Post Lock-Down Opportunity for Wineries

The above chart from the USDA is a little cluttered, but the dotted lines show how US consumers have been moving from eating at home, and somewhere around 2011 shifted to eating away from home. Not earth-shattering observations that two-income families with complex schedules moved away from traditional family meals. But why should we care? We should care because an interesting thing has happened with wine demand in the last 7 weeks.

Crisis Management for Wine Country

I'm not alone when I say that I've never been through anything like this and didn't see it coming. I had no way of imagining such a circumstance: a world-wide pandemic that closes down the US and World economies? While I've seen shelter-in-place orders for regional issues, it's beyond comprehension that this would ever take place in as many countries as we're seeing now, or in the entirety of the State of California and the growing list of other states and regions that have similar orders.

After the string of directives this past week from state, federal and local governments that pounded down our prior realities, I spent time surveying the wine industry landscape and talked to as many people as possible to gain a sense of where we stand. 

The Email You Don't Want to Get

I have a role that puts me in contact with winery owners, analysts, entrepreneurs and occasionally even people with checkmarks next to their Twitter accounts. They run the gamut. I get a couple hundred emails a day - most of them junk but more than enough to have me working 12 hour days to keep up. People are always asking my opinion, and on occasion, they want to give me their opinion.

This week I received an email from a casual acquaintance who is a wine consumer but likes to read the SVB State of the Industry Report and check in every year with me. This year his email was disturbing. Here is what he said almost verbatim. I've changed the region to 'wine country' to make it more general and added emphasis:

Do Tasting Rooms Steal Sales from the Wholesaler?

Procter & Gamble has long been respected for it's integrated product development, integration of acquisitions, and brand marketing. Consider the number of iconic brands they hold like Ivory soap, Pampers diapers, Duracell batteries, Gillette razors, Tampax feminine care products, Crest toothpaste, Tide detergent, and the list goes well beyond that. P&G has more billion dollar brands than any company in the world ... but they don't sell wine. If P&G sold wine people would be running to their mailboxes for free samples and the TTB would not be happy about that.

Annual DtC Videocast Tomorrow - Last Chance Signup

I'm not fond of looking at pictures of myself. It's even worse when I try and grab a screen shot like the above from last year's Tasting Room videocast. Blech. Makes me sick. That looks like I'm getting ready to spit! Actually it's the end of a sentence where I'm saying 'tasting roooommmmm.' That's what I look like when I say 'm,' and it's the best I could do - I'm sad to say. But looks aren't everything. 

Current Benchmarks for your Tasting Room

We know that the average winery today has nearly 60% of their sales made direct largely through wine clubs and tasting rooms. How do we know that? Through an annual survey conducted by SVB.

If you have a club or a tasting room, how do you know you are performing at the top of the club performance, or even above the average? If I asked you how many wineries pay for data capture within their comp structure in the tasting room, what would be your guess? 

Today 168 wineries have responded to the SVB Annual Tasting Room Survey and here is the result thus far for that question:

What about the average dollar comp awarded to tasting room staff in your region. Is that of interest? How about the average tenure of a club member sorted out by average price point so you can compare your winery against a winery with a similar price point? Would it help to know the average gain in club members in your AVA last year, or what about the average number of lost members?

Each of those questions are examples of benchmarks that will be available to you for free but here's the catch: The benchmarks are only available to those who take the 10-15 minutes to complete the survey. Isn't that an investment well worth making?

When the survey is closed on March 18th, we will spend over 200 person hours completing the analysis and will then return charts, graphs, and an excel spreadsheet cleaned of any identifying information. You will be able to dig even deeper into the data if you want.

In May we will host a live videocast to go over some of the results as we did last year.

In the July issue of Wine Business Monthly, the magazine will publish some of the information and conclusions in their annual Direct To Consumer edition.

None of the above is possible without the 10-15 minutes invested in the survey itself. Please consider taking the time to answer the survey questions. Your participation will improve both your own direct program, and help the US wine industry improve.

Start the survey now: http://bit.ly/1U0KuSa 

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If you feel this content is worthwhile, please promote the link in your favorite social media platform, or even better - please forward the link to your winery colleagues and ask them to participate. 

If you would like your AVA to participate, we will also send them free Regional Benchmarks for their own use if we have a statistically significant sample size and an address to send the information. 

Replay of 2015 DtC VideoCast + Chat

Another live videocast is in the can and has already hit summer re-runs on YouTube.

Somebody will soon be sending you some popcorn for you to pare with a pinot gris, so you can settle in with your tasting room colleagues to review the findings of the Wine Business Monthly/Silicon Valley Bank Tasting Room Survey .... feedback-results, whatever you want to call it.

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.



What's the Average Starting Salary in Tasting Rooms?

I used to work in retail when I was a young man. It can be fun when you have a good dialogue with a customer but when alcohol is involved, customers like Miles and Jack in the scene above can make life pretty uncomfortable for public serving employees.

That's when you need someone behind the counter who is confident and knows how to handle those situations. And before that, you want someone who can balance sales and client experience but there is a cost to attract that kind of a person, but how much is that?

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.

