This seems like an echo of everything else these days - the "K" shaped economy.
As a person who is new to wine, I feel kind of bad when I buy anything from places like Target/Wally. But it's convenient.
I used to work at a store that offered a wine club, but I never felt motivated to try it because I'm feeling a bit of subscription fatigue. Especially when you don't get to choose.
Not sure I offer any kind of solution at all, but those are my very limited experiences, anyway.
David, you are correct. This used to be the playground for the rich. The folks who sold a software company and now want to say "I own a winery". But that did as much harm as good, because folks were interested in seeing people with passion, not just people with money. As their search went on, their interest faded. There are quite a few wineries out there making really nice wines, but they get lost in the "OH look at me!" monuments to wealth. So folks like us, who built a successful operation from the ground up, grew to 40K+ cases, and lasted 5 decades to reach the 3rd generation, are facing an uphill battle. We want customers to have access to our product for dinner, without having to drive an hour to the winery on a Thursday night on their way home from work. So we end up in stores making much lower margins because we have to go through a wholesaler. And it's there we compete with wines which sell for less than we can get our grapes off the vineyards. So, maybe in one aspect, you are correct. Stay small enough to be out of distribution, or get very large and enter an expanded market. Either way is scary as hell for us in the middle.
This is interesting, and seems to flow with many retail sectors - things are either boutique or big box, the middle is disappearing (kind of like the middle class? but thats for another type of blog).
Virginia Wine's part of this story is fascinating - we have very few that qualify as "big producers" by this standard. Our boutique level wineries and brands and where very exciting things are happening - innovation and experimentation. These brands survive on word of mouth and relationship cultivation, and the story is as important as the taste. Our producers are seeing inventory swell and challenges getting into retail and maintaining DTC sales. The landscape is shifting dramatically and I'm not sure there is a clear strategy or formula to get through.
I'm just finding wines and makers I love and supporting them as much as I can!
I've noticed in certain circles on LinkedIn the conjecture that wine companies have flawed product and we are in a downturn because of the bad product, therefore we have to resort to marketing (which hasn't changed in decades...bottle shot, vineyard shots, happy people) to Sales strategies (pitched by more than a few on LinkedIn who have no clue).
You correctly point out that "the product" in nearly all small wineries is the Founder, not the actual wine. Small is cool, nimble, rare, exciting, new. But once you get to 50,000 cases, it's hard to believe the founder is doing all the work; guiding the vision for sure, but unlikely doing all the hard-scrabble work.
50,000 cases or 600,000 bottles (or 5x 10x that) doesn't sell itself (likely isn't flawed). It requires marketing, sales and more importantly distribution to be successful, continuously successful. Like you said, they have to push to double that or, reluctantly cut it in half. And doubling that, the only economies of scale for that double (at least in this market) is the bulk market. If a mid-sized winery did double right now, now is a good time. But imagine a difference scenario:
Imagine a consultant telling a winery, in order to survive, cut what you do in half, lay-off part of the workforce, retrench, sell off what you got, harvest only 6,000 case equivalent in 2027 and remember when you were 25,000 cases and maybe when you were 12,000 and remember what your life was like?
Pride. Pride will get in the way, not money. It's likely the owner wasn't making that much more at 50,000 cases because of overhead/COGS. We are told that if we aren't growing, we're dying, we're falling behind. If we retrench we're losers, quiters, not ambitious enough.
The free advice you're giving and I'm giving in this comment, make the smart choice, scale is a two way street and it is a choice, don't let pride get in the way.
Pride indeed. I very casually threw out the "hard to swallow" modifier at that point, which was ultra-subtle, but you're correct. Who exactly is going to do that? On the other side of that - as the winery chief for extremely wealthy owners many times before, it eventually becomes about the money. Even the uber-rich don't like to lose a million or ten million a year - that tends to usurp the pride part. If this article had another title it would be "The Wine Business is Really, Really Hard" (even if a handful are able to make it look easy.)
