Will a Stock Correction mean Lower Wine Sales?

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.

What? Locals Overwhelmingly LIKE the Wine Industry

      Doesn't Everyone Hate The Wine Business?

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.

Wine Business Data Hack: Resources Edition

A Technical Issue?

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?

250,000 Credit Cards Stolen in Wine Industry Hack

 

ECommerce Payments

 

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?

That question is no longer academic because today - right this second, hundreds of people in probably 100 separate companies are cleaning up after the personal information of 250,000 winery customers was hacked in a recent data breach. [i]

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.

Replay of 2015 DtC VideoCast + Chat

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.

SVB Direct to Consumer Live VideoCast

 

Live Video Conference:

 

Tuesday, May 12, 2015

9:30 a.m. – 10:30 a.m. Pacific Time

 

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's Rob McMillan reviews 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
• Rob McMillan   EVP & Founder, SVB Wine Division
• Cyril Penn  Editor in Chief, Wine Business Monthly 
• Craig Root  Founder, Craig Root and Associates 

Join Us On Twitter:

Follow Rob (@SVBWine) on Twitter and join the conversation before, during, and after the webinar by using #SVBWine.



Should You Ever Discount Your Wine?

 

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.)

How Important Are Tasting Rooms to Success?

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.

W20 Group and VinTank Settle Down

 



Its fair to say that I've been involved in the wine business for a long time. I'm old enough to remember Italian Swiss Colony Wine commercials in the 60's,the Judgment of Paris in the 70's, the wine cooler craze in the 80's, and the VinTech fraud that spanned both the 80's and 90's.

Is Your AVA "Just Like Napa?"

 

Follow the Yellen Brick Road

 

     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?

Is the Central Coast "just like Napa?"

What's the Average Starting Salary in Tasting Rooms?

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?

2015 State of the Industry Q&A

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.

Sign Up: SVB Wine Report Released Next Week

Live Video Conference

Wednesday, January 21, 2015

9:30 a.m.–10:30 a.m. Pacific Time

 

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!!!

Are Wineries Going to Buy Fewer Grapes in 2015?

Buying More or Less Tonnage in 2015?

Self-Imposed Marooning  

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].
 

Santa Karma is Sending You Money in 2015

Putin Claus

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.

Will Bottle Prices Increase in 2015?

 

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].

2015 Grape Purchases and 2014 Yields

 

 

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.

 

But the thing I like the most about this time of year is starting to work on the Annual State of the Industry Report and that always starts with the Annual Wine Conditions Survey which is now officially open [Link To Wine Conditions Survey]

What is Important to Research for 2015?

 

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.

Should You Enforce Your Wine Club Contract?

 

On occasion I get suggestions about something on which to blog. I really appreciate the ideas and use them when I can. This past week I got an email from a follower who suggested I post on their experience with a disgruntled wine club member. The review they got in YELP is a good place to start:

"The wine club is a total scam! I only wanted the wines that weren't in stores so I was told I had to join their club. I didn't want to but I got a discount on the wine. Once I got my first shipment which had all the wines I wanted, I just cancelled the club. Then the as*****s charged my credit card without even telling me! I was like, WTF? and was told by some bitchy tasting room person that I signed a contract that said I had to give back the discounts if I didn't take both shipments! Like who reads contracts? And just because I quit their winery, they didn't send me concert tickets they said they would."

ACME Winery

For the second week in a row I'm asked to anonymize the winery. So we officially have a trend keeping the semi-innocent anonymous to protect the wicked. But in this case, there are some things I can tell you about this winery to give you a flavor of their business model and their side of the situation:

• They are 100% direct to consumer - nothing is sold wholesale
• They sell less than 7,000 cases
• Their average wine sells for $60 per bottle up to almost $400 per bottle
• Half of their wines are completely allocated and in very high demand - selling for double the retail room price on the secondary market.
• Their wine club contract requires a one-year commitment and if cancelled in the first year, the discounts have to be repaid to the winery. That part reminds me a little but like the old CD clubs.
• They include concert tickets for new wine club sign ups but in this case the shipment was made and the customer quit before tickets could be sent.

