#1 Opportunity Awaits
For me, a critical important takeaway is a mindset of opportunity and openness to change to seize it. Most businesses -- mine included -- can find areas for improvement in good times and in those more challenging. (I feel quite lucky to have started Trellis Wine Consulting in 2008, as I had nowhere to go but up. Many people have commented to me over the years how hard that timing must have been, but since I didn't know any differently, there were no laurels to rest upon and no pulls of complacency.)
Rob McMillan, Founder and SVP of Silicon Valley Bank's Wine Division, predicts 7-11% growth in 2012 and sees opportunity for higher priced wines at $40+. These are of course the wines that struggled most during the recession, and it's encouraging to know that outlooks and sentiment alike are positive. These predictions do not mean that all businesses will see growth in sales and profitability -- it's still a very, very competitive market and continues to become more so. Having a defensible, written competitive strategy will be a factor in separating the businesses that grow from those that stagnate. McMillan suggested that Generation X -- those born in the 1960s through the early 80s -- are a prime target. And he encouraged wine businesses to invest in CRM (customer relationship management) software. CRM investment continues to lag in the wine and spirits industry, which is a weakness given its focus around better understanding and serving customers. Considering we're all first in the hospitality business, it is a critical weakness.
#2 - Wholesaler Relationships Need ImprovementI've always been surprised by the frustration and animosity many Oregon producers have toward their distributors. This tends to stem from a blend of two factors: problems on the distributor side and lack of understanding of how these relationships are supposed to work.
I understand the plight of producers. A boutique winery that isn't being paid for its goods and is, therefore, placed in a difficult situation given lack of leverage is very tough. Brutal, in fact.
What I don't understand is an unwillingness to understand the wholesale business and work as partners. In a partnership, both parties need to outline expectations, goals, communication preferences, etc. And they both need to support each other while recognizing that it will never be a perfect relationship. The same winery lamenting a distributor's poor performance in North Carolina (picking on my home state for no good reason) may be lacking fundamental tools for its distributor partners:
1. wines delivering excellent quality and packaging
2. clear, competitive pricing
3. plan to invest in the market with regular visits (no, it's not just the distributor's job to sell a supplier's wines)
4. understanding the importance of sampling as one of the best marketing tools
5. plan to invest in marketing to create pull through (i.e., well designed website with trade section containing useful tools, truly competitive packaging design, promotional and programming calendar prepared in advance, etc.).
Eugenia Keegan and Ellen Brittan delivered an excellent presentation. They surveyed distributors beforehand and gathered very important data to support their points. Having correct pricing, a compelling story, and a plan of action for the market were cited as most important. Quality and value are the most salient factors in a distributor's decision to engage a supplier, but there is much, much more a winery needs to do to be competitive.
The next time you are working the market, ask the sales rep to see his price book. Take a moment to understand how he must approach his day. There are anywhere between six to 12 spots in most rep's wine bags, so hundreds or thousands are not selected daily. One of your primary goals should be making it easier for him to select one of your wines with some consistency.
If your child were applying for a spot at a coveted university which selects fewer than 10% of applicants, would you advise her just to send in the application with a minimum amount of effort since it's the university's job to know how special she is? I think not. The burden of proof lies with the winery -- which actually spells opportunity.
#3 - Never Underestimate the Importance of Friends I was also impressed by the panel presenting "Oregon Wine in the eyes of the World," moderated by Domaine Drouhin's David Millman. Bringing together a panel of speakers ranging from a noted Oregonian to wine experts from across the nation underscored the notion of wine as a globally competitive marketplace. Speakers included Jeremy Noye of Zachy's, Doug Frost (one of the world's only MS/MWs,) Josh Raynolds of Steven Tanzer's International Wine Cellar, and Sam Tanahill of A to Z Wineworks.
When devising a brand strategy we need to consider the entire market, not just the competitors in our backyard, because those are the wines on the shelves we covet. The panel highlighted the need to do the following to build a successful national brand:
1. Employ a longer-term strategic vision.
2. Value market work and the personal relationships it creates.
3. Develop strong wholesale relationships. (Sound familiar?)
4. Devise ways to unify the Oregon wine industry to raise awareness of the quality being produced here and grow the share of all wines from the state. This is an especially longer-term return on investment, requiring suppliers to put brand Oregon ahead of brand XYZ winery. We see this a lot in the old world -- think Wines of Spain, Wines of Greece, Union des Grands Crus de Bordeaux, etc.
#4 Recognize and Appreciate What You've Accomplished The wine industry is a tough place. It takes so much hard work to tend vines and coax fruit into wine (or have the patience to let it be). It's no wonder owners and operators are sometimes to exhausted to think about the marketing and sales side of the business. Not too long ago, when there were many fewer competitors in Oregon, making great wine was enough. The success of the pioneers like David Adelsheim, who won the 2012 Lifetime Achievement Award, made the industry that much more attractive . . . and now, competitive.
We do need to take the time to recognize our accomplishments. Celebrating successes and rewarding great performance infuses a winery culture with the positive energy to face the work that needs to be done to continue growing.
Jesse Lyon and Duke Tufty of Davis Wright Tremaine, one of the few firms specializing in wine law in the Pacific Northwest, encouraged their panel to think about creating a "culture of compliance." Duke enlightened us about OLCC decoy policy given his experience on a ride-with, which interested me so much that I asked my colleague, Janel Lubanski, to schedule one. (Stay tuned -- she'll be blogging about her experience in a future post as soon as it's completed.)
I was honored to be a part of this discussion on the importance of direct sales and how to blend best hospitality and compliance practices in tasting rooms. My section focused primarily on the value of direct sales to the overall industry, and how tasting room visits lead to wine club members. For example, a May 2010 Wine Business Monthly study found that 83% of all club sign-ups stem from a tasting room visit.
Bill Baldwin of Partners Group reminded owners to take a close look at insurance coverage and factor defense fees into the amount taken. Also, he emphasized that prevention is critical. Two industry direct sales experts then provided specifics on how their wineries handle prevention.
Ashley Hancock of Duckhorn Vineyards in Napa, California, offered some excellent advice, such as "to slow down when it gets busier" and offer guests who have over-consumed a refund, as well as the opportunity to return as a "guest of the winery" to save what could become a very difficult situation.
Michael Brown, Sokol Blosser's Director of Consumer Sales, reminded the audience that all of us had likely been in a bachelor(ette) gathering and encouraged everyone to re-think how we approach and serve groups. Providing a suitable space, food pairings, and plenty of non-wine beverages can add to the group's enjoyment and lead to repeat visits . . . and even wine club sign-ups.
In closing, we would, of course, be delighted to discuss any marketing projects that were inspired by the symposium. Please reach us at 360-210-5551 or email me today.