Top 6 Wine List Success Strategies Restaurants Must Employ Post COVID-19

This year, 2020, will be my 42^nd year in the alcohol beverage industry, and the 20^th anniversary of supplying the wine industry with on-premise insights through Winemetrics and its predecessor company. During those 20 years, I have visited at least 100 different restaurants each year to keep my finger on the pulse of restaurant wine service. It is based on this experience that I make the following observations and recommendations.

1. Post your current wine list information online.
   It’s hard to believe this still happens, but for some reason, a sizable portion of the chains we survey don’t post this information on their websites. With restaurants now struggling for revenue, you would think this to be a no-brainer. Want high-value wine consumers to come to your restaurant? – Let them know what you are serving! The corollary to this is posting a selection online and having it out of date. With the option of merely posting the PDF wine list you currently print for your wine service, is there any excuse for this shortcoming?
2. Offer separate Dine-In and Take Out/Delivery Menus for Wine (with lower pricing on takeout menus)
   Most restaurants have figured out that they need more value-oriented offerings on their take out/delivery food menus, offering family meals and comfort food to  patrons unable to commit to in-house dining during these uncertain times. Sadly, this rationale does not extend to the wine list, where the same list is nearly always used for both.  Any savvy wine consumer is more than willing to pay a certain price for wine served in fine stemware and at the appropriate temperature, possibly with a recommendation from a knowledgeable sommelier. That same wine stuffed into a delivery bag with none of these accoutrements must understandably be priced lower.
3. Offering a larger variety of serving sizes to accommodate specific consumption opportunities
   Many wine consumers, especially crowd-wary Boomers, would prefer to have their wine delivered to their home or table without the need of a server or corkscrew. Half-bottles and cans in 375 ml, 750 ml screwcap bottles, even 500 ml – 1 liter  bag-in-box all provide a safer and more varied selection of consumption options. According to the National Restaurant Association, 56 percent of adult consumers said they would be likely to order alcoholic beverages if they were offered as part of a food delivery order from a restaurant (as quoted by FSR Magazine). With over 40 states permitting wine sales with take out/delivery, restaurants must endeavor to not just provide wine variety, but also convenient serving sizes. Personally, I am far more likely to order two 375 ml corkless containers with my takeout order than a bulkier and more fragile 750 ml corked bottle.
4. Utilize the expertise of restaurant beverage professionals to sell more wine for delivery.
   Unlike retail stores, where many of the wines are chosen on brand name and/or retailer incentives, most wines on restaurant wine lists are competitively tasted prior to their selection. Such personal endorsements should be leveraged to promote wine purchases for delivery. In fact, this tactic should be utilized for both the Dining-In and TakeOut/Delivery wine lists.  Who could resist ordering a half bottle or bottle of wine personally recommended by the beverage manager or sommelier of a favorite restaurant?
5. Pay attention to regional differences
   I have never been a fan of the one-size-fits-all wine list as practiced by some national chains. Regional differences are now mandatory in the age of COVID-19 where some states are shut down, while others have opened for in-house dining. A number of regional chains, e.g. those in New England, have now been able to re-open all of their units. Northeastern/Mid-Atlantic states are far more open to imports while the West Coast and Central States may focus more on domestic producers. Beer and cocktail lists have embraced regional differences for years; it is time for restaurant wine lists to catch up.
6. Elicit feedback or providing access to loyalty programs and incentives
   In the thousands of restaurants I have visited over the years, I cannot remember a one asking me specifically to evaluate the wine selection. Food and service, yes, but my opinion on the wine list, never. When I have found a particularly good list, I would write a personal complimentary note and include my business card. The number of times I was contacted by a restaurant, often after spending a substantial sum of money? Maybe twice. Restaurants in the COVID-19 environment are going to depend on repeat business. Would it be giving away too much if the clientele that spent more than $100 received a free glass of wine (where legal), an appetizer or a discount with a significant dinner order to encourage a repeat visit?  It is time for the restaurant industry to collectively take a direct marketing course to understand the huge cost difference in acquiring new customers vs. retaining existing ones. Hint: the free glass of wine/appetizer will pay massive dividends.

 

The Post COVID-19 era will transform on-premise wine service. This is the first of many updates regarding the changes required by restaurants to meet evolving demands.