 

Business Would Be Fine Except for the Employees and Customers

 

So how do you handle a consumer like this who games your wine club agreement? My response is to change your system.

Over the years I've talked to numerous wineries who tried to sell a wine in lower demand in exchange for a consumer getting their hands on an allocated or high scoring wine that was in high demand.

To my thinking in brand building, you really want to make wines that are in demand, and build demand for all your SKUs. Getting a consumer to take a wine they don't really want doesn't build demand for that wine. It may even have a negative impact on how your overall brand is perceived.

Think of this analogy: You find a really awesome pair of custom made Italian shoes in your size, but to get them from the manufacturer, you have to buy a second pair of shoes that are ugly and don't fit.

If you are the buyer, you give zero value to the ugly shoes that don't fit. That means for you to feel like you received fair value for the purchase, you had to feel the price you paid for the package of shoes would be fair either with or without the second pair of shoes.

To go a step further, you may feel that the second pair of shoes has negative value because you now have to go find someone who likes the style of the second pair and has the right size foot. That's going to cost time and effort. If you are making those shoes, what you really want to do is identify a consumer who values ugly shoes in that size. ( .... hope that didn't take analogy too far ... )

 

Is the Contract Legal?

 

I can totally relate to this frustrated winery owner. I didn't mention it, but they did in fact send the concert tickets to the consumer too. So they totally lived up to their side of the deal and got hammered in a review for their trouble. Was their contract legal? Could they charge back the customers credit card for the discounts?

A wine club contract can be a legally binding agreement but that's really a red herring. The practical reality is if you are talking about contract rights to a wine consumer, you are well past building your brand and off topic.

I'll probably get kicked out of the Bankers Union for saying this, but I don't think contracts matter that much. You can have a legal right to something, but in the end what really matters is how you do business, no matter what a contract says.

 

If a social media review is unfair, shake it off. You wont please everyone. Some people are just unhappy and carry a chip on their shoulder. But negative truthful reviews are an opportunity to check on how your business is done and improve. Is compensation motivating the right things? In this case, is the tasting room staff messaging the club program effectively so their are no surprises.

 

Responding To YELP Reviews

 

I feel as though the question of what to do with a negative YELP review has been discussed sufficiently in the blogosphere, but the short treatment is: 1) You can respond as a business owner to a negative review. 2) You can't have a review removed unless the post was a violation of YELP's user agreement but good luck with that. 3) You have no right to have your brand removed from YELP. 4) Don't pay a company who says they can remove negative reviews. They can't.

 

If the reviewer seems crazy, ignore it but if the reviewer sounds reasonable respond to it and show you really do care about providing good service. Interestingly though, for some unknown reason most wineries I checked this week don't respond to reviews at all. You can also encourage people to write reviews which will push the negative review from the front page at least.

 

Finally - thanks to the anonymous winery for suggesting the topic. Hopefully they will get some good thoughts from the community.

 

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What are your thoughts about wine club contracts? What advice can you offer this winery regarding their approach? Do you have any similar customer service stories to share and if so, how did you handle it"

 

Please join this site at the top right of this page for updates and new posts, sign in and offer your perspectives for the benefit of the community.

 

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What to do When You find YOU are the Problem

The Reward of Struggle

"What is worth savoring that isn't worth toil.

Is gain satisfying without cost?
Without darkness can we explain light?

Our teacher is pain, our brother the fight.

Our effort is gain but our pride the price.

No bliss in bereavement but strength through the test.

Reward through trial: That is wisdom expressed." - Unknown author

 

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Poetry? No this isn't Deep Thoughts by Jack Handy but I have a management philosophy supported with  recent story to share that I hope inspires you in a way that might dramatically improve your business. 

 

While the Napa quake was more than a bummer for many, it produced some really interesting positive results such as creeks that started flowing in the middle of a three year drought. 

 

Another positive from the quake and the work I did talking to wineries to determine a damage estimate: I've now heard four separate stories about wineries who found something during the clean up - and one CEO in particular who found something he had lost for some time in the clutter and din of repetitive work. He found his well-intended efforts were to blame for the problems his winery faced.