Annual SVB/WBM Direct Consumer Sales Videocast

      Lots of Shades and Few Patterns

When I wrote the business plan for Silicon Valley Bank's entrance to the wine industry in 1992, I did so largely from a researchers perspective, as I had only modest prior industry experience, and by the time I authored the plan, the industry had completely changed.

I discovered in the process that there were conflicting industry opinions from many of the experts and little research available to support those opinions. The research that was being done was being created by researchers in Chicago and New York; far from wine country. There was almost almost zero street-level intelligence, with the exception of the work done by Motto Kryla and Fisher and Gomberg, Fredrikson & Associates.

As an analyst back then, deciphering the wine business was like trying to see patterns in the lead picture: Plenty of pop and thousands of brands, all trying to find their way in a crowded landscape. Every winery's nozzle was aimed in different directions - region, varietal, wine style, consumer, path to market, consumer segment - because strategy was too often supported by guess work.

That induced me to research and produce my own information for our customers - and the wine community as a whole. The upcoming videocast: Insights for Successful Consumer Wine sales is one such example. --> [signup here] <-- 

      What's the Greatest Risk Today?

The wine business is far more complex than people think. It's a maze of complexities with different models, varying paths to the consumer, pressure from federal, local, and state regulations, a lack of good information, controlling power in a small numbers of hands and changing consumer demand. Oftentime decisions are made with the love of the product in mind, versus a business decision being made with financial returns in mind.

Perhaps the greatest risk we should all be most worried about is our tendency to continue on on a path that's successful. If it works, we keep riding the trend as far as we can, until the strategy fails. In an industry that takes 5 years to get a fully mature yield, shouldn't we be making decisions with a view to meeting the future instead of reacting to the present? Where will things be in 5 years? I guarantee the industry 5 years from now will look very different than it does right now, so the strategies that are starting to wobble today, will be on life support five years from today.

With that in mind and the new SVB DtC Survey now complete, there are many things we'd like to bring out and discuss, including current insights from the survey as well as marketing solutions to consider. This is a time where we need people to grasp the issues, and participate in the evolution of the business and consumer. Getting out ahead of this evolution is where you will find opportunity for growth. 

      Understanding is the Beginning of Change

What are some of the changes we are seeing in this year's survey?

There are more tasting rooms being opened today versus wineries, as a result of the shift to direct to consumer sales, but since 2013, there are fewer of both being opened.

Tasting fees which have been increasing for years are now leveling off; a sign that tasting fees have reached the point where they may be discouraging good/new customers.

After years of seeing increases in by-appointment tastings, the percentage of pure by-appointment has dropped in favor of a mixed model, accepting both walk-in and those with appointments, with respondents suggesting the mix of tastings is also going more of a blend of formal and casual, reflecting consumers with split preferences - some preferring casual and others formal.

  Live Direct to Consumer Videocast

I hope that's enough of a teaser to get you to sign up for the annual SVB/Wine Business Monthly Live Videocast, where we will offer more dialogue on many new findings, along with a lively discussion of solutions and strategy.

In addition to myself and Cyril Penn, included as new guests this year are Tammy Boatright; a person with more than 20 years in direct marketing and winery management and Lisa Kislak with decades of experience in white table cloth restaurants applying data to drive marketing decisions.

Please [register] for this year's live telecast which will take place May 22nd at 9:30 Pacific Time. Joining live gets you into the chat room where you can ask questions of the panel, and discuss with wine people from across the globe. 

Even if you can't make this time, registering will get you the link to the videocast replay when that's available.

This year's panel will include:

        Tammy Boatright - President, VingDirect

        Lisa Kislak - Chief Marketing Officer of Crimson Wine Group

        Cyril Penn, Editor in Chief, Wine Business Monthly.

Date:   May 22nd, 2019

Time:  9:30 am - 10:30 AM Pacific Time

I Can't Take the Lunacy!

This might be the shortest blog I've ever penned, but I've got to get this off my chest.

In the 2019 SVB State of the Industry Report I pointed out some changes we as a wine industry are facing, including the lack of engagement by our younger consumers which I attribute in part to the cumulative negative health messaging coming from neo-prohibitionists.

Annual Direct to Consumer Survey Closes this Week

Every year SVB and Wine Business Monthly collaborate on a survey that maps out the changes in direct to consumer wine sales - providing benchmarks to respondents that are invaluable in day to day business, and equally important as we chart new paths and channels to sell wine.

