Brand cultivation in the wild

Man, those Duckhorn slides. I could envision some banking or private equity associate stretching the images of wine bottles to indicate revenue explosion over the past five years; and when Carol was describing her relationship with TSG as a partner, I could imagine sitting in on the conversation between management and the investors at TSG. As an investor in consumer and retail businesses, and also as a consumer, I was excited to learn more about Duckhorn’s history of private equity ownership and the impact it has had on the company.

Carol used the term “relentless focus on luxury” to describe how Duckhorn is trying to grow, and I especially appreciated her thoughtfulness, attention to detail, and creativity in do so. Two key lessons on preservation and cultivation of the Duckhorn brand, one small scale and one large, stuck out to me:

1. Carol described policing menus, making sure that sommeliers used the term “Decoy by Duckhorn” rather than “Duckhorn Decoy.” This seems like a minute detail, but in her description, I saw her ruthless pursuit of brand preservation. I agree, a customer who seems Duckhorn Decoy might not realize that it’s the less expensive line unless it is separated as she described. The lesson for me here is to find the instances where even such subtle wording choices might have a differential impact on how customers perceive your brand.

2. She also shared with us the thoughtfulness with which Duckhorn decided to acquire Calera, a “blue-chip brand” that was already highly respected by others in the industry. Recognizing that everyone’s eyes would be watching them, her team made sure that the next big step after acquisition by TSG was still brand-enhancing and not destroying. A different acquisition of a less respected name might have eroded the industry’s faith in Duckhorn’s success as a brand after taking money by a financial player looking for a profit. This example is a good reminder be thoughtful about how any structural decision, small or large, might enhance or erode brand in the eyes of customers or competitors.

Brand cultivation is not always obvious, and Carol's lessons helped bring to light some examples that we might not otherwise at first glance. As an investor, I want to be wary about how these business decisions, however small or large, could impact my customers perceptions of my brand. And as a consumer, I want to use what I learned from Carol to make better decisions, and also to recognize when my decisions are the product of marketing decisions rather than a result of my own preferences. 

Bloated Wine Lists

This last Wednesday, I had an interesting conversation with an editor at a celebrated wine magazine about restaurant wine lists. I was in New York to cook a dinner at the James Beard House representing my family's flagship brand, Lawry's the Prime Rib, and our PR agency set up the meeting as a casual introduction to who we are and to plug the eightieth anniversary of our Beverly Hills flagship locations. 

The conversation quickly turned to our wine lists and that the editor considered our list to be small. His comment was less criticism than consideration and I pushed him to elaborate upon what their editorial perspective, and him personally, looks for in a fine dining restaurant list. Moreover, we are in the midst of planning a moderate overhaul of our food and beverage offerings at Lawry's and I wanted to glean any advice possible from an industry insider. He cursorily commented that wine lists need to consistently convey the theme and ethos of a restaurant which was nothing too divined. But when I dug into his comment that our list was small, he cautiously expressed a frustration with the size of some lists in higher end fine dining establishments. In fact, he went as far as to say that he found some lists to be almost unethical in that these bibles of wine functionally mothball delicious products that should be enjoyed. Obviously, this is not the case in most restaurants but his comments and the fact that this publication gives awards based in part on the number of items on the list surprised me. 

As a restaurant owner/operator, I am baffled by the working capital that some fine dining restaurants have sunk into their wine programs no matter what their wine sales are in the end. Let me be clear, I enjoy a well curated wine list that provides choice, engages the curiosity of an eager oenophile and allows a sommelier to express her craft but how many offering is too many? And how unique and/or redundant do lists needs to be keep them at the forefront of the industry. How many  4 or even 5 figure price tags are necessary on a list and how often do they actually sell? Considering this publication is regarded as a standard bearer for the industry, perhaps it's time to reset those very standards.

Palate profiles and wine preference implications

After my question in class on Friday about biology and palate, and Professor Rapp's comment about Bottlenotes' bitterness tolerance scale - the comment that people who like black coffee will prefer Pinot Noir and Sauvignon Black struck home for me as that describes my respective preferences perfectly - I decided to do a quick bit of more research. Not surprisingly, I found a few articles confirming the connection between how you take your coffee and your wine preference, as well as connections between a few other non-wine desires and specific varietals.