Correct on the uber-rich. They cut losses. But there are plenty of marginal players that have a partner/spouse that pays the bills and runs the winery as breakeven rather than for profit. I mean some of the natty/low intervention folks don't have enough markup in DTC to make their wineries viable and they can't scale up even a little, too much cash out the door. Look at Subject to Change and what happened there, Whole Foods did them no favors.
High quality observations Jim. I feel like many wine pundits take a narrower view when there's clearly several major trends going on simultaneously. This is the closest to my thinking I've seen in print. Good recommendations too. Only thing I disagree about is that wine drinkers are less interested in exploration now. I just think they don't want to pay for the privilege to explore, since there's so much more awareness about what kind of quality can be had at various price points. Story can't carry a premium like it used to, that's for sure - the wine itself has to compete. And that's not easy...
High praise coming from you. (Never thought of myself as a pundit, but here I am I guess.) Yeah, I don't disagree with the exploration versus paying for that privilege dichotomy - and I agree the consumer's awareness is keener than ever. What we have is a narrowing of the funnel (and by narrowing I mean a strangulation) at the gatekeeper level. Those 2 people who buy for all of Specs. Those 5 people who buy for all of Total. Or the (it used to be) one person who buys for 150 BevMos...I know there's others involved in the processes, but the number of "wine buyers" sellers need to befriend right now is very, very small. That's not the buyers' fault - it's just where the business is. And, you know better than almost anyone, selling a relatively unknown Zinfandel is tough, tough, tough. I say that because you are one of the few who can, anytime you want. The winery's got no chance in the Safeway.
Thanks man. Oh yeah - It's so different on the 3 tier side of retail and you're spot on about the gulf that's opened up. My family's winery is Deerfield Ranch, and I worked there for decade. We were at about 30k cases, and the situation is exactly as you describe (and has been for a long time). If you've got wine to move these days, I think having unique SKUs for each channel to prevent conflict is the best hope. Then pick your battles well and roll up your sleeves.
This seems like an echo of everything else these days - the "K" shaped economy.
As a person who is new to wine, I feel kind of bad when I buy anything from places like Target/Wally. But it's convenient.
I used to work at a store that offered a wine club, but I never felt motivated to try it because I'm feeling a bit of subscription fatigue. Especially when you don't get to choose.
Not sure I offer any kind of solution at all, but those are my very limited experiences, anyway.
David, you are correct. This used to be the playground for the rich. The folks who sold a software company and now want to say "I own a winery". But that did as much harm as good, because folks were interested in seeing people with passion, not just people with money. As their search went on, their interest faded. There are quite a few wineries out there making really nice wines, but they get lost in the "OH look at me!" monuments to wealth. So folks like us, who built a successful operation from the ground up, grew to 40K+ cases, and lasted 5 decades to reach the 3rd generation, are facing an uphill battle. We want customers to have access to our product for dinner, without having to drive an hour to the winery on a Thursday night on their way home from work. So we end up in stores making much lower margins because we have to go through a wholesaler. And it's there we compete with wines which sell for less than we can get our grapes off the vineyards. So, maybe in one aspect, you are correct. Stay small enough to be out of distribution, or get very large and enter an expanded market. Either way is scary as hell for us in the middle.
This is interesting, and seems to flow with many retail sectors - things are either boutique or big box, the middle is disappearing (kind of like the middle class? but thats for another type of blog).
Virginia Wine's part of this story is fascinating - we have very few that qualify as "big producers" by this standard. Our boutique level wineries and brands and where very exciting things are happening - innovation and experimentation. These brands survive on word of mouth and relationship cultivation, and the story is as important as the taste. Our producers are seeing inventory swell and challenges getting into retail and maintaining DTC sales. The landscape is shifting dramatically and I'm not sure there is a clear strategy or formula to get through.
I'm just finding wines and makers I love and supporting them as much as I can!
