The Eulogy for the SVB Wine Division

    I'm not dead yet!

Fear of the unknown is a real thing. I think it's a self-protection response. Fear puts all of your senses on high alert as if a threat were imminent. In that state, and with an absence of real information, you theorize what's happening, then make up your own story of what you would do if one of the many permutations you imagine came to pass.

When the FDIC took over the bank almost three weeks ago, everyone imagined or feared the worst. It was the unknown in all its glory. 

This has been uncharted territory for all of us - clients and employees alike. How many have experienced a run on a bank? If you operate a business, what are you supposed to do to develop a plan? Google, where all truth is located, had "bank run" trending. There's your answer.

Living in two worlds

 

MORPHEUS:  You take the blue pill... the story ends, you wake up in your bed and believe whatever you want to believe.  You take the red pill, you stay in Wonderland and I show you how deep the rabbit hole goes.

After decades in banking, I thought I'd seen everything. But last week, with a jolt to my system, I was unfortunately proven wrong. This would turn out to be one of the worst weeks in my life. I kept thinking I must be dreaming this!

Silicon Valley Bank: What comes next?

Processing

Those who've read this blog before may notice the headline slide has changed from SVB on Wine to Rob McMillan on Wine. I know I don't need to explain that change. 

This is a horrible message for me to have to write. I was asked to stay silent the past few days by SVB but now that the die is cast, I thought I should sit down and share what I know.

To start with, my employer, formerly known as Silicon Valley Bank, no longer exists. I'm still processing the whole thing, as most people are who are associated with the bank. 

On Friday morning, clients, employees, bank suppliers and shareholders all awoke to the same news: SVB has been taken over by the FDIC. For everyone involved, there is a range of emotions to process; fear, anxiety, anger, and so much more. I'm personally cycling through all of the same emotions.

The 2023 SVB Annual State of the Industry Report will be released January 18th

 Register here for the videocast, replay, presentation deck, and copy of this year's report.

Within the 2022 SVB State of the Wine Industry Survey run last October, we asked how 2022 went and got the following response. (See headline slide) 

Forty-percent of respondents said that the year was one of their better years or their best year ever. Fully sixty-five percent said it was a good year, and those results are very close to those from 2019 when we asked the same question. 

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.

Industry Sentiment Index Turns Decisively Negative

 

We've created a Sentiment Index and have run with the idea in our State of the Industry Report for the last 6 years, gaining some interesting insights along the way. The headline slide is an early read of how the industry participants feel presently, as well as an indicator of the relative impact of pain points and success factors. 

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.

Where Is the DTC business headed?

 

The answer to the blog title is the point of the Annual SVB Direct to Consumer Videocast, which is taking place this coming Wednesday, June 15th. 

You can sign up to receive the SVB DtC Report, receive a link to the live presentation, and a post-conference link to the videocast replay ----> [HERE.] 

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.

Internet Sales are dramatically higher, but how do we know?

 

Selling Wine in a Pandemic

What an insane past few years! But doesn't it feel wonderful to be moving into spring and at the same time into the endemic phase of this crisis? With fewer mask mandates now, maybe we'll be able to smell the spring flowers! But before we linger too long on the warmer days ahead, we still have some work to do. So let me take you back to the start of this crisis in 2020 when the COVID case numbers began picking up. 

At that point in time, I wrote a piece called Selling Wine in a Pandemic which is one the most-read pieces I've posted. I wrote it on March 15th, 2020 - a date that is etched in my mind and probably yours if you live in California. 

If you don't recall, that was the date Governor Newsom first issued the shelter-in-place orders and closed tasting rooms, restaurants and bars. I finished writing that blog on March 15th in the morning, but by late afternoon, I had to go back and update it when news of the lock-downs came out. 

There is good news to talk about!

 

 

Last week I had a call from a friend in the wine business asking for a meeting to discuss the Annual SVB State of the Wine Industry Report. I had no real idea what he was going to say.

When we met, he told me he appreciated what I presented in the report but didn't like the stories he'd read in the news. He thought some were overly critical and missed the positive things happening in the wine business. He asked me if I should be more positive during interviews to cast a better light on the business.

From his perspective, the industry is doing really well. That's because he sees the industry from the vantage point of a business that is hitting the cover off the ball. And to his view, a very large part of the premium wine business reported 2021 was one of, if not their best year ever!

How much did wineries make in 2021?

We all became unusually preoccupied in the U.S.starting somewhere around March 15th, 2020. I don't know about you, but the picture above was how I felt at that point in time. Since then, all of our thinking and behavior has evolved in a myriad of ways, and some of that evolution is permanent.  

I'm hopeful we are nearing the end of this queird social, economic, and health experiment. After getting sucked out of our realities by the COVID tornado, I think we are finally on the glide path that will land us in Oz. I know it won't be Kansas anymore when we lift from our comatose fog. It will be something different and probably in Technicolor. But whatever it is, it's going to be better than the last two years!

Anyway, with all the distractions since 2020, I've been remiss in posting this blog. In my defense, I thought this post probably didn't matter given the other issues we were all facing. But the smoke is clearing, the vaccines and boosters are helping, Omicron is waning, so just maybe I'll be able to shake someone's hand again without running for alcohol sanitizer.

