Is tourism a problem? It depends who you ask, but it's impact has been feared and debated for a very long time as an issue. Even way back in 1972 when many of us were still living life in black and white, and cable was part of your corduroys instead of your TV, tourism's impact in the Napa Valley was being reviewed and questioned.
Some things have have remained the same today but the narrator in the above news piece offered an interesting view into tasting rooms of the day when he said tourism was "important to PR, and to a lesser extent, sales." You see, tasting rooms back in the day weren't put in place to sell wine. That's what distributors did. Tasting rooms were nice-to-haves. My how those days have changed! Today tasting rooms and tourism are linked to the survival of family wineries. Direct sales represent 60% of an average winery's sales, and tourism is the lifeblood of the family winery. Without tourism and direct sales, I'd make an educated guess that 60% of the wine business as we know it would fail.
This is the third of a three part series: Part 1, Part 2
If millennials are narcissistic, lazy, and entitled as described in our last post, you will need to quickly come up with some new marketing tactics. So instead of giving them a toaster for joining the wine club (a boomer era tactic), maybe you could give away a free mirror with every new account? Oh I know! What about giving away a tiara for the self-absorbed, and some Red Bull for the lazy ones?
Desperate to find the secret of the millennial code, media and researchers have taken creative license over the past fifteen years which in the final analysis, hasn't provided the hoped for guideposts that would convert marketing strategy into new consumers - at least as it relates to the wine business. But it has created a dialogue overblowing the impact of our youngest cohort (eg, above video.)
Just the Facts Millennials are the most engaged and socially connected generation of all cohorts. They demand sustainability and authenticity in their products. Socially responsible and transparent companies rank high in importance when it comes to their purchase decisions. They demand customization and wide selection. They consume more wine per occasion than all the other cohorts combined. Thirty-three percent of Millennials say they are motivated to buy more frequently when a friend recommends a wine, but 99.8% say they like any wine better when a friend buys it for them. One hundred and fourteen percent agree with the statement that feeding one's animal spirits premium wine is better than hitting your toe with a hammer. The remaining percentage believe morning-after flat party beer is good for hydration, so long as there are no cigarette butts in the bottle. When there are butts in the beer, their preference to consume falls to 0.4% with a statistical error rate of +/- 0.4%
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.
Let's talk about Millennials! How exciting is that conversation? Demographers and researchers are laser focused. It's a feeding frenzy at times because that's the growth opportunity of future retail. Boomers are old news, nothing to write home about and not hardly anywhere near as interesting as Millennials.
Oh ... there is GenX of course but why talk about them? They are a small cohort.... except they are the second largest consumer of fine wine in the U.S. today and the largest growth opportunity for most wineries, but that doesn't matter. Let's talk about Millennials!
WMC: "Millennials Consume 42% of all wine in America"
The Wine Market Council presented their annual 2016 roadshow in New York in January, and using the above slide announced with fanfare that Millennials are now the largest wine drinking population in America,consuming 42% of all wine and surpassing the boomers with 30% of total consumption.They also said Millennials were consuming 160 million cases compared to 114 million cases consumed for boomers (below right chart).
To many of us in the business the facts appeared grossly exaggerated, but the media ran with the story because it was such a senstational headline. The long-awaited ascendance of the millennial had finally come we were told, and the articles proclaiming the fact hit the wires in waves:
WMC: "Millennials and Boomers Consume the Same Amount of Wine."
Inexplicably, six weeks later at their Yountville presentation, devoid of any supporting facts or charts, the WMC offered the following totally contradictory statement in their presentation:
"Boomers and Millennials today account for nearly the same amount of wine consumptionand Millennials will soon account for decidedly more consumption."
Every year when we start the Direct to Consumer Survey I'm always a little nervous about participation. The effort required to sell wine has become more difficult by the day, and owners have to make choices about where to invest their precious time. Survey results could be viewed as nice-to-have versus a critical need, but in this case I'd argue this is a have-to-have for wineries with Direct to Consumer sales.
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.
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.
I remember walking to school shortly after the Cuban Missile Crisis. We were practicing ‘duck-and-cover’ drills in our classrooms, and we trained
on what to do when we saw the blinding white flash. The propaganda video clip at the top is a great example of the beliefs of the day.
