April 21 2008
A couple of months removed from the day-to-day wine business, I have noticed a few things:
1) My creative juices are firing on all cylinders
2) My wine passion and passion for blogging has renewed after suffering through a little bit of the “cobbler’s son” syndrome
3) I am starting to see the forest for the trees related to the wine business and that is leading to more business and less wine in my writing. Not sure if this is bad or good.
4) I am back to the roots of this blog and relying on intuition rather than artful insight based on anecdotal evidence
What this all means is I wrote my post yesterday about calling for a merger between Wine 2.0 and the Open Wine Consortium very much in the Malcolm Gladwell “Blink” mode, without a whole lot of analytical thought. It just seems right and the right thing to do at the right time. This type of “by the seat of the pants” writing leads to some breakthroughs and it leads to some holes in logic, as well.
To that end, I somewhat purposefully did not put a whole lot of detail about how I might do a merger because I wanted to get the point across about relativism and absolutism and, well, there is only so much room for minutia before skimming gives way to snoozing.
That said, I can do follow-up posts and based on a couple of comments I received, I am going to comment in-line:
Paul Mabray, CEO of Inertia Beverage Group wrote:
Candidly Jeff, I think these two organizations are so very different they should NOT integrate. As a supporter of both here is the clear distinction I see:
Wine 2.0 is an event.
OWC is a network.
P
My suggestion is to create one organization that can create a business model around a network of people and events. Simply, this is what thousands of non-profits do on a daily basis—they have a mission, they act as thought-leaders, they serve constituents and many marshal an army of volunteers.
Most blogging and social media companies have developed their revenue streams around content creation and live events, so this much is not so much a foreign concept.
And, frankly, social networking is great, but business still is done in person. So, the difference between a network and an event is negliable.
What a combined Wine 2.0/OWC organization can do is become a national Wine Institute-like organizational body/think tank that executes thought-leadership and acts as the pivot at the crossroads of wine and technology.
While it can be argued that Wine 2.0 is expanding their focus to consumers that is only after the first three or four events were geared as wine technology networking events. The event I attended in November of ’06 was purely a business card exchange with all of the attendee’s being folks in and around the business. The owner of Wine 2.0 undoubtedly is trying to monetize the effort and the way to do so is to try to pull consumers in. I don’t begrudge him that, but I think harkening back to his near-term roots, in conjunction with a merger of equals with the OWC can help better chart a unified course that can then map to how to engage the public.
As I noted in my post, the key here is to consider this effort as a part of relativism and keep the best interests of the industry in mind and set aside, for now, the notion of good old capitalism.
Longer term, I am all for capitalism. In fact, being a non-for profit does not mean you cannot make money, and handsome money, it just means you have to spend what you make serving your mission.
As a sidebar note, I am not a fan of the phrase Wine 2.0 because it will seem as antiquated as “Alta Vista” or “Webcrawler” in a couple of years.
Joel Vincent, founder of the Open Wine Consortium said:
I am on my PDA so this will be brief until I get to my desk. 1) OWC is nearly 800 right now. OWC invites partnership and collaboration with any entity that furthers technology in the wine world.
Lastly, having an Electrical Eng background, I have always likened OWC to the IEEE for technology - education, driving projects to conclusion like standards, and educational events with a purpose. Again, for techies, your proposal would be like merging IEEE with the Consumer Electronics Show. Could there be tighter collaboration? Potentially. And we are exploring that with Wine2.0 and other wine related trade and consumer organizations. So thats where my head is at. I’m glad to discuss further when I get back to my desk.
Thoughts?
btw - There is already a European Wine Blogger Conf and it and the NA version are vastly different from Wine2.0 both in content and in purpose. The link to that conference is on the front page of OWC.
In this regard, I have to politely disagree on the IEEE and CSE. Apples and oranges. What I am saying is that Wine 2.0 is barely out of the gate, so let’s not give them too much credit and it started a scant time ago (less than two years) as a networking hub for wine technology companies.
I would encourage Joel and Cornelius to review non profit business models and determine how a fit can be created that will create ONE organization that serves the convergence of wine, technology and social media for the betterment of all parties in the value-chain. Yes, that will include consumers, but only after we figure out what the hell we are doing first. And, really, before it hits consumers it needs to hit the wine industry who remain, largely, in the dark on technology and the value of the web. A rising ride raises all ships and getting everybody on the wine side reconnoitered is a good thing.