I've noticed in certain circles on LinkedIn the conjecture that wine companies have flawed product and we are in a downturn because of the bad product, therefore we have to resort to marketing (which hasn't changed in decades...bottle shot, vineyard shots, happy people) to Sales strategies (pitched by more than a few on LinkedIn who have no clue).
You correctly point out that "the product" in nearly all small wineries is the Founder, not the actual wine. Small is cool, nimble, rare, exciting, new. But once you get to 50,000 cases, it's hard to believe the founder is doing all the work; guiding the vision for sure, but unlikely doing all the hard-scrabble work.
50,000 cases or 600,000 bottles (or 5x 10x that) doesn't sell itself (likely isn't flawed). It requires marketing, sales and more importantly distribution to be successful, continuously successful. Like you said, they have to push to double that or, reluctantly cut it in half. And doubling that, the only economies of scale for that double (at least in this market) is the bulk market. If a mid-sized winery did double right now, now is a good time. But imagine a difference scenario:
Imagine a consultant telling a winery, in order to survive, cut what you do in half, lay-off part of the workforce, retrench, sell off what you got, harvest only 6,000 case equivalent in 2027 and remember when you were 25,000 cases and maybe when you were 12,000 and remember what your life was like?
Pride. Pride will get in the way, not money. It's likely the owner wasn't making that much more at 50,000 cases because of overhead/COGS. We are told that if we aren't growing, we're dying, we're falling behind. If we retrench we're losers, quiters, not ambitious enough.
The free advice you're giving and I'm giving in this comment, make the smart choice, scale is a two way street and it is a choice, don't let pride get in the way.
Pride indeed. I very casually threw out the "hard to swallow" modifier at that point, which was ultra-subtle, but you're correct. Who exactly is going to do that? On the other side of that - as the winery chief for extremely wealthy owners many times before, it eventually becomes about the money. Even the uber-rich don't like to lose a million or ten million a year - that tends to usurp the pride part. If this article had another title it would be "The Wine Business is Really, Really Hard" (even if a handful are able to make it look easy.)
Correct on the uber-rich. They cut losses. But there are plenty of marginal players that have a partner/spouse that pays the bills and runs the winery as breakeven rather than for profit. I mean some of the natty/low intervention folks don't have enough markup in DTC to make their wineries viable and they can't scale up even a little, too much cash out the door. Look at Subject to Change and what happened there, Whole Foods did them no favors.
Just received my book and will take the next few hours to read. Thanks sir.
You're too kind!
High quality observations Jim. I feel like many wine pundits take a narrower view when there's clearly several major trends going on simultaneously. This is the closest to my thinking I've seen in print. Good recommendations too. Only thing I disagree about is that wine drinkers are less interested in exploration now. I just think they don't want to pay for the privilege to explore, since there's so much more awareness about what kind of quality can be had at various price points. Story can't carry a premium like it used to, that's for sure - the wine itself has to compete. And that's not easy...
High praise coming from you. (Never thought of myself as a pundit, but here I am I guess.) Yeah, I don't disagree with the exploration versus paying for that privilege dichotomy - and I agree the consumer's awareness is keener than ever. What we have is a narrowing of the funnel (and by narrowing I mean a strangulation) at the gatekeeper level. Those 2 people who buy for all of Specs. Those 5 people who buy for all of Total. Or the (it used to be) one person who buys for 150 BevMos...I know there's others involved in the processes, but the number of "wine buyers" sellers need to befriend right now is very, very small. That's not the buyers' fault - it's just where the business is. And, you know better than almost anyone, selling a relatively unknown Zinfandel is tough, tough, tough. I say that because you are one of the few who can, anytime you want. The winery's got no chance in the Safeway.
Thanks man. Oh yeah - It's so different on the 3 tier side of retail and you're spot on about the gulf that's opened up. My family's winery is Deerfield Ranch, and I worked there for decade. We were at about 30k cases, and the situation is exactly as you describe (and has been for a long time). If you've got wine to move these days, I think having unique SKUs for each channel to prevent conflict is the best hope. Then pick your battles well and roll up your sleeves.