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What To Do In Tougher Times?!?!?!

There have been a number of recent stories about wineries making changes of some sort in order to ride out the downturn in our industry. The most visible current story involves Pali Winery, a Santa Barbara County-based winery that actually has been proactive in trying to move wines.

A recent article by Reuters suggests that Pali has made choices out of desperation in order to ride out this downturn. In fact, though, Pali had already started earmarking fruit last year that did not meet its standards for its $50-60 single vineyard wines into lower priced appellation wines that retail for 1/3 the price. This is nothing new, though – wineries have been doing this for a very very VERY long time!

I’m not as old as others in this industry, but I can remember back two decades when wineries in Napa were starting to offer second labels for wine that didn’t make the cut for their best stuff. My first recollection was Hawk’s Crest, the second label for Staps Leap Wine Cellars. But that said, there have been many many cases of this, and most wineries have offered appellation blends, or other types of blends, for a long time.

It simply makes sense. If you have barrels of wine that simply do not live up to your standards, is it best to blend these with your better barrels and therefore bring DOWN the quality of your better wine? Or does it make sense to isolate these and create another wine that is made up of good but maybe not GREAT stuff?!?!?

A few other things I’ve witnessed this harvest:

Wineries choosing to ‘skip’ a vintage – not bringing in grapes at all – to try to keep their cash flow up and keep their doors open.

Wineries choosing not to bring in fruit from specific vineyards because of the cost of that fruit, and in some cases, the unwillingness of the vineyard owner to drop per ton or per acre prices.

Wineries offering ‘special deals’ to increase cash flow to pay for upcoming grape bills – ex. Buy one case at full price, get the second for a penny . . .

There is no doubt that the consumer will come out the winner in the end . . . assuming consumers have any money to spend, of course . . .

I’d love to hear your thoughts on this . . .

Cheers!

11 responses to “What To Do In Tougher Times?!?!?!”

  1. @Mike Grodhaus: I like you’re term “psychic scar.” Agreed!

    I’m a consultant for spas, not in the wine biz, but there are many similarities between the two. In general, I’m against discounting because it psychologically cheapens your brand quality. Plus, raising prices later means you have to overcome the idea that, “I should still be able to get a deal on this.”

    I’m more in favor of upgrades, perks, freebies, or discounts on things like shipping. There’s no fallout later if you choose to take those things away.

  2. Mike Grodhaus says:

    I know these are challenging times for wineries, but they are challenging for consumers, too. This recession is different than any we’ve experienced in the last 30 years because it has left a pyschic scar. Even people with good jobs and money have become afraid to spend money. So wineries are going to be challenged for a while as people continue to scale back their purchasing of non-essential goods.

    I agree with the comments that a winery should not dumb down its wine or reduce quality in any way just to cut costs or increase cash flow in the short run. That’s a recipe for disaster in the long run. I know that as a consumer, what I would appreciate and what would keep my loyalty is little things like freezing current release prices for a year or two and reduced or free shipping. Hopefully most wineries can do things like that and still stay in business.

  3. Keith Miller says:

    Short Story…

    My Background … 25 years selling wine as an employee of others and owner for last 12 years… I am currently an owner of a Wine shop/ Liquor store, 7k sq ft and 9 employees. Great location and it has seen a profit within 2 years of opening…Built for success I say but I have the experience to do so (Too many people start business in which they have no experience).

    Oh I am known for stirring the pot and will continue to do so! And also owner of Wineguystv.com!

    Source of following: http://www.tercerowines.com/uncategorized/what-to-do-in-tougher-times/#
    (My comments after Keith Says)

    There have been a number of recent stories about wineries making changes of some sort in order to ride out the downturn in our industry. The most visible current story involves Pali Winery, a Santa Barbara County-based winery that actually has been proactive in trying to move wines.

    Keith says…Being proactive is key… It turns into cash flow in most cases.

    A recent article by Reuters suggests that Pali has made choices out of desperation in order to ride out this downturn. In fact, though, Pali had already started earmarking fruit last year that did not meet its standards for its $50-60 single vineyard wines into lower priced appellation wines that retail for 1/3 the price. This is nothing new, though – wineries have been doing this for a very very VERY long time!

