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.

Why Am I so Optimistic about 2021

Opportunity Knocks

Ebullience! That's a word we haven't heard much in the past year. But I predict that's only the start. You might soon also hear such rare terms as buoyancy, vivacity, and euphoria bandied about. 

Count me in the camp that is exuberant for the opportunity presented to us in 2021 - 2022. I can't wait to work again in a group practicing social nearness sans masks as in the headline picture... though my vision of tomorrow has a nicer desk than the headline picture. Why so cheerful you ask?

I covered some of the information in this post when we announced the opening of the SVB 2021 Direct to Consumer survey. 

Discover 2021 Consumer Trends by Participating in the Annual Direct to Consumer Survey

    Let's Never have Another Year like 2020

I opened the 2021 SVB State of the Industry Report with this line: "2020 will go down as the year in which we answered the heretofore rhetorical question, what else can go wrong? 

We are all glad 2020 is over. We are all grateful vaccinations are signaling an end to what we've endured this past year, and almost uniformly across America, there is renewed optimism that 2021 will be better as we move into spring.

Predicting Higher Demand for Wine in 2021.

    The Case to be Made for a Party 

At the end of Prohibition in the U.S. the consumption of wine as measured, slowly grew until war was declared in 1941 and rationing took over everyday lives. Whiskey distilleries were repurposed to produce grain alcohol for torpedo fuel, which interestingly created unintended consequences of new cocktails for sailors and higher rum consumption in the U.S. Fifteen percent of total beer production was allocated to servicemen and while wine wasn't rationed, prices of alcohol increased during the war making it difficult to afford a bottle of anything, so wine consumption fell. 

Imagine the exuberance at the end of 1945 when WWII came to an end, completing a fifteen-year period that spanned the 1929 Market Crash exacerbated by the Dust Bowl, leading to the Great Depression, food lines, increased poverty and homelessness, and high levels of unemployment. 

On August 15th, 1945 with Japan's surrender and acceptance of the terms of the Potsdam Declaration, there was hope those unhappy times would soon be behind the country. The sacrifice of the Greatest Generation had paid off and the men and women in the military would soon be coming home! Life would eventually return to an altered normal - but a much better one full of peace and hopefulness.

As the soldiers were brought home starting in 1945 with those in the European Theatre under Operation Magic Carpet, a rolling party broke out on the homefront. It is estimated that 1946 consumption of alcohol reached pre-prohibition levels of 2 liters per capita. Wine became a beverage of interest for many of the returning service members who had experienced European wine.

SVB Annual State of the Industry Report and Videocast is Wednesday. Sign up!

 

    We're All Glad that Year is Over

2020 will go down as the year in which we answered the heretofore rhetorical question - What else can go wrong? That is the opening line from the 2021 SVB State of the Industry Report that will come out Wednesday the 13th. 

Throughout 2020 many of us experienced the same run of emotions from disbelief, fear, acceptance, determination, and occasionally even a bit of joy through one of the most difficult times in history. As we went through the year, we would think to ourselves - this has to be the worst of it. It has to get better from here? 

We all fought through a series of events, increasing our vocabulary along the way: Coronavirus, COVID, S.I.P. Orders, social distancing, Zoom meetings, herd immunity, PPE, and pandemic - which I thought only happened in bad science fiction movies before last March.

    Will 2021 Be Better than 2020?

I can say with absolute confidence that 2021 will be better than 2020, but I can also say that “normal,” when we get there, will be different from what we left. But we have lives to live and businesses to run so let's get to it! 

Despite the headwinds and distractions, there are opportunities we need to consider and take advantage of and consumers who will be looking to buy your wine. 

We need information and the right tools to be able to plan. While we have to talk about the past for context, this coming Wednesday, I hope to give everyone the benefit of a look forward.

Start with the headline slide for a teaser. Despite the gloomy events of the past year, luxury wine sales held their own, particularly when you consider this performance in context with the last recession. The last recession featured trading down. This recession has given a breath of life to trading up again! Aren't you curious why?

The Annual SVB State of the Industry Report is Arriving January 13th. Sign up for the Webinar and Report!

 

This is the opening photo from the 20th Annual SVB State of the Industry Report where we begin with a reflection; not on our industry, but on how we each as individuals adapted and prevailed during the most unique business conditions in our lifetimes. 

It's important to celebrate this victory but now that vaccines are being given and we can see an end in sight, what's next? Will business conditions return to normal? 

If we answer that question truthfully, the answer is no. That means doing nothing and hoping for a good year will produce poor outcomes. Change is needed and will require all wine businesses to apply the learnings from 2020 and evolve to find the unique prescription for your individual winey's success.

