WITS and Wisdom

Jane Firstenfeld and Jim Gordon put together a great summary article for Wines & Vines magazine online (HERE) on the Wine Industry Technical Symposium (WITS).  This year there was a great deal of discussion about talking directly to consumers and social media.  Many of the expert panelists gave excellent advice:

Pete Blackshaw from Nielsen Online: “Credibility is all.  Your company must earn consumer trust with authenticity and transparency, by listening and responding to what consumers have to say.”  ”Shape your image by managing the conversation.”

Philip James, founder of Snooth.com: “One of your most important functions is to feed your community with content.”

Robert Celsi, Trinchero Family Estates, regarding how to be attractive to the trade: “You need to have a unique selling proposition, either from a profitability standpoint or a consumer preference standpoint.”

Jennifer Becker, founder of Ensemble Marketing Group: “The first part of the relationship is getting noticed.  Wineries need to define and enact an awareness strategy.”  ”Make sure your staff is constantly capturing data at your winery.”

Pamela Hiett, Jackson Family Farms’ Direct Sales Manager: “Add value to your customers’ experience, by understanding their lifestyle and understanding your brand’s values.”

Dan Michael, Gallo Director of Consumer Direct Sales: “Successful long-term relationships are nourished by listening and an occasional surprise.”

Tim Elliott, winecast.net:  First listen, then “ask questions, be helpful and authentic, and speak with a human voice.”

Shana Ray, industry consultant: Social media is “not a fad, it’s a change in communication.”  ”Wineries have stories; wine is meant to be shared.  People are talking about it, and you can influence what they say.”

Taking these suggestions in sum provides a quick roadmap for successfully talking to your consumer audience, whether they don’t yet know who you are or are your longest term wine club member.    Be real/authentic, listen, surprise/delight, tell your unique story with good content, capture information, share news and items of interest, and most of all, dive in and make the commitment.

Retail Reset

In a recent St. Petersburg Times story (see it HERE), longtime business reporter Mark Albright reports on what many of us have already started seeing or at least feeling in wine retail.  First of all, everyday pricing on luxury goods is undergoing permanent changes – even high-flying fashion producers like Manolo Blahnik shoes and Prada have significantly lowered their prices; examples used in the article state these new prices to be around 25-30% lower than prices just one year ago.  We’ve all seen the same thing happening with high end wines, at least via some significant “temporary” discounting (just check out winestilsoldout.com).  Is it now time to consider a more permanent reset of your pricing, using these luxury producers as models?  It is definitely worth some consideration – I call it “reset to recover,” a move to send a strong signal to the market that you’re realistic about the economy, and at the same time keep your case goods inventory moving.

As scary as this thought may be, the remainder of Albright’s article may be even more frightening.  Most retailers, from supermarkets to luxury department stores, are cutting back significantly on the number of sku’s in their retail stores.  Supermarkets may be expected to cut 1000-2000 items, depending on their sizes.  And if supermarkets are asking “Do we really need 6 types of corn flakes?”, what do you think they’re thinking about their bloated wine selection?  Slow movers are bound to be discontinued, accelerating a trend that we’ve already seen over the past several years.  It may become impossible for smaller wineries to compete with the Gallos and Constellations of the world in this environment, at least within the grocery channel.  But certainly fine wine retailers will also be asking the same questions – do I really need all this expensive inventory?  Does anyone know these brands?  Again, as I’ve pointed out in an earlier blog entry (HERE), it is more important than ever for your brand to matter – to be a wine that consumers recognize and care enough about to pick up and try.

I Guess it’s Official Now – WSJ says “Luxury Wine Market Reels from Downturn”

Well, about 9 months after we all knew it here in California, the Wall Street Journal reported today that many of California’s high end wineries are reeling from the recession.  The link is below, but you won’t read much you don’t already know if you’re in the wine industry – from heavy discounting, to poor restaurant sales, to distributors cutting their books, to many wineries being up for sale, it’s all there.

The best quote is from Eliot Stern of the Sorting Table – “If you’re a $90 wine and suddenly you’re on the internet for $50, how do you ever become a $90 wine again?”  Something to think seriously about if you can avoid panicking in this horrible market.  One bright spot pointed out is a winery that has been working hard getting their social media marketing together – Alpha Omega, which reports that revenues are up due to their consumer direct efforts.  Again, if you haven’t started this effort, you’re already behind and need to get busy on your website, Facebook, YouTube and Twitter presence, and keep at it – a once a month posting won’t do it.