    Keith says…Yes they have been…I agree, and it is a good thing, Honda makes more than one type of car right?

    I’m not as old as others in this industry, but I can remember back two decades when wineries in Napa were starting to offer second labels for wine that didn’t make the cut for their best stuff. My first recollection was Hawk’s Crest, the second label for Staps Leap Wine Cellars. But that said, there have been many many cases of this, and most wineries have offered appellation blends, or other types of blends, for a long time.

    Keith says…And the consumer understands this as long as the information is given thru a new label and or a store / restaurants tells them. Inform the consumer… Most do it horribly!

    It simply makes sense. If you have barrels of wine that simply do not live up to your standards, is it best to blend these with your better barrels and therefore bring DOWN the quality of your better wine? Or does it make sense to isolate these and create another wine that is made up of good but maybe not GREAT stuff?!?!?

    Keith says…Again a business must inform the consumer of it’s decisions to gain respect which in turn builds that particular brand.

    A few other things I’ve witnessed this harvest:
    Wineries choosing to ‘skip’ a vintage – not bringing in grapes at all – to try to keep their cash flow up and keep their doors open.

    Keith says…Every business knows there needs and that nut they must pay every month…do what you have to do…But remember to inform everyone.

    Wineries choosing not to bring in fruit from specific vineyards because of the cost of that fruit, and in some cases, the unwillingness of the vineyard owner to drop per ton or per acre prices.

    Keith says…To each his own in our world…stick by your decision.

    Wineries offering ‘special deals’ to increase cash flow to pay for upcoming grape bills – ex. Buy one case at full price, get the second for a penny ..
    Keith…What one needs to do may not be for another… Just don’t be short sighted. Be creative!
    There is no doubt that the consumer will come out the winner in the end . . . assuming consumers have any money to spend, of course…

    Keith says…Trust me the consumer has the money. Careful what you read on the internet and hear on the news!!!
    I’d love to hear your thoughts on this…

    Keith says…Ok here are some of my thoughts below… 🙂

    So in my mind this article (blog) is all about the wine business / industry and how one should operate. We give our opinions…well here is mine.

    People in business that complain about their business have ”not” done enough to make it successful. Or you can also say they have not done the right things, or they are not surrounded by the right people…I can go on with just this.

    For now let’s take Pali winery as the example…Pinot Days Chicago, Navy Pier
    Lakeview Terrace – Chicago, IL
    Saturday November 15, 2008
    1-4pm
    http://www.pinotdays.com
    (Posted on the website) “The Grand Tasting will showcase 80+ producers of pinot noir. Consumers will be able to sample over 200+ pinots from every important region in California, Oregon, New Zealand and Burgundy, and meet the winemakers who create them.”

    Why is Pali attending this event??? They are not distributed there (based on the website). This type of so called marketing is done all the time by winery’s… waste of time. I know because I have been to enough of them. The cost of this trip alone, plane, hotel, food and entertainment is another waste. They distribute in two states… When is the last time they went directly to say a retailer and or restaurant and thanked them for all of the support they have given them (should happen every quarter in person or thank you note). That is where the brand is being built. A winery representative standing behind a table and pouring wine in a room full of consumers (half in the bag) with “200” other winery’s is not where one can build a brand. Sure it can be fun, but please do not think your marketing.

    Customers: Wineries need to pay attention to their customers (Restaurants and retailers), do the part of thanking them at least 3 times per year. When are they going to understand how important that relationship is? We as buyers control the market in a sense.

    Wine Dinners: Coming to town and having a wine dinner for buyers is another waste of time and money. Your wine is in 100 stores in the market and 6 buyers are invited. There is no follow up ever done on the distributors’ part and or the “winery” to obtain orders.

    Marketers: Wineries hiring or listening to individuals and or companies that have very little or no background (hands on experience) in the wine business is another waste of dollars… Wineries are getting used by many people.

    Brands: You can tear a brand down faster than you build it!
    Business: Know your business and all aspects and then surround yourself with good people that can help with all of the day to day. Remember we hire people like ourselves! So know all aspects of your business.