Meeting the Challenges of the COVID-19 Impact On-Premise

July 9, 2020

Winemetrics is revising its focus to deal with the post COVID-19 on-premise market. Below are our findings based on current and past research as well as anecdotal observations based on 35 years of personal on-premise sales and marketing experience. (Also, Winemetrics is based in Fairfield County, CT, part of Metro NYC, which experienced the greatest impact of COVID-19. Having been first and most severely affected, this region is rebounding before many other parts of the country which have yet to see peak infections and deaths).

1. The State of the COVID-19 Pandemic
   2. As of 6/30/2020, over 10 million people worldwide have been infected with COVID-19, 2.6 million in the US alone, resulting over 500,000 deaths globally of which 127,000 were residents of  our country.

https://www.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6

1. Social distancing will have to remain in effect for months to come to prevent a resurgence in new infections. In places that don’t follow the recommended protocols, there will be a second wave of infections. Based on the Spanish Flu epidemic of 1918, the second wave could produce more fatalities than the first.
2. Given Trump’s decision to hold rallies in states where COVID-19 infections are increasing, a second wave is almost inevitable.

https://www.washingtonpost.com/nation/2020/06/10/coronavirus-update-us/

1. Even without mass rallies, it appears that the increasingly lax behavior of people in all states will not necessarily create a 2^nd wave but extend the first wave.

https://www.npr.org/sections/health-shots/2020/06/12/876224115/coronavirus-second-wave-nope-were-still-stuck-in-the-first-one?utm_source=pocket-newtab

https://www.pressdemocrat.com/news/11040335-181/age-of-coronavirus-cases-dropping

 

2. On-Premise Trends Likely to Remain in Place post COVID-19
   1. Consumer confidence lowest since 2008 so the discretionary spending required to boost restaurant revenues is unlikely to transpire in the near future.
      https://news.gallup.com/poll/312596/economic-confidence-scarce-economy-reopens.aspx
   2. Even with many states moving into Phase 2 of re-opening, overall desire to patronize dine-in locations is historically low, over half of consumers arenot comfortable going to a restaurant.
      https://wineindustryinsight.com/?p=110340
   3. Even before the COVID-19 pandemic impacted the U.S. economy, in late 2019, numerous national and regional chains were planning restaurant closures due to stagnant revenues and competitive pressure.

https://www.investing.com/magazine/last-call-restaurant-chains-closing-locations-by-2020/

1. Industry experts believe over ¾ of independent restaurants may not reopen without financing from the Federal government.
   https://www.fsrmagazine.com/finance/report-85-percent-independent-restaurants-could-close-without-direct-aid?utm_source=fs_insider&utm_medium=email&utm_campaign=20200611
2. Alcohol sales for delivery will continue as a part of licensed restaurant services throughout most of the country.

Over 40 states permit take-out purchases of wine, a trend that will invariably continue into the foreseeable  future as it provides vital revenue for the restaurant industry which is currently reeling from bankruptcies and foreclosures.
https://www.foleyfoodandwinesociety.com/Magazine/News-and-Articles/New-Alcohol-To-Go-Rules-in-All-50-States?linkNum=3

 

Alcohol sales may well help the restaurant and alcoholic beverage industry survive the pandemic. According to the National Restaurant Association, 56 percent of  adult consumers ( over the age of 21) said they would be likely to order alcoholic beverages if they were offered as part of a food delivery order from a restaurant.

https://www.fsrmagazine.com/expert-takes/alcohol-sales-help-restaurants-stay-afloat-during-pandemic

 

