February 6 2007
Tim over at Winecast.net has posted the very first edition of the new Unfiltered podcast. He and I are co-hosting and it’s designed to be a monthly podcast that gathers industry folks together to have a conversation in a roundtable format. Topics will range, but it should be something akin to The Sportswriters on ESPN or Face the Nation, except for wine wonks.
This month’s edition features Jeff Stai from Twisted Oak Winery and Tom Wark from Wark Communications and his own leading blog Fermentation. Tom is also now doubling as the Executive Director for the Specialty Wine Retailers Association, which he details on the show.
Overall, the show turns out well, especially for a virgin effort. The only downside to the podcast might be my own staccato pattern--I think most actors and people with personality talent don’t watch themselves because it’s too painful. Even without much of the personality talent, I know what they mean. I’ll work on it.
Kudos to Tim for organizing and look for monthly editions going forward. The link to the podcast can be found with either of the below options:
Link for listening on your PC:
http://winecast.net/2007/02/05/unfiltered-1-twisted-oak/
Link for download:
http://winecast.net/podcasts/Unfiltered_20070121.mp3
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February 4 2007
With apologies to Gary Vay-Ner-Chuk at Winelibrary and his likely epitaph, I’ve had the opportunity to meet a couple of other people that are also changing the wine world.
The wine industry has always attracted outsiders—while it seems to be a fairly inclusive community, the truth is that most of the money required to start a winery has come from outside the industry. Very few have bootstrapped their way to the top—it’s just not set-up that way given capital costs for land, personnel and equipment and the lag time in between grapes in the ground and bottle on the shelf.
For many people (myself included) interested in aligning their passion with the industry in a professional capacity, working somewhere in the value chain is the way to go. This model for getting close to the industry is probably the best way to go because outsiders can drive change in what can sometimes be a hidebound and traditional business clinging to legacy models of business.
As a result of professional work, I’ve recently had the opportunity to come across numerous people, most of them young and all of them passionate about creating value in the world of wine.
Interestingly, I say “creating value” because most people in the wine industry, though capitalists they may be, are not nakedly greedy and fueled by the love of money. More often these people are organically fueled by a passion for the vinous arts with an appreciation for good business that begets profits.
Two companies I’ve recently interacted with, led by wine industry outsiders, are examples of companies that are going to change the way we buy wine at retail from a distributor and how we buy wine consumer direct online.
Taken in Two Parts, I’ll review the distributor first.
Many in and around the industry deride the three-tier system as profiteers required to be a part of the sales chain by regulatory mandate and not value-add. The grinding axe usually includes an anecdote about lack of focus for quality-oriented small brands and heavy-handed sales tactics for grocery store wines. While that may philosophically be true, there needs to be a line of demarcation between big distributors and small distributors.
Professionally I’ve been on something of an extended road trip meeting with small distributors in many states and almost to an organization; these are smart, engaged, creative people shaking things up by focusing on artisan brands that require a hand sell.
Candid Wines based in the Chicago area is one such distributor. Started by Scott Kerrigan and Damien Casten, both of the business partners come to the industry from other professional experiences.
Casten was a young American living in Paris when his wine radar went off while eating a fantastic meal, well-paired with wine. After working in the rat race, he enrolled in the New England culinary institute and returned to France to cook at fine dining establishments, include the Michelin three star restaurant Lucas Carton before eventually settling in Chicagoland and meeting up with business partner Scott.
Scott Kerrigan, a fascinating guy and my lunch companion at Blackbird in Chicago recently had a similarly circuitous route to the world of wine. An MBA with a law degree, he’s obviously wicked smart and well-oiled in the machinations of big business. Straddling the line between foodie and passionate wino, he enrolled in culinary evening school to hone his home kitchen chops before transferring his business acumen to the wine industry and starting up Candid Wines with Damien.
Their position to market is, perhaps, the most interesting aspect of their business, though certainly not the only aspect that makes them unique and a safe bet for success.
With their mantra of, “We Make Wine Lovers Happy” they are building a business that does a 180 on the traditional distribution business. And, in my experience, entrepreneurs that are stridently dogmatic about their “brand,” how they do what they do and with whom they do it are the best candidates for long-term success. A clear execution path from points A to B is the result.
Candid wines is just that. They strike me as protégés of Kermit Lynch, creating an iconoclastic reputation for absolutely the best quality wines with a terroir-based organic bent. By building on their own palates with a reputation for quality, they will create a business that succeeds by the dint of their hard work.