WSJ Article on the Luxury Wine Market

Expenditures on Luxuries for the Home Are Up in First Quarter

Unity Marketing reports that affluent consumers spent 17% more on home luxuries in the first quarter of 2009 versus the same quarter of 2008, and 16% more than the last quarter of 2008.  This is very good news indeed, as it means that more of these consumers (avg. HHI $200K+) are staying home, but still want to enjoy the good life at home.  They are also probably entertaining more at home – this is where the good news for high-end wines comes in.  As we’ve seen almost every month in 2009 so far, all wine sales are up at retail, even those $20+.  So consumption remains strong at home, even though restaurant sales are suffering, as we all know.  Now is an excellent time to build retail distribution in fine wine and other retail outlets.  I’m sure we’ll see this trend continue into the holidays this year.

The flip side of this is, if affluent consumers are staying at home, how are visitor counts at wineries this tourist season?  I haven’t heard too much negative so far this year; counts seem to be down at least a bit, but winery business doesn’t seem to be too bad.  It will be interesting to see post-mortems on the season after harvest this year.

Luxury Brands’ Use of Social Media

Thanks to Mashable for this excellent little article on how some luxury brands are using social media.  They discuss how hard it can be to be “exclusive” as a luxury brand while at the same time promoting your brand via broad, accessible media like the internet – but it can be done!

See the article HERE.

Top 10 Brand Practices on Twitter

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Is the winery “mailing list” model dead?

Tablas Creek (an excellent blog, BTW) posted an interesting blog entry just the other day about “wine clubs” vs. “mailing lists.”  Typically, what we’ve seen up to the present is that wineries will adopt one of these models for ongoing business with their prime, most involved consumers.  Their blog made me think about the future of these models – which is more sustainable in the long run?

Wineries that have been lucky/good enough to have demand that outstrips their wine supply will likely use the mailing list model to allocate their wines as they see fit, based on customer loyalty, longevity and past buying habits.  The problem with this model, from a customer’s point of view, is that the discussion is always one-sided – the winery tells you what they have for you, take it or leave it.  And, by the way, if you leave it, you’re likely to get a lower allocation next time.  I began to see fundamental changes in some wineries’ mailing lists last year – I didn’t take my allocation from a couple wineries, and by the time the fall 2008 offering came out, I not only didn’t lose my allocation, some numbers had actually gone up.  Not surprising, given the economy, but the result may be that, at least for most wineries, the mailing list concept may be dead.  What’s the point of being on a formerly-coveted mailing list if you have no trouble getting the wines later or from another source?  Now some wineries may believe that as the economy improves the demand will come back, but there have been many projections that show that consumer luxury spending will come back VERY slowly, and indeed, for the boomer generation, may never be the same.  I suspect that most exclusive mailing lists will have difficulty recovering due to permanent buying habits by consumers.

Certainly there will always be a few select wineries that will be considered “must haves” (see my previous post) and will be able to maintain an exclusive mailing list concept for their direct consumer business.  But how many wineries will this be?  I’d be willing to bet that there are less than 40 of these strong brands in all of California, and maybe only half that.  Unless a winery/brand can truly say it is an icon with consumers, it should already be looking at alternative models for their consumer business.  One can begin this process by actually talking to customers – get feedback, find out how they may want to customize their purchases, why do they belong to your mailing list/club, what they like/don’t like about it, etc.  This collaboration with your best consumers is a great way to keep them involved and also to learn from them.  This is certainly more work than just putting out an allocation every 6 months, but done in the right way will make these consumers more loyal in the long run.  Wineries can then take that feedback to evolve their mailing list/club model to best serve these irreplaceable customers.

Is your brand a “must have” or a “can live without?”

We know all too well now that this recession has greatly changed the marketplace for wine in general, especially for high-end luxury brands.  One thing I keep hearing from time to time is that there are some brands, typically somewhat older, well-known brands that continue to do well, or are at least holding their own, in this down market.  They are, in many buyers’ minds, “must have” brands.  What’s their secret?  Many of these brands certainly have something that others can’t easily duplicate – some history, a large base of consumers who know the brand well, a great brand reputation/history of big scores.  So how can other high-quality luxury brands play this game?