The key here is to lead with strategic intent and in doing so you have to have the end in mind and work backwards to present day.
I have the first $100 bucks for 2009 dues. Can I make that out to “Open Wine Consortium” or some other entity name that is mutually agreed upon by the founders of two organizations that NEED to come together?
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April 20 2008
For the development, health and wealth of the industry in the quickening convergence between wine and technology, two bodies, the Open Wine Consortium and Wine 2.0, must merge in 2008.
I do not say this in a “maybe think about it, explore it and kick the tires on it” notion. I mean explicitly: Do it. Merge for the benefit of all collective members and the industry.
Set aside entrepreneurial agendas, build a mission, build an organization and do it as a quasi-for profit, non-for profit dedicated to being a central organizational body for the wine and technology space that can act as a central hub for the industry, wine technology companies and new media i.e. bloggers and online businesses.
On the cusp of Wine 2.0’s San Francisco event on April 24th and the Open Wine Consortium’s 700th member in two months time, it is time for the two to merge for a truly beneficial future for the wine industry as thought-leaders and activists in driving positive change.
You have to call a spade a spade and acknowledge that the wine industry is very fragmented—fragmented to the point that the abundance of associations like the Wine Institute and the, “in-need-of-Viagra” WineAmerica, amongst dozens of others, alongside a generally collegial environment, is a self-defense mechanism because naked absolutism, as modeled in the corporate business environment, is not as practical as relativism to the wine business.
Relativism, according to Wikipedia is:
Relativism is the idea that some element or aspect of experience or culture is relative to, i.e., dependent on, some other element or aspect. Some relativists claim that humans can understand and evaluate beliefs and behaviors only in terms of their historical or cultural context. The term often refers to truth relativism, which is the doctrine that there are no absolute truths, i.e., that truth is always relative to some particular frame of reference, such as a language or a culture.
Absolutism, according to Wikipedia is:
Moral absolutism is the belief that there are absolute standards against which moral questions can be judged, and that certain actions are right or wrong, devoid of the context of the act. “Absolutism” is often philosophically contrasted with moral relativism, which is a belief that moral truths are relative to social, cultural, historical or personal references, and to situational ethics, which holds that the morality of an act depends on the context of the act.
I bring this up because you can see the differences between two industry titans in those two social science references. Robert Mondavi? Believer is relativism? I would say absolutely. Bill Gates? Is he a believer in the absolute standards of his worldview? Absolutely!
In the limited choice game of evolution or revolution, this is one area where a wine industry revolutionary rise up by our brothers and sisters is beneficial for everybody.
Continued fragmentation serves nobody, but individual self-interest, and frankly, there is not enough diversity in this space for moral absolutism to make sense.
Wine 2.0 has a track record of putting on successful events amongst the digital avant-garde in the wine industry and has recently developed a board of advisors, which includes J. Smoke Wallin, a co-founder of WITS—the Wine Industry Technology Symposium. Wine 2.0, while representing mostly wine technology companies, with strong participation from wineries that “get it” has a developing influence with consumers in the Bay area, as well. Wine 2.0, in their own words is, “Blending the line between wine and technology.” Wine 2.0, as a phrase and name, also has a limited shelf life, as well.
The Open Wine Consortium, a wine social network, came out of nowhere in February of this year and has become the place to see and be seen in the online wine world. Now 700 members strong and growing, its burgeoning group’s portion include wine technology companies, wine bloggers, online wine stores, importers, exporters, and dozens of others. In fact, members are planning a U.S. wine blogger conference sometime later this year.
In such a small vertical like wine and an even smaller sub-vertical with technology, wine and new media, now is the time to unify and diversify instead of perpetuating the increased fragmentation that can kill momentum and hamper progress.
The wine industry manifests relativism, and now is a particularly good time for pockets of the industry to notice this notion and collaborate for the betterment of all.
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April 10 2008
Just the mere mention of IBM and I sense a somnambulistic state with eyes glazing, head bobbing, as if in a dimly lit and warm hotel conference room after a catered luncheon, a lumpy, middle-age fellow wearing Khaki’s, a logo’ed company button down and Rockport’s talking about something vaguely important, assuming incorrectly that it makes sense to his audience.
Alternatively, maybe that is just me channeling the seven years I spent in the IBM channel working for and with IBM resellers.