But, what’s more interesting is the transparency with which they are building their business. Sure they sell wines to retailers and restaurants in the Chicagoland area, but they also have a robust consumer-oriented events portion of their business and this, in my estimation, is their secret sauce.
Most distributors provide closeout wines to non-profit events and maybe supply a bottle or two for a retailer tasting on Saturdays.
Candid Wines take their personal backgrounds and strengths to create events for consumers that are a likely profit center, and also have the magic opportunity to drive consumer pull demand for their wines at retailers and restaurants.
Smart. Very smart.
Their events, including corporate, public, catered, and charity events is an opportunity for them to give, in their words, a “Candid Wine Experience” that “delivers all the passion and pleasure that embodies great wine.”
With growth occurring in every corner of the wine industry—from amount of wineries to continued record-setting levels of consumption, I’m glad to see that new spins on old business models are occurring to advance the cause of the industry—just like Candid Wines is doing in Chicago with a singular focus on sensibly growing their business while building their wine portfolio and creating events that, of course, “Make Wine Lovers Happy.” They are turning the traditional mode of linear operation of the supply chain inside out.
Next up, I’ll review an online business that is capitalizing on the emerging Wine 2.0 space coupled with the off the charts growth of online winery consumer direct shopping.
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January 15 2007
I could start this post off a million different ways. Really, I could. I think the best way is to just lay out the circumstances.
James Laube of Wine Spectator, writing on the subscription-only area of their web site, had three posts last week.
The first post on January 9th gave an overview of TCA—which is the chemical abbreviation for 2,4,6-tichloroanisole. The post explains a couple of key points:
1) TCA is a chemical so powerful that even in infinitesimal amounts it can cause musty/off aromas and flavors in wines
2) The taint most often comes from natural corks, but can also be a systemic problem in wineries where damp places and chlorine based cleaning agents are common
3) TCA poses no health risk, though it can ruin a wine by inducing “off” flavors and can strip a wine of its fruit characteristics
4) People vary widely in their ability to perceive TCA and some cork producers claim that 6 to 10 parts per trillion is acceptable as most people won’t notice it at this level.
4.1) There are, however, some tasters that can detect TCA at 1 to 2 parts per trillion.
This is all well and good, and relatively unexciting. Many people are familiar with corked wines.
But, what happens next, after the TCA baseline has been laid, is where it gets interesting.
Later that day, on January 9th at 5:17 pm ET Laube in a second post that day publishes a post on Pillar Rock wines with the headline: Pillar Rock Battles TCA-Tainted Wine
In summary, Laube indicates in his post that all four bottles he received last year of the ’03 Pillar Rock Cabernet were corked. He gave it a score of 55 points that was recently published on the Wine Spectator web site. Laube explains that his suspicion is that the winery is tainted, and it’s not merely corked wine. Obviously distressed by the score, the winery owner Cary Gott reached out to Laube after the scores were released in December of ’06 and asked him to re-taste the wines while at the same time he sent them to a lab for analysis.
The wines that Gott sent tested with low levels of TCA—1.4 and 1.6 parts per trillion, respectively. Then Laube re-tasted and he thought they were corky again. So, Wine Spectator sent them in to be tested and they tested at 1.2, 1.4 and 1.9 parts per trillion, respectively.
Gott said Tuesday of last week that he was going to continue to sell the wine, which retails for $125 a bottle with production limited to a mere 357 cases because, according to the quote from the post, “We don’t see the wine having the apparent taint of TCA.”
Laube finished his post with the following riposte: “You may or may not be able to taste the TCA in Pillar Rock’s 2003 Cabernet. The question is: Do you want to take the chance?”
Still with me? Good. This is where it gets interesting. The comments section on the blog post contain all manners of accusations and defenses—many lambasting Laube for his self-righteousness with his palate and others still defending his journalistic integrity for making this information public.
It’s helpful to know that chemical tests can pick up TCA at 1 part per trillion. So, the levels that Laube supposedly picked up the TCA notes are equivalent to machine level chemical testing. Wikipedia gives an analogy (found here) on “Parts per Trillion” that equates that level of chemical to: one particle of a given substance for every 999,999,999,999 other particles. This is roughly equivalent to one drop of ink in a shipping canal lock full of water, or one second every 320 centuries.