The 2019 survey closes this week. Join the hundreds and hundreds of wineries who have already taken the survey this year [Take the Survey]

Take the above chart for instance which was a product of last year's survey. In it, we can see that for the first time, there are more tasting rooms being built than wineries. Why? Because wineries all believe they need a tasting room to sell direct. But is that true? The answer is that not all tasting rooms are necessary, but client experience is necessary even if there isn't a tasting room

The Lost Wine Consumer of 2019

The SVB Annual State of the Industry Report diagnoses trends and makes projections about tomorrow. I write it as much for me as for the industry, because I think it's critical to stand away from the business every year and take a fresh look. It helps me and the SVB wine division take a consultant's approach with our clients and diagnose owner's critical needs. 

Normally there aren't huge surprises when I research, but this year, I came away with a cascading shock when I discovered the business wasn't anywhere close to where I believed it was. And every bit of research since has continued to add to the realization that the industry isn't only at a cross-roads, we stand a chance of losing the wine consumer altogether.

Second Hour Broadcast - 2019 SVB Wine Industry Report

We're presenting a second hour of content for those who want more from the release of the Annual State of the Industry report. Register now, join us and continue the conversation!!

~~~O-O~~~

The summary statement from the Annual SVB Wine Report is the Wine Business is at a decision point. We either keep doing what we are doing today and see the category sag, or we change the way we sell and market. Why have I come to this stark conclusion?

2019 State of the Industry Report Signup

2019 SVB State of the Wine Industry

Report & Videocast

Wednesday, January 16, 2019 at 9:30 a.m. PT or 12:30 p.m. ET 

The wine business is changing. You can feel it, even if you can't quantify it. Before you plan out sales and marketing for 2019, you will want to tune-in and discover what's taking place, because there were surprises I didn't expect when I started researching this year.

Cannabis & Millennial Wine Consumption

Following the 2012 initiatives in Colorado and Washington that legalized the recreational use of marijuana, questions started to be asked around the wine business about the substitution effect of pot and wine. Even more interesting to me is to think through, why the wine industry would even ask the question?

The reason the question is being asked is everyone in the wine industry has been feeling uncomfortable with sales trends for some time, and we are all trying to pin down the root causes for the changes. Many have already concluded cannabis is hurting wine sales.

While I've avoided talking about cannabis in the Annual SVB State of the Industry Report up to this point, this year because of the trends I'm seeing, I felt it necessary to take this subject head-on.

You can sign up  [here]  to receive a link to the 2019 SVB Wine Industry Report and the live videocast which will take place on January 16th this year. But here are some of the thoughts I'll present on wine and weed within the report this year.

Wine Supply is Hitting a Tipping Point

I've been pointing out the slowdown in the growth rate of consumer demand by volume for some time now. We are still growing as an industry, but the growth rate is slowing, particularly when looking at volume.

I began discussing shifting consumer demand and premiumization in the Annual State of the Industry Report as early as 2006. This is a pretty optimistic industry, so I was called a Debbie Downer when I started discussing the forward trends back then. That blow-back has since settled into a reluctant agreement. Instead of debating the facts as I've laid them out now, the discussion has settled into a strategy discussion.

Source: CA Grape Acreage Report

At some point in a cycle, an equilibrium point is reached as planting moves forward in response to growing demand. At that point, growers will slow down planting. 

The nearby chart shows a strong runup in planted acreage starting in 1995. That was a reaction to the start of the current explosion in demand for wine we've experienced for the past 25 years. Something changed to the slope of the line in 2001. That pause was created when planted non-bearing acreage became bearing and coincided with the Dot.com bubble and recession. From there, planted acreage fell into a more predictable but slower pattern, supported by healthy consumer demand. 

In 2017, planted acreage hit another inflection point, and a new phase began with acreage removals adjusting for oversupply. That's an indication that we are fully planted, and supply has reached a point of excess. It's hard to argue that demand is growing substantially when acres come out of the ground. That said, looking deeper into this does reveal the source as declining consumer acceptance in lower-priced, high-production wine.

But from all the signs I can see, it appears we've arrived at that tipping point in supply. That will change a lot of things going forward.

The Annual SVB Wine Business Survey

 

      Business Intelligence?

There is something changing in the business environment. You can feel it. Business is good, but it's fundamentally changing. You have examples of change in the way your business is functioning right now. The consumer is different, but what's causing the change and how will the change impact you? 

