Open: 2016 Survey of Wine Conditions

 

 

 

 

What's really going on in the wine business this moment? Can wineries raise prices? What's the supply situation in the Central Valley? Is there good land available for planting anywhere? Where is there too much supply? With the crush in the tanks now, winery owners are starting to think about 2016 and making plans.

 

I started researching for the Annual State of the Wine Industry Report in August and have a good idea what it's going to look like already, but I always like getting another layer of information of the current situation. So for the past decade now, I've led a survey of the current conditions in which more than 600 wineries and the major AVA's from across the country participate every year.

 

Ten years since we started this, I'm told by winery owners that new surveys now show up in email boxes every week. Thankfully I'm consistently told, "We look for your survey and make sure to participate." Why are we so lucky to get this kind of participation? I think there are a few reasons but bottom line, we keep the information anonymous, we aren't selling the information, and we give back more than we take.

 

The survey takes about 10 minutes and in exchange, we send without cost the complete survey results, dozens of relevant graphs, and our early analysis on wine industry conditions. [Last year's survey results].

 

Note the results this year will be released in early December only to those who participate in the survey. Ready to take the survey? Click on the link below.

The Highest Return on Your Time Invested

Each year I get to write a State of the Industry report that's pretty well received in the wine business. Its even used as part of the curriculum in several U.S. Colleges and Universities which my mom thinks is really cool. She thinks I should be given an honorary PhD by one of the Universities but I haven't been able to donate enough money to a place of higher learning so as to receive that kind of recognition. Der Weinerschnitzel is considering offering me a fellowship, but thats still in early discussions.

Draghi and Grape Pricing

Price and Returns of CA Grape Crop

Total Value of CA Grape Crop

Mario Draghi was in the news this past week concurrent with the Preliminary Grape Crush Report. Both are related. A weak Euro and oversupply are not the best combination. Thankfully, we are not presently oversupplied nor is the Euro weak, but where is it headed?

Cigarettes, Lot18, Fred Franzia and Wine Inventory

Have you ever found yourself disbelieving your own eyes or being flabbergasted at a decision that defies logic? For instance, what would happen if you sold all of your wine for less than it cost to produce? Or how about making legislation that made the possession of cigarettes illegal? What would you say if someone told you they wanted to try and change WallMart into Nordstrom? Those are all placeholders for a discussion on business strategies and odd news from last week.

Can You Sue A Wine Writer?

I go crazy hearing about all the idiotic lawsuits that get thrown out there. One such suit was Overton vs Anheuser-Bush in which the plaintiff accused Budweiser of false advertising by using suggestive imagery like "scenic tropical settings, beautiful women and men engaged in endless and unrestricted merriment" ... ostensibly because they were drinking Bud Lite beautiful women would just come to life from their imaginations. I know every time I pop a bud open, I get a door knock. Doesn't everyone?

Then I saw [this story] about a critical on-line review of a doctor. Apparently the defendant didn't like the doctors bedside manner amoung other things. The good doctor didn't like the review and wasn't going to take this lying down, so he sued to have it removed. Of course the brilliant doctorended up promoting the review more than the patient ever could have hoped. But the whole things got me to wondering if anyone has ever successfully sued a professional wine writer over a scathing review?


While I'm not an attorney, I believe a suit could be brought for monetary damages if a review like that were proven untrue, the writer knew it wasn't true, and it established a loss in brand or current sales. Of course proving someones own subjective opinion was knowingly wrong isn't easy.

And while we're on the subject, what about all the consumer reviews in Blogs YELP and other on-line consumer sites? Has anyone been sued for saying bad things about a wine in the Wild West of the Web? And a related question: What should you do about those types of reviews?

The Best President for the Wine Business is ....

I Lied .........

Think Its a Tight Race?

I admit it. I said last week that SVB on Wine would be going on hiatus until January while we are producing the Annual State of the Industry report. Well .....I guess I lied. Shocking! A banker who lied? I guess that makes me eligible for public office though. ....hmmm....upon further reflection ....nope .... unlike President Clinton who never inhaled but he did lie, I did inhale ... once ... as an aspiring musician but it was a job requirement. Nonetheless, that makes me unfit for public office and as a colorful Senator once said, "If nominated, I shall run to Mexico. If elected, I shall fight extradition." I mean really, who would want to run for public office these days and endure the mud-slinging and digging into the mistakes in your life? We've made office fit only for people who never made a mistake, or were never caught in a mistake.