Wine and Cuban Hero Che
Walking to school in the early 60's, I’d plan
where I would hide along the route just in case. One of the neighbors had a bomb shelter but
after that, it was refrigerators in garages and fireplaces as the preferred hideouts. It was a discomforting
time for the Country. President Kennedy embarrassed in the Bay of Pigs Invasion was staring down Khrushchev, the Premiere
of the former USSR in a game of nuclear chicken with continental annihilation
hanging in the balance.
With that as context, it’s surreal to find myself sitting in
a bar in Havana Cuba writing this piece and participating in an official U.S.
Trade Mission promoting California Wine. We're not promoting world peace or selling tractors. We're promoting a luxury product to a socialist country.
The first part of the year has turned into a fire hose of new industry information in the wine business. Right after we released the State of the Industry Report, we all ran to Unified to hear more discussion about industry trends. I missed Fred Franzia's lively lunch presentation Tuesday but was there all week and once again moderated the Thursday General Session. I then came home and got on a plane to Miami where I will leave with the Wine Institute and the Napa Vintners for a Trade Mission to Cuba at 4:00 am Sunday morning.
Thursday, January 21, 2016 9:30 a.m.–10:30 a.m. PT
I expect this will be one of the most interesting reports we've ever authored. I would like to invite you to join us live for a discussion of the report and wine business with our expert panel: Rob McMillan, EVP & founder of Silicon Valley Bank’s Wine Division, Paul Mabray, Chief Strategy Officer of VinTank, Amy Hoopes, Chief Marketing Officer/EVP Global Sales at Wente Family Estates and Jeff Bitter with Allied Grape Growers.
We will review the findings of the 2016 State of the Wine Industry Report, which is based on SVB’s in-depth survey of wine industry experts and insiders, third-party research and Rob’s unique perspective as a long-time member within the wine industry.
This presentation will include insights on:
Changes in the market share of imported bulk and bottled wine
Predictions of 2016 sales growth in the fine wine segment
Winery financial performance
Expected changed in U.S. per capita and total consumption
Consumer demand changes
Harvest yields and bulk inventories
Prediced changes in the opportunities of domestic wine producing regions
Bottle price changes
Please [register] for the videocast and receive a link to the replay and the complete 2016 Wine Industry Report after the live event.
It can be a little hard getting revved back up when the year starts. Truth be told, few of us are excited to jump back in full speed. We'd rather slip back to revel in the warmth of the holiday's then start executing on the new plan.
I have a little difficulty finding normal when the year starts because November and December find me researching and writing the Banks Annual State of the Industry Report. Add in Christmas, the New Year, business holiday parties, routine daily business issues and my birthday - which falls on December 24th, but it's OK if you forgot. You can get me a gift next time. Anyway.... I can't wait to start the new year and find normal again!
With the New Year's Resolutions on our minds, one related question someone inevitably brings up is "do-overs." If you had a chance to do anything over, what would that be?
I have more than my fair share but I'll throw out one. It's the story of the young lady who agreed to marry me when I was 21 and she was 18. I thought she was a real keeper and we were in love. She said yes! I was so excited until my brand new fiancé said I had to ask her father and then reality started to set in. What if he said no?
I've just spent the past 6 weeks researching and writing the 2016 State of the Industry Report. It always sucks the life out of me because its all encompassing 12 hour days without a break, even on weekends. When it's done, I'm ready for something else entirely. I look for re-runs of Friends and I Love Lucy or comedies I've seen a zillion times like Groundhog Day ... which is the segue into an article I saw this morning titled: Pennsylvania: Sweeping liquor Reform bill advances toward full Senate and uncertain future.
No it's not Monday when I normally post. I got inspired midweek from Tom Wark who wrote a piece yesterday in his Fermentation Daily Wine Blog entitled Critics of the Napa Valley Wine Industry are Losing Badly. It's a passionate opinion piece of the goings-on in Napa County politics which are overheated with rhetoric.(Rhetoric | rhet·o·ric \ˈre-tə-rik\: language that is intended to influence people and that may not be honest or reasonable.)
The Annual Wine Conditions Survey is open and delivering interesting early information on supply, price, and many other interesting questions. The survey closes next week but after the first week, almost 300 of your fellow wineries have invested 12 minutes. Why take the survey when we are all busy? Because participants are the only ones who will get complete results.
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.
