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July 19 2007

Wine Marketing in the Consumer Content Era

It’s been a while since I posted here at Good Grape so I thought I would get back into action with a meaty topic I think a lot about in my day job as a wine marketer.

How has wine marketing changed in the era of consumer generated content?

At one end of the spectrum is the ground-breaking work by Hugh MacLeod harnessing the power of social media to reposition Stormhoek as a “social object.” You can check out Hugh’s account of his campaign by viewing a 25 minute video of a talk recorded at the PSFK Conference in London last month.

What is most interesting about Hugh’s story is how simply—and almost by accident—he implemented a global marketing campaign in a very fragmented and traditional industry. Like a lot of wine brands, Stormhoek is a volume play where critic’s scores, aggressive sales practices and shelf-talkers are the standard marketing approach. So what did Hugh and Company do? They engaged the blogosphere and started a global conversation about their brand. The result was more than doubling sales in less than 2 years for an investment of about £20,000 (approx. $41,000 USD).

The other end of the spectrum is where 99% of the wine industry is at the moment with their heads in the sand about the internet and little clue about social media. They live in fear someone uneducated consumer will bad mouth their wine on one of the new Wine 2.0 sites such as Cork’d. This level of spin control and anxiety is understandable given the subjective subject of wine tasting where a $2 Chardonnay could be judged superior to a $40 Chardonnay.

But I have three words of advice for winery owners - Join the conversation!

We have seen a few brave wineries start blogging and engage the growing wine blogosphere. Although the jury is still out on their efforts, I know wine has been sold and word of mouth has resulted in new customers.

Don’t have a tasting room? Use your blog to create a ”virtual porch.”

Have a limited marketing budget? Spend some time reading and responding to wine bloggers and they will say some good things about your wine and drive traffic to your blog.

The theme of this week’s Wine Industry Technology Symposium underscores the urgency of wineries adopting new online marketing strategies. My favorite quote was from wine podcast superstar Gary Vaynerchuk from Winelibrary.com who said in his talk to , “Embrace your website as your business.” Amen, brother; I hope a few wineries there got the message.

So the bottom line is that wineries who are not part of the social media conversation are doomed to let consumers determine their word of mouth. Like any online endeavor there are trolls but if you engage and extend the conversation you are more likely to encourage partisan customers to come to your aid. If you do nothing, you are likely to suffer in ”Google Hell” for some time.

All it takes is a bit of time and focus. The rest—like what Stormhoek has done—could be history.

Cheers,
--
Tim Elliott
Winecast

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May 9 2007

Unfiltered 4 Podcast is Posted

My monthly podcast as Ed McMahon to Tim Elliott’s (Winecast.net) Johnny Carson is posted. It’s a good listen. Paul Mabray, CEO of Inertia Beverage Group, provides excellent insight and Mark Fisher brings a fresh perspective as a wine journalist for the Dayton Daily News --plus, Mark’s a real good guy, even if he’s an Ohio State fan.

Check it out at the link below

http://winecast.net/podcasts/Unfiltered_20070422.mp3

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April 3 2007

Are Wine Prices Determined by Quality or Marketing?

I’ve been doing some work recently that got me thinking about how much a wine’s price is determined by the actual quality of the wine in the bottle and how much by the demand created through marketing. Aside from a few very rare exceptions, wine needs to be marketed to be sold. This is normally done through retail stores, the winery tasting room, to wine clubs and increasingly through online wine merchants. All these add to the costs a winery has to pay in order to get their wines to the customer but they are not the main cost driver; the grapes are.

If you are Fred Franzia making his famous “Two-buck Chuck” you are paying about $100 a ton for your over-cropped Central Valley Cabernet Sauvignon. The yield per ton is probably something like 7 tons per acre which doesn’t produce the most concentrated fruit. That ton of fruit will make around 60 cases or 720 standard bottles so Fred’s got around 14 cents per bottle in fruit costs. Now you can start to see how he can make money selling it for $1.99 at Trader Joe’s. Contrast that with the premium producer in Napa Valley who spends $6,000 a ton on fruit and up. There the yield is between 3 and 4 tons per acre that will produce a more concentrated, complex wine. Assuming the same 60 cases are made, the Napa Valley producer has around $8.30 in fruit costs. Not too bad if the wine will be selling for $50 or $60 a bottle but still 60 times more costly than Mr.Franzia’s wine. But this post is not intended to be a forensic dissection of the wine cost structure, for that, visit my friend Vini.