But the most interesting thing I came across, partly because it came from a startup mentioned in class, was from Winc. At the link below, Winc describes the "Palate Profile Quiz" which its clients can take to help the company hone in your wine preferences. Not surprisingly, the first question is how you take your coffee! But while this six question quiz seems like a good place to start for someone who is just getting into wine, I wonder whether the company has any more sophisticated techniques for dedicated users (or at least plans for such). I would think there would be great value in a recommendation engine based on past purchases and / or ratings, similar to, for example, Netflix. This could potentially incorporate a combination of a few of the sources of expertise we discussed in class, perhaps both wine critics and mass ratings, to really hone in on an individual's palate. If someone could do this right, such to the point that after enough input the engine could very reliably recommend new wine products that have a very strong hit rate of the client loving the wine, I would think it would really be a game-changer in the industry.

https://support.winc.com/hc/en-us/articles/222812747-What-is-the-Palate-Profile-Quiz-

Being nice to distributors

One of the points that stood out to me from Carol Reber's discussion on Duckhorn was that her sales team always walks into the wine business with a "thank-you." Carol emphasized Duckhorn's deep, rich relationships with distributors and noted that many suppliers failed to act in kind. Instead, she said, most brands focus on why distributors are failing to help them sell through inventory.

Given the bottleneck that distributors pose in the U.S. wine industry's three-tier structure, I was curious what other steps suppliers could take to make distributors' lives easier (and consequently enhance those suppliers' prospects). Below are some findings.

According to the Beverage Trade Network, success for suppliers in new distribution partnerships depends on customer knowledge for three different types of customers:
1. Your retailer's customer
2. Your distributor's customer
3. Your customer

For the retailer's customer, or the end consumer, the key is to build buzz around the product through adroit marketing prior to pitching the distributor. This relates to a point that Martin made in class yesterday about whiskey distillers: you need to tell a story that resonates with the consumer in a new and creative way in order to stand out from all of the competition.

For the distributor's customer, or the retailer, it's important to get close with the most productive accounts in your distributor's portfolio and determine where you utilize in-store activation / promotions to develop under-performing retailers. Before signing up with the distributor, you can also get the top-performing retail stores in your category to ask for your product from the distributor in question.

For the supplier's customer, or the distributor, the idea then becomes to understand and anticipate the distributor's weaknesses. In the consumer goods company where I worked before the GSB, we did a lot of heavy-lifting for the retailers by showing them market data, sending in merchandisers to implement marketing campaigns, and demonstrating which shelf arrangements would yield maximum average weight of purchase. With distributors, one could picture wine suppliers achieving something similar by going that extra mile: knowing when distributors are too busy to add SKUs, understanding the pinch points in their supply chains, and being really familiar with the contents and gaps of their SKU portfolios.

While many of these steps seem like common sense, it turns out that most suppliers don't implement them effectively. It seems much easier to treat the distributor as a glorified delivery service entitled to a slice of the pie by America's convoluted legislative framework.

How do we buy wine?

The conclusion from Douglas Zucker’s article “Drowning in the Wine Lake: Does Choice Overload Exist in Wine Retail?” that consumer choice overload does not exist in the wine category is unexpected to me, though not surprising. The rationale makes sense: as knowledge of wine increases, wine buyers are looking to find and experiment with new wines regularly. The amount of choice available to them in grocery stores or wine stores serves as an ideal environment in which wine consumers can explore and educate themselves.

However, the article’s conclusion and our discussion in class got me thinking about purchasing patterns. Particularly, how does the average consumer decide which wines to buy? Where does he or she buy them? And what should wineries and brands be thinking about as they market to various customers?

A recent survey conducted by wine.net surveyed 2,000 wine drinkers to understand what matters when buying wine, what types of wine consumers prefer, and where they buy their wines. Their methodology was simple: they showed consumers three different bottles of red wine (ranging from $10 to $150, but prices were kept secret) and asked them to choose their favorite, and did the same with white wines.

The survey found that the main attributes that consumers considered when choosing which wine was their favorite were:

• Appearance of the bottle (82%)
• Perceived price (65%)
• Wine region (58%)
• Shape / color of the bottle (53%)

I wasn’t surprised to see that appearance and shape and color of the bottle affected consumer’s perceptions so drastically – after all, we heard from Carol Reber the importance of branding and labeling bottles, particularly if they are going to be on retail shelves. Perceived price was an interesting attribute, implying that people actually like wines better if they think they’re more expensive. Given most of the experts we’ve talked to have said that once you’re above the $100 threshold, no one can really tell the difference in taste, it’s interesting to see how much price perception matters to consumers.

The study also showed that most consumers buy their wines in grocery stores or liquor stores. The conclusion for me (and the conclusion I think most wineries have reached) is that wineries and brands should continue to focus on their bottle label and appearance, as classier and more elegant looking wines often may get picked over higher quality wines. For the full survey results (including how red and white wine drinkers differ in their preferences), the survey is linked here.

