Is it the Right Time to Start a Second Label?

 

Can I have Seconds?

 

It's that time in the cycle again. We are between balanced and long on grape supply in certain varietals and regions and we're facing an unprecedented 'three-peat' of great yields and quality in California after the upcoming harvest. The dearth of balanced supply with inevitably be the dearth of some business models over the next several years.

 

One consequence of these types of atmospherics is that clients start calling to ask me about the availability of financing and want my thoughts on the wisdom of starting a second label. That's an idea on its surface that might seem to be a low-risk proposition - after all, you have been blessed with inexpensive grapes or available bulk - but building a business strategy on a temporary supply issue can make an already bad situation worse in most cases - but not all.

 

There are some instances where starting a second label makes a lot of sense, so please email me if you're a client and want to talk about your specific case. But for the benefit of others in the wine community to spur a little discussion hopefully, here are several real stories of wineries who faced the decision to start a second label in the last 15 years and some examples of success:

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.

Anti-Winery Sentiment is Building

 

The Winter of Our Public Discontent

 

 

John Steinbeck

Consistent with the farming traditions of the past, the wine business has long been known for its collegial, collaborative, and giving ways. There are always exceptions but people in the wine business historically have worked together for the common good of all.

What Will The Wine Business Be in 20 Years?

 

Its been pretty amazing to see the changes in the wine business in the past 20 or so years. The ways in which the business is different today would make today's business unrecognizable to someone pulling a Rip Van Winkle and waking to see what the business has become. No longer the pioneering slow-moving cottage industry, today the business is moving forward at an ever quickening pace.

 

One thing that was unimaginable even a decade ago would have been 'for sale' signs on a winery. Today its not that uncommon to find real estate professionals handling smaller winery and estate transactions, or straight vineyard sales. Similarly, a decade ago there wasn't much in the way of dedicated M&A advisors handling winery transactions. Silicon Valley Bank made an early attempt at it but couldn't really make it into a business. Today depending on how you count, there are between 3 - 5 dedicated practices selling winery properties. Makes you wonder where the business will be twenty years from now?

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.

Supply 2014: Is it Too Much or Not Enough?

This is the time of year when we all hold our breath. In California, some vines are flowering and some are about to. We are mostly out of from the threat of frost but not entirely, and clearly we are not out of a threat from rain in this era of seemingly increasingly unpredictable weather patterns. Nobody likes to see their crop impaired or ruined but this is a year in a macro way, we really wouldn't mind seeing a reduced crop load, as long as it doesn't come in our own vineyard holdings. It depends who you read these days in getting a read on the grape markets.

Fraud In the Wine Business: A Repeating Story

Is Anyone Looking?

The wine business is filled with hard-working owners who are passionate about their craft. Never has there been an industry who's owners are more willing to work for almost nothing, just to be in the winery club. No matter if you came in as a farmer, financier, film-maker, or from family money - if you are in the wine business you are accepted with open arms into the brother/sisterhood of the business. Everyone is willing to share and trust their neighbor. It is a hospitality industry and all our instincts are open and accepting, really as a normal reflex to see the wine business as we all want.

All those thoughts seem wrapped up in the romance and feel of our business and makes this such a cool place in which to work. Then this past week I saw the following news report:

• Xandria Roxanne Neal, 44, of Hidden Valley Lake, CA plead not guilty today to 29 counts of embezzlement of more than $300,000 from from St. Helena's Rutherford Wine Company, where she had been an accounting clerk since 2009. The incidents occurred between September 2011 and January 2014. She allegedly used gift cards with a company credit card and used the money for personal purchases. 

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?

2014 SVB Wine Report Producers Cut

Another year of the SVB Wine Conditions Survey, the Annual State of the Industry Report, and the live video cast is complete. For those of us involved in the production - from my St. Helena Banking Team, the SVB Marketing & PR folks and the Video crew, it’s a labor of love but its also a real grind.

The report starts in late October with planning for the survey, and finishing in middle January with the release of the report and live video cast. The final piece of the report is publishing the transcript from the videocast chat, and answering some of the questions posed which we are doing below. At the end of the transcript, I have posted answers to many of the questions. You are welcome to comment here on anyone's post by logging in and noting the time of the post. You are also welcome to ask new questions and I will do my best to get you the answers. Please forgive transcript errors and double posts which appear often. That’s part of the chat landscape.

