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Two to Ponder and the Impact on Wineries

A Not-for-Profit Invasion?

I am worried, very worried.  Simply stated, working on little more than a hunch, I do not think it is outside the realm of possibility that if the economic climate of today (or if it gets worse) carries throughout 2009, we might see a contraction in small, domestic wineries at a significant clip.

25% loss of winery life pops into my head. 

Most small wineries, with equally small production, live on wine clubs, the tasting room, ecommerce and spot distribution in their regional market.

These, unfortunately, are also areas that are immediately felt in a consumer cutback.  Opting out of a winery club shipment, reduced tourism, less discretionary spending via the Internet and less dining out – all of these are very real realities.

Yet, the realities of the business side do not change – expensive production, carrying costs for wine in barrel before you can monetize, an omnipresent need to invest in marketing and expensive overheard in the form of facilities and personnel and compliance management.

I hope I am wrong, but this reality has me thinking about the nature of business organization, as well.

My question is this:  with two prevalent trends being cause-based marketing and the economy, how long will it be before we see not one or two, but dozens of wineries re-classify themselves as a not-for-profit with an alignment around a cause as their validation for doing so.

For the last five to seven years, scores of not-for-profits have gotten into the social capitalism game and have earned favored, not-for-profit status in doing so – able to operate in a profit-making form and function with proceeds being donated to their cause.

We have not seen the reverse of this – incorporated businesses doing the reverse, but we may soon …

Yet, there is a perception that needs to be overcome about a not-for-profit as a business tool.  Simply, being a not-for-profit means a winery needs to spend all of their money at the end of the year.  Profits are not paid out as dividends to owners or shareholders; they are paid out in the form of salary, overhead or in alignment with the cause.

Frankly speaking, most small wineries are acting as not-for-profits anyway, buckets of profits being scarce, and wine being more avocation then profit center, they are just not aligned with a cause and enjoying the tax benefits that a not-for-profit status enjoys.

It can only be a matter of time before very small wineries realize that the tax benefits of tithing to a favored cause outweigh paying taxes, thereby aligning their marketing efforts to be simpatico with the wine and the selected cause.

It may be that investment in a cause could save the life of a winery, while relieving tax burden.  Uncle Sam may not like it, but the edges of our society who can use a much-needed hand in dozens of areas will. 

For more reading on not-for-profit status, Google “benefits of not-for-profit status”

Touch and then Buy

A fascinating study was released in the research journal, Judgment and Decision Making that has implications for winery e-commerce, particularly those wineries on the higher-end of the price spectrum.

Noted in an article in ScienceDaily, we all know that many purchases require high-involvement decision-making.  The article notes purchasing a puppy and buying a car, two apt high involvement purchases where the “try before you buy” model is almost a pre-requisite and aids in creating attachment before purchase.

However, really, can a high-end wine, absent a Parker score be any different then purchasing a car?  Many would have you believe that shipping costs and compliance issues are the greatest inhibitors to winery ecommerce, but what if it is not either of those—what if it is the lack of tactile engagement with the bottle? 

According to this study, that may be the case:

Researchers from Ohio State University and Illinois State University tested how touching an item before buying affects how much they are willing to pay for an item.  A simple experiment with an inexpensive coffee mug revealed that in many cases, simply touching the coffee mug for a few seconds created an attachment that led people to pay more for the item.

The results, which were published recently in the journal Judgment and Decision Making, found that people become personally attached to the mug within the first 30 seconds of contact.

People who held the coffee mug longer than a few seconds seemed not only more compelled to outbid others in an auction setting, but they were also more willing to bid more than the retail price for that item. 

“The amazing part of this study is that people can become almost immediately attached to something as insignificant as a mug,” said lead author of the study James Wolf, who started the work while he was a doctoral student at Ohio State.

“By simply touching the mug and feeling it in their hands, many people begin to feel like the mug is, in fact, their mug.  Once they begin to feel it is theirs, they are willing to go to greater lengths to keep it.”

This is very fascinating on a number of levels, but particularly related to wine shopping at retail and online. 

Personally speaking, I touch, pick-up, read the label and study every wine I buy at retail.  Perhaps, unbeknownst to me, I have been creating an attachment to that bottle.

However, juxtaposed against this is the wine online buying experience, which is woefully bad, in most cases, with contextual information and pictures.

The best you get in most cases is a label shot.

I read a blog post at Snooth recently where they were shooting bottles because what they got from the wineries was, in most cases, inadequate.

If you look at a wildly successful online retailer who sells shoes, an even more difficult mental sale then a bottle of wine, you can see how they have multiple product shots, interactivity, user reviews and the like.

If I am a winery, the lesson I take-away from this research is that good money needs to be invested in product shots and selling copy.  You want to give somebody all of the ammunition necessary to become engaged with your wine, online, while shopping and if you can do that with a 3D bottle that equates to the visual experience of holding said bottle, then all the better.

For more information, Google search “3D product photography” and “3D camera”


Posted in, Good Grape Daily: Pomace & Lees. Permalink | Comments (3) |


On 01/31, .(JavaScript must be enabled to view this email address) wrote:

I agree with your thoughts. My suggested solution is to tap into the “buy local” movement which encourages building a community of products. It saves energy and promotes healthy growing practices. I have never understood why CA wines are more expensive at the winery. Other wine producing countries it is just the opposite. My suggestion is create a program of wine available in refillable containers discounted to encourage local consumption. Think about how much more wine that CA folks drink that most other locations. Unfortunately we cannot afford to purchase everyday wines at $30/Btl and up. Make wine a food, reduce the impact to our planet, and build a local community of support, reduce operating and packaging costs. We are seeing it with cheese, produce, meats, olive oil, etc. Let’s get wineries on board. I’m frustrating with buying wine from Italy, South America, and New Zealand but cannot afford the current pricing model.

On 02/01, dhonig wrote:

another great post, which is why I nominated you for best wine blog at the American Wine Blog Awards.

On 02/02, Jeff wrote:


Thanks for the comments!

Mark, I love your local approach similar to what we see in Italy.  I fear that there will be much bloodshed, however, before wineries get that notion!  We’ll see.

DHonig - thank you very much for the nomination—very gracious of you and I sincerely appreciate it!

All the best, guys and thanks for checking out my site!



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