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July 7 2010
Quick thoughts on wine news from the last week …
Poof! Goes the Wine Deal Web Sites
“Now you see it, now you don’t.” That is the sales premise of the flood of “one wine deal a day” flash sales web sites that have sprung up over the course of the last four years with the economy contributing to the development of a number of sites in just the last two years. Ironically, “Now you see it, now you don’t” can also describe the long-term viability of most of these sites, as well.
In the span of one week, the market innovator was acquired (Woot.com by Amazon.com) and one of wine ecommerce’s oldest players got into the game (Wine.com via dusty, legacy URL wineshopper.com).
You can now be sure that a shakeout of these sites is imminent.
Woot.com was the originator of the concept of one screaming wine deal a day. They were followed shortly thereafter by Wines til Sold Out, the now defunct Radcru.com and then Winespies.com. What followed in the wake of these companies has been a rash of “me too” imitators trying to capitalize on a combination of excess inventory in the wine supply-chain and consumers looking for a deal.
In addition, the concept has been co-opted by dozens of other companies who are not principally in the wine space, but offer deep discounts on luxury goods, including wine – companies like Gilt Groupe and Rue La la and others.
Specific to wine, Cinderella Wine, Winery Insider, One Wine One Deal, and Wine Heist all play in this space, in addition to a rash of others. Anecdotally, I have heard that upwards of 40 of these sites exist.
The consumer-facing business model is simple enough—usually there is some sort of free email sign-up “membership” element and then one wine deal at a time with a time limitation, sometimes one day, sometimes up to a week. The wine on offer is at a significant discount from retail price. Sales copy varies from site to site ranging from the compelling to the hackneyed.
The short-term value is that the consumer gets a “deal” and the wine brand gets a sale with some level of brand protection given the membership and non-broadcast nature of the advertisement.
However, the questions I have related to these sites are numerous:
• At what point does the consumer get numb to wine deals in general?
• Is there a potential degradation to the wine brand in a fire sale?
• Does commoditizing wine with price as the activation lever create long-term, conditioned harm to the wine buying market?
Just as major label clothing brands like Ralph Lauren have segmented their clothing offerings so I can buy a Polo shirt for $65 at Nordstrom, and a Chaps shirt at Kohl’s for $14.99(probably made at the same factory) is it manifest destiny with wine that second labels are going to increase in importance as production in the upper echelon adjusts to normalized market demand?
Paul Mabray, Chief Strategy Officer at VinTank doesn’t anticipate wineries increasing risk with second labels when he noted in an interview:
“The notion of ‘flash sales’ of super luxury products ($40+) does have a life span. As demand shrinks (leaving excess inventory that requires these types of channels), the wineries generally reduce production to match market needs. I would expect that in a 12 - 36 months the pool of excess inventory of these types of wine reduces and the ability for these wine sale sites to source in the category dries up. At that point, these companies will need to move to a different product type (International?) or change their value proposition (e.g. great prices of upcoming wineries).”
Specific to the wine sale sites themselves, how much longer are the number of entrants in the race viable before a shakeout occurs and a winery is on the hook with outstanding receivables?
I have always followed the Jack Welch (former CEO of GE) school of thought – if you can’t be number one or number two in your market, then you’re in the wrong market (paraphrased).
I watch trends closely and the surest sign that a trend has reached its zenith is when an acquisition occurs, or a late adopter gets into the game. The wine business has seen both instances occur within a week.
If I were a winery, I would pay close attention to the tenured players and let the rest of the inquiries to “flash” sale a wine quietly go away, because the majority of these “flash sale” sites are a “flash in the pan,” not long for the world.
July 5 2010
Quick thoughts on wine news from the last week…
Displaced Leadership at WineAmerica
It is unfortunate that industry association WineAmerica is undergoing a Board of Directors led leadership change with its Executive Director position.