Questions You want Answered

 

The Annual State of the Industry report that Silicon Valley Bank produces takes a shrimp load of work to pull off and a lot more assistance than First Mate Dan. That’s why I stop writing the weekly blog in November. I have to dedicate my copious free time to research, composition, then production. Fortunately I have great people around me or I would drive my customers financial ships straight into the dock without their help.

 

I've been done writing since before Christmas, but the draft at this point has gone through 12 iterations. I know there are still going to be some tie-pos, ghrammaer and speeling mistakes in the 34 page report but all the read-throughs make me want to make me gouge out my eyes at this point. That's a clear sign that its ready for release.

What's Going to Happen Next?

Right about this time of the new year we're wiping off the gravy from the corners of our mouths, sending thank-you notes to those who sent us Holiday Gifts[i], trying to figure out how to quickly get rid of the dry tree on the side yard that's become a fire hazard, and feeling guilty about the fact the outside lights are still up on the house. You at least turned them off on January 2nd so that’s something I guess.

Beringer & The Morgan Stanley Report

Beringer Vineyards & Winery

I had some really intriguing calls the past 6 weeks that all come out of activity in Australia and Treasury Wine Estates in particular (TWE.EX). The calls centered on Beringer which has been rumored for sale for years. Those rumors have grown since the disclosure that Treasury Wine Estates had Beringer destroy $150MM in wine inventory in the US. Things got more intriguing last week with the release of the Morgan Stanley Report that predicted dire shortages of wine supply. All that traffic out of Australia ... so I started to wonder if the two events might be related?

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.....

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.

Millennials Aren't All That

Louis B Shrimperton III "LB3"

I have a large degree of respect for Tom Wark's dog Louis B. Shrimperton III. "LB3" as he likes to be called, serves as Tom's sounding board when Tom writes his daily blog and he's also a Millennial with a distinctive opinion. Having descended from the Flying Nun as you can clearly see by the above resemblance, he's able to give Tom a high-level perspective on things.

On rare occasions Tom writes an interesting blog and he did so this last week writing "Unsubstantiated: Millennials, Wine & the Meme." Tom addresses a pet peeve of mine when reporters and writers repeat equine excrement in what I've referred to as the Millennial Myths. That's the notion that Millennials are driving the wine business. Here's one quote from a newspaper article I cited in a recent blog I penned:

"the U.S. ranks third in total wine consumption, and is gaining rapidly on the leaders. Much of the (3.3% ~ 850,000 case) increase can be attributed to the Millennial generation"

The problem with this quote and an unending string of others ..... they just aren't real or helpful in describing wine business opportunity.

Experiment or Die

Stupid mistakes and do-overs. Come on. Admit it. You've made your share. I made a similar mistake to the lumberjack in the above video. Trying to save a couple hundred bucks by not hiring a professional, I cut a tree limb away from my sliding glass door. Cutting straight down with a chain saw the limb cracked and held together by the fibrous bark. Like a hinge it pivoted down, perfectly connecting with the glass door below shattering it to pieces. It cost me $1,200 to replace the door and I've never made the same mistake since.

Inventory Days Higher, Grape Prices Headed Lower

Pig in a Python

Here's a late edit to this post: If there are 6 pigs in a 7 pig python and the python doesn't ....er ... pass one of the pigs, how many pigs can the python eat?

To really understand what's going on with inventory, you have to get a handle on the whole chain: Consumer demand, depletions, distributor supply, winery supply, imports, bulk wine supply, forecast harvest yields, and non-bearing acreage. I spend a great deal of time trying to sort through each of those to get a sense of what is coming next for the producers. Its a nerdly existence but it helps the winery clients who bank with me so I take the time, research, read, and talk to a lot of smart people.

Grape Prices are Heading Lower.

Total Wine Sales Continue to Move Higher

About six weeks ago I was asked to speak about the economy, the environment for the US wine consumer, and the fine wine business. The meeting was part of a management retreat for a large wine company and included an acquaintance of mine who we will call "Deep Gullet." It included many of the distributor partners of the company as well so there was quite a wide perspective on the business. This wasn't a client of mine and never will be, but I took the invitation because I thought I might learn something from Deep Gullet and the other presenters. I did and came away with two important perspectives:

1. The small 2011 vintage was really difficult for fine wine distributors. Allocations were more the norm for their retail accounts because there just wasn't enough wine produced.
2. Attempting to increase bottle pricing - even in an allocated environment has been like pushing a wet string up the hill.

Overwhelmingly everyone believed 2012 was going to be a lot better from a supply perspective given the large and record harvest, so the allocation issue was probably temporary. The second issue however was about the consumer and that didn't seem to be going away. That got me wondering again about the popular press reports on supply shortages.

