The first part of the year has turned into a fire hose of new industry information in the wine business. Right after we released the State of the Industry Report, we all ran to Unified to hear more discussion about industry trends. I missed Fred Franzia's lively lunch presentation Tuesday but was there all week and once again moderated the Thursday General Session. I then came home and got on a plane to Miami where I will leave with the Wine Institute and the Napa Vintners for a Trade Mission to Cuba at 4:00 am Sunday morning.
There were many interesting questions in the chat room that the panel didn't answer and I'll get to some now, but before I do there was discussion about DtC in several spots in the chat as you will see, and I need to say right up front that isn't the purpose of this report or video cast. That's why it received such minimal treatment. That said, there will be another survey, report and video cast coming out later in the spring that deals with that important topic specifically. If you want to get the benchmarks of that upcoming DtC research you need to be a winery and participate in the survey when it comes out. If that's of interest, please email me and I will get you on that survey list. (rmcmillan@svb.com)
On to the questions:
9:51 AM Brandon: why are you assuming interest in craft beer and spirits will decline?
% Brandon – There’s a difference between a prediction and an assumption. This is a prediction based on past behavior of consumers over the last 70 years, all of whom started off beer heavy and evolved to wine over time. Alc bev consumers have to go through a discovery period. In the U.S. that is in the early 20’s. Today craft beer is the beverage of choice for the youngest consumers and spirits are close to wine. That’s the same pattern boomers exhibited and the pattern of the generations before the boomers. While there is no guarantee of the pattern continuing, someone would have to come up with a significant finding of fact that would change that trend. For instance, if wine were proven unhealthy and beer healthy, that would change the prediction.
9:52 AM WineMaps: Would low price generic/jug wine dying makes me think about wine out of the tap, I wonder if there are any numbers on keg wine sales.
%WineMaps – Keg sales are increasing but it’s not a low price product. It’s a premium product. Generic jug wine is different. Much like the strong growth in premium boxed wines, it’s more about premium value, ease in protecting the product from oxidation, and simplicity in delivery. Bartenders would prefer taps first, screw caps second, and corks last.
9:59 AM dr doug: what is the position with high quality fine wine on tap as a growth area??
% Dr. Doug – Fine wine is doing well on tap based on comments from the company that fills the kegs. The one issue that has held up the adoption of kegs in general has been the investment in kegs themselves, and the investment in change at the bar. You can’t use the beer taps. I am told the wine delivery system needs its own plumbing. Obviously those early hurdles are being overcome based on growth9:59 AM Damon: Will they touch on OR/WA acreage as well? ~15% of total domestic market
% Damon – It’s always a struggle to talk about everything and all regions. In the hour we try and cover top level issues impacting the business. The news for the PNW is good in that the industry, now looking for great vineyards at more reasonable prices, has ‘discovered’ Oregon and Washington and more and more PNW wine will start showing up on kitchen tables going forward.
10:02 AM copainmark: Not seeing Lodi filling coastal needs. Have you been there in the summer?
%CopainMark – Lodi is placed between Fresno and coastal production. The big production wineries buy fruit but many of the grapes are sold to North Coast wineries making premium and fine wine. Lodi has done the smart thing and promoted small wineries making premium wine and that has raised the brand of the region. I don’t think they have found to top yet on potential but it will be fun to see how far they can take it.10:03 AM sdb: the generational survey data is sourced by who is making DtC purchases. Is it projectable to traditional off premise retail?
%SDB - Until this past year I would say yes. Off-premise data through Nielsen and IRI is now is getting skewed slightly lower by direct sales. I have financial statements of wineries and can see first-hand that growth in the above $20 segment is higher with my data now compared to reported on-premise sales. In the past, my information for above $20 was closely aligned with Nielsen scan data. It’s a single year of variance however so hard to draw a firm conclusion.
10:08 AM Ed Skupien: When will we see analytical data for price categories $20-30, $30-40 and so on?% Ed – Nielsen and IRI can’t track the data with scan because it’s too small a segment. We’ve been able to come up with some analytics through survey. That information was returned to the survey participants in early December and I’ve referenced some within the State of the Industry Report. The information is only sent back to those who participate in the SVB research study. For those who want to be included next time, please send me an email: rmcmillan@svb.com
10:10 AM winestudies: Speakers, could you drill down to a few of the high growth lifestyle segments, rather than just assuming that all cohorts within an age bracket behave the same? For example, Women Golfers was a hot topic.
% WineStudies. – We absolutely don’t presume cohorts behave the same and talk in the report about some important observations and distinctions. That said, in one-hour we aren’t going to drill down much and have to focus on the big topics. We've had consistent requests to do more of this and we are considering expanding the one hour show to include a follow up presentation after 90-120 days from the report release. Topics are still being discussed and this might be a consideration.