Gendered Wine

We can skip the lengthy intro about how consumer patterns are gendered, the dining experience itself is rooted in gendered traditions, certain foods are considered "manly" or "girly" and just get to wine descriptors. I particularly enjoyed a 2017 Snooth article, and its intro: "Esteemed wine critics like Robert Parker and Antonio Galloni employ gender-positive terms in their tasting notes without compunction. Masculine wines are commonly associated with structure and power, while feminine wines can be perceived as delicate and thin." In our discussions about building vocabularies to talk about wine and the concept of wine notes, I thought it would be interesting to take a small glance at this, and remind us all to try to delete using gendered terms when we think/talk about how a wine tastes. It's annoying and lazy! 

There are a few articles, like from Wine Enthusiast that shamelessly approve the gendered terms when encouraging the use of "feminine" in describing a wine: “Imagine a wine that has similar characteristics to a woman and her best qualities,” says Wheatley. “A wine that is light, refined and delicate might be called feminine; the polar opposite of those so-called masculine qualities in wine—strong, muscular, larger and bigger.”

Basically, now that we are all wine geniuses, I encourage us all to be aware of and disapproving of how stupid it is to call a wine masculine or feminine. "Cougar juice" is also enough to make me never want to buy white wine again, but it is hard to disagree with the data on that one...

I was once in a fairly nice restaurant for dinner and ordered a cocktail. The waiter came back and told me the bartender wanted to double check that's what I wanted because it's typically for men. I was so offended I ordered 3 of them (even though it turned out they weren't good) and drank them all. I also told the waiter to tell the bartender he is a fool, but I'm not sure the word made it back. I'm sure that the same goes for men who order the "girly cocktails" or a particularly feminine, flowery glass of wine instead of some "strong, aggressive Cab." 

I called it lazy before and I'll call it lazy again. The more we can learn, the better our vocabulary and astuteness gets, the less we need to instinctively rely on silly gendered aroma descriptors when we have millions of words out there at our disposal! It's no surprise that a brief search through Alder Yarrow's site proves that he doesn't rely on these descriptors very much at all...he knows what he's talking about! 

Class Wars: Wine vs. Beer

I've liked our discussions about wine versus beer in class, but still wonder why it is we are obsessed with comparing the two. (I like both wine and a beer, by the way. ) They aren't very similar! From its production process, to its alcohol content, to its look--nothing about beer and wine are similar other than the fact that people drink them a lot. If we're going to go down that road, why not compare beer to sparkling wine? At least they both have bubbles...

I was surprised to discover that a 2005 Gallup poll revealed for the first time that more Americans said they preferred wine to beer. I'm sure, by the way, that there are a dozen other polls proving the contrary, and the polls the year before and after are probably also a mixed bag. Nonetheless, we look at what Slate's explanation for this is:

"Part of beer's populist appeal—and its edge in the beer vs. wine war—has always been its absence of cant about its main point: to provide a little (or a lot of) happy intoxication. You can appreciate wine, but you drink beer, the saying goes. Wine's cult of connoisseurship has always had a specious edge. Like the Victorian obsession with the "grace" of the nude female form, the high-flown language and ceremony of wine-drinking can seem like a fig leaf of sorts, a cover for fancy-pantses who like to get buzzed."

What?! We possible have Robert Parker to blame for his erudite, arcane vocabulary. Alder Yarrow did a fantastic job of bringing us through the centuries of wine criticism and showing us just how recent the snobbiness of it all has been. Wine always was a lifestyle beverage just like beer always was, so why did it become classist, a point of separation? By the way, the word "lifestyle" didn't enter the dictionary until 1987 apparently!  

And then there is the take of the Economist about "wine-track Democrats and beer-track Democrats" because apparently this matters: "Part of Bill Clinton's genius was to bring the wine-drinkers and beer-drinkers together. This was, after all, a man who went to Yale and Oxford but who grew up the child of a widow in the backwoods of Arkansas."  

Weirdly, as we have discussed that the wine industry has had trouble accessing the millennial market, it would appear that it's shifting. Many articles have been written that millennials now prefer wine and liquor to beer, making the beer industry worry. They even go so far as to say that millennials account for 42% of wine drinking in the US (partially because they are now mostly over the age of 21. Here is a good article about it.)

If we went down this rabbit hole of politicizing ones choice to drink beer, what does this say about the millennial population? Let's choose not to go there, and agree that someone can like both wine and beer, or that someone's choice of the two is not uniquely lifestyle-defining, but could be as simple as taste preference...let us not forget that eventually it can just come down to what's tastier.