To put it bluntly, the key answer here is: DON’T STOP MARKETING!  It is very tempting, while trying to cut costs in a down market, to severely cut marketing spending, whether it’s public relations, advertising, personnel, marketing materials, sampling programs or event participation.  Typically, you do NOT see “must have” brands cutting their key marketing programs during down times – they know that this is an investment for the future.  Brands that maintain their marketing efforts in down times are almost always the first to gain sales momentum when coming out of a recession.  I’m sure many of you may ask – wouldn’t it be better to have more salespeople on the streets actually meeting buyers and selling?   Certainly a strong sales effort has to remain part of the marketing mix, but there has to be more to it than that.  If a salesperson has no story to tell, no materials or programs to discuss, how is your brand different from any of the other 20 or more brands that buyer will taste that day?

I would say that the most important marketing effort a high-end wine brand can partner with a strong sales effort is public relations.  Any PR effort you now have, any agency working on your PR, should be the last thing you should cut in your marketing effort.  What I’m talking about here is PR in the broadest sense, not just sending wine to wine magazines and newspapers.  PR includes story pitching to both wine and lifestyle publications, event/tastings participation, participation in appellation/association events, and of course, the newest form of PR, social media via your website and other tools like Facebook and Twitter.  The messages must be authentic and your wines must be excellent, but sustained continued effort in these areas are the best way to become a “must have” brand and avoid the dreaded “can live without” syndrome.

Millenials – The Key to Pulling Wine Out of the Recession

The Nielsen company released a survey recently outlining some current and future trends in the general buying habits of consumers across America.  It’s no surprise that the recession has been hardest on older consumers, which, yes, now includes us baby boomers.  This group, even after the recession passes, will likely continue to keep tight control on their spending in order to shore up their retirement prospects.  Luxury wine sales are likely never to be the same for many or most in this +50 age group.

Millenials, on the other hand, and not surprisingly, will be more optimistic and slowly start to “splurge” on spending in some categories, far ahead of any other age group.  The Nielsen study found that, for example, millenials will be the first to increase spending on travel, dining out, and beer/wine/liquor.  Among all consumer age group, only 24% indicated they will increase spending on wine as the recession lifts.  On the other hand, 43% indicated they will increase their spending on dining out – but this shouldn’t be blown out of proportion – most indicated they will be spending a little more, not a lot more.  So don’t count on $80+ bottles of wine moving quickly off wine lists for some time to come.

So the takeaway here is find some way to be relevant and appealing to millenial consumers.  Get into the “conversation” – social media done well can give a winery a distinct advantage to those not participating.  The time to get started is now!

The Coming Wine Tax Increase

No one likes to talk about this, but I don’t think there’s any doubt that there will be some form of Federal AND California state tax increases on alcoholic beverages including wine.  The state is in dire straits, and since the last increase was in the early 90s, I believe it is bound to happen, and happen soon.  While we can hope the extreme and poorly-drafted “nickel a drink” tax bill (representing a 640% increase on wine tax) will never be passed in a wine-producing state, we still could be in for a significant tax increase on wine.  The Federal government is looking for ways to fund health care initiatives, and again “sin taxes” are likely to feature prominently.

Those of us in the industry back in 1991 know what a chilling impact the Federal and state excise tax increases had on wine sales – the country was also in a recession at that time, and the wine industry was in poor shape.  Thankfully 60 Minutes and “The French Paradox” helped to pull us out of that downturn, and the 90s turned into a fabulous decade for the industry.  It’s hard to imagine we will be as fortunate this time around.

To me the question will be – how will wineries respond to a tax increase?  This is something you need to think about now – would you consider “eating” a tax increase to prevent a shelf price increase on your wines?  You have to remember that an increase from the supplier, even when it’s simply passing through a tax increase, may get marked up two more times before it hits the consumer – it can be a truly significant increase to your shelf price.  It may be worth considering eating any tax increase (or at least a portion of it) for the time being if you can economically, and then take the price increase when the economy is stronger, hopefully by 2011.  Think about it!