To the point of the blog though, top-level the answer to the title question is "more than you expected."

I have an announcement to make!

I have an announcement to make!

That's always been a phrase that makes me nervous. People don't walk into the room and grab a bullhorn to offer something trivial. What follows that remark will be something big, interesting, or important and hopefully welcome! 

This utterance might precede a happy notification that a grandchild is on the way, someone is engaged, or perhaps that your new college graduate received an offer for the job of their dreams! But it's not always that way.

Signup: 2022 SVB State of the Industry Report

In the fall of each year, I pull apart the US Wine Industry into components and then analyze what's changed, review the trends, and make predictions in the Annual SVB State of the Industry Report. 

2021 will be the BEST YEAR EVER for a lot of Wineries!

 

SVB Wine Conditions Survey

Problems are Opportunities Waiting for Solutions

This is the last week to participate in the Annual SVB Winery Conditions Survey. It will close Friday, October 15th.

There is no information like this available anywhere in the wine business. We take on this initiative annually at a substantial cost, but we give it all away to the industry. This data is used by Associations to apply for grants, by academia for research and in V&E classrooms, as a benchmarking tool for all wineries, and as part of the research we do to prepare the Annual SVB Wine Report. That said, it's impossible for me to provide the information without you dedicating the 15 minutes needed to complete the survey. 

There are always interesting surprises along the way, and this year is no exception. 

As I prepare to begin the writing on the SVB State of the Wine Industry Report, I am aware of many headwinds such as supply-chain problems, fires, smoke, the unprecedented drought, low soil moisture that will be a larger part of 2022, short supply of labor, rising input costs, water rationing, issues with property insurance, dealing with mandated vaccination policies, travel restrictions, and what will likely be declining overall volume sales for the total wine category this year. 

Where Does Your AVA Stand Among its Peers?

 

How are we doing on the SVB Annual Winery Survey?

I get the question all the time at survey time. Let me update you.

With two weeks down and essentially one week left until the 2021 SVB Wine Conditions survey closes, we have 300 respondents. 

We need a minimum of 450 responses to provide statistically meaningful data but are hoping we have a more normal response above 600 wineries respond. That would require doubling where we sit today.

Each region with 20 responses or more will get its own regional benchmarks. There are only 5 that hit that mark now. Several AVAs who have been significant participants in the past include Lodi, Paso, Foothills, Texas, and New York, but all AVAs have a ways to go to get to historical participation rates, so please make this short exercise a priority!!

SVB Survey Early Results: Water Worries

 

Water Concern

The Annual SVB Winery Conditions Survey has been open for one week and will close on October 15th. We currently have about 200 of the 1,000 responses we will need for thorough analysis. You can get us closer to 1,000 responses by participating this year.

Even with low initial participation, there is some preliminary information coming into focus. 

Water is clearly a worry with 42% of responders expressing concern they may have a serious problem in 2022, while 51% are on edge but believe they should be fine (headline slide). That leaves only about 7% feeling confident about water supply going into next year which tells us for these responders - water is a real concern.

It will be interesting to test this in the spring when rain totals come into focus because from all I've read, we will need a flood year with heavy snowpack to see improving reservoir levels and soil moisture content in the western states. And what are the chances of having an abnormally wet year? The answer is in the word 'abnormal.'

So if the chances are high that 2022 will be a serious year for water concerns, what are people planning on doing about the problem?

Wine Demand is Turning Negative, Defying Good News

Photo by Mohau Mannathoko

I don't like it but...

it's true. I might have missed on a prediction that I made. 

Starting in January of this year, I began predicting that overall wine demand would grow through and into at least 2022. As the days passed, the better-than-expected situation with COVID vaccinations became clearer, so I held firm to my forecast and underscored it further in a March blog post. There were so many positives to support my faith in our industry's 2021 opportunity, how could I not be optimistic? 

The Wind's At Our Back

We are sitting with the highest GDP in decades. Fiscal and monetary stimulus from the government is being delivered in trainloads. Restaurant and tasting room sales are being added back to the calculus. Internet sales are at records. Frustrated and cooped-up consumers with exploding personal savings are desperate to spend it on experiences like travel and tourism. The jobs numbers are increasingly positive. And, the stock market is at record highs producing even more discretionary income. 

The 2021 DTC Videocast Brings Clarity to a Changed Consumer

The Report

Fifteen hundred people signed up to watch the 2021 Silicon Valley Bank Annual Direct to Consumer Videocast held on May 25th, where we released the newly formatted and constructed benchmarks and metrics from the March 2021 DTC survey. 

I'd say the broadcast went well, outside of my worst nightmare coming true when my internet died in the opening and I had to switch wireless connections. No matter. I survived one more Zoom surprise. 

The Annual SVB Direct to Consumer Webcast is Tuesday May 25th

 

    How do you sell wine in a Pandemic?

That was the question asked in middle-March 2020 as the industry, country, and world awoke to discover that we were living in circumstances that seemed more like a second-rate Hollywood movie. 

Now, more than a year into the COVID Pandemic, we have answered many of those early questions, and we’ve discovered a few things about ourselves along the way, about our ability to adapt, create, and even thrive in some cases during a period I would describe as the most difficult business conditions since Prohibition.