Wine on the Plane

Last summer, I worked on a study with Alex Dichter, global head of Travel, Transport, and Logistics at McKinsey. Based in London, he was used to flying across continents on fancy business class seats where passengers are wined and dined. So I was surprised when he said that he never eats on planes. His philosophy is that business class is for sleeping, not eating (more on this here). 

I've since adopted some of his arguments on eating for wine and any alcoholic beverages. If I'm flying, I'm not drinking.

Yes, I understand that traveling can be stressful, especially if we're sitting in tight economy seats. But will alcohol really make it better? My main argument is that alcohol will dehydrate your body and that is not something you need when traveling. Especially in these times of coronavirus, making sure you're 100% healthy should be your priority. Drink at home, at the hotel, or at the restaurant at your destination, but enjoy a cup of tomato, apple or orange juice on the plane. 

Second, I was once curious about the quality of the wines they were serving on my flights, and needless to say, I was quite disappointed even for business class fares. The retail price of bottles on the menu of major Star Alliance carriers for long-haul business class was about $16-20 and in economy, they were between $5-10. Comparing how much money I spend on a trip to the cost of a glass of wine (especially from a health perspective) really convinced me that it is just not worth it to drink when flying. 

So, I urge you, next time you fly, to avoid alcohol and see how much better you feel! 

Powdered wine - sign me up

The results for the investments just came out, and although the powdered wine did not win the largest sums of investment, I think it is a fantastic idea, especially for low-middle end casual restaurants.

I believe that, although it will be first adopted by the outdoorsy folks, people who enjoy a nice glass of wine while hiking without carrying heavy liquids, the potential of powdered wine is in the low-middle end casual restaurants. Just as most soft drinks served at those restaurants come in the form of powder, which is then mixed with water, powdered wine has the potential of becoming the new normal for those restaurants that are mindful of margin and cost.

Having worked on a final project attempting to cut distribution cost by replacing glass with silicone, I'm amazed at how much more shipping weight powdered wine can cut. Even though glass represents 40% of the weight of an average bottle of wine, it still means that the liquid accounts for the remaining 60%. As such, if powder can replace 100% of the bottle with 10% of its weight, the shipping costs would be relatively negligible. Moreover, the volume would also be reduced manyfold, again reducing costs.

But what about taste? What about flavors? What about branding? These are the tricky questions. I'm assuming that technology will do its wonders and create, at least for the cheaper wines, equivalents in powder form. Powdered soft drinks is an indication that consumers may not care about the original form, so long as the end product tastes the same. From a branding perspective, the powder will have to be played down to the point where no one cares about that aspect anymore. One way to do so would be to have a "wine tap" where restaurant patrons can have a free glass of wine. Once they realize that there is not much difference, and that the price is much lower, chances that they fuss about the powder will be quite low.

Powdered wine has so much potential, it is just waiting for the audacious restaurateurs to try it out.

Madeira: A Favorite of the Founding Fathers

For the past couple of years, I’ve gone to the Feast of the Blessed Sacrament in New Bedford, MA. Also known as Madeira Feast, it’s the largest Portuguese feast in the world [1]. It doesn’t take long after arriving that you’re confronted with a tiny, pungent cup of madeira. (Thankfully, there are also ample food opportunities available, including a cook your own meat on a skewer barbecue pit [2]). Supposedly, this event has the highest consumption of madeira outside of Portugal!

For those that are less familiar, Madeira is a fortified wine, in addition to being an autonomous region of Portugal. It’s strong, a little spicy, and sweet. Due to the quirks of geography and trade, madeira has enjoyed worldwide popularity -- much more than what you would expect for a specialty wine from a small island off the coast of Morocco. Historically, ships would stop at Madeira (the island) as the final stop before their transatlantic voyages, which were exempt from Britain’s Navigation Act (which limited what wines and spirits could be brought to the colonies) [3]. Almost like an eighteenth century Duty Free, ships would stock up on alcohol, primarily madeira. Apparently the lessons of Inniskillin and how Duty Free can increase the popularity (and margins!) on alcoholic beverages stems from a little earlier than the 1960s. This is also the reason that madeira is celebrated in New Bedford, MA, since it was a former Atlantic whaling hub.

Initially, madeira was the “luxury” alcohol available in the US, beyond the beer and rum. Wines from France and Italy were not imported because of the challenges of the journey, which made madeira the best choice available given it is very stable, not temperature sensitive, and benefitted from extended aging. It was apparently the favorite wine of the founding fathers! [3].
However, madeira suffered from some of the challenges we’ve seen other wineries and varietals face -- like changing consumer preferences (reduced share of throat) and increased regulation (Prohibition).

There are some folks arguing that it should have a greater place on the table in modern times, including the New York Times [4]. I don’t know if a hot summer day was the best place to drink it, but I could see it having an excellent place when paired with richer holiday foods or during a crisp fall or winter day. I’d encourage you to try it and toast to the founding fathers!

[1] https://www.newbedfordguide.com/2019-feast-survival-guide/2019/07/23 
[2] http://destinationnewbedford.org/event/feast-of-the-blessed-sacrament/
[3] https://www.thedailybeast.com/americas-love-affair-with-madeira-wine
[4] https://www.nytimes.com/2017/01/30/dining/wine-school-madeira.html

Hard Kombucha, thoughts on a trend pioneered by Hard Seltzer

The recent hard seltzer boom has given hope that other "hard" beverages may also take off very soon. One of my favorite drinks is kombucha, and I recently tried some hard kombucha. Why? I was at a housewarming party (in the Bay Area), and the host had prepared a selection of drinks that included beers, White Claws, hard kombuchas, and EANABs. My kombucha was tasty and I could barely distinguish the alcohol, which led me to reflect on the drivers of my choice of beverage. Did I choose the hard kombucha because I simply favor the taste of kombucha or because it is "healthier" than the other options (or maybe I believed that it was healthier)? The more insightful question, rather, is would I have preferred a regular kombucha?

