Why Devin Kelsey Enrolled In This Class

To preface, I apologize for the admittedly on the nose title for the blog post - I was struggling to come up with anything wittier and I found it funnier to simply steer into the skid and give the least imaginative title possible rather than give a mediocre title which might make you think I actually tried and ask yourself, "Does Devin actually think that's a good title for a blog post?" With this title, we all know that I didn't try to come up with a creative title and that keeps us all on the same page.

Regarding the answer to that question, however, I tentatively must admit that I'm genuinely not (currently) a wine nerd, yet I've often wondered what it might take to become one - And have joked with many friends that it was a key goal of business school. I'm very much the type of person who enjoys things like wine where you can obsessively follow a given industry and have a niche community with which the passion for the industry is unbounded - I currently follow cinema, craft beer, and college football all with that level of zeal that many in the course likely have for wine. Yet, despite enjoying wine, I have struggled to become a wine nerd.

I think a huge part of this issue stems from something I spoke about the other day in class - My inability to contextualize the world of wine in the way I seem to so easily be able to do for my other huge passion areas. For these areas, the world has always made sense in very clean and discrete terms. There seems to be an excess of information such that nobody knows everything and yet it's clear how any new information fits into the system of other information that you already have mapped in your head - I'd love to get to this point in wine at some point.

So, admittedly, I signed up for the class largely as a consumer wanting to gain a more formal understanding of the industry. I doubt I'll ever start a winery, though I do enjoy the sexier industries for which I believe in the product (the film industry being my biggest passion) so I was quite confident I would at least enjoy this course from the business side paradigm more than I might enjoy most other classes at the GSB.

Why is wine so expensive in the US?

I recently had lunch with a friend who had just returned from a vacation with her boyfriend in Spain. When I asked her about her trip, she responded, “why is wine so expensive in the US?” She complained about how ludicrous it was that she routinely paid $15 or more for a glass of mediocre wine, while a week ago she was enjoying an incredible 3 euro carafe of Rioja. My curiosity was piqued.

The discussion on the three-tiered system shed light on this issue. Economic theory dictates that increasing the number of players in the value chain leads to double marginalization and drives up prices for the consumer. Operations theory suggests that potential for inefficiency and waste increases as the supply chain becomes more complicated - e.g., potential for inaccurate demand forecasting and inventory purchasing at each stage of the supply chain compounds. For these reasons alone, we would expect to see lower alcohol prices in countries that do not mandate a three-tier system.

I left class wondering whether this fully explained the delta, or whether there were other factors at play, e.g. –

Consumer expectation (demand side) – because wine plays a larger role in culture, people at all income levels expect to be able to purchase decent wine at a reasonable price

Subsidies (supply side) – since wine is economically important for countries like Italy, France, Spain, do government subsidies play a role in keeping wine prices low?

Vineyard economics (supply side) – Many European vineyards have been in the same family for generations, while owners of American vineyards have held the land for a shorter time. (NB, this is based on completely anecdotal evidence). If this is the case, are mortgages helping push up the price of American wine?

Others?? 

Wine tourism in Italy vs. US

Before the GSB, I was fortunate enough to spend a year living in Rome. I fell in love with wine tasting in Italy as a way to familiarize myself with the food, history and culture of a region. While each experience was unique, I noted a common theme. Compared with Napa / Sonoma, which was always swarmed with tour buses and seemed to have a formula for getting visitors in and out the door, Italy struck me as comically underprepared for wine tourism at scale. Wineries in Umbria expressed bemusement when we said we would like to visit the winery and try the wine, and indifference when we tried to purchase it. At some of the finest Barolo wineries in the world, we were treated to hour-long personal tastings and tours of the vineyards and facilities (and trust when I say we did not buy enough wine to warrant their time).  Even Tuscany, which seemed the most equipped to receive visitors at scale, invested a huge amount in the visitor experience.

These experiences (and the differences I perceived between wine tourism in the US and Italy) inspired my interest in this class. I hope I will come out of it with a more nuanced perspective on how wine producers choose to interact with their customers, and what this means for their brands. 

Let's Talk Wine

I have grown to appreciate wine over the past few years in part due to my parents and in part due to my dislike of beer. In fact, one of the very first times I met my husband, he remembers me politely declining his beer, only to respond by describing my strong interest for wine instead. For as long as I can remember, my mom has used wine as a treat at the end of the day – a way to relax and live in the moment. My dad on the other hand started loving wine most likely through numerous business meetings and events. He grew to love everything about wine and through the years I have seen him develop his own taste and preferences. I have also seen him become more sophisticated in his knowledge of the industry. I always lean to him when looking for a wine recommendation and am rarely disappointed. 

One thing that I have been left questioning is this idea of price and quality. As Sunny mentioned in her post, humans perceive a higher price to indicate higher quality. I too have fallen for this before. In the context of entertaining and “wining and dining”, I would be interested to understand how perceptions or feelings towards a host or business partner might change based on the price of the wine or even the design of the bottle label.

When looking for research in this area, I found an interesting article from the WSJ. It says, “Successful business people are supposed to be able to identify value — and the wine list is no exception.” So how might one person accomplish this without any wine knowledge? The answer described indicates “cheating” by studying the wine list ahead of time and making an informed and knowledgeable decision. For others who may not have the time to invest ahead of time, simply asking the sommelier for help and admitting your weakness in wine selection is an easy and honest choice. Each of these choices seems like reasonable solutions that would not be harmful to building a business relationship!

For me, when choosing a wine at dinner, I have often relied on brand names that I am familiar with – typically brands that I saw frequently around the house. By taking this class, I hope to develop a foundation to begin establishing my own personal taste palette and understanding of the industry. Additionally, I have loved learning more about how wine is positioned in the market and the numerous strategies that are embedded in launching each brand. 