So getting back to the wine in the bottle, the basic difference is in the quality of the fruit and cellar treatment (i.e. new oak barrels vs. chips, aging time, etc.). For producers making the finest wines they tend to spend a lot more on these items but in the final analysis the most extravagant producer might have something like $30 of cost in each bottle produced. Since distributors buy at an average of 40% off retail, this wine would sell for a minimum of $57 a bottle assuming a 10% winery profit. But what if this wine is priced at $150 or $500 a bottle? Well, the profit margin is certainly higher but there are probably higher marketing costs, as well.

As I learned last week, there seems to be a point where price and quality diverge. The reputation of a winery, bolstered by glossy treatment in the wine magazines and 95+ Parker scores also help to push the demand, and price, for these wines. But are they the best example of a certain wine region or variety? Well that, my friends, is in the eye, and palate, of the beholder. You might think Screaming Eagle is the zenith of Napa Cabernet while I prefer what Ladera is doing for a lot less. Preferences aside, there are many great quality wines from all over the world that compete for our hard earned wine dollar. What really separates them is not the quality of what’s in the bottle but the demand that is created for those bottles. That, in a nutshell, is the essence of marketing… at least in my book.

Cheers,
--
Tim Elliott
Winecast

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March 21 2007

Unfiltered 3 Podcast is Posted

Tim Elliott, our generous host and producer of the Unfiltered podcast, has completed and posted the third edition of the Unfiltered series. Nice editing job, Tim--completely taking out most of my guffaws and vocal tics, which is always nice.

I feel like Carl Spackler from Caddyshack when he’s talking to Ty Webb. “This place got a pool?” Ty: “Pool and a pond. Pond would be good for you.”

A pond would be good for me. I’m not sure I rate caddy swim time with these good guys and their good, smart company.

This podcast is designed to be something of an insider confab on wine topical items--something akin to the MacNeil Leher hour or (if you’re like me) the Sport Reporter’s on ESPN on Sunday morning--which is more my speed.

Our guests for this edition are Josh Hermsmeyer from Pinotblogger.com and Andrew Barrow from Spittoon.biz

Covering a bunch of different topics, this was a fun conversation ... give it a listen at the following link.

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March 15 2007

Another Winery Starts Podcasting

As a wine marketer, I’m always on the lookout for new and innovative strategies to sell more wine. As the first wine podcaster, I feel a certain responsibility to keep current on the genre by subscribing to every new wine podcast (for a while anyway). When these two things meet, I take notice.

So it was with great interest that I discovered today that Trinchero Family Estates has started to podcast. This is the conglomerate that white Zinfandel has built with the best known brand being Sutter Home. Their podcasts are focused not on consumers like first entrant Goosecross Cellars (disclosure: I work with Goosecross) but on the trade. Kudos to whomever at Trinchero came up with this idea as I’ve always thought that business-to-business podcasting is as compelling as business-to-consumer. It’s somewhat perplexing why this is not the first thing large wineries would think about in this medium as distributors, retailers and restaurants are naturals for regular communication in forms that can be consumed on the go. But that’s where this effort falls a bit short in my opinion. Instead of providing RSS feeds for listeners to subscribe to, they make the user download each podcast individually. This can be easily fixed and I’ll bet someone will take care of this shortly. My impressions of the first few shows I listened to are, well, sort of dry and basic but it’s a start.

I’m hoping other large wineries (and I’m talking to you, Gallo!) will follow Trinchero’s lead here and address their podcasts to the trade and maybe even the consumer, too. It’s inexpensive and very effective.

Until next time,
--
Tim Elliott
Winecast

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