Nobody cares about those experiences or IBM, at least nobody that reads this blog, I presume. I understand that, but I want to draw a quick correlation because the way IBM (and many large technology companies) conduct their channel development and support is the model that I believe the wine industry is going to evolve towards.
Since I was nominated in the Best Wine Business Blog category of the AWBA, I figure if it walks like a duck and talks like a duck … it must be a duck, hence a post on some mechanical items in the wine biz.
The Context
Josh from Pinotblogger wrote a very nice piece earlier this week that covered a lot of ground, but the thing that sparked a notion is that the author of an article in which Josh was quoted puts words in Josh’s mouth about the potential demise of fine wine retailers, and in particular, ties that assertion to wineries selling direct. Josh, obviously, refutes this bit of creative license by the writer of the article.
Just as Josh notes, I would say the same thing. Fine wine retailers are not going anywhere. I do not care if a winery can ship to all 50 states in quantities that they desire, it is not going to happen. What will happen is wineries that cannot traditionally access the market will have increased DIRECT opportunities. But, to think that the three-tier or fine wine shops are going away is folly.
However, what could happen is the same thing that happened to IBM.
Now, let us throw a couple of things out of this conversation just for simplicity sake: let us throw out importers and let us throw out the online component; we can deal with that later on. Secondarily, let me say that pieces of this model already exist, but not at the scale that I think it will in the next 10 years. And, finally, let us, for the moment, discard the whole “distributors stink” conversation, particularly as it relates to the restriction of free trade, lobbyist money, etc.
Consider IBM as “the wine industry.” Forget that at about $91B in annual revenue that IBM is approximately 30X the size of the domestic wine industry, too.
What does IBM have to do with Wine?
Basically, the bigger you get, the greater the need to service customers. In addition, IBM is a hulking big ship, only able to make a turn with 18 miles worth of notice. And, sales people are expensive, and IBM has many products. Too many products in fact to have sales people covering all of the different types of customers—small, medium, enterprise, and on down the line.
So, you develop a channel program and in addition to having a couple of distributors through which all of your hardware and software sells through, you also have resellers that, yes, work directly with the customers in the various industry verticals and niches.
This is not any new idea; it is the same general notion as the three-tier system.
But, here is the rub. Years ago, IBM knew that the technology lifecyle creates downward innovation pressure on products that would create commoditization if their was not a “value-add” component. So, they put restrictions and incentives in place for both the distributor AND the reseller, who is now known as a “Value-added Reseller” or a VAR. Both the distributor and the VAR get more money and, essentially, are locked out of engaging with customers if there is not some sort of services component to their transaction. They restrict the heck out of you until you demonstrate that you are adding legitimate value with the end-user in some sort of solutions form.
This, is where I believe the wine industry is headed. Basically, the three-tier system is down to the very large players and the very small players.
It is a broken mess and nobody is happy about it, otherwise the big guys would not keep consolidating and the small guys would not keep bubbling up.
An Evolving Model?
I think the eventuality is that the large wine distributors are going to morph towards being just that—a distributor. The provider of logistics. Moving boxes from point a to point b. In the IBM model the distributor sells to the reseller who sells to the customer, the business.
However, the area akin to our IBM analogy that has not fully taken shape in the world of wine is the “Value-added Reseller” part, the guy that works with the customer. Sure, the distributors say they do it now, but not to too many people’s satisfaction in the fine wine portion of the wine business. In this case, and in my crystal ball, there is actually going to be a fourth-tier.
Assuming that the big guys morph into pure play logistics providers, I think that these small distributors can and will eventually morph into value-added services providers to retailers, selling through wine, for a mark-up, without ever, necessarily, taking wine into their possession. So, small distributors aren’t going to grow up in the wake of big distributor consolidation, they will actually evolve into something different that complements the needs downstream with retailers and end customers.
Small distributors will morph into being a services company. They will be the sales ombudsman on the ground, the retail event planner, the consumer tasting provider for tightly staffed retailers, the content developer for retailer blogs and web sites, the extended marketing team--basically anything that adds an additional service that the retailer cannot capably provide that is separate from actually getting wine from point a to point b, which the distributor will do, albeit at a much smaller rate than the current 30-33% mark-up plus chargeback’s and spiffs.
This new fourth tier will pick up the margin slack from the distributor who no longer adds value commensurate to the 33% while new logistics providers, from outside of wine will enter the fray; they are skilled at moving stuff and will enter the game because they won’t have to find and sell to the retailers, they just have to sell to the value-added resellers. And, well, anybody can get a bonded warehouse for wine.