    Websites: Be creative with your website, build your base of consumers and give them reasons to come back and visit that site.

    “Do the work when times are good so when hard times arise you are ready for them.” Thanking the ones that put the wine in a consumers hand is the key for the winery. I have bought a lot of wine in my day as a store owner and or employee, now my current wine buyer has continued that tradition. We sell wine by building relationships with those who choose to walk in our doors and spend their hard earned money. They know we appreciate the business. As a business that basically builds brands, I have never been thanked by a winery after the purchase of wine through a distributor.

    To sum up…many businesses like to complain when times are a little tough. Look in the mirror and you will see the reason for slow sales. Stop sitting on your hands and expecting positive things to happen with your business. It is called work and no one said it was easy.
    • Be consistent!
    •Be persistent!
    •Build your brand!
    •Follow through on everything you do!
    •Be creative in your day to day business!
    •Make a decision and stick with it, give it time to work!
    •Appreciate your customer!Appreciate your customer!

    All the above may seem simple and everyone may say “I know this and that, whatever Keith.”

    Doing is something different I say… Try just showing your customer your appreciation for an extended period of time (a year) and you will see what I mean. Do it and you will reap the rewards in time!!!

    Keith Miller
    Wineguystv.com
    Thewinerygroup.com
    Milehighwineandspirits.com
    keith@wineguystv.com

  4. Phil C. says:

    I’m all for second labels…I know my family and I have had fun with them (i.e. Worthy).

    I do have to say it is really sad to hear stories of people skipping vintages and just letting fruit drop and die.

  5. Dennis Schaefer says:

    The Reuters story on Pali was misleading and not put in context. Pali is not marking down its wines; it saw a big market for reasonably priced pinot and went after it. Heimhoff perpetuated the story in his blog. A simple phone call to Tim at Pali would have resulted in the getting the facts straight.

  6. Larry says:

    Great points all!

    Short story? Sure – bring it on!

    Cheers!

  7. Keith Miller says:

    My comment will be very long so i have to post that one later today…anyone mind a short story?

    Keith Miller
    wineguystv.com

  8. Larry,

    Second labels are just what the Doctor ordered… we started with out second label first…then released the premium wines the next year at a higher price point with the signature label…this became the first label then and the second label is still being used for wines that don’t make the grade…

    Why would you take your best label and discount it…I have seen marketing studies… it ruins your image, perception of brand is gold never cut the price it will bite you in the @ss…

    My .02Cents…

  9. jimmyz says:

    these are good times for consumers. for me softening prices are an opportunity to build a collection with a longer window rather than “buy and consume”. Its also a great time to try wines that one might not normally sample. For the wine pros – the wine business is centuries old and has endured war, pestilence, economic upheaval, changing tastes, natural disasters, and through it all devoted winemakers ply their craft. thank god for perseverance.

  10. Fred Swan says:

    Great points, Larry.

    I think one has to know and respect one’s brand. If the brand is built on price and consumers look to it on that basis, whether the brand be Walmart or “2 Buck,” then maintaining a low price edge is key and diluting quality somewhat will probably be immaterial. But, for brands based either on good quality or consistency of product, diminished quality can be a disaster. Dedicated customers will notice that “corners are being cut” and go elsewhere.

    I also think that, while promotions to maintain cash flow and move inventory are key, doing things that lower the perceived value of a product is dangerous. So, straight price drops can be problematic. Unless of course one’s prices are simply ridiculously high to start with. And there are more than a few wineries in that camp.

    It will be interesting to see how many cash rich winerie decide to “sit on their cellar” during the down economy and then sell the bottles as marked up library releases five years down the road.

    Fred
    NorCalWine.com

  11. This economic slowdown is affecting everyone. There is risk in what Pali is doing (as evidenced by the Reuters article) as people may feel the winery is becoming desperate.

    It’s fine to have several levels of wine under one label (single vineyard, reserve, county designations), but to have a wine at 1/3 their normal price gives rise to some unfortunate speculation.

    You can leverage your name with a cheaper label perhaps by saying “New Brand Pinot by Pali” making the association clear yet not confusing the buyer.

    2nd labels are quite common in Bordeaux and many are very successful wines in their own right.