On-Premise Transformation Post COVID-19

• Nearly all aspects of on-site beverage service will change.
  https://www.forbes.com/sites/thomaspellechia/2020/06/09/post-pandemic-restaurants-will-have-to-change-their-ways/#215078d75a45
• The mandate for disposable menus will effectively limit beverage list sizes. A one-sheet format of food menu items on one side and beverage items on the other will be widely adopted. Such a format is currently used in many successful chains including Hillstone/Houston’s.
• The encyclopedic hard copy wine list (wine book) will be retired and replaced with a link or QR code on the food/wine menu. The iPad list may suffer a similar fate as neither can be easily sterilized for rapid reuse by diners.
• Interaction between restaurant personnel will be reduced or restricted based on the diners’ wishes. Host/Hostesses, servers, wine stewards, bussers may no longer approach tables during the ‘dining event’. Instead diners may be directed to a table, order via smart phones and receive their food on a covered cart by a face-masked server/busser. Diners will access and distribute their orders from the cart which will be equipped with both heating and cooling elements to deliver products at their optimum temperatures.
• Traditional wine by-the-glass (BTG) and tableside bottle service will most likely be curtailed. The prospect of a wine dispensed into a glass at the ‘bar’ and then transported by hand through the restaurant to a diner may entail unnecessary risk. Single serving (187 ml) and half bottles (375 ml) with Stelvin (screw cap) closures will become preferable to wine BTG. However, wine BTG may actually accelerate if restaurants offer self-serve BTG dispensing activated by a credit card (systems of this sort are already being used to sell beer on-premise).
• The’ localvore’ movement will continue to accelerate. Diners, especially those in urban/suburban markets, will tend to support locally owned restaurants and beverage suppliers in the aftermath of COVID-19. This may impact sales at national chains and products of larger wine companies.
• There will be enhanced ‘pursuit of value’ as many consumers will have experienced a decline of income and assets post COVID-19. Higher priced wines may suffer steep declines on-premise if not effectively marketed and/or venues reducing their markups.
• Restaurants will have to be more effective in managing the online customer experience. Loyalty programs will be vital to a restaurants success. A thorough analysis of the challenges and benefits of this new paradigm is provided in the link below.
• On-premise programming will not be as effective due to the loss of on-premise salespeople at the distributor level. Most distributors have reduced (in many cases severely) the number of on-premise sales reps on their payroll. It remains to be seen if and when these number return to pre-COVID-19 levels.
  https://www.fsrmagazine.com/consumer-trends/post-coronavirus-changed-restaurant-customer-new-expectations?utm_source=fs_insider&utm_medium=email&utm_campaign=20200617

 

4. How Wine Suppliers Can Prepare for Post COVID-19 Conditions
   • Make recommendations based on more limited wine selections and lower prices
   • Offer analysis of pre-COVID-19 wine offerings and how they can be modified for the new demand profile.
   • Expand product lines to offer screw cap closures and smaller (375 ml, 187 ml) sizes.
   • Increase offerings of draft wines, including special cuvees that can be offered on a seasonal basis at discounted pricing. These can expand brand awareness without undermining price positioning of the brand.
   • On-premise programming will not be as effective due to the loss of on-premise salespeople at the distributor level. Most distributors have reduced (in many cases severely) the number of on-premise sales reps on their payroll. It remains to be seen if and when these numbers return to pre-COVID-19 levels.

How E&J Gallo Captured the #1 On-Premise Ranking from Constellation Brands*

In 2013, Constellation Brands (CBrands) had a commanding lead among suppliers on-premise, based on Winemetrics On-Premise Wine Distribution Reports with a 40% lead in combined By-the-Glass (BTG) and By-the-Bottle (BTB) listings over 2nd place E&J Gallo.  By 2017, the same survey placed E&J Gallo (E&JG) in 1st place, with a 12% lead over now #2 CBrands. So what happened to CBrands in 4 short years to have them lose such a commanding lead in wine distribution?

1. Most of CBrands top 15 brands lost distribution during the 2013-2017 period while a majority of E&JG’s brands gained share.
   

   During this period, among the top 15 CBrands producers, 11 lost share while just 4 gained distribution share. In contrast, E&JG had 11 brands gain share with only 4 falling in distribution. If we remove the recent CBrands acquisitions (Meiomi, The Prisoner Wine Co.), the top 15 CBrands distribution, would have dropped by nearly 1/3.  

2. CBrands, with the exception of Pinot Noir, did not invest in varieties that produced significant growth during this period.
   

   In 2013, CBrands had the number #1 Zinfandel brand, Ravenswood, which was the #2 brand in the CBrands portfolio. It fell to the 14th ranked the brand in the CBrands’ group, having fallen -85% over this period. Likewise, Blackstone, the 4th ranked brand in CBrands’ portfolio in 2013, and the leading Merlot brand at the time, lost -71% of distribution by 2017, and now ranks 12th.

   Of E&JG’s 3 leading brands in 2013, Ecco Domani #1 brand,(Pinot Grigio) grew +7%, while 2013’s #2 (Mirassou) and #3 (Macmurray Ranch) both predominantly Pinot Noir producers, lost double digit share by 2017. E&JG was able to offset these losses with growth by  La Marca (Prosecco), up +147% and Apothic (Red Blend) +465%.

   It could be fortuitous that E&JG invested in varieties that experienced robust growth during this period and CBrands’ misfortune to be heavily invested in varieties (Zinfandel, Merlot) that experienced sharp declines during this period. However, Pinot Grigio, Prosecco and Red Blends, E&JG’s major source of growth,  had been growing for a number of years. However, with 2 robust Pinot Noir brands in 2013 (Mirassou and MacMurray Ranch) it is curious how these brands could not take advantage of this variety’s growth during this period.  It also seems inexplicable that a pre-eminent supplier like CBrands could not effectively promote a brand in these expanding Prosecco, Red Blend and Pinot Grigio segments.  It is interesting to note that the 3 top brands of E&JG were ‘home-grown’ while nearly all of CBrands leading producers were purchased from existing suppliers.