One year ago Monday, I woke to a bit of a shaking. Having been 18 miles from the Loma Prieta Earthquake in 1989, I was experienced enough to recognize this wasn't a run-of-the-mill quake, and in fact for me, this was far worse than Loma Prieta. I live on the fault line rupture and while Loma Prieta was far more widespead and longer, it was also deep and there was no surface rupture. This one was very shallow and far more violent if you live in southwest Napa.
While Napa is the current poster child for the debate, whether Sonoma, Santa Barbara, Oregon, Virginia, Paso Robles, or the San Joaquin Valley - the wine business has received it's share of public scrutiny the past few years in local press. While "wine country" is viewed by many as an idyllic place to live or retire .... certainly so if you read listings from local real estate agents, that view isn't shared by a non-homogenous mix of anti-winery folks in what is now being labeled in an on-going story of the greedy and detached winery owners and growers versus their communities.
I spent an inordinate amount of time over the July 4th weekend on the Blog that was released on Monday which discussed the pilfering of 250,000 credit card records from eCellars.
I got so focused on understanding this situation I got a little freaked out yesterday when my company laptop didn't work right, my cell phone started freezing and nobody could hear me when I called, my home internet seemed to be operating at 10% of normal, and then the car battery died. WHAT IS GOING ON? .... just a bad day of negative coincidence?
I've always thought the wine industry should be the most uninteresting industry for cybercrime. Wineries have lots of inventory to steal, but anyone who works in this business knows there isn't much cash to take. It all gets used up in barrels, bottles, inventory, and facilities.
Who and even more to the point, why would anyone bother to hack into a winery? It's not like there are any huge IP secrets to take. North Korea doesn't care about the 2015 vintage. Chinese spies have to get paid more to focus on our Government's and defense contractor's systems rather than messing with wineries I'd think. Pre-pubescent teenagers trying to hack winery computer systems would have more fun trying to hack celebrities' personal sites or play World of Warcraft. That's where young people can really experience virtual power and control.
Besides, the wine business is really a bitty industry; one full of mom and pop shops.So why would anyone bother to try and hack into a winery when there seem to be so many other far more interesting and larger industry targets out there to probe?
This is a really big deal. While I've heard no mention of the cost of this, it has to easily be millions of dollars in the aggregate given the number of businesses and impacted people who are cleaning up the mess thus far. And those losses are before considering any fraudulent credit card purchases which may have happened or may still happen.
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.
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'sRob
McMillanreviews 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
I'm betting nobody knows who Thorstein Veblen is. Like this picture, you have to be a little cockeyed to know him; be a Jeopardy Champion, enjoy thumbing through pictures of people who look like axe murderers, or maybe you are an economist with little to do with your free time except refresh your memory about a Veblen good?
One on-going debate in the wine business where Veblen's theories play a role is price discounts. Should you discount, and if so when and by how much? To get at an answer we'll review some economic basics. (... I know how exciting that sounds but stick with it. I won't kill you with math.)
Federales posing during the 1910 Mexican Revolution
I am a closet genealogist so when I began dating my wife, I started kicking cans in her ancestors. It turned out that one of her ancestors was a minor player at the beginning of the Mexican War of Independence and a Federale. I think the system was a little less formal than what we experience today.
But there is a bit of a standoff taking place in parts of wine country. No, the battle isn't with the Federales - not with the ABC, CDFA, BOE, TTB, or FDA each of whom has a regulatory role in the wine business. The battle is over events, tourism, and tasting rooms.
On March 16th I was invited to be THE keynote speaker at the 21st Annual Central Coast Insights. OK ... maybe I was just "a" keynote speaker ... OK fine. Just don't look at me like that. I was just a "basic speaker." There. I said it..... Are you happy now?
Anyway, speaking in Paso Robles I was reminded of something that has always bothered me. The region makes great wines; as good as any place on earth and yet it has gone through constant boom and bust cycles over the years. Grapes from the Central Coast go into both value priced jugs, and collectable wines too. How can that be?
You are probably a wine expert in some form if you are reading this, but do you know precisely where the Central Coast AVA is located? Are you aware of the varietals for which the AVA is best known?
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?
The Annual SVB Wine Report and the Live Broadcast is complete. For those that missed either one, the replay and report can now be accessed here: LINK.
For those who are looking for some power point slides to use in their own presentations, we've also posted 86 slides at the bottom of the page. Most of them were used in research but not used in either the Report or the Videocast. You are welcome to use the information there - with attribution of course.