The Easiest Way to Improve Club Profitability

 

While away on vacation the past few weeks, I've had some time to catch up on Dilbert which is a muse for all business revelation. The above comic got me thinking about Tasting Room compensation and specifically how staff are rewarded for new club member signups.

Of course paying for new club members makes sense because you need new members. Asking the next obvious question then .... why do you need new club members? You might think the answer is to increase your direct sales but for many the real answer is, you need new club members just to keep your wine club from shrinking.

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.

The Most Important Factor In Wine Club Success

The psychology and dynamics of consumer choice is complex. Economists can make it even more complex but one of the theories that I've always liked is the concept of marginal utility, and if you can hang with me a bit, I want to use it as a backdrop in discussing the single most important metric to track and drive wine club success.

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?

Do You Like Drinking Day-Old Wine?

My mom used to go to the Day-Old Hostess bread store. She would get apple pies and Ho-Ho's and freeze them for our school lunches. They were really good....maybe not that healthy but Hostess advertising said they were healthy snacks back then - wholesome goodness I think was the pitch line, and even day-old Hostess snacks never were stale. Of course now we know it was due to the overuse of preservatives which by themselves can cause a corpse to never decompose.

There is no Day-Old Wine Store for good reason. With Twinkies and Snowballs, freezing made the product usable on my schedule. With wine once its opened, you either drink the whole thing or risk letting the remnant oxidize. Personally, I hate oxidized wine but there's a dilemma. Do I drink a really nice bottle with dinner and have some left that might not be consumed? Or, do I drink a lesser bottle and not be as concerned if I have to dump it? Of course I can just drink the whole bottle, but the calorie thing is becoming a real problem these days .... maybe it was the Twinkies. Either way I blame it on my mother pushing me into addiction. Twinkies are a gateway drug you know.

I can't tell you how much day-old wine I've had to dump over the years. I'd hate to think about what that cost me; maybe thousands of dollars given my drinking habits stemming from my traumatic childhood. While I've not found a solution to my Twinkie addiction, I have found the solution to my dilemma of wasted wine. If you like this solution as well, there is a deal for you at the end of this blog - only for SVB on Wine readers.

 

Successful Tasting Room Metrics

 

In our second live video broadcast of the year, we focused on the Tasting Room, Wine Clubs and Direct Sales with a panel of industry experts. The entire broadcast was supported by an extensive survey, with over 500 respondents taking part from across the US. The complete results from the survey were returned to the participants. This broadcast included participants from several countries, but primarily North America. Hopefully you were able to tune into the session live from the Silicon Valley Bank studios and participated in the discussion. If you weren't able, above is the YouTube link to the broadcast.

Please log in and comment for the community at the end of the transcript with any of your perspectives and suggestions for the next live broadcast.

Is Your Tasting Room Successful?




... and your rice pudding sucks

The other day I  stopped in at Wal-Mart to get some things. While checking out, a very large woman in very tight clothes came up from just outside the store and angrily told my cashier she lost her debit card after she paid. While I looked around the floor for the card the cashier said, "Yes, I remember you putting it back in an envelope" to which the woman replied, "Its not in there. I put it in the envelope but you rushed me to get out of line. You rushed me. I want to see your manager!" 

..... Are you kidding me? I had to work at holding my tongue.

Why Join a Wine Club that Ships Adult Diapers?

I'm probably not the only man around that has a hard time giving gifts. As Dirty Harry aptly put it, "A man's got to know his limitations," and I understand that about me. Oh sure.... chocolate, flowers, jewelry, wine ... the usual accouterment I can handle. I'm not a total hack. I don't forget occasions .... well my PDA doesn't forget occasions, but getting something unique and impactful isn't that easy for me.

I'm not as bad as my dad so that's something. Even as a kid, I knew mom wouldn't understand getting a handheld blow-dryer as a birthday present. Was that supposed to be a signal about the state of her coiffure? My dad was the kindest man I ever knew so I'm guessing it was a practical gift to help her speed up her morning routine (still not a good reason ... I know).  My mom's expression which is still seared into my 7-year-old mind was like the woman to the left who was gifted Tae Bo videos. Even I'm smarter than that. A gift has to be something the other person wants or could use.

So that leads to the question of the week: Would you pay to be in a program that automatically charged your credit card and sent a surprise gift that's guaranteed to be 30% off the normal retail price, even if the company running the program had no clue about you or your tastes? Would you pay to be in that program? What if you are a healthy 40 year old and they sent you adult diapers 30% off. Is that a gift with which you'd be happy - even if it's cheap?

That's an apt description of the traditional wine club that still dominates the wine business. It's one screwed-up model at this point.

What's the One Job Wineries Can't Fill?

Click To Enlarge

According to the SVB Wine Conditions Survey we ran in late 2012, direct sales in different forms represented three of the top five areas of opportunity this year. So why don't all wineries just go head-first into the gaping chasm of the direct sales opportunity and shed the bonds and shackles of the three-tier system?

Really the whole thing with direct is a love/hate relationship. Winery owners love the higher margins but they hate figuring out the labyrinth of change required to install a top functioning direct program. To be fair, its really not an easy path with hurdles in so many areas including hardware that isn't integrated and skills that aren't available or in many cases even well defined.