3. Winemetrics Data Tables
   

   2013		2017				2107
   Rank		#BTG	#BTB	BTG+BTB	% CHG	Rank
   	Constellation Brands	2416	3211	5627	-21%
   1	Ruffino	198	283	481	-29%	4
   2	Ravenswood	35	68	103	-85%	14
   3	Mondavi Priv. Select.	176	179	355	-42%	6
   4	Blackstone	84	89	173	-71%	12
   5	Woodbridge	90	90	180	-69%	11
   6	Clos du Bois	167	195	362	-35%	5
   7	Estancia	120	181	301	-36%	8
   8	Franciscan	41	264	305	-19%	7
   9	Mark West	305	313	618	83%	9
   10	Crawford, Kim	253	287	540	76%	3
   11	Simi	41	63	104	-62%	13
   12	Hogue	40	49	89	-67%	15
   13	Nobilo	111	120	231	160%	10
   14	Meiomi	286	329	615	++	2
   15	The Prisoner Wine Co.	46	203	249	++	9

   2013	2017					2017
   Rank		#BTG	#BTB	BTG+BTB	% CHG	Rank
   	E&J Gallo	3078	3241	6319	24%
   1	Ecco Domani	553	552	1105	7%	1
   8	La Marca	362	204	566	147%	2
   11	Apothic	266	265	531	465%	3
   5	Canyon Road	269	253	522	62%	4
   2	Mirassou	211	217	428	-26%	5
   9	Martini, Louis M.	151	195	346	56%	6
   7	Barefoot	152	152	304	24%	7
   4	Alamos	125	134	259	-21%	8
   NA	Starborough	108	108	216	++	9
   NA	The Naked Grape	107	107	214	3467%	10
   12	Dark Horse	82	116	198	161%	11
   10	William Hill	89	104	193	89%	12
   3	MacMurray Ranch	55	100	155	-65%	13
   NA	Carnivor	63	65	128	++	14
   6	Red Rock	57	60	117	-53%	15

*Based on Winemetrics On-Premise Wine Distribution Reports 2013, 2017 which survey wine distribution in 170 chains and restaurant groups. Only wine distribution is measured in this report, but the assumption incumbent in our report is that chain beverage managers retain brands that provide the most revenue so greater distribution is congruent with greater revenue. Our observations pertain strictly to on-premise analysis based on Winemetrics restaurant database.

 

Wine’s Crisis On-Premise and How to Resolve It – Part 1

Winemetrics is halfway through its 2016 on-premise wine list surveys, and to be frank, there is very little good news to report. Wine lists are not only decreasing in size but also in variety. Selections are increasingly based on brands controlled by the top 10 suppliers. Since the start of 2015 we have seen many iconic independent wineries ‘absorbed’ by the largest suppliers. Benziger, B.R. Cohn, J. Winery, Orin Swift, Patz & Hall, Siduri, Talbott, The Prisoner to name just the ones that come to mind.  But this decline of wine on-premise is just half of the bad news for wine. The meteoric, unstoppable rise of craft beer and craft cocktails may spell the end of wine on-premise as we know it. The key, and most damning piece of evidence is the admission (in confidence) from wine professionals themselves. When not at company functions or on the corporate  expense account, they are drinking beer and cocktails, simply because there is more variety, flavor and value in the average beer and cocktail list. This is especially true in casual restaurants where the same wine products appear with monotonous regularity. For the record, I am not a proponent of the ‘small is beautiful’ school of wine marketing. Major national brands are extremely important to a segment of wine consumers that seek the comfort of a consistent, well-known producer. However, when these brands or their line extensions dominate wine lists to the exclusion of any innovative or more esoteric products, it is at that point that any wine consumer with a slightly more adventurous palate closes the wine list and orders a beer.  And, I confess, that’s what I do now.

If you believe my observations aren’t supported by facts please click on the link below to Lewis Perdue’s Wine Industry Insights where he features a recent Gallup survey.

