March 21 2006
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Posted in, New World. Permalink | Comments (0) | Print | Email This
March 20 2006
I read a lot of books--almost exclusively in the wine, marketing or business biography category.
I recently finished a book called Brewing up a Business about the development of craft brewer Dogfish Head Brewery in Delaware.
This is really an excellent book as a narrative to starting a business--it’s a fairly breezy read and offers a great deal of insight for the armchair entrepreneur.
One of the really interesting things that the founder, Sam, discusses is the theory of "Beneficial Inefficiency." I googled this phrase and the index for this book came up #1. So, I’m going to suggest that perhaps this is an economic theory created by Mr. Calagione.
This isn’t a new theory, but what it suggests is the fact that scarcity is good for business--particulary small businesses--in order to create excitement. Dogfish purposefully doesn’t create as much product as it could sell.
I was thinking about this while enjoying my first Silver Oak wine last week in Las Vegas--Silver Oak is a winery that releases very high-end immediately drinkable Cabernet a couple times of year (as opposed to Cabernet that should be cellared for a good number of years to soften the tannins)and boasts an extremely fanatical customer base--they snap this stuff up quickly, there are limits on bottle purchases, etc. Clearly Silver Oak practices this scarcity model and their customers buy into it. I say buy into it because, frankly, it’s expensive. And, while I have a largely untrained palate, I have to say that while it was enjoyable, well-made wine, it wasn’t profound, which is what I would expect for a wine that costs $60 and up. In fact, I’ll go on record and say that I’ve enjoyed wine that I thought was better that cost $13.99 and 19.99.
But, I digress, the quality of the wine, or my relative enjoyment isn’t really the point related to Beneficial Inefficiency or scarcity as a marketing tactic.
My larger question is this (with background context): with all of the news ablaze about direct shipping, letting small wineries stay on equal footing with larger producer’s that have more power with the distributors, etc. juxtaposed against the fact that (depending on where you read the statistic) the wine market is populated with 6500 labels and 500 of those (or 8% ) makes up 90% of the wine market in $$$’s sold.
Isn’t a really relevant question here, maybe the wineries have it all wrong? Maybe they don’t need to grow bigger, maybe they won’t be able to sustain a market of new customers buying direct in the Midwest, maybe what they should do is create less product and market it better.
The old joke about the wine business is that, "If you want to make a million in the wine business, start with two million" is probably very apropos. It takes money to make money and somewhere lost in this wine shipping debate separate from the evil death clench of the distributors is the notion that wineries might be better off sticking to their knitting, creating a hospitable environment in their tasting room, limiting production, increasing quality and seeing what happens--shipping be damned.
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March 18 2006
Crush by Dave Matthews
Lovely lady
I am at your feet
God I want you so badly
And I wonder this
Could tomorrow be
So wondrous as you there sleeping
Let’s go drive ‘till morning comes
And watch the sunrise and fill our souls up
Drink some wine ‘till we get drunk
This article on "Critter Brands" appeared on the wire today. I much prefer the term "Adventure " brands, but, alas, it appears that ‘Critter" has become more popularly used.
This is the same story that’s been told numerous times in the wine press, and is now becoming a thread of conversation in various popular publications--Wine Enthusiast and newspapers.
"The average American consumer doesn’t want a big, tannic, heavywine that requires aeration and maybe decanting," he said. "People wantwines that you can open up and enjoy right now that are mellow,fruit-forward, kind of user-friendly wines that taste good and go wellwith food."
Annual sales of wines with animal labels or names reached more than$600 million last year, ACNielsen said, while overall sales were nearly$4.07 billion. ACNielsen records its sales data from supermarketpoint-of-sale purchases.
About 1,000 brands were introduced over the past three years, Bragersaid. Only about 400 had staying power - sales of at least $20,000annually. Of those, critter brands outsold the competition about 2 1/2to 1, Brager said.
A couple of new bits of information has been broken here, first that animal labels represented sales of $600M last year out of nearly $4.07B. That’s 15% That’s staggering.
Well, no wonder we keep seeing the proliferation of off-beat brands.
But, from a branding perspective, how long can this last? And, is this a fad or a trend. I would argue that it’s a trend with a shelf-life.
What can’t be argued is that these fun, quirky wine labels are flying off the shelf.
But, given that this wine is largely being attributed to grocery store sales, can we assume that its sales are primarily being driven by emerging wine consumers--folks, perhaps, a little less sophisticated in navigating a wine shop? Can we assume also that twenty-somethings i.e. Generation Y is also purchasing a fair amount of it?
The answer is probably yes.
But, I posit that everything has an adoption lifecycle--i.e. a lifecycle--birth, growth, maturity, decline. Product Manager’s know this to be true, certainly.
Take music for example, in practical terms, this is spun a little differently, but true no less.
Baby-Boomers grew up on bubble gum songs before graduating to the Beatles. Kids from the 70s grew up on John Denver before moving to Zepplin. And, my generation, well, the first album I ever had was Air Supply. And, I quickly moved to heavy metal before reversing course into classic rock--Zepplin, AC/DC, Pink Floyd, et al.
What’s interesting about this today is that all the kids that grew up on Britney Spears (gratuitous photo link) are now buying so-called backlog artists the likes of Zep, and Aerosmith, Kiss, AC/DC, Steve Miller.
Blender Magazine, a youth-oriented rock magazine, and Rolling Stone both have a monthly feature on artists that have seen their best albums 20 years in the past.
Heck, Guns n Roses, classic rock to kids nowadays, has their Greatest Hits on the Billboard 100 list--from a CD that was released two years ago, based on songs that were released, at the latest, in 1991.