What is the Industry Reporting for 2020 Results? The SVB Survey Has Early Returns [Still Open]

While the unprecedented impacts of the Pandemic and wildfires have rightfully absorbed the attention of the media and industry participants, the basic marketplace challenges I've reported in the 2020 State of the Industry Report are still alive and confronting the industry.

Data and information has never been more important than today. Changes to consumer behavior emanating from shelter in place orders, a recession, and the ruination of restaurants in America among other factors, are creating new changes for wineries, and yes - new opportunities as well if you listen and plan.

The Twentieth Silicon Valley Bank Winery Conditions Survey presents a view of business conditions sorted by region, average bottle price, time in business, and other filters, all to give participants an accurate read of the current industry, and all gratis to participants. The Survey is drawing to a close next week. If you haven't yet participated in this study, I encourage you to do so. Only participants get the complete set of anonymized data and analysis back, at no cost to participants for an investment of 15 minutes of your time. 

PLEASE - will you personally support the wine industry by committing to participate this year? 

Here is a link to a PDF file of the questions to prepare, and here is a link to the survey itself.

You Are at the Bottom and Looking for Inspiration

Inspiration is the substance of undiscovered strategies. It can come from almost anywhere if we stay positive and are open to it, but it's the fuel that ignites change.

This pandemic has put many people in the wine, travel, restaurant, and hospitality business on their heals or flat on their backs. 

Being in the cruise business might come to mind as being the worst place to be today, but at least cruise lines can raise money to survive. 

Perhaps the most difficult job today is owning a small travel agency as does my friend Michael Mastrocola at MillenniuM Travel, who many will know because he arranges annual cruises for a host of wineries. 

Signup: SVB State of the Industry - Special Edition

  

On March 23rd, eight days after we closed tasting rooms in California, I posted a blog about crisis management where I suggested for scenario planning, June 1st would be a good guess for reopening. So I was really excited to hear that this past week that we've started the conversation about reopening tasting rooms in California and along the west coast. Perhaps my educated guess might turn out closer to correct than I deserve?

Post Lock-Down Opportunity for Wineries

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

What is Normal in a Post COVID-19 World?

The Coronavirus Pandemic for the wine and restaurant industries has been like getting picked up in a tornado and dropped into the Wizzard of Oz movie but without the welcoming committees. It's been dizzying to see overall demand for wine improve, at the same time premium wineries are fighting for survival. 

Crisis Management for Wine Country

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

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

Canceled: Annual SVB Direct to Consumer Survey

You probably recognize the photo up top of Times Square. I took it this afternoon from a webcam. You might never again see it this empty - or so that's my hope.

The Decision to Cancel

Selling Wine in a Pandemic

There are times in life when we have to react to circumstances that are well outside of anything expected. A pandemic? Well, that's a circumstance with which none of us have any experience. That new aspect of our lives required us to adapt then employ behaviors that are out of the norm. For some, this is distracting, but for others, this is nothing less than debilitating.

The Annual SVB Direct to Consumer Survey is Open

Improving and evolving your direct sales strategies, marketing, and sales will be the difference between success and struggling in the coming decade as the industry's consumer target evolves under our feet as, anti-alcohol groups push their agenda and competition from beer, spirits, and foreign wine intensify. We defend ourselves by using data and evolving or approach.

For instance, how does your tasting fee compare to your region? Are you enticing consumers or scaring them away with that? Are your tasting rooms sales growing like others in your area? What are the splits between club sales and tasting room sales and are they in-line with comps. There are so many other questions that deserve attention.

Shortcut for those looking for the links: Survey Questions  Take the Survey Now ... otherwise, let me convince you a little more.

The Email You Don't Want to Get

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

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

Final Call: Sign up for the 2020 SVB Industry Videocast and Report

I finished writing the SVB Annual State of the Industry Report in early December. There are always surprises I discover when going through the research and writing. This year the surprise was the top slide. This slide is from the Annual Industry Survey and it answers a question everyone has: How is the industry feeling about the current market?

In the 2019 report last year, the overall industry sentiment turned barely negative with one percent of the industry on average turning pessimistic. That's news in and of itself in this most optimistic of businesses. But in the 2020 report which will be released this week, a whopping 46 percent of the industry turned pessimistic. Wow! Have conditions turned that bad that fast? 

I think you have to respect the data. But I also believe identifying the risks and threats allows us to best define solutions to fight back and in the videocast on Tuesday, we will talk about some solutions.

Hopefully, you want to hear how we see the industry this year - threats and opportunities. Signing up for the videocast will give you a replay link to watch later, an early link to the report and slides produced and used during the session. [sign up here]