Yes, you read that right. If you were in crystal clear pure drinking water the size of a shipping canal lock and one single ink drop was put into the water that is roughly the equivalent of the 1.2 parts per trillion that Laube picked up of TCA taint in the Pillar Rock.
The 61 comments (and counting) themselves run longer then the actual post, with one commenter, Tim Long, noting:
“James - You astonish me with your hubris! First you highlight just what an ace taster you are, able to ID TCA virtually with the sensitivity of “one of the most advanced wine-analysis laboratories in the world.” Next, though “any TCA is a defect”, 1.2 or 1.4 ppt are “low levels” of taint. Defective wines, but only on a low level? OK. Next you move on to blatantly insult the winemaker(s); “I’m not surprised that Gott and other winemakers didn’t pick up the flaws in this wine. The TCA levels in the tested bottles are below the threshold of many tasters.” Cavalierly lumping Mr. Gott and the “other winemakers” in with those other “many tasters” who are mostly not, incidentally, successful wine professionals, is an insult in my book! Oh, and “a person can be a great winemaker without necessarily being a great taster.” Please tell us who these great winemakers are whose palates, you have no choice but to inform us, are so obviously less great than your own? That way we can all work together to put them out of business, at least unless we are certain that you have tasted and anointed their wines with your amazing (only slightly-mythologically “super sensitive") palate! Since you are “not sure where the industry would be if issues such as this weren’t addressed,” this has nothing to do with vanity? Wow. I think I’ll have a beer.”
Brian Loring, himself a winemaker who makes some Pinot of merit, was on the board commenting in response to the Tim Long comment above and he said:
“Tim Long - I’ll step up and admit I’m not a super taster. I’ve never been able to taste all of the nuances that Jim and his felloow WS editors can detect in a wine. But I am very sensitive to TCA. I can’t tell you how many times I’ve sat at a table with a bunch of winemakers when I was the only one to initially detect a corked wine - only to have many others eventually come to the same conclusion. But there are always a few that will never detect the presence of TCA - and actually like the wine. But that doesn’t mean that TCA wasn’t present.
I would imagine that it’s really difficult for Jim to write these types of reports. And all of us in the wine world dread having something like this written about our wines or winery. But Jim has a responsibility to report what he knows… otherwise he loses all credibility. WS already gets way too much conspiracy theory type stuff written about them… could you imagine the outcry that would occur if they covered up information like TCA in a winery? They’d be crucified. It’s really a no win situation… but presenting the facts is always the most professional way to go. And as much as it pains me to see such a report - if it’s true - I can’t see any other option than to report it.”
To his credit, Laube doesn’t shrink from the flames and rants on the comment board, answering most that issue a challenge or require a rebuke. On Friday, Laube issued his final salvo with an oblique post that seems one part haphazard apology because TCA taint in a winery is something of a victimless crime and a reach-around pimp slap to the commenters dosed with some (slight) humility when he says,
“I knew early on that there would always be someone who knew more about wine than I did, and I tried to learn from them.
I also knew that there would be better tasters and better writers, too.”
In my scan of this situation, it’s hard to get a read on the motive behind Laube and Wine Spectator going public with this. Generally speaking the wine industry is genteel without a lot of malice. Laube hides behind journalistic credibility which is a paper thin excuse because he is hardly a journalist and more a writer—big difference. Laube does no investigative work that I am aware of, nor is he paid to seeing as how he works for a lifestyle/affinity magazine. Really, in my estimation, the situation seems to be about power and power summed up by the fact that the winery is not pulling the wine off the market, and I’m guessing that Laube, with his super-palate, thought that it should have been pulled. Had it been taken off the market, if the winery owner, Cary Gott, acquiesced to Laube’s palate, I have a $100 bucks that says the story would be a non-starter and might have never seen the light of day—digitally or otherwise. But, really, from a business perspective, with a virtually imperceptible amount of TCA in the bottle and with a production of just 357 cases priced at $125 a bottle with the assurance that the owner of the winery hadn’t detected it, would you have pulled it from the sales channels? Leave a comment.
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January 4 2007
I’m moderately technologically adept—and I think most people, certainly those that manage and read blogs are as well.
While I’m nowhere near the Jetsons in terms of technological savvy or acumen, I embrace my inner geek and roll with it—this despite some of my Luddite friends—some wine drinkers and many who are not. I know a person that doesn’t have a computer at home and, gasp, another person that doesn’t have a personal email. My father who is young enough to be with “it,” whatever “it” may constitute looks at a computer the same way he looked at a microwave 25 years ago—with awe and wonder. And, he still doesn’t use either one.
