting the effort at substantial cost and producing results free of charge ever since. It has to be a labor of love on our part. I don't think anyone would confuse it with a for-profit initiative! But we are at a crossroads.