From Winemetrics’ observations of hundreds of chains and independent restaurants, it does not appear that the wine industry is taking this threat seriously. As a 35 year veteran of this industry, I have seen trends, brands and fads come and go. I remember vividly a distributor presentation by a wine cooler executive in the 1980’s who extrapolated his brand’s 2 year growth curve a decade into the future, promising his audience of a massive windfall in profits. According to the executive, this was ‘guaranteed’.  It didn’t quite work out that way – has anyone seen a wine cooler recently?

Of course, we cannot lay the blame solely on the wine industry, as the restaurant industry is also complicit in this process. Possibly persuaded by off-premise sales figures and incentives of the larger suppliers, restaurateurs have yielded too much control of their wine lists to big corporate interests. In Part 2, I’ll discuss steps restaurants can take to not only invigorate interest in the wine segment, but actually take ownership of innovation for their wine selections.

 

 

 

Craft Beer vs. Wine: Innovation vs. Stagnation

While wine lists across the board are decreasing in size and variety, beer list trajectories are  in the opposite direction, expanding in both size and diversity in even the most casual chain restaurants. Moreover, there has been a quantum leap in beer-oriented chains at all levels of the chain spectrum from national chains such as Yard House and World of Beers, now 70+ units strong, to regional chains such as Eureka  and Plan B.  These chains have certainly been helped by the explosive interest in craft beer,  which has seen growth in both the mundane e.g. Pumpkin Ale, to the esoteric e.g  Gose and Brett-fermented ales.  So why hasn’t the wine industry begun introducing exciting and buzz-worthy products to keep pace with their beer brethren?

The answer lies largely in the attitudes prevailing among the thought leaders in each industry. With few exceptions, the wine industry has doggedly remained loyal to the European concept of wine, that wine is a product of terroir and tradition, e.g. the fixation that the best wines are representative of a specific variety and place. Estate-grown wines of approved varieties or blends that follow traditional production methods are held in the highest esteem by an increasingly narrow group of gatekeepers in both wine production and wine media circles.  Had the beer industry followed the same path, the majority of producers would still be following the Rheinheitsgebot, which dictates that beer consist only of malted barley, yeast, water and hops. And we would never have had the vast array of products that has vaulted the American beer industry from mediocrity to its current apex of innovation and growth.  Fortunately, American beer producers rightly found this European model too constraining and began experimenting with untraditional flavors, fermentation techniques and aging methods.  In a few short decades, American craft beers have become the global standard of beverage innovation. If you had suggested 30 years ago that American brewers would be opening facilities in Germany, the birthplace of modern brewing, you would have been laughed out of the bierstube. In the 1990s, hypothesizing that someday small American brewers might have a market value of over $1 billion (Lagunitas, Ballast Point) would have earned one a trip to a local asylum.  Yet it has come to pass.

What remains puzzling is that, despite craft beer’s incredibly successful example, which has been eating the wine industry’s lunch for the past decade, few wine producers have dared to defy the ossified old guard who continue to enforce the standard of European wine production.  Is it arrogance or merely ignorance that prompted the wine industry to relinquish an entire segment that it should rightfully own –  cider ( a low alcohol fruit wine), to the American beer producers?

Having been in the alcoholic beverage industry for over 3 decades I have a fairly good ideaof  how this saga will play out, unless drastic measures are implemented very soon.

The wine industry today is much like the U.S. auto industry of the 1970’s, which took the attitude that the public will buy what it tells them to purchase. We have all seen how successful that approach has been. Now Toyota is the world’s largest car company. Hopefully, the wine industry will come to its senses before it is too late.

Did Constellation Brands Pay Too Much for Meiomi ?

Many wine industry insiders were surprised at the lofty price Constellation Brands paid for Caymus’ Pinot Noir powerhouse, Meiomi. A deal that did not include any vineyard land or grape resources, from what we understand. However, if you believe that on-premise distribution is the benchmark of brand equity (build brands on-premise, build volume off-premise), then there may be some justification for this tidy sum.

Winemetrics is about to release a new report introducing its Wine Equity Quotient™ (WEQ) and Brand Equity Quotient™(BEQ). Both of these valuations are based on a wine’s (or brand’s) on-premise distribution characteristics which include:

1. total number of listings (either by-the-glass or by-the-bottle, there is a separate WEQ for each)
2. total number of chain/restaurant groups where it has distribution
3. The diversity by chain type (Casual, Upscale Casual, Fine Dining) of its distribution
4. Average Price

When Winemetrics compared the top 3 Pinot Noir By-the-Glass by their WEQ values, we came up with the following numbers.