The last duty I have for the year is to post the Q&A from the live videocast. This year as seems is always the case, we had participation both Nationally and from about a dozen countries. There seems to be world interest in the US Wine Industry for some reason?
The chat follows and I've littered it this year with the labels of random participants. Feel free to contact me if you have any other questions and I'll get back to you as I'm able.
Please join SVB on Wine, Rob McMillan, EVP and founder of Silicon Valley Bank’s Wine Division, and an expert panel as they discuss the wine business and findings from the 2015 State of the Wine Industry Report.
Rob will be joined by a panel of industry experts, including Paul Mabray, Chief Strategy Officer of VinTank, Glenn Proctor, Partner in the Ciatti Company, and Amy Hoopes, Chief Marketing Officer/EVP Global Sales, Wente Family Estates in this interactive video conference, including live viewer Q & A.
This annual industry report is based on SVB’s in-depth survey of wine industry experts and insiders, third-party research, and Rob’s unique perspective as a long-time member of the wine industry.
This presentation will include insight on:
Global Economy and its impact on the wine industry
Winery financial performance
Predictions on 2015 sales growth
Wine inventory position
Consumer demand trends
Harvest yields and their impacts
Bottle pricing decisions
Bulk import activity
Digital trends (CRM, DtC Sales, Social Media, 3rd-Party Marketers, and Compliance)
Sign up for the presentation and receive a link to the replay and the complete Silicon Valley Bank State of the Wine Industry Report 2015 after the webinar.
Please share this important industry educational opportunity on your preferred social media apps!!!
I know the above chart is a little hard to read. When I start working on the Annual State of the Industry Report each year in October, the industry starts off a little hard to read too. I kinda go into this almost shipwrecked mode and cut myself off from normal business interactions and then a combination of research, survey, interviews, and analysis eventually gets me to a point where I can start writing and eventually escape my self-imposed marooning.
What I hate about the delay between finishing the report and publishing, is the world moves substantially at times and my predictions are out in the wind hanging there .... exposed to the elements for all to see. If my predictions were off when the paper is released, who wants to read the rest? Or, if they were on they can still sometimes be a retrospective view by then if events move quicker than expected. It's a little unnerving during the wait, but you'll have to tell me how I did when you read the report and watch the Live Videocast.
The State of the Industry report for this year is going to be released January 21st along with the live video broadcast. If you haven't, you can still sign up for that here: [register].
This is a wonderful time of year to be a banker in the wine business, or more specifically, it's a wonderful time to be me! ...... holiday parties, presents, my office filling with client wine gifts keeping me in a jolly mood through the holidays, and then my birthday - which falls on Christmas Eve just in case that slipped your mind this year?
The birthday part was a mixed blessing growing up in a family of six kids, and that cost me years of therapy. But I'm better now. I've learned to be thankful for all things, and this year in particular I'm getting my birthday AND Christmas wish; about $2 trillion in stimulus from World Despots.
The Annual Wine Conditions Survey will close this Friday. Thus far over 300 of your fellow wineries have participated from across the entire West Coast and Nation. It takes 12 minutes to complete and helps us all understand industry dynamics better. Participants are the ones who will most benefit for small time invested, as they are the only ones who will get the complete results and added analysis.
Please join your fellow wineries and participate in the survey before the close Friday[LINK].
I always love this time of year. Harvest is winding down for many and past mid-point for everyone. Fermentation is moving through the normal process with wine makers trying to control the pace as if they were trying to steer a stage coach careening down a hill. The smell of grape must littering the fields starts to intertwine with the smell of burning wood stoves as the temps start to cool toward the end of the month.
I'd like to get your thoughts and comments on something.
As most know, each year I author the SVB State of the Wine Industry Report that is released in early January. Prior to writing the report, we run a survey of the wine industry that is supported by all the major AVA Associations in the country. The survey takes 5-10 minutes to respond, is open for two weeks. This year the survey starts October 8th.... that's this coming Wednesday already!
For that small investment of time, participants receive the complete output along with custom charts and analysis that will help you prepare for 2015. Not even our clients receive that content if they don't participate in the survey.
If you would like to participate in this as well as the Annual Tasting Room survey we run in the spring, you can email me at rmcmillan@svb.com and I will add you to the invite list.