Maybe it is a pipedream, but I would not bet against it. If I were a small distributor, one of the first things I would do is hire a copywriter for retailers to use for their newsletters and hire an event planner to lead the organization of retailer-driven events.
Is this a pipedream or am I smoking a pipe of a different sort? What do you think?
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March 25 2008
I am offering another quick reminder that voting is ongoing for the 2008 American Wine Blog Awards.
I am pleased to be nominated in two categories—Best Blog Graphics and Best Wine Business Blog.
My site is, presumptively, the dark horse in both categories. The Best Blog Graphics is likely swinging towards an upstart and the Best Wine Business Blog is amongst stiff competition against three legitimate businesses. It is flattering for me, but stiff competition regardless.
Your vote is important—not necessarily for this blog, though that would be nice, but for all of the finalists.
You can see all of the nominations summary style at Fermentation
And, you can vote for your favorites at the voting mechanism found here.
Some brief commentary, in my mind, 2008 is a critical inflection point for wine blogging. No, not blogging in general, that much has been decided, but specifically for wine blogging.
In a few short years, and particularly the last two, the increase in mindshare and influence wrought by wine blogs has been tremendous, but the rubber is starting to meet the road and in order for wine blogging to become something truly valuable to the wine industry we need to continue to tick up in exposure, go pro so to speak.
It is an interesting notion that wine message boards wield an equal and commensurate influence as blogs in ‘08 and likewise it is unfortunate that Wine Spectator keeps their blogs behind the subscription gates, almost despite the loosening up on content at media power brokers like The New York Times and the Wall Street Journal, but then the wine industry moves at its own genteel pace.
That said, your vote is a vote for progressiveness. A huge turnout in voting is a validation for wine blogs in and of itself. Go. Do. It. Now.
As a sidebar to my blog being nominated in the Best Wine Business Blog category, I started a “Wine Business Network” group on the professional networking site LinkedIn a few weeks back. If you are not on LinkedIn, you need to be pronto. It is becoming THE rolodex tool for the new millennium. Well, I started the group very innocently and seeded it with six or seven people. Quietly, passively, it has grown in number about 12X and I am getting 10 – 15 requests to join daily.
If you are on LinkedIN, are related to the wine business and you would like to join the group, please view my profile here, or just go straight to the link for the group here.
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March 23 2008
The increase in wine consumption in the U.S. is great for everybody; a rising tide raises all ships, right? It could, however, be better.
How so, you ask? Well, for starters, it would seem that most of the growth is from new customer acquisition, which is fantastic. In the parlance of Wine Market Council research, new consumers are coming in as “Core” consumers—those that drink wine at least once a week.
No doubt, the increase in wine consumption in the U.S. is tied to Generation Y and no doubt, it is linked to the absolute boom we have seen over the last decade in terms of fine dining and Chefs as celebrities.
I grew up watching the Frugal Gourmet and Yan Can Cook on PBS and now there are whole channels dedicated to food. Mario Batali, amongst many, is ubiquitious, leading to a more sophisticated food culture.
New customers and a more sophisticated culture are contributing to the wine bottom line.
However, after reading an article in Wine & Spirits magazine (summary here) and watching Diners, Drive-in’s and Dives on a perpetual loop on the Food Network, I am beginning to re-think the culture of wine.
Instead of new customer acquisition the way we are seeing it, the low hanging fruit, what about conversion of those less inclined to wine? New business development, if you will.
Perhaps I am biased because if I were ever going to open up a restaurant (I am not masochistic enough to actually do that) I would open up a joint. It seems much more interesting to open up something that can become a local institution than to try to hit the next wave for five years of boom.
That said, it seems like our joints, diners, drive-in’s and dives never have a wine list that is worth a damn.
If I had one wish, it would be that every distributor sales rep. in the country would pick out five joints in their territory, the local institutions, the places that give our cities a sense of place and soul, and work diligently to build a quality wine list at these cultural gems citing all of the research about wine consumption in the U.S.
Selling wine to fine dining establishments is great, but it is competitive and there is only so much room for so many bottles of wine at a finite number of places where you would expect to sell wine. However, by farming the acres of diamonds, by building the bottom up, the places where you do not expect to see a nice, affordable bottle of wine, the wine industry can create cultural change and a culture of wine for good, for the long haul.
Anything else is a cyclical trend.
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