Those are the questions business owners should be asking today because change creates both opportunities and threats. So we need to understand what's happening in measurable ways. We all need to know exactly what's transpiring, but how are you going to get that business intelligence?

      Story of My Life

I've always been frustrated by the lack of actionable information and the availability of street-level intelligence in the wine business. There was plenty of information on wine-making and grape growing, but there was never satisfying business intelligence available. What is really happening? How can I know if a decision is sound without any reference points? 

With no good information available, more than 15 years ago I started doing annual research just to make sure the wine community had a starting point. There is a lot to talk about today:

• What are emerging trends in Direct to Consumer sales?
• Is there any pricing upside available in my price segment?
• Will M&A continue and if so, what are buyers seeking?
• What growth rate can I anticipate next year?
• Where should I look for new consumers?
• Are imports or cannabis going to cut into sales? 
• Will grape prices increase next year?

Do Tasting Rooms Steal Sales from the Wholesaler?

Procter & Gamble has long been respected for it's integrated product development, integration of acquisitions, and brand marketing. Consider the number of iconic brands they hold like Ivory soap, Pampers diapers, Duracell batteries, Gillette razors, Tampax feminine care products, Crest toothpaste, Tide detergent, and the list goes well beyond that. P&G has more billion dollar brands than any company in the world ... but they don't sell wine. If P&G sold wine people would be running to their mailboxes for free samples and the TTB would not be happy about that.

After-Hours TV: The Cutting Edge of DTC Sales

It Never Ended

The annual SVB videocast was over, but the cameras kept rolling and the discussion continued through the night until the sun started peering through the studio window. Eyelids sanded away retinas with each blink while the smell of spent smokes and stale beer perfumed the room. Amazingly, it was time to shave again, but the studio audience asked for more.

The panelist's raspy voices found comfort with hot coffee, and with adrenaline driving us forward we offered up new topics such as gullet level depletions, employing wine ambassadors in your sales strategies, and the value of making social statements with your brand. But who would get the last word? Would the videocast end?

Video Replay: Secrets to Successful DtC Sales

On May 17th we presented several of the findings from the most recent Direct to Consumer survey. This year we again had good participation from the wine business community both in region and by case production. Many great observations were offered from the panelists:

Last Chance: SVB Live DtC Videocast

I wanted to title this post with something like, "Jaw Dropping Evidence You Won't Believe !!" Then I was going to send you to another site that would have you click through 75 random pictures. Don't you hate it when you get pulled into one of those links? They never get to the picture you wanted to see. It's a form of internet fraud and torture.

Well I actually do have more than 75 slides we've just finished putting together. They're from the most recent Direct to Consumer survey; hardly a fraud. I think you would really appreciate all of the information, but the total deck of slides are only for original survey participants. There are some slides and information anyone can get though.

Among many interesting metrics and findings, the conclusions on Urban Tasting Rooms were pretty remarkable ... we could even say the discoveries are 'jaw dropping?'

Support Animals and the New Napa Hillside Initiative

This past weekend I went to Trader Joe's to get supplies for making pizza. When I entered the store, I noticed an old yellow Labrador mix wearing a vest that said "Service Dog," the kind anyone without any proof can buy from Amazon.

Rover was wandering around with a middle-aged woman who outwardly didn't seem disabled in the least. I felt a tinge of guilt with being politically insensitive to even wonder inwardly about the animal's legitimacy, so I just moved on to the pepperoni.

Soon thereafter I noticed a Standard Poodle, also with "Service Dog" emblazoned on his vest and once again, the owner didn't show any outward disability. I'm still not used to the frequency with which I see animals in restaurants, grocery stores and other public places. But again trying to be politically correct, I put the questions out of mind and paid attention to the mozzarella.

      Unintended Consequences

Then an interesting thing happened right while I was fondling the pizza dough. The two dogs decided to get into a full-fledged dog fight with snarling, snapping, foaming jowls and biting ...  right there, in middle of Trader Joe's, right between the pizza dough and prosciutto! Right next to the baking potatoes.

Both owners jerked at their dog's collars and screamed, "NO [insert dog's name here]!" At the same moment one of the dogs yelped and limped away; the clear loser in this month's Trader Joe's Service Dog Battles.

Vegas had the Standard Poodle with a bite over/under at 3. Had I known, I would have put money on the old Lab to kick the poodle's ass, but ... shouldn't there be regulations about this bad behavior?

      Measure C and Dogfights