So, I’m firmly in tune with both worlds—the technologically advanced and the “kicking and screaming” camp.
That said, I read some technology predictions for the next 25 years that scared the hell out of me.
If these predictions are correct, whatever technological progress we’ve made in the last 25 years will be eclipsed by a factor of 5x in the next 25 years and it could have some radical implications on the world of wine.
Ray Kurzweil, a noted futurist with a track record of accurate predictions, released his sixth book in the fall of 2005 called, The Singularity is Near.
His book is predicated on a theory he calls the Law of Accelerating Returns. This theory is an evolutionary system that says that order increases over time. The “singularity” referenced in the title is described as a transforming event on the future horizon in which computers will exceed and then blow far beyond the capacity for human intelligence.
Kurzweil is quoted in an airline magazine called Hemispheres as saying,
“We can use these technology forecasts based on regions of the brain that have already been simulated to come up with pretty good estimates of the amount of hardware and computational capacity required to simulate the entire human brain. In my book, I analyze that and come out with about (10 to the power of 16) calculations per second. We’ll have that amount of computation for about $1000 by 2020.”
He continues to break down his theory into laymen terms by saying simply,
“By conservative estimates by the late 2020’s, we’ll have detailed models and simulations of all the several hundred regions of the human brain, and we will then understand its principles of operation. This nonbiological machine intelligence will ultimately be more powerful than biological intelligence because it will combine the power of human intelligence, which is primarily pattern recognition, with the typical strength of computers.
The question was then posed about an uprising of computers that perhaps create havoc like some science fictions movies or space age cartoons.
Kurzweil’s answer was,
“First, we’re going to merge with the technology. When you get to 2035, you’ll be hard-pressed to find a human who doesn’t have a substantial nonbiological thinking process inside his body. These people will be hybrids. It’s not like you’re going to walk into a room and say, ‘OK, all the machines over on the right and humans on the left.’ It’s going to be all mixed up”
What does this have to do with wine?
One of the stories got strong play 2006 was the concept of the “Robo-Sommelier.” Numerous articles were written and the blogosphere was atwitter at the prospect that a robot, er, wine-bot, could taste and identify types of wines and would have the ability to become personalized to recommend wines that suit an owners palate.
In a BBC article that I read, a Dan Coward from Bibendum Wine Limited, gave his best Thomas J. Watson impersonation when he said,
“I love new ideas in wine, but this one seems like technology for the sake of it.”
Thomas J. Watson, a leader for decades at IBM is famously recalled for his utterance,
“I think there is a world market for maybe five computers.”
Coward continues,
“The human taster will always have the upper hand in terms of flavour, smell and texture, and can make qualitative judgments based on the combination of these factors.”
Not so fast.
If Kurzweil is correct, the computational ability to mimic and exceed human sensory capacity—a function of the brain-- will be eclipsed by 2020—a mere 13 years from now.
What scares the heck out of me are signs now that point to continued hegemony based on this technological assumption.
The battle for terroir and appellation specificity might become not a battle to be fought, but a quaint notion leftover from a bygone era.
Numerous folks are already globally sourcing fruit putting out a bottle that speaks to flavor profile and not of “place.” If technology advances as it has been suggested then consumers would presumably have their palate typed to a specific wine that was made exactly to their specifications, regardless of where the fruit came from. Instead of bemoaning Yellowtail, we would be bemoaning, perhaps, 95% of the industry?
And, perhaps most sinister, what if Parker, in a nod to Ted Williams who wanted to preserve his DNA and his body via cryogenics for future possible use, used the available computational modeling to mimic his palate in order to have a robot chemically taste wine in perpetuity, long after he has passed, to keep the Wine Advocate going and his acolytes legion long into the future thus furthering his influence into the next several decades without silly things like a succession plan.
Crazy? Sure it’s crazy, and so was the idea of this thing called the Internet being omnipresent in our lives just a mere 20 years ago.
I’m not sure if George Jetson drank wine, but many of us will swill it down, if only to cope with the changes that are likely coming to our passionate place in this world.
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December 31 2006
Maybe I haven’t noticed it before, but it seems like wine is the subject of more frequent academic research. I recently saw notice of two pieces of research—one on wine promotions and another on wine as an investment.