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.

Wine Sales In the Last Half of 2013

The Best View of the Housing Bubble Pre-Crash

I recall giving a speech in August of 2008 to about 125 growers and winery owners. The speech was on the economy and I pulled up the slide above to demonstrate what I was seeing ahead of us. This was at a time just after Lehman Brothers collapsed where it had become apparent that we had crested a market high in housing and entering a bearish period. What the chart says in brief, is the historical average ratio of existing home price divided by median 4 family income is 2.8 times. That's what the red line is. With a ratio of 2.8 times, if a family made $100,000 a year, they could afford a $280,000 home. You can see what happened by late 2006 into 2007.

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.

 

Do You Know the Location of the First Successful Winery in the US?

This week we're moving off the normal marketing, economy, and business issues and asking a basic question anyone working in the US wine business should know:"Where was the first successful commercial winery in the United States?" Do you know? I confess I didn't know for sure. I remember thinking Jefferson was a really important figure in American wine and he worked at establishing a commercial presence in Virginia early on, so maybe Virginia was first? Surely with the native vines in existence, there must have been a successful wine businesses established before the time of Jefferson?

I had this debate over a bottle of wine with someone smarter than I last week. The discussion of "firsts," depending on where you live and who is telling the story can change dramatically, so the interwebs - which everyone knows is the possessor of all that is true - can sometime provide false information. The reality is the real beginning of the US Wine business has been butchered in history books and folk-lore. There is however a definitive rendering of the subject.

If you haven't ever read A History of Wine in America, I highly recommend spending the time to do so. I've even linked a free Google e-book to the above title so you have no excuse. The book sheds a bright spot light on the subject and will have you the envy at your next party where you win the attractive table centre piece for getting the right answer. That said, I know many of you are Cliff Notes kind of people and wont spend time in the book, so if you want the shortcut to the answer, read on.

 

Is Demand for Wine Dropping?

I saw the above video last week referencing demand for wine and the title got my attention. Is the demand for wine really falling? When you watch the video above many people might think so, but I don't really put a lot of faith in LiveEx as a measure of demand for fine wine. This might be speaking to Bordeaux largely and LiveEx might have use in other areas but not for overall consumer demand.

Last week we did a version of a Mid-Year State of the Industry Blog, but in it noted that its hard to do a State of Anything in a blog so we left out consumer demand. With this video clip from Bloomberg hitting the interwebs, I thought it might be worthwhile to debunk the above perspective.

Mid-Year State of the Wine Business

There are several thingies (......that's a technical economic term) that are happening right now that all link together in some form to drive components and the present direction in the wine business. Since this is a blog though, and blogs are generally top of mind and brief, discussing the state of anything is going to either violate the Constitution of the Blogosphere or the tenants of mildly meaningful research. Instead, I'm going to leave out a pantload (......that's another technical economic term) ... of discussion topics such as demand for wine, and go with the top 4 thingies worth pondering at this point in the year.

• The first thingy is water. There isn't any as the video above portrays. That's not good. And it's not just  a Central Valley thingy. This water thingy is running throughout the Ag. and wine industry and will only get worse.
• Second is the heat wave from the past week. Early discussions suggest the heat will reduce expected crop size by 10% plus or minus due to sunburn from the recent record heatwave. A related issue vis-à-vis supply is the size of the world harvest in the Southern Hemisphere.
• Third is rising interest rates. That does all kinds of thingies to the wine business.
• Fourth: the world is shrinking and so is the market share for US produced wine.

What Does the End of QE Mean for Wine?

Everyone likes Fridays. This Friday is a little more special so I decided to post a non-Sunday blog for the first time. Why the deviation? Because Friday is the day we receive the most hours of sunlight in 24 hours .... and then its all downhill after that.

While that sounds a little gloomy phrased up that way, consider that its coming from someone who has been following and predicting the movements in the economy and wine business the past few years. Its been enough to make anyone gloomy especially since I've been consistently right. (Editors note: Please don't wake me and remind me of a forecast that was wrong. Thank you.)

Anyway, something happened yesterday that is making me put on economic sunglasses to protect my eyes: The Fed announced the economy is looking pretty darned good, inflation is in check, and unemployment is coming down to manageable levels. Add to that the US Credit Rating was raised back to AAA about 10 days ago and that is down right exciting right? What did the markets do? The Dow dropped 200+ points and the 10 year Treasury Bill rose 13 basis points. In fact the 10 year, which is the benchmark used for vineyard and acquisition financing has increased about 40 basis points since May. So what gives? If this is good news why is the market off and what does that mean for the wine business?