To Zin or Not to Zin - life lessons from 2008.

When I departed for college back in 2008, my parents were unusually bashful about both drinking and dating advice. We had always operated under the premise of a “don’t ask don’t tell” policy - I was responsible for my actions and would be solely responsible for the consequences. I was thus surprised when my mom chimed in one night, likely after a glass or two of wine. “Just never drink White Zinfandel,” she told me somberly. “Men will assume something about you that you’re not.” Likely due to my discomfort I nodded and we moved onto another more innocuous topic. Yet the lessons stayed with me, and likely persist at some level even now: 1) Never drink White Zin, and 2) the type of wines you drink have implications for how others might perceive you.

Although I have since tasted White Zinfandel and decided it’s far too sweet for me regardless of my mother’s assertion, I’ve never verified her point. I therefore welcome this opportunity to dig in. Hopefully the results of my search will either provide myself and classmates license to embrace the varietal without guilt, or steer us away for good reason.

White Zinfandel is a rosé made from the Zinfandel wine grape. Typically these grapes are used to produce deep and jammie reds that I tend to love. White Zinfandel, rather, describes a way the grapes are processed, which results in a sweeter-tasting rosé wine. The technique is believed to have been developed in the 1970s, when Sutter Home changed the way it produced Red Zinfandel to make it more potent. They extracted some of the grape juice before fermentation, which they fermented into the newly branded “White Zinfandel.” Likely due to this sugary and drinkable flavor profile, the varietal took off. White Zin became Sutter Home’s most popular wine, and spread to other vineyards, making up 10% of wine sales by volume in the U.S. as of 2006.

So where does that land us? I did note that White Zinfandel was started from a waste product, and is still cheaper to produce than most table wines, in part due to a lower fruit quality required to make the drink. This perception of low quality isn’t helped by the fact that it’s often consumed as illustrated below, like a fruity “starter” drink and often over ice.

Yet according to some sources, White Zinfandel is becoming an acceptable beverage order.  Winemaker Chris Brockway sells a $22 Sonoma County version, which is reported to be not overly sweet. Christina Turley sells one for $18 (her red Zins sell for upwards of $100 per bottle).

I thus conclude my research by acknowledging a shift in perception, but also a likely still-entrenched bias. Though I would personally like to resist the notion that wine choices signal dating behaviors, I do still think a White Zinfandel could signal a nascence with wine unless 1) you are drinking a particularly nice one, and 2) you are accompanied by a person well-versed enough to recognize that. I would love Alyssa’s input here, but for now I think I’ll stick with my chards.

References:

• Why white zinfandel is cool again: 4 bottles to try now
• Wine Searcher

Wine Direct

I found the discussion around wineries working with Wine Direct very interesting, and I kept thinking about my experience over the summer. I spent part of the summer in New York working with a luxury womenswear designer called Prabal Gurung who was using Shopify to manage his ecomm business.

I spent a lot of time working on ecomm and it was very interesting to see what kind of considerations small luxury brands in fashion thought about when considering ecommerce / tech partners.

I think a lot of similarities may exist with wineries, and I think these considerations could give Wine Direct a competitive edge over other tech players. 

The main considerations included:

1)      What other comparable players do you work with? Whenever we approached a tech partner over the summer (be it a retargeting agency or a website pop up optimizer), the first and seemingly most important question the team wanted to know before anything else is what other high fashion brands the tech partner worked with. Given Wine Direct’s extensive portfolio of top wineries, I would assume that they would be able to make themselves the top consideration for wineries given their proven experience in the field, even if other players had better or more cost-effective  tech features…

2)      What is the costing model? Given how new ecommerce was to the brand I worked for, and given the limited funds they were willing to devote to it, there was a higher propensity to favor and explore ecomm solutions that took a percentage of topline versus a flat fee (e.g. picking a retargeting agency that charged a Cost of Customer acquisition versus agencies that charged a flat fee, even if the flat fee would likely yield a lower total cost). I wonder how true this might be for wineries new to the ecomm game, and what kind of costing model Wine Direct has adopted

Wine Documentaries for Thanksgiving Break!

I assume some if not many in this crowd are familiar with these, but for anyone who is not and is looking for some wine-related media entertainment over break, I figured I'd point out three extremely enjoyable wine documentaries available on Netflix:

1. "Somm." The most famous (I think) of the three, "Somm" documents the journeys of a few individuals seeking to earn the rank of "Master Sommelier" - the highest in the industry and of whom there are less than 300 in the world. It is probably the least relevant of the three from the business perspective of the industry, but excellently illustrates the breadth and depth of wine knowledge that exists at the highest levels of wine academia. Very fun film with great characters as well.

2. "Somm: Into the Bottle." Technically the sequel to "Somm," but in my opinion the association is only for marketing purposes, trying to ride on the success and popularity of "Somm." "Into the Bottle" is really about the winemaking process, and visits many different geographies, wineries, and winemakers to illustrate the impact variations in all the different steps of this process have on the final product. For anyone who is not as familiar with how wine is made, this will be extremely educational. It also has much more relevant business info, at least as pertains to wine production (supply chain management...not so much). Some of the characters from "Somm" return for commentary.

3. "Sour Grapes." This documentary is about Rudy Kurniawan, an infamous wine counterfeiter, and his exploits in the world of fine and rare wine auctions. From an entertainment perspective, the film is a fascinating crime and human interest story. But it also gives an enlightening glimpse into this unique part of the industry, where significant sums of money are changing hands for these famous bottles of wine. This is the high-end collectors side of the luxury good aspect of the industry, and makes one think about some of the issues we've discussed in class related to the connection (or lack thereof) between taste, perceived quality, and price.