However, what cannot be discounted in this renewal process is the fact that the organization is headquartered in Washington, D.C. and hangs its hat on a mission of, “Encourag(ing) the dynamic growth and development of American wineries and winegrowing through the advancement and advocacy of sound public policy.” With that as a mission, they were caught positively flat-footed on HR 5034 – a piece of potential legislation that, if nothing else, is entirely about “sound public policy,” or the lack thereof.
“ … Don’t get caught watchin’ the paint dry” is an oft-quoted sound bite from the basketball movie, Hoosiers. Simply put, WineAmerica got caught not only watching the paint dry in regards to HR 5034, but also watching the grass grow.
In fact, WineAmerica was caught so flat-footed that other organizations showed themselves much more in tune with and proactive regarding the danger HR 5034 represented to its constituencies. The Specialty Wine Retailers Association (SWRA), in particular, mobilized outbound mindshare building activity along with a consumer campaign with a great deal more efficacy than any response from WineAmerica. Since April, everybody but WineAmerica continues to provide visible thought-leadership around the necessary reversal of HR 5034. They have been significantly outworked in effort and influence.
HR 5034 reminds us that when crisis strikes, enemies come in two forms – the enemy we know and the enemy within. The enemy within is the competing forces for the same good that expose ineffectual activity.
It may be true, as suggested in a Wines & Vines magazine article, that this personnel change with WineAmerica is about “cutting costs,” but it’s hard not to wonder if the change in leadership at WineAmerica isn’t related to its impotent advocacy when they needed to rise to the occasion.
Southern Wine & Spirits in Indiana
Here’s one clue that a press release from Southern Wine & Spirits trying to ingratiate itself into the state of Indiana was written by a public relations person who doesn’t have the wherewithal to Google, “Indiana state nickname.”
I’ve lived in the state for all of my 37 years. Never have I heard the word “Indianans.” Note reference above to Hoosiers. And, the bonus is “Hoosiers” rolls off the tongue a bit easier.
As a sidebar, one insider at a large competing distributor in the state noted, “We’re not going to make it easy on them.”
Facebook and DTC for Wineries
With IBG (formerly Inertia Beverage Group) licensing use of the ecommerce software from Vin65, presumably replacing use of their homegrown product, The ReThink Engine, one wonders what business direction they are headed in.
After acquiring the assets to the former New Vine Logistics last year, IBG used to be a “software as a service” ecommerce platform provider for wineries. Now, they are looking like a next-generation, full-service logistics provider, which is probably a good idea given that the game for ecommerce software looks likes its over, having been fully commoditized.
Secondarily, with Facebook making radical advancements in providing capabilities for brands to engage with customers, you wonder how long a winery having its own website for ecommerce even makes sense.
The game isn’t about the actual transaction, the game is about engagement with a customer, or potential customer.
Facebook’s ability to cultivate, know and engage with fans of your business on a one-to-one basis is tailor made for wineries.
Throw in the ability to incorporate ecommerce and build inexpensive interactivity and I wouldn’t be surprised to see the first of several wineries go Facebook-only this year, with a more significant movement happening next year.
July 1 2010
If knowledge is power than educated wine enthusiasm is the Admiral’s Club and a first class plane ticket while your friends look enviously on from coach.
I stay mindful of the fact that, for better or for worse, engaged and knowledgeable wine enthusiasm is one of the most exclusive clubs in the world. Yet, it is a club that anybody can enter with the proper credentials – credentials that are easily acquired by those with enough wherewithal to seek a higher understanding while creating their own knowledge path.
This independent path to knowledge is also key to understanding why others denounce wine enthusiasm as the province of the elite – acquiring knowledge takes a little bit of work and some proactive effort, something that immediately eliminates the majority of people for whom life is looky-loo tourism instead of culturally immersive travel.
Plus, we too often dismiss that which we do not understand. But, it doesn’t have to be this way.