• Meiomi          WEQ – 29
• Mark West    WEQ – 19
• Mirassou       WEQ – 21

Constellation paid $160 million for Mark West in 2012. While we are unable to precisely determine Mark West Pinot Noir WEQ for this year, we do know that since it’s purchase this wine has increased on-premise distribution by about 40% since  2012. Using that number of total listings with Mark West’s current WEQ calculation, it would yield a WEQ of 13.

Let’s use this Wine Equity Quotient™ value with Mark West’s purchase price to estimate what Meiomi might be worth in today’s market:

160/13 = p/29 where p would be the purchase price of Meiomi in millions of dollars

p = 357 or $357 million dollars.

Certainly Constellation Brands used far more sophisticated analysis than this to determine Meiomi’s fair market value, but I don’t think they overpaid.

Winemetrics Wine Equity Quotient™ (WEQ) and Brand Equity Quotient™(BEQ) will be introduced in Winemetrics’ new 2015 Wine Buyer’s Report, our first report targeting wine buyers, beverage managers and wine professionals who sell to this group. This report will be released August 1, 2015.

Syrah/Shiraz, Zinfandel Becoming ‘Optional’ Varieties

Syrah/Shiraz and Zinfandel, once among the top 10 varieties on-premise, have fallen to 16th and 15th respectively as reported by Winemetrics 2014 On-Premise Wine Distribution Report. Malbec now has more combined By-the-Bottle (BTB) and By-the-Glass placements than either and is ranked 11th. Red Blends, those non-traditional varietal mixes (not to be confused with Bordeaux Blends, Rhone Blends and Super Tuscans, which Winemetrics tracks separately) have jumped to 7th position.

Although Red Blends frequently incorporate Zinfandel and Syrah and often have similar flavor profiles, their catchy names and packaging, appeal more to Millennial consumers. More restaurants, especially casual chains with smaller lists, are dropping Zinfandel and Syrah/Shiraz from their wine lists.

How Can Wine Reverse its Decline On-Premise?

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. 

Beringer: What is this venerable wine brand worth?

Actually, this is a two part question. First we’ll explore its current value to Treasury Wine Estates (TWE) which is purported to be entertaining its sale. Second, we’ll examine Beringer’s potential value to a buyer.

Note: this analysis is solely based on TWE/Beringer’s on-premise distribution. Winemetrics firmly believes the overall long-term viability of a wine brand (or spirits or beer brand) is a function of its strength on-premise which provides 3rd-party endorsements, consumer trial occasions and brand building opportunities.

1. Beringer’s Value to TWE – Should TWE sell Beringer it would lose its flagship brand and nearly 50% of its on-premise distribution. Penfold’s, TWE’s #2 brand on-premise, has less than 1/4 of Beringer’s distribution and Australian wines are continuing to decline on-premise.  TWE does not have a strong #2 or # 3 brand to pick up Beringer’s lost distribution. Beringer and Penfold’s account for 60% of TWE’s distribution on-premise.  The remaining 40% is divided among 18 brands, the largest of which, Chateau St. Jean, has only a 6% share of TWE’s BTB (By the Bottle) distribution. The loss of Beringer would drop TWE from 4th to 9th in Winemetrics Supplier Rankings and most likely curtail TWE’s distribution opportunities on-premise.

2. Beringer’s Value to a Potential Buyer – Any potential buyer of Beringer would have to be interested in the popularly priced portion of its portfolio as 2/3 of Beringer’s on-premise BTB distribution is White Zinfandel, (the BTG portion is even higher).  Beringer owns the White Zinfandel segment, accounting for nearly 60% of its distribution and outselling #2 Sutter Home by over a 2:1 margin.  Beringer White Zinfandel will provide any potential buyer with a significant presence in casual chains and one of the most recognized brands in the wine industry, but such a buyer must either have confidence on the long-term viability of White Zinfandel or be prepared to rebuild Beringer’s ultra-premium presence on-premise.

All of the data quoted in the above blog is from Winemetrics’ 2013 On-Premise Wine Distribution Reports and may not be used or published without permission.

 

 

Winemetrics 2012 Supplier Report

2012 Supplier Leaders and Followers

Big winners in 2012 include Wente Vineyards, The Wine Group, DFV, Winebow, Zonin USA, Mendocino Wine Co. and Duckhorn.

Suppliers that had a less than stellar 2012 on-premise: Treasury Wine Estates, Diageo, Wilson Daniels, F. Wildman & Sons.

Above results are based on supplier on-premise distribution in 165 leading restaurant groups and chains as surveyed by Winemetrics LLC.