Moving on to the topic at hand, many people seemed pretty engaged on the piece we wrote last week that discussed Argentina and the negative impact their Government has on the wine business. After watching the feisty Presidential debates this past week, I said to myself .... "Self? Which of the two candidates is best suited to help the wine industry for the next four years?"  'Myself,' predictably didn't answer me, so I've decided to go against my better judgment and toss it out for a discussion topic this week.

Argentina: Why Malbec doesn't Flood the US

There's no substitute for visiting a wine region to get a true sense for the business. Tasting doesn't tell you strategy. Reading won't describe scents in the air. A travelogue gives you no indication of the heart of the people or the quirks in customs. For that you have to visit the region.

A few months ago I was given the opportunity to speak at the VIII Foro Internacional Vitivinícola in Mendoza Argentina. It didn't take long for me to accept the invite. In the U.S. I've tried many of their wines but wasn't that impressed, probably because I've never focused on the region and generally was drinking wines in restaurants that were over priced. But the buzz over quality Argentinean wines has never waned. Some of my clients even have vineyards there. So I saw this as an opportunity to broaden my understanding of the Argentina and get first hand knowledge. What I came away with was inspiring and mind altering.

Part II: Planting Decisions Are Different This Time

Changing Patterns: You're Mad if you Don't React.

The wine industry is made of family owned companies. Family owned companies seldom last past the 3rd generation in part because the family and business conditions that support the start of a business evolve over the years. Watching the clip above from MADMEN, you see the founder ask the question, "Why can't I just build on what I have?" The answer is a reminder that your customers needs and wants evolve, and you have to recognize and predict those pattern changes. 

To survive and adapt, a leader has to get out from behind the day to day world of running the business and ask tough questions about change. Today whether you are first or 4th generation, it's time to review the horizon because while the business continues to rebound, its not and wont continue in the same way it did in past recoveries as we discussed in Part I: The Long Term Future of US Wine Sales last week.

Just what specifically will be different in this recovery for the wine business? Its too long of a topic to discuss on a Blog so much of this I'll reserve for the State of the Industry Report due out in January of 2013. But for now lets just start with one segment: planting .... and maybe a little on pricing because they are related.

Part I: The Long Term Future of US Wine Sales

Don Draper, the Middle Class, and the Mad US Wine Consumer

Economically speaking, a luxury good is one with a demand curve that's straight up and down and a commodity has a horizontal demand curve. Practically speaking there's a lot of gray between the two and Luxury for American's is easier to segment into "need to have" (a vacation camping close to home) and "want to have" (a vacation at the Hilton in Rome).

There was a time when luxury goods were that: Custom goods manufactured for the wealthy. Mass Luxury? At best that was just an oxymoron. Back in the day, lettuce was not a luxury good. It came in fresh iceberg or older iceberg. There were no field greens mixed in a gas sealed bag replete with mustard greens and escarole. But when the boys came home from a World War and the Boomers started popping out and growing up, America grew a large appetite for something more than 'need to have' products. We desired, wanted and coveted the Jones' stuff next store. An exploding middle class was the catalyst that gave the Mad Men out there license to pitch our wildest needs and wants, and we consumed our way to prosperity.

Today with a shrinking middle class, displays of wealth politically incorrect, a waning Boomer, and a $9 trillion dollar hit to the net worth of America's consumers in real estate losses, can we still have Mass Luxury goods like we used to and more important, will we be able to afford them, and even more important still, what does that mean for wine?

2012-2013 Predictions on the Wine Business

Each year I take out my crystal ball, put on funny clothes and after my eyes roll into the back of my head for a sufficient amount of time, write Silicon Valley Bank’s State of the Wine Industry Report and make some predictions. I am a most fortunate soothsayer to be able to see so much of what is largely a private industry. Silicon Valley Bank has it's own data base of financial information, I produce various surveys throughout the year with more than 500 respondents, have direct contact with clients, prospects, suppliers to the wine business, relationships with distributors and large scale farmers, academia, media and I’m sure I’m missing an angle or two. That all helps to clear up the cloudy crystal ball.

Can Wineries Increase their Bottle Prices?