Why Sell Wine Based on Aroma and Taste?

Selling commodities is difficult because people buy on emotion, or instinct if you will. Want and desire are powerful emotions that can stimulate the release of endorphins. It's why some people are shop-a-holics. It feels good to buy. But it's not that easy to get emotionally worked up about borax, chlorine, and salt. As an economic good, a commodity has no real differentiation, so small price differences in competing products can make huge differences in total sales.

Think about how you won't buy gasoline at one gas station because it's four cents cheaper around the corner. That's a commodity. Ever buy a piece of art that way? Of course not because art's value is in the eye of the beholder, is easily differentiated, and consequently will have wide price ranges. When art is sold, it's sold on the artist's reputation or the emotion the piece evokes for someone. Marketers work overtime to take commodity-like goods and then pretend they aren't commodities by creating and building an emotional appeal around the brand.

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.

The Dance of Grape Pricing

 



ABC. It's Easy As 1-2-3

 

The vines flowering this time of year remind me of seventh grade. Maybe its the Aqua-Net hairspray smell the flowers produce but that's when we had our first crack at dancing after school which made institutionally official, our life-long quest to read the minds of the opposite sex. Filing into the sour milk scented cafeteria one sweltering afternoon, the boys took up their station on one wall while the girls occupied the opposite wall. The girls giggled and pointed at us prepubescent pimply-faced males while we in turn stared blankly back across the barren dance floor. "ABC. It's easy as 1-2-3" from The Jackson 5 cranked at volume eleven in the background, so we started to move to the music right where we stood thus signaling in our Cro-Magnon genetic way that we could dance. Well, we could if we wanted to. We just didn't want to. The girls of course had been practicing their dance moves since 3rd grade in front of their full-length closet mirrors. Us boys? We were playing baseball, football, kick-the-can, capture the flag, and tiddlywinks, oblivious to girls - unless you count the observation of cooties.
=======================
If you want to skip my meandering memories from 12 year olds first dance experience, you can skip down To The Point Now.
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Are Immigrants taking American Jobs?

Immigration is a hot topic bracketed by views from the right and left that aren't predictable based on party affiliation.... maybe because the Hispanic vote has taken on such a high priority for the 2014 elections? From the Ag perspective, getting a sufficient supply of legal farm help has continued to be an increasingly difficult task forcing many farmers to use whatever help they can find. While the Wine Business is not as dire given the higher wage paid, you're foolish to think the current debate wont have any real impact here given the breadth of the discussion.

Some of the questions raised: Is it really fair to give a free pass to people who have ignored the laws of the State and are here illegally? Should you deport families whose children are born in the US and are citizens? Is it fair to taxpayers to be forced to educate illegal immigrants when our education system is in such a poor state? Is it fair to have Americans pay for illegal immigrant's medical expenses when they go to an emergency room? Are they taking jobs from Americans? You might think the jobs are low wage, but what about the high-paid jobs that are being filled by immigrants under the H1-B Visa program? Wouldn't Americans want those jobs? Under the Bill, estimates are that we will be granting up to 1.1 million illegal farm workers some measure of a legal status. Does that make sense?

Bovine Excrement & Global Warming

 

I will get to the topic at hand but first, a moment of silence .......... <that's enough> because last Friday Jonathan Winters passed away. In his honor, I've pinned a video of he and Dean Martin to the blog to remember his greatness, and give a little chuckle to all those who spent the weekend bleary-eyed doing taxes. For you Millennials who don't recognize the other guy in the video, that is Dean Martin who was of course the founder of Men's Warehouse.

Jonathan Winters was a brilliant comedian of a thousand voices. Only 27 actually took up residence inside his head at any one time according to staffers at Bellevue. No matter which personality was home, the man was truly a gift to humanity. He could ad lib on almost any subject. I wish he were here to help explain in his own special way what exactly happened to the 16th Amendment. That's the one that makes us all go crazy to meet the filing deadline. I'm sure he'd have quite a bit to say about that. For you Boomers who weren't born yet, the 16th Amendment is the one that says in it's entirety:

"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

That's it. That's the whole Amendment. I'd love to hear Jonathan explain how we moved from those 30 words to the present 6,000 pages and 500 million words. It's so complex we spend $6BN annually processing our returns. Ninety percent of the populace today have to use a tax professional or tax software to process their returns.

