Thank you for sharing your thoughts as you experience them, Jim. I'm seeing similar things. While markets for grapes and wines from regions such as Lake County, Amador County and Napa Valley are definitely on the down side, there are almost amazingly some companies and individuals who are remarkably positive about it all. They see the down market as an opportunity. While most are selling, the bolder investors are buying. A handful of wineries are even reporting growth, even while most are reporting losses and setbacks.
This, of course, is typical of free market commerce, but it is opportunistic entrepreneurship that grew the domestic wine market in the first place; since the 1960s, a freakishly long period of steady growth up until just 4 years ago. It is why, in debates going on in forums such as LinkedIn, I cannot agree with the negative argument that the wine industry is "dead," or that we should prepare for death (especially by hiring marketing consultants who are the ones most eager to see the market die... so that they can be hired to do what they do, which is prattle on and on about their strategies, which I describe as "duh"). When asked, I say the industry is in a period of adjustment, which leaves lots of room for positive outlook on the part of entrepreneurs savvy enough to recognize the trends and plan accordingly.
I was in the computer and chip industries for over forty years and have been consulting on climate impacts and adaptation since 2011, primarily for wine producers these days. I experienced many cycles and while wine and chips are very different products there are some lessons that I believe apply to both. You can't win by retrenching. At best you survive in a weakened state. You need to understand your customers, and your competition, and invest thoughtfully in the future while others are pulling back, providing you with additional opportunity. It's been said that, "Great companies are built in tough times." And, raising prices while accepting lower volume is a slippery slope that the wine industry has been on for some time now. A good part of what we're seeing today is very likely the direct result of that.
You’re making a fair point here, Bob, but I disagree, especially with your last two sentences. That simply is not what I have seen over these past decades.
I think the historical lesson is less that retrenchment fails, and more that blind retrenchment fails. “You can’t win by retrenching” is just too absolute to hold up, especially in the wine business.
Semiconductors and wine run on very different clocks, I think we can agree. In chips, Moore’s Law created relentless pressure: if you stopped investing, even briefly, you could lose ground and never get it back. A competitor moved ahead whether you were ready or not. In that world, investing through downturns was often necessary just to stay relevant... I’m asking you here, not telling you.
Wine is far slower and, in that sense, more forgiving. Vineyards do not become obsolete overnight, and customers do not change behavior at semiconductor speed. Inventory lingers, brands drift gradually, and both mistakes and successes can take years to reveal themselves.
In wine, plenty of durable businesses, as I call them, have become stronger by retrenching first: cutting SKUs, leaving weak markets, simplifying portfolios, and, most importantly, matching production more honestly to demand. That is not retreat.
What usually fails is cutting blindly: removing people while keeping all the complexity, preserving every label, and hoping a smaller payroll alone fixes a business that still lacks focus.
The same applies to pricing. Raising prices while accepting lower volume is not automatically a slippery slope; a great deal of fine wine has been built exactly that way. The risk begins when price rises without enough clarity behind it, when the bottle asks the customer for more but explains itself no better than before. And as I argued in an earlier piece, most price increases today are not opportunism at all; they are usually simple attempts to catch up with inflated costs (or at least they should be).
To me, the real lesson is that sequence matters. In tech, investment often has to come first because delay can cost you market position almost immediately. In wine, simplification usually has to come first, because complexity starts costing money long before growth starts paying it back.
There's no doubt about the different time scales, Jim, which is one of the things I really like about the wine industry. And, I completely agree that cutting blindly is a huge strategic blunder. Simply cutting the SKUs that currently bring in the least revenue currently falls into that category, since if examined more closely one that's selling less today may be addressing an emerging market opportunity that will result in more revenue in the future. A sharper focus is critical, but it needs to be thoughtful, rather than formulaic, and look to the future not to the past. This also applies to organization and sales channels, of course. Investment in the future doesn't have to mean greater complexity. It can take the form of future focused simplification.
Another great thing about the wine industry is that most producers, with the exception of large public companies and those owned by private equity, tend to be run by people who are passionate about wine and want to share that passion with others. This can be a weakness as well as a strength, though. It's like "build it and they will come." While the drive to create good, or even great, wine is a definite positive, complementing that with trying to understand who your customers are and what they're looking for is even better.
And, yes, costs are going up for a host of reasons. When looking at pricing, though, it's important to also look at how costs can be reduced without compromising quality and at what's happening with your customers' buying power. The thing that bothers me about trading higher prices for less volume is that if everyone does that, the consequences for the industry aren't pretty. Also, if there are no decent wines at affordable prices, what happens to the "on ramp" for new wine drinkers that Liz Thach talks about.
At the end of the day, though, I suspect that you and I agree on more than we disagree on.
