Wine Direct for Restaurants

The history of direct to consumers wine sales was a fascinating, frustrating and intriguing case study. In particular, learning how Wine Direct under the leadership of Joe Waechter has been able to establish a direct marketplace for wine consumers by leveraging Joe's career experience in the logistics business. Joe described the success of the SAAS component of Wine Direct in part because of the reality that wine makers are simple people with limited technical experience and resources to manage the complexity of an online sales presence. Similarly, I believe most restaurateurs are simple people and organizations that are much more interested in and success at creating a great dining experience than they are at maintaining the physical inventories represented by a wine list. The inefficiencies of a managing a wine list run deep into a restaurant operations. From the seemingly insignificant - the opportunity cost of the time spent searching for a particular bottle of wine to the missed moment of hospitality when a bottle is listed but unavailable. To the significant - improvements in working capital by elimination of low turnover inventory redundancies and next day replacement of super premium bottles of wine. 

Is there an business opportunity for restaurants to order small quantities of premium wines, often wines under allocation, direct from the wineries to both eliminate the cost of the distributor but also to free up working capital by not buying half or whole cases? Can the time-consuming responsibility of the sommelier or restaurant manager be automated via a SAAS patch between a restaurant's POS system and Wine Direct? Moreover, I have had poor experiences with restaurant wine inventory softwares and I see there to be an opportunity to connect all of these industry level opportunities. 

Adult beverage sales during crises

One nugget that stood out to me from last class was Jessica Kogan's comment about promoting Cameron Hughes during the 2016 election. She noted that social crises present optimal times to do a massive marketing push for adult beverages--in a bipartisan manner, of course.

Intuitively, this strategy made sense to me. If people are stressed and need a release, and alcohol can take the edge off, why not facilitate the happy union of the two?

I was curious, though, if there were research on the relationship between alcohol consumption and broader societal malaise. There unfortunately isn't much written about the topic in the U.S., though there are several reports pertaining to alcohol consumption trends in Eastern Europe, Russia, and Greece. In general, it seems that economic crises don't reduce the amount of alcohol that people buy but do change the type of alcohol they consume. In countries with poorly-enforced regulations, one often sees a significant increase in the illegal trade of alcohol. For countries that are deeply divided but still prosperous, the relationship between alcohol sales and the national level of social angst is still more anecdotal.

That said, there does appear to be a relationship between unemployment and alcohol: the rates of substance misuse and addiction are nearly twice as high for the unemployed as they are for employed workers. Thus, when Cameron Hughes is busily promoting its wares during America's next great social trauma, they might want to remind people to avoid risky drinking.

Colgin Cellars Acquisition by LVMH

Yesterday, LVMH announced the acquisition of a 60 percent stake in Napa Valley winery Colgin Cellars from Ann Colgin and her husband Joe Wender. Founded by Ann Colgin in 1992, Colgin produces vineyard-designant cabernet sauvignon, syrah and a red blend from two estate vineyards, Tychson Hill in St. Helena and IX Estate atop Pritchard Hill. Colgin is prized among collectors for its ultra-premium quality and limited production. Each Colgin wine has at some point received a 100-point rating from wine critic Robert Parker.

This development follows a string of acquisitions of top-quality wineries by luxury conglomerates. In October 2017, Francois Pinault’s company Artemis purchased historic Clos de Tart in Burgundy. That same month, the Chanel family purchased Chateau Berliquet in Saint-Emilion. Importantly, Colgin’s sale also represents an ongoing trend of iconic, founder-owned wineries in Napa trading to new corporate owners. In 2014, Artemis purchased Eisele Vineyard (née Araujo), a winery founded in 1990, from Bart and Daphne Araujo. Earlier this year, Constellation Brands purchased Schrader Cellars from Fred Schrader (coincidentally, Ann Colgin and Fred Schrader were married until the mid-1990’s and founded Colgin – then named Colgin-Schrader – together).

The Colgin deal is a reminder that while Napa began as a small farming community (and in some circles, still feels like one), labels such as Colgin are luxury brands at their core. Ann Colgin and Joe Wender have no children, and thus a highly lucrative offer that enables them to continue owning and operating their business (and also paves a path for an eventual exit as they age) must have been too good to pass up. The Colgin team will remain intact, and Ann will remain at the helm as CEO. Moreover, LVMH, with experience selling luxury brands around the globe, can more easily place Colgin products into the hands of consumers in Asia and other foreign markets. Their expertise will be a huge value-add to Colgin’s existing marketing and sales operations.

I do wonder what an increasing number of corporate deals will mean for Napa Valley. For one, I question whether consumers will care to know and understand the personalities and histories behind this region’s storied vineyards, or whether outstanding wines can continue to stand on their own as luxury brands even after the founders move on.

More details on the transaction here.

The Oldman's Guide

Shortly after I started my first job, I sat down for lunch with a very senior partner, who was very particular with his wine preferences. Knowing nothing about wine at this point, I figured the best strategy to not sound dumb was to admit defeat immediately and start asking about how I could even start getting into wine.

He said there was one book - the Oldman's Guide to Outsmarting Wine. I went home and 2-day shipped it from Amazon, and immediately went out and bought some of the value picks from each of the American grapes, and started to learn.

To this day, this is still the 'most' amount of effort I've put into appreciating and understanding wine. I can't say that my effort or knowledge has evolved too much more since then. But the one thing that really stuck out from this short burst of effort was the central lesson - the best wine is the one you like most. And that wine vocabulary is just a way of navigating toward what it is that you want to drink and learning how to discern between what you like and don't like.

