Good Grape Wine Company

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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 http://www.goodgrape.com/index.php/338/