Thank you for sharing your thoughts as you experience them, Jim. I'm seeing similar things. While markets for grapes and wines from regions such as Lake County, Amador County and Napa Valley are definitely on the down side, there are almost amazingly some companies and individuals who are remarkably positive about it all. They see the down market as an opportunity. While most are selling, the bolder investors are buying. A handful of wineries are even reporting growth, even while most are reporting losses and setbacks.
This, of course, is typical of free market commerce, but it is opportunistic entrepreneurship that grew the domestic wine market in the first place; since the 1960s, a freakishly long period of steady growth up until just 4 years ago. It is why, in debates going on in forums such as LinkedIn, I cannot agree with the negative argument that the wine industry is "dead," or that we should prepare for death (especially by hiring marketing consultants who are the ones most eager to see the market die... so that they can be hired to do what they do, which is prattle on and on about their strategies, which I describe as "duh"). When asked, I say the industry is in a period of adjustment, which leaves lots of room for positive outlook on the part of entrepreneurs savvy enough to recognize the trends and plan accordingly.
I was in the computer and chip industries for over forty years and have been consulting on climate impacts and adaptation since 2011, primarily for wine producers these days. I experienced many cycles and while wine and chips are very different products there are some lessons that I believe apply to both. You can't win by retrenching. At best you survive in a weakened state. You need to understand your customers, and your competition, and invest thoughtfully in the future while others are pulling back, providing you with additional opportunity. It's been said that, "Great companies are built in tough times." And, raising prices while accepting lower volume is a slippery slope that the wine industry has been on for some time now. A good part of what we're seeing today is very likely the direct result of that.
You’re making a fair point here, Bob, but I disagree, especially with your last two sentences. That simply is not what I have seen over these past decades.
I think the historical lesson is less that retrenchment fails, and more that blind retrenchment fails. “You can’t win by retrenching” is just too absolute to hold up, especially in the wine business.
Semiconductors and wine run on very different clocks, I think we can agree. In chips, Moore’s Law created relentless pressure: if you stopped investing, even briefly, you could lose ground and never get it back. A competitor moved ahead whether you were ready or not. In that world, investing through downturns was often necessary just to stay relevant... I’m asking you here, not telling you.
Wine is far slower and, in that sense, more forgiving. Vineyards do not become obsolete overnight, and customers do not change behavior at semiconductor speed. Inventory lingers, brands drift gradually, and both mistakes and successes can take years to reveal themselves.
In wine, plenty of durable businesses, as I call them, have become stronger by retrenching first: cutting SKUs, leaving weak markets, simplifying portfolios, and, most importantly, matching production more honestly to demand. That is not retreat.
What usually fails is cutting blindly: removing people while keeping all the complexity, preserving every label, and hoping a smaller payroll alone fixes a business that still lacks focus.
The same applies to pricing. Raising prices while accepting lower volume is not automatically a slippery slope; a great deal of fine wine has been built exactly that way. The risk begins when price rises without enough clarity behind it, when the bottle asks the customer for more but explains itself no better than before. And as I argued in an earlier piece, most price increases today are not opportunism at all; they are usually simple attempts to catch up with inflated costs (or at least they should be).
To me, the real lesson is that sequence matters. In tech, investment often has to come first because delay can cost you market position almost immediately. In wine, simplification usually has to come first, because complexity starts costing money long before growth starts paying it back.
There's no doubt about the different time scales, Jim, which is one of the things I really like about the wine industry. And, I completely agree that cutting blindly is a huge strategic blunder. Simply cutting the SKUs that currently bring in the least revenue currently falls into that category, since if examined more closely one that's selling less today may be addressing an emerging market opportunity that will result in more revenue in the future. A sharper focus is critical, but it needs to be thoughtful, rather than formulaic, and look to the future not to the past. This also applies to organization and sales channels, of course. Investment in the future doesn't have to mean greater complexity. It can take the form of future focused simplification.
Another great thing about the wine industry is that most producers, with the exception of large public companies and those owned by private equity, tend to be run by people who are passionate about wine and want to share that passion with others. This can be a weakness as well as a strength, though. It's like "build it and they will come." While the drive to create good, or even great, wine is a definite positive, complementing that with trying to understand who your customers are and what they're looking for is even better.
And, yes, costs are going up for a host of reasons. When looking at pricing, though, it's important to also look at how costs can be reduced without compromising quality and at what's happening with your customers' buying power. The thing that bothers me about trading higher prices for less volume is that if everyone does that, the consequences for the industry aren't pretty. Also, if there are no decent wines at affordable prices, what happens to the "on ramp" for new wine drinkers that Liz Thach talks about.
At the end of the day, though, I suspect that you and I agree on more than we disagree on.