Recently published research from Cornell University explored the results of effective wine promotions in restaurants.
A twelve-week field study conducted at a mid-priced chain restaurant in Houston, TX reviewed promotion strategies using three methods—server recommendations, recommended wine-food pairings and low-price tasting portions.
This is interesting because of a recent post I wrote on the naming of Olive Garden as the Wine Person(s) of the Year by Wine Enthusiast Magazine. Olive Garden uses aggressive sampling as a sales tool.
One obvious flaw that I see in the Cornell research is there is no variable accountability for the type of patron—either by demographics or psychographics. A mid-priced restaurant in the Houston area that is seafood-oriented (which this research was based on) may produce radically different research results than a mid-to upper priced steakhouse that is a regional restaurant, but not a chain. Demographics, red versus white wine and the like would all potentially yield different results.
Despite this seeming hole, which, in truth, would be difficult to account for, the Cornell research showed that all three promotion strategies worked with varying degrees of positive success.
Tables tents promoting wines, for example, can increase wine sales by 12 percent. Table tents promoting food-wine pairings can increase wine sales by 7.6 percent.
The biggest boost comes from offering wine tasting portions or wine flights and can provide an 18 to 47 percent boost to sales. The research noted that that this can help introduce wine to nervous customers.
Overall, the research offers hope for continued academic research to promote ways to effectively sell wine.
Despite my sharp criticism of Olive Garden, mainly because I think pimping White Zinfandel and Cavit Pinot Grigio to the portion of the wine market that is completely uninteresting to the majority of people that call themselves a Wine Enthusiast, I think that more adoption of unique selling activity is a good thing. And, I’m doubly glad to see academic research, the bastion for thought penetrating business practices ahead of the curve, engaged in foodservice.
Food – wine pairings on the menu, flights and sampling are all activities that will sure increase beverage service at restaurants of all stripes and continue to foster wine as a social way to marry food and wine in a memorable setting.
~~~~~~~~
Other recent research focuses on wine as an investment vehicle and may surprise many who have said that wine is a somewhat dubious investment aside from ego gratification.
The old grind used to be that past performance is not an indicator of future results. But, maybe that’s not true, at least in the shorter-term.
Investors, for years, but especially in the real estate run-up of the last five to seven years have been investing in Real Estate Investment Trusts (REITS) that act as sort of a mutual fund for property holdings as an investment vehicle.
And, many rock bands in recent years have set up bonds based on the future royalties of their musical properties. Incidentally, James Brown, who recently passed away, and was featured in the Wine Spectator Unfiltered column on their web site a couple of days ago,
The Christmas Day passing of the legendary singer and songwriter James Brown saddened Unfiltered over the holidays. We don’t know anything about the Godfather of Soul’s tastes in wine, but the man sure did know how to liven up a party. On two occasions, he performed at Wine Spectator’s Wine Experience, funking it up in Las Vegas in 2002, just as he had at the event 10 years earlier. Even at the age of 69, he had the black-tie crowd shimmying and shaking like it was the ‘60s and ‘70s all over again. We’re gonna miss you, Mr. Dynamite.
… was one of the artists who issued bonds on his music.
This is germane because it would be interesting to see an investment firm create a sort of REIT based on verticals of first growth’s or the like.
The investment itself is summarized as follows:
First, investment grade wine assets provide, on average, positive returns in excess of those forecasted by well accepted models that have been show to explain much of the variation in average stock returns.
Using a well-documented investment analysis tool, we show that wines on average provide large, positive excess returns. Specifically, using the Fama-French three-factor model, we document average excess returns of more than 0.60 to 0.75% per month and 7.5 to 9.5% per year over returns predicted by factors show to account for risk. Furthermore, our results suggest that wines have very little exposure to common market risk factors …
Previous research on wine investments has pointed out many negative aspects of such investments. Investing in wine can be risky and the range of returns is significantly large. These characteristics have not changed. However, this paper provides alterative research that supports the argument for investment in wine assets. Since a hedging strategy is one that offsets or protects against against risk, and since wine assets do not fluctuate according to market risk factors, investors committed to researching those wine assets expected to deliver strong returns can contruct a credible case for assembling a wine cellar.
And, that sound you hear? It’s a cacophonous simultaneous exhortation of “Yes” as men ready their spousal justification strategy for ’07.
Keywords: wine restaurant promotion research, wine investment promotions, music bonds, wine sales
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