10:10 AM alismithstory: GenX is almost always skipped over bc the big winery focus on Mils...GenXers are here and buying quality/premium wines.
% AliSmithStory – I agree. Gen X are the big growth area. As I’ve said consistently, it’s really the 35 – 55 cohort that matters with retail, no matter what demographers call it. Today that group is Gen X, though Boomers with all the wealth can’t be ignored.
10:11 AM PatMerr: GenX is a small age group
% Pat – While true, this is where size doesn’t matter. They are the second largest purchasing cohort of wine and the best growth area today for fine wine.10:13 AM creber: SVBRob: How and who defines quality? By scores? By lack of flaws? By terroir? Very tricky question. Trade & consumers don't seem to be in sync on this.
% Creber – It’s an ethereal question but I’d say it’s the consumer. Quality is at every price point.
10:13 AM kcbranch: with the consolidation of distributors comes the inevitable growth of small companies...how far out do the panelist think that might occur. Someone is already working on that
% KCBranch – New distributors have been popping up as large companies consolidate and leave second tier markets. The problem is many of the new ones have been capital constrained and not all successful. It’s something that I’d hoped would have solved itself long ago but it’s slow in coming.
10:16 AM sdb: but average in size in the SVB panel data?
% Damon – the survey of about 600 wineries annually is a statistically significant representation of the wine business. That means there are few million case producers in the set, and a bunch of small ones. Regionally there is pretty good representation too with Napa normally leading the respondents. Size wise, the average size of the winery IIRC is about 20,000 cases.
10:16 AM CB: Is the DTC figure for the U.S. or just Calif?
% CB – The respondents are largely West Coast but there are other regions that participates. Virginia was a larger participant this year.
10:16 AM skunin: I make wine in SB County. We have over 100 wineries here, and most would agree that we're a significant region in the US. 98% of our wineries produce less than 50K cases... Most are less than 20K.
% Skunin – SB County has been a modest participant in the surveys we do. Most of the major AVA’s participate in the survey by sending the email to their constituents. That includes the Associations in Napa, Sonoma, VA, Lake, Oregon, Mendocino, Livermore, and Washington to name several off the top of my head. We not only give the participants the full results back, we send the AVA’s who participate, their own benchmarked information against other AVA’s. We’d love to have a greater participation in the SB County region. If you haven’t participated in the past and would like to next survey, please send me an email to rmcmillan@svb.com
10:16 AM lauramicciche: Can someone speak to how important (or not) is it to have brick & mortar vs DTC exclusively online?
% LauraMicciche – That is something we should handle on the DtC Survey that we do with Wine Business Monthly later in May. The answer for what it’s worth isn’t a simple one. Cost and return has to be taken into consideration as no matter what you build, you have to sell a lot of bottles to pay for the construction. Being on a wine tourism road plays into the discussion as well. It’s not sensible to build a Taj Mahal on the top of a mountain consumers never frequent. That’s a particular problem Washington Wineries face who are in the East side of the State. Hope that helps a little.
10:17 AM Michael: I think many of these types of forums seem to not realize that the industry is composed of micro companies more so than the mega corporation wine factories.
% Michael – We are more than aware, and every year get comments the other way. We try and balance the comments. This year the changes in the business start with the large growers and wine companies. When you see when the big companies are investing, it leads to the understanding of what is happening with consumers. The consumers are what should be important to all wineries regardless of size. I guarantee next year the report will be far more pedestrian and back to a smaller winery bias.
10:20 AM Late Bloomer: Should the industry be worried about the much greater availability of marijuana, especially on the West Coast?
% Late Bloomer – That is a worry that is out there. At a distributor conference I attended, there were stories of wine shops that went dry in Colorado when positioned near a pot shop. Recently the discussion I’ve seen suggested ganja was more of a substitute for beer. I’m not sure there is a real conclusion at this stage.
10:20 AM winestudies: Skunin, regional wine metrics by winery size are available in some regions. For example, in some states, e.g. NY, the regional Farm Credit Bureau provides this as a service. West Coast -Moss Adams
% Winestudies – Note on this comment, this is something we do gratis each October and have about 600 participants annually. The survey takes about 15 minutes and is non-invasive. If you want those benchmarks, you have to take the survey. Our own clients don’t get the benchmarks if they don’t participate.
10:22 AM sjshaffer: For the Panel: Are the new health guidelines in the UK and US having an effect on consumption.
% SJShaffer – Not at this point in the U.S. The reg changes aren’t as prescriptive as those in the U.K. I can’t speak to the UK but suspect they will have a negative impact.
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That's it for this season's report. Again the link to the full report is www.svb.com/wine-report
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