As we discussed in class, I think there is definitely a desire for unsophisticated wine consumers like me to understand the basic tasting notes, and a desire for it to be simple and approachable. The Oldman's guide began to do that for me, but it was still a lot of effort. What I think I'm looking for is a guide that tells me what the 'stereotypes' of various wines are, so that I can begin putting words to wine and validating whether I taste the same thing or not.

Any recommendations?

Winedirect – a marketplace for all generations?

Listening to Joe discuss how he turned Winedirect around was fascinating. From the ashes of the global financial crisis, Joe grew Winedirect at an impressive 40% annually, facilitating more than $1billion in wine sales. Yet, even though Winedirect’s SAAS business enabled many small niche wineries to run e-commerce direct to consumers, Joe’s frustration was evident. Clearly, many of these wine producers were not optimizing their SAAS platforms. It is quite a shame. SAAS platforms have made it about as easy for non-digital natives to massively scale their sales and manage customer relations.

Given the massive consolidation amongst wholesalers and retailers, Winedirect’s future growth is now more strongly tied to the fortunes of small wine producers. This makes it more compelling for Winedirect to spearhead their own marketplace website; Winedirect has the knowledge of the wine business, a clearer understanding of consumer preferences, and most importantly, the digital expertise to drive customer eyeballs, engagement and retention.

We had an in-depth discussion in class on Wednesday with many good suggestions on what the marketplace must feature to win. However, I felt a great deal of discussion revolved around making a digital platform more approachable to those new to wine. Many of the suggestions were on catering to millennials’ desire for diverse and unique offerings, as well as sustaining their interest in a low attention span world. It is important to cater the marketplace to the millennials – who represent the future. But it would be remiss to pander only to them. While our case studies highlighted that Millennials were the largest US wine consumer segment, the 2017 Silicon Valley Bank wine report indicates that Millennials, with their limited purchasing power, buy wines at a lower price points.

Thus, if Winedirect chooses to become a Marketplace, it will need to continue targeting “traditional” Gen X and boomers. First, Gen X and boomers still trust ratings from authoritative sources. Wine scores of established wine critics like Parker, and magazines like Wine Spectator are still featured on bottles at retailers for that purpose. Second, Gen X and boomers do not have as large a craving for variety shared by millennials. Millennials can be fickle between wine varietals, and even hopping around to craft beer and domestic rye whiskeys. Gen X and boomers have a greater preference for consistency and brand names. They want their reliable Kim Crawford Sauvignon Blancs, and the occasional indulgence in some fine Duckhorn. As such, Winedirect cannot just be a marketplace for small lesser known wineries. Thus, Joe will have to strike a careful balance in creating a market place that will appeal to different preferences across age groups. Luckily, Winedirect as digital experts of the wine business are well positioned to curate a bespoke online wine purveying experience, across all generations.

What happens after the harvest?

In 2003, my parents, in what I assume was a fit of midlife crisis, decided they must start a vineyard. I grew up in Riesel, TX, on a small farm in a small town of about 900 people. We raised cattle and an ever changing odd assortment of zucchini, squash, cantaloupe, corn, okra, tomatoes and the like. After taking a wine tasting class at a newly minted winery one town over, my parents decided that normal fruits and vegetables were boring and they just must have a vineyard. The vintner told them buyers were increasingly looking for local branding but there were far more people who wanted to make wine than grow grapes, so they constantly imported juice from out of state. Eager to brand their bottles not only Texas made but also Texas grown, the vintner made a deal with us on the spot to buy any grapes we can grow that exists to this day for our little vineyard.

Me installing the trellis system for a new section in 2010

There was a catch for me though. As a 13 year old, I was plenty able to help with the planting but couldn't enjoy any of the product. What was a labor of love for my parents turned into just labor for me. I planted hundreds of vines, built a trellis system, trenched our irrigation ditches and installed our drip lines. Springs and summers were spent endlessly spraying, mowing and trimming. Within a few years we started bearing fruit, and as I grew older and grew a taste for wine I started getting more into the process. To this day I trek home ever summer to help with the harvest and am proud now to have now helped picked tons of grapes at over a dozen harvests. It was a lot of hard work, and I don't think the 13 year old me would believe it, but the vineyard has turned into one of my favorite parts of home and one of my proudest accomplishments.

2017 Latimer Family Harvest

This brings me to my motivation to enroll in GSBGEN 356. I've spent more hours than I can count planting and maintaining a vineyard, but my knowledge of what happens next is comically absent. My only tasting talent is the ability to discern a white from a red, and even that I would struggle with if I couldn't see the wine. Embarrassed enough by my lack of knowledge, I will often forego mentioning our vineyard because it inevitable leads to questions about wine that I am completely helpless to answer. I am hoping to learn in this course what happens after the harvest and to learn to speak intelligently about wine that goes beyond the vines.

Memorable Experience = Memorable Tasting Wines?

I feel like I've always struggled to remember the taste of certain wines. In part, I think it's because the flavor differences can be really subtle and muted, especially in comparison to other drinks, like cocktails, where the band of flavor is much wider.

But, this study I came across suggests that the time and place where I encounter new flavors may be linked to my memory of flavor. The study found that negative tastes from foods that caused stomach pain activated the area of the brain associated with memory of time and place. No such link was found for foods that did not cause pain. This study makes me wonder if in further research some additional links would be found between memory of time and place and taste in a positive context (if new studies using different methodologies were conducted).

If such a link is found in a positive context, I wonder if the implication for wineries is to try to create new physical experiences at their wineries associated with their tasting rooms - bolder artwork, more immersive displays and architecture, etc. to try to develop a more memorable experience leading to a more memorable tasting wine.