Middle Class Mashed

Middle Class Wealth Back to 1983 Levels

That is a question all wineries are asking: When will they be able to meaningfully raise bottle prices and recover their margins? To get at the answer, you have to start by answering the question, what drove the prior pricing increase in the 90's into the 2000's? The answer is the middle-class and the Boomers.

The Great Recession wasn’t that great for anyone but it outright sucked if you were in the middle class. The middle class is that section of the population that was more likely to have lower savings, lower stock market exposure, and a higher percentage of their net worth centered in their homes. Since 2000, the middle class has shrunk in size, wealth, income and optimism about their future according to a recent report from The Pew Research Center. The impact of the weakening of the middle class will continue to linger and impair the wine industry's ability to pass on the higher costs of grapes for many years to come.

Can You Succeed in the Wine Business Without CRM & SM?

You are a with-it kind of person so you probably recognize the acronyms in the title stand for Social Media and Customer Relationship Management. You are so together, you probably have your Facebook and LinkedIn accounts with more than 500 of your closest friends and colleagues connected. You have a Klout score. You have a smart phone and check in with Foursquare at every occasion. You’ve even started tweeting twice a day about such fascinating things as, "Happy #FF" and "Isn't it a beautiful #DAY all my peeps." And the result of your social dalliance with SM on growing your sales is?..... Absolutely Nothing. Nada. Zip. Zilch. Zero. What is going on? Where are all those Millennials who are supposed to be Tweeting up a storm and rushing to your door. If you do Social Media, they will come! ...... won't they?

The Mystery Surrounding Lot18's UK Closure

The past week's change in strategy announced by Lot18 to close their UK efforts was curious, particularly when you consider they have been there only four months. Its a mystery worthy of Scotland Yard if you ask me. Repeated calls for an investigation have fallen of deaf ears. There are some clues however: The closure follows a couple small rounds of layoffs and the abandonment of some early initiatives directed at other luxury areas. In their press release, Lot18 suggested the reason for the closure:

‘Unfortunately, the supermarkets’ stranglehold on the UK market proved too powerful for us to compete with and we have not experienced the anticipated growth rate.’

A likely ruse it is. The supermarkets did it! They strangled Lot18 and I'm guessing the deed was done with a rope in the produce section by Colonel Mustard! Seems very suspicious to me. I called their CEO Philip James for comment on Friday but at press time there was no response so we are on our own to solve the mystery. What's the real reason behind Lot18's U.K. closure? Elementary my dear Watson.

Is There Really a Grape Shortage?

Women's Syncronized Swimming Team Drowns Trying
To Signal Help with their Legs

I thought I'd tip my lid to the upcoming Olympics in London and in this weeks edition of SVB on Wine, share a story and a revelation about market bubbles and tie that into an observation about year-end grape supply and grape market dynamics.

Let The Games Begin!

Is 7%-11% growth in US Fine Wine disappointing?

Up to the spring of 2010, I wasn't the most popular of prognosticators. Prior to the crash I started handing out predictions as I saw things, a housing bubble, large market corrections, etc. Strangely, after the first gloomy prediction my literary agent stopped getting any calls for book signings and speaking opportunities. “Call someone that's not a Debbie Downer.” I was a pariah, a leper, an outcast with the likability of an attorney from the WSWA. Then last year when I said we were at the beginning of another long-term period of growth in fine wine, the phone stared to ring. I was once again quotable and in demand for speaking engagements. What’s the old saying? Failure is an orphan, but success has many fathers? That's why it's particularly disappointing for me to throw a little cold water on the wine recovery.... but let me emphasize the adjective 'little' because its a measured mid-year course correction, doesn't change the growth forecast, and I still want to get some speaking invitations.

Neo-Prohibitionists are Alive and Well

Taxing alcohol will save us from all sorts of ills, or so many would have you believe. Here's a quote that got my attention this past week:

 "Returning alcohol taxes to their 1977 levels (when the government collected $57 in 2009 dollars per gallon of alcohol) would raise an additional $18.5 billion in revenue across all levels of government -- and also lead to reductions in drunk driving, violent crime and disease."

But things aren't always what they seem. Remember the recently concussed CARE Act? ..... "To keep your kids and communities safe." Somehow I don't think that bill was about our kids or communities. I know, call me a cynic.