These weren't trained service animals, but that only became clear AFTER they became territorial over the baking potatoes. The animals owners were abusing ADA regulations for their own ends. Obviously the name on the animals vest doesn't make the animal a trained service animal.

It reminds me of the current dogfight we have on our hands in the upcoming Napa elections where a ballot measure has an appealing name that would lead a person to believe there is an imminent threat to the County's water supply from agriculture. But just like the vests on the dogs in Trader Joe's, the title of this initiative doesn't reflect the true intent and if passed, most in the County will only discover the real bite after this dog of an initiative is approved.

Estado de la Industria Vinícola de Estados Unidos 2018

Autor: Rob McMillan, Vice President Ejecutivo, Silicon Valley Bank

PREFACIO

Esta es una traducción al español del estado anual del informe de la industria vitivinícola de los Estados Unidos que utiliza Google Translator. Por favor, disculpe los errores en la traducción literal. Si usted desea leer el informe original en inglés, por favor haga clic en [este enlace.]

Si alguien quisiera editar las traducciones al español usando el informe original, le agradecería, al igual que a todos los lectores de habla hispana. Si está interesado y tiene tiempo, envíeme un correo electrónico a mis contactos al final del informe.

This is a Spanish translation of the Annual State of the US Wine Industry Report utilizing Google Translator. Please excuse errors in the literal translation. If you would like to read the original report in English, please click [this link.]

Are you Irrelevant to the New Consumer?

I hit my drive this far from the hole.

When released, the SVB Annual State of the Wine Industry Report gets wide coverage both domestically and internationally. In concert with the release, we also present a live videocast of the report, followed by the on-demand replay.

Despite a full hour of content from the original telecast, every year viewers ask for more content and added sessions. That's been hard to schedule but we're trying something new this year.

Last Chance to Get 2018 DtC Metrics

The Direct-to-Consumer Wine Sales Survey closes March 23

 

Take the survey

How do you know you are performing at the top of club performance, or even above the average? What percent of revenue, relative to total revenue do your neighbor wineries produce from just the tasting room or just the club? If I asked you how many wineries pay for data capture within their comp structure in the tasting room, what would be your guess? What percent of revenue comes in through web sales in your region?

What's the reserve tasting fee in your region? How about the average tenure of a club member sorted out by average bottle price? Would it help to know the average gain in club members in your AVA last year?

What Will the Wine Business Look Like in 2028?

I've recently been thinking about the changing metrics we've had available to manage the wine business over the years. What metrics existed 30 years ago for small wineries? How was wine sold then? What was the atmosphere like? How did we get information?

With daylight savings time upon us, I also started daydreaming today while looking out at the pool and thinking about summer. That brought me back to a trip to Mexico I took 40 years ago, so Mexico met up with metrics in this post as I pondered what direct sales will look like in 2028.

In 1988 my wife won a sales contest at work that provided for an all-expenses-paid three days at the Fiesta Americana in Puerto Vallarta. I had never been to a foreign country before, except Canada and I didn't count Canada as foreign. But Mexico? Well going there would make me an official world traveler!

Weed is Impacting Wine Sales

         Everybody Must Get Stoned ...

I spent last week at the Unified Wine Symposium in Sacramento. I've been coming to the conference since 1995; the first year ASEV and CAWG merged their separate conferences into one. Life was very different back then.


In 1995 you could find a really good bottle of Napa Cabernet for $15, Fed Funds were 8.5%, and marijuana possession was considered a Schedule I substance under the Controlled Substance Act of 1970 and prosecuted as such - right along with LSD, mescaline, and magic mushrooms.

The very next year - late in 1996, California became the first state to allow the legal use of medical marijuana, leading to the collapse of the Unified Conference and all wine sales as we knew them.

OK that last part's not true. Since that first year of Unified, wine sales in the US have experienced 20+ years of growth, even with medical marijuana coming on the scene. And Unified's Trade Show which back then didn't even fill up the first floor of the Sacramento Convention Center, now has two floors of trade show participants and a waiting list to get on the floor. Needless to say, the Unified Conference has thrived.

2018 SVB Wine Report Videocast Replay

The 2018 Annual SVB Wine Industry Videocast was presented last Wednesday to a record audience both domestically and across the globe. You are welcome to replay and review the session above. 

I'm always happy when the videocast is over because it marks the end of 3+ months of writing and research, which is a marathon to begin with considering I have other job responsibilities and the research and report activities push through the Holiday Season. This year though, the process felt like running a half-marathon wearing ankle weights.