How Can Wine Reverse its Decline On-Premise?

September 6, 2014 § 1 Comment

Before I write another word, let me provide a brief background of my experience in this industry. I have a B.S. in Soil Science and have worked as a vineyard manager and winemaker. I began drinking wine as a college freshman and took a job upon graduation picking grapes in upstate New York to learn about wine, excuse the pun, from the ground up. That ocurred because I had, during the 30 hours a week that I worked while going to classes full-time, I managed to accumulate the funds to purchase a 1969 J.Grivot Vosne-Romanee and a 1966 Chateau Calon Segur, two wines that changed my life forever.  I have worked every imaginable job in this industry, from production to sales and marketing.  In the course of my wine industry career of over 30 years, I have launched a number of successful wine brands and products. I have also witnessed failures and collapses of wine segments and brands largely due to the arrogance and close mindedness of those responsible. Market conditions in some cases played a role in these failures but the changing market conditions were apparent and largely ignored by those that could have affected the necessary changes to avert disaster.  Based on this experience and my position at Winemetrics, which has allowed me to track the progress of wine on-premise for the past decade, I offer the following heartfelt advice to my industry.

1. Start Innovating before it is too late

Innovation means creating compelling unique products, not a new name or label that you hope the consumer will find appealing. Look at what the artisanal spirits and craft beer industries are doing. New flavors, new processes, with exciting products as a result. Where are the new varieties to entice our wine consumers, where are the new production methods to create new flavors. Why not a Port barrel-aged Zinfandel or a Tannat-Syrah blend?

2. Listen to consumers and make something that fulfills a need

Do you think that the Master Distillers at Jim Beam woke up one morning and decided to create a Black Cherry flavored whiskey on a whim? There are currently more placements on cocktail lists of flavored whiskeys than there are for traditional ones, the same is true for vodka and rum. I’m certain the decision to make flavored products was not popular with the traditional production team but had they ignored this direction their companies would be out millions of dollars in profits. Fortunately, the distillers realized they were in the beverage business, not the whiskey business.

3. Discard the old models that are no longer relevant.

Mixologists have given us cocktails with an incredible variety of flavors using non-traditional ingredients that have vastly expanded the flavor landscape of libations. Craft brewers have created entire new categories of beer. I remember when the first Pumpkin Ale was introduced, now the annual release of this single product overwhelms that of the venerable Oktoberfest beers. Both artisanal mixology and craft beer are American (i.e. U.S.) phenomena. We have a culture of innovation and chafe at the rules meekly followed in Europe. Rheinheitsgebot? Sorry Hans, we’re putting pumpkins and nutmeg in our beer and it tastes great. How does the wine industry react to new ideas? Let’s review a historical example.  I was already working in the wine industry for several years when Jess Jackson released his signature Chardonnay. The reaction of most of the wine press was not positive. I remember the backlash in the wine press about this upstart winery (KJ) that blends grapes from different regions and allows some residual sugar in the finished wine! Quelle horreur! To this day I read blogs and hear wine buyers rail against this ‘inauthentic’ wine that happens to be the #1 wine on-premise and has probably made wine drinkers out of millions of otherwise disinterested consumers. Let me put this another way. This is probably the most popular wine in America, which wine consumers obviously love, and you, Mr./Ms. Wine Gatekeeper loath this product because it does not conform to your parochial definition of ‘acceptable’ wine. Are you really serious? Do you think there is an equivalent individual or group of individuals in the beer industry saying this about Pumpkin Ale? No, because its introduction captured new drinkers and was overwhelmingly positive for the industry. My suggestion to self-appointed ‘wine authorities’ who hate products that encourage consumers to drink wine? Find another career.
 
4. Bypass the Gatekeepers
 
The wine industry is cursed with a group of narrow-minded gatekeepers who prevent excellent products from reaching a demanding and appreciative audience. 

5 Reasons Why Wine Is Losing Share to Cocktails and Beer On-Premise

September 4, 2014 § 2 Comments

5 Reasons Why Wine Is Losing Share to Cocktails and Beer On-Premise

  1. Competition
    When I first began selling on-premise in the early 1980’s there was no competition to wine. Craft beer and spirits were rare and wine was the recognized companion to food. Fine dining restaurants eschewed beer and had, at best, rudimentary cocktail lists. Wine was the only option and it developed in a competitive vacuum. Those conditions no long exist and wine is having its primacy eroded.
  2. Profit
    Wine is the least profitable alcoholic beverage a restaurant can serve. Bottled beer is more profitable, draft beer, properly managed, is even more profitable and cocktails provide the best margin of all. This means it is in the best interest of the restaurant to promote these other beverages, not wine. This does not even factor in the fact that a cocktail and bottle/draft are guaranteed to be fresh, unlike a BTG serving of wine which may have been opened for over 24 hours prior to serving.
  1. Price/Value
    I have witnessed (and can objectively verify) the contraction and ‘specialization’ of BTG wine list at a time when cocktails and beer are moving in the opposite direction (see 4. Innovation). Given the options of a 20-ounce glass of iconic craft beer or imaginative cocktail versus a mass-market common varietal (which may be the most expensive of the three) what would the average Millennial choose? My guess is the wine would be dead last.  Here is a concrete example. I was in a South American restaurant having dinner. There were no craft beers on the list (surprising that can still happen but it does) and a glasses of the most ubiquitous brands of the most common varieties were in the $9 range. For a dollar more I could purchase a grilled pineapple and cilantro margarita made with Don Julio Reposado and Cointreau. Which would you purchase? By the way, that margarita was magnificent and judging by the condition of the open wine bottles on the back bar, there was no choice.
  2. Innovation
    The explosion of flavored and uniquely aged spirits as well as specially craft and aged beers and ciders has placed the United States in the forefront of innovation in these industries. Foreign beer and spirits producers are in awe of what has happened here. Fifteen years ago, American beer was still largely a joke in Europe, now we are making products that totally surpass most of what is offered there. I can find a better beer selection in my hometown bar in rural Pennsylvania (from mostly local producers) than I could in Frankfurt or Berlin. While America does not have this edge yet in spirits, we are most certainly the innovation leader is crafting superior cocktails from domestic and international ingredients.  Our success in beer and cocktails can be directly attributed to disregarding the European models. The European model for beer was the Rheinheitsgebot, where pure, natural beer could only be composed of yeast, barley, hops and water. European cocktails used only local or country specific ingredients (English gin and Italian vermouth in the same glass, never!)
  3. Image
    Wine no longer has a leading-edge image, it is the beverage of choice of Boomers (aka parents of Millennials) while Millennials themselves have more eclectic preferences. On of the reasons I started drinking wine was it was a beverage my parents didn’t drink. With wine as the Boomers top choice it is no surprise that their offspring are seeking out different libations. Craft beer and artisanal spirits have captured the imagination and discretionary income of this younger segment of the population.

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