And now to the point of the blog, it would have really been great if Jonathan Winters could explain Climate Change. Like the tax code, understanding Climate Change requires us to listen to others who know more than us. We have to try and decipher the meaning of the technical writings so we can plan and avoid any negative forecast impact. But like all things, wisdom begins with understanding. The problem is understanding gets really difficult for us when we start listening to unqualified on-line writers who give us their interpretations of technical reports, whether its the tax code or Climate Change.

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.

How to Have Others Pay for Customer Acquisition

Last week I had the opportunity to head off to the Bloomberg studios in San Francisco and participate in a wine panel with the still somewhat lovely and modestly talented Michael Honig of Honig Vineyards & Winery, and the witty and much more attractive Bill Price Chairman of the Vincraft Group. If you didn't get a chance to see the give and take, you can take a look above if you give a hoot. The event was also covered by Steve Heimhoff in his Blog so its possible if you are in the wine business, you are probably already saying to yourself,

"Self?...... Who cares about a wine panel even with attractive and slightly weathered male models? I might as well read the back of wine bottles ....... special soils with long days and cool nights ... blah, blah, blah. Time to go watch bud break." 

Mom

My mother's review of the segment was the chairs seemed uncomfortable, I needed to sit up straight, and I was the smartest and most handsome boy on stage. She said it was amazing! Then again, she used to be proud of my finger paintings ( .... no not the ones I did when I was at Hillview.)

You might think the over-educated Ivy-League Bloomberg folks would bail us out and make the panel compelling? Those gentlemen must be worth a listen? Sadly to me, after watching this you will most likely come away saying,

"Self? ....... I can't believe that host dude Jeff made a mistake introducing the name of this Blog! Isn't that some sort of professional breach for a member of the Paper, Ink & Lies Union #911 to insult a fellow professional writer.?" 

Personally, I think Jeff has blog envy. No matter. There is another person who was interested in this wine panel: the wine consumer.

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

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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.

How Much Do Tasting Rooms Make?

I had a good meeting with one of my longest tenured clients this past month. We were talking over strategy and the discussion evolved to discussing their tasting room. Specifically, they don't have one - so should they?

My client is in a region where there is an agglomeration of tasting rooms. The winery is doing well without one. A little off the beaten path, if they did put one in they would need to develop some strategies to get people to the winery.

Wanting to hone in on a measure of expected return in their planning, they asked me what's the ROI of a successful tasting room? I could have given them the stock answer and talked about measures of profitability, but the reality is there is no such thing as an average ROI on a tasting room. If fact you are missing the point of a tasting room if success for you is defined as profit.

How Much Value is there in Wine Tourism?

Many in business view another competitor moving into your territory as an affront to all that is fair and decent. Its the moral equivalent of "I was here first." Sometimes that kind of in-your-face competition is truly a net sum zero game. For example, there was a small drive-thru coffee station in the shopping center I frequent, but one day Peat's Coffee moved in. They survived about a year but now the drive-thru is closed. There are plenty of examples just like that but other times, competitors and related businesses cooperating together can have a positive impact on business conditions and instead of waring, can come together and win together.

Is Your Wine Trash or Treasure?

You've heard the saying that one man's trash is another mans treasure. How is it possible that two people can view the same object completely different? Its the difference in how each man values the object in question and how the object makes them feel. What about your wine? Is it trash or treasure? It really depends on who is answering the question AND if they are a target consumer for your product. If they are your target - they better not answer trash. Value is a consistently misunderstood concept but it is critical to consider in any successful marketing strategy.

This is the time of year when the end of year news starts to wane  and winery neighbors come out of their cellars to see if they have a shadow then discuss microbial spoilage, stuck fermentations  and quite often these days - their strategy to market their wines and how to do it in the context of a changed economy. Take a look and listen at just such an exchange in the above movie.

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?

Need Some Fresh Ideas To Help Your Marketing?

If you are like me, you get offers of reports on trends in the wine business about every day. Several years ago I saw a synopsis of an extensive report that seemed pretty interesting. For the mere price of $2,500US I had a several hundred page report on my desk in about a week. Now this was when I still had an expense account so please don't start emailing me more sucker offers.

Sadly, much of the report seemed like it was written by a fresh-out-of-college student, or at a minimum someone who never lived in the wine business. It was rehash of everything you already knew. To make matters worse, I was cited in several places for things I'd said. That instantly devalued the purchase. Why would I listen to me? I always lie.

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.