And, even Dave Matthews has maintained relevance in the college scene for 10 years--a triple lifetime for an artist--basically because he keeps regenerating fans as college kids and their younger siblings simultaneously get turned on to him.
What’s the point, right? Despite what Yellowtail says:
That’s the story of Yellow Tail’s success, said Roy Danis of W.J.Deutsch & Sons Ltd., which imports Yellow Tail. It sells for around$6.99 a bottle.
"If they don’t have a good experience drinking the wine, they’re notgoing to come back, regardless of how pretty the picture is on thebottle," Danis said.
"The ultimate reason why people kept coming back was because weover-delivered on quality for that price point. Yellow Tail’s successhas to do with what’s in the bottle," he said.
The "Adventure" brand that ultimately survives long-term will be the product that segments its markets by diversifying--because peoples taste grow and develop and as they move through the lifecycle with a product they have a product to graduate to--just like the Old Navy/Gap/Banana Republic model. I think Yellowtail gets this and is, in fact, moving to this model. Though, I question if they will delineate between the brands enough to create a value perception i.e. Old Navy to Banana Republic.
Or, quite frankly, the move from Britney Spears to Led Zepplin.
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Posted in, Good Grape Daily: Pomace & Lees. Permalink | Comments (0) | Print | Email This
March 17 2006
Irenses amo bibo Vinum--loosely translated stands for: "The Irish Like to Drink."
And, the Irish have a little bit of wine history. Interestingly, the popular press likes to intrinsically link food and wine together--and for the most part they should be, though growing evidence indicates that Generation Y’s wine adoption is well ahead of the adoption curve at which you have some acumen to appreciate a fine meal.
This month Saveur Magazine highlights Ireland’s growing food reputation--a place heterofore not known for anything other than "Banger’s and Mash." And, well, the fact that most people I know think of Guinness as sort of a drinking man’s substitute for Slim-Fast. A pint acts as a meal replacement. But, given the food link is a wine revolution too far off?
The future is always tied to the past and with that, I ran across a cool bit of historical info. related to Irish wine history:
The Story of the Winegeese
The story of the Irish Winegeeseis fascinating. Their roots lie in the flight of the "Wild Geese", thesoldiers who fled from Ireland to France after the Treaty of Limerickin 1691. During the 18th and 19th centuries many thousands followedthese soldiers for political and economic reasons. Sometimes theytravelled on the French ships that smuggled wine into the west coast ofIreland, described on the ships’ manifests as "wild geese", evoking thelonely calls of birds travellingwinter skies.
"Winegeese" is the name given to the emigrant Irish families who, fromthe 17th century onwards, engaged in the wine trade in the variouscountries that they adopted. Many of these pioneering Irish familiesplayed significant and enduring roles in the viticultural developmentof some of the principal winegrowing regions in both the Old and NewWorld, such as Michel Lynch of Bordeaux.
The site is pretty interesting and is diligent about its gathering and preservation of Irishmen in wine history. Check it out.
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Posted in, Free Run: Field Notes From a Wine Life. Permalink | Comments (0) | Print | Email This
March 16 2006
Gordon Gekko: The point is, ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right.Greed works.
--Gordon Gekko in Wall Street
I caught this article on Bloomberg.com.
March 14 (Bloomberg)—A boom in fine-wine demand is drivingthe most buoyant market in three years and leading to moreinnovative ways of trading and investing in top vintages. Auction volumes have surged, with Christie’s posting a 15percent increase in 2005 sales to $42 million and Sotheby’s a 40percent gain to $29.1 million. The London-based wine index Liv-Ex100 rose 19 percent after being little changed in 2004. Essentially, companies like uvine.com and are enablers for trading. Kind of like an eBay of sorts for wine.
Online Wine Trading That’s Open To All
Through Uvine, trading in wine internationally is made possible for alltiers of the wine distribution chain. Whether you are a wine producerlooking for a more direct route to market, a wine investor seeking alucrative wine investment or a private consumer searching for aparticular vintage, Uvine Wine Exchange is the ideal place to dobusiness. Another company, liv-ex.com also functions as an exchange. The London International Vintners Exchange (Liv-ex) is an electronic exchange for fine wine. Our electronic trading and auction platforms enable a global network of professional traders and merchants to deal quickly and efficiently in wines from around the world. Liv-ex also provides price and other market information to both members of the wine trade and private collectors.
This free market economics is interesting to watch in the wine trade--particularly as old guard wine producing countries (France) cling to business models and traditions as denizens of the global economy darken their doorstep (Argentina, S. Africa, Spain, New Zealand, Australia).
And, one significant downside to this model is the notion that counterfeits apparently run rampant--so that prestige bottle might be as valid as the Rolex you bought at the corner of 53rd and Broadway in NYC.
yes, despite all of the turmoil in the world wine markets and the skepticism that I have about wine being an investment vehicle separate from a fun diversification strategy, there was this article on the Liv-ex return in ‘05.
Indeed, our major theme for the last two years is that young wineslooked overvalued relative to older vintages. In general this is stilltrue, but some of the more obviously “cheap” mature wines have becomemuch less so over the last year. We do believe, however, that despitethis, older stocks are going to continue to outperform, but the bestopportunities may now lie in the second-tier wines.
I’m reminded of the traditional stock market where older companies that are steady, mature and throw off profits are neglected for the next, big thing. Tulip Mania, I suppose, is a part of the human condition.
Nonetheless, the Liv-Ex fund had an 18% return in ‘05 and unless you own real estate in San Diego, that’s a pretty good year.
Caveat Emptor!
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