It is an oft-repeated refrain on this site: spending time with a few books can send the wine interested headlong down a road that can turn into a lifelong journey. It is a small price to pay in short-term time spent as a trade-off for decades of potential enjoyment.
That said, my go-to book recommendations for a self-directed short-course in wine have been:
• Windows on the World Complete Wine Course by Kevin Zraly (General wine overview)
• Making Sense of Wine by Matt Kramer (Context based approach to understanding wine)
• Wine Style by Mary Ewing-Mulligan (Understanding wine styles and matching to your palate preference)
While the above three books are fantastic, the final book recommendation that has been missing to round out general knowledge has been an accessible and interesting read on viticulture. The book From Vines to Wines by Jeff Cox has stood in serviceably (if not dryly) as a resource for becoming attuned to viticulture and winemaking, however, it has never quite elevated itself in my mental bookshelf as fourth member, making my trio of books a quartet.
Fortunately, I have finally found my Ringo Starr, a superstar replacement for Pete Best.
Ironically, and old school, joining Zraly’s book first published in 1985, and Kramer’s book published in 1989, is Hugh Johnson and James Halliday’s The Vintners Art: How Great Wines are Made published in 1992.
The Vintners Art might be the one completely indispensable wine book that you do not own and have never heard of, a jewel 18 years in the making.
What I value in a non-fiction book (wine or otherwise) is:
• Survey style
• Opinion-oriented with authority
• Context-based
If done correctly, a book of this nature doesn’t impart rote knowledge it offers subsumable wisdom. And so it is with this consumer-oriented viti and vinicultural treatise by Johnson and Halliday.
Covering three main sections – the vineyard, the winery and the bottle, the book covers a lot of ground – everything from terroir to winemaking choices for specific varietal wines, wine faults and manipulation.
When finished with the book you’ll walk away with enough knowledge to vex even the most seasoned tasting room manager, if not a compulsion to call Crushpad.
Some of the most interesting reading in the book is regarding terroir, an issue that is still a clumsy topic in the U.S., like an English major in a Sudoku puzzle contest.
Succinctly, Johnson quotes the late Peter Sichel, former owner of two Chateau’s in Margaux and a renowned negociant who characterized terroir as a combination of character, personality and quality.
Said Sichel, “Character is determined by terroir; quality is largely determined by man” The third cog in the terroir wheel is “personality” which is largely determined by weather. By themselves, the six simple pages are worth seeking out.
In addition, the book does a Nostradamus-like job of presaging some of the issues we see in the market today, both from a Bordeaux perspective alongside U.S. sales trends.
Quoting Peter Sichel from the book:
The wine culture based on appellations and soils has been phenomenally successful and one simply must not put it in danger. If you can produce wines with character, you should not emphasize their varietal composition. Sooner or later varieties will cease to mean very much because of the infinite variety of wines which can be made from (say) Chardonnay or Cabernet Sauvignon, depending on soil, weather, viticultural practices, yields, winery techniques and so on. If you simply call your wine Cabernet Sauvignon the consumer is going to have difficulty in relating it to other wines: if you are producing a wine which really has to be upmarket, people say “why should we pay four times as much for this Cabernet Sauvignon when there are Cabernets which are so much cheaper.”
In those few sentences, Sichel manages to describe both the allegedly elastic, but inelastic Bordeaux wine market and our current domestic wine market in one fell swoop.
The rest of the book is like that, too. There are nuggets on every page that put the last 25 years of wine evolution into mental order, while also providing generous morsels of insight that bring fuller understanding to the art of making wine.
The Vintners Art by Hugh Johnson and James Halliday published with a suggested retail price of $45, which is $67 dollars price-adjusted for today—not a cheap book. However, you can find this as a used book on Amazon.com for under $2 plus shipping and handling. Snapping this one up is highly recommended and recommended for you to recommend. If wine knowledge is, indeed, power then make sure to pay it forward and let everybody fly first class.
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