Asking this question reveals that succeeding in this alternative alcohol market is not so easy. Hard seltzer had the advantage of being almost completely new (no one I know who likes White Claw used to just drink seltzer), whereas hard kombucha, hard tea, and even hard water have a clear "regular" version that we all enjoy. The value-add of alcohol that is barely distinguishable seems much lower. It is also important to note that those regular drinks are known for their health benefits and there is not yet a clear answer as to whether an alcoholic version would maintain the health benefits.

Therefore, my personal outlook for hard kombucha is mixed. Despite its initial success, I believe it will have a difficult time finding hard seltzer-like growth on its own, but can potentially be packaged in forms such as kombucha cocktails and play in the field of pre-made, single-serve cocktails.


Sources:
https://www.theiwsr.com/news-and-comment-radius-trend-hard-kombucha/
https://miruspromotions.com/industry-trends-hard-kombucha/
https://www.marketwatch.com/press-release/hard-kombucha-market-2020-2026-pointing-to-capture-largest-market-growth-and-share-with-developed-economies---industry-research-co-2020-01-24

Top Insights from the Quarter

We learned with remarkable depth across such a breadth of topics, strategies, and perspectives, I wanted to focus in on a few that really stood out to me via raw impact and surprise:

| Law

The first is the defining function of law. If f(x,y,z...) is the function governing a businesses' operations, one of those variables better be a nuanced understanding of the 21st amendment. This law sketches the contours of the wine industry, with every U.S. wine operator providing the color between those lines. Its passage destroyed the potential for businesses and gave others' powerful competitive advantage. How do we not have Amazon Wine? Can you even think of investing in a wine provider without core licensing in the bag? If you don't understand this, the instruments of your perspective on the wine industry are out of tune -- you're simply unprepared to answer many of the industry's most poignant questions.

| Math

Supply outstrips demand. From immediately getting cold-called in the first class to our very last day together, the charm of this fact is imbued in its counter-intuitiveness. How many industries can claim this? But the more we dug in, the more this simple fact tessellated the picture of the global wine economy. Some classes, I sat there thinking, "Well of course supply outpaces demand--so many winemakers and sellers vying for real palette estate." Others I'd think, "How come everybody doesn't want this? There are 84 million wine drinkers in the U.S. alone, plenty of colleges--at least the buck-chuck segment should be filled..." This is one of those questions that I feel leads to healthy reflection and progressively deeper understanding of the industry if one keeps asking it of him/herself over time.

| Art

My favorite class was hearing from our guest sommelier (note: "Blogger" doesn't recognize 'sommelier' - sad!). For whatever reason, the human mind seems unable to look at an expert and recognize the fact that talent isn't innate; it's brute force, studying, getting things wrong, and building a skill. It was great to peak behind the curtain to hear how his conceptual backbone and experience informs his ability to truly taste and appreciate different wines (and countries, regions and cultures in turn). His matrix "tastes-like" slides I'll never forget, and it honestly made me leave wanting to start yet another side hustle to delve into a subtle part of the world -- purely for the journey of it.

| Learning

One of the most important elements of this class that I've already articulated to some is the pace. This class moved. We didn't waste time, and if you didn't show up, you'd feel completely out of place (let alone look stupid).

That comes from a mutual trust from teaching and students to buy all the way in, but it also comes through execution. There was an expectation that everyone not only had "done the reading", but had informed takes on it, had found the logical gaps, explored alternatives and was looking to share their value-add.

To make this environment a reality in one's own life, take expectations and situate them within a given class/workplace as premises, have a vision for what's important, and reward contribution. This course created genuine intellectual excitement, and I love being reminded of what that looks like.




The Declining Trend of Bordeaux Wine

I am sure everyone knows Bordeaux as the famous wine production region. Indeed, they have over 60 appellations, 6,000 chateaux, and 120,000 hectares of vineyards all together. However, the reason I am writing about this is because I heard on BBC Global News today that they are not doing very well these days. According to Bordeaux Wine Board or the CIVB, domestic sales of their wine has dropped 10% last year, which accounts for 54% world wide or 130 million bottles.
According to multiple sources, this is due to the drinking trend. First of all, French people are not drinking a bottle per day (which French men used to a few decades ago); they are drinking much less. Also, the drinking culture amongst the younger generations (millennials) has changed drastically. Instead of wine, they tend to go to other alcoholic beverages. Finally, craft beer is a huge alternative to the wines, and Bordeaux craft beers are actually on the boom. There are many popular breweries in the region, attracting domestic and international customers—a market disruptor for the wineries. Despite the trend, critics say that Bordeaux will remain a dominant wine region offering quality wines to customers.

https://www.telegraph.co.uk/news/2020/03/11/bordeaux-bows-french-thirst-craft-beer-amid-record-drop-domestic/
https://www.telegraph.co.uk/news/2019/08/20/bordeaux-winemakers-forced-promote-rose-white-wines-young-drinkers/
https://www.thewinecellarinsider.com/wine-topics/bordeaux-wine-production-facts-figures-grapes-vineyards/

Going Public...In Canada?

I was fascinated by Wendy Berger's presentation last week during our final class. In particular, I was intrigued by the recent trend of US companies going public via a "reverse merger" in Canada, even though many of these firms don't operate in the country at all.

I decided to dive into the topic in more detail and create an FAQ:

What is an RTO?
A reverse takeover (RTO) is a 'backdoor' method of becoming a publicly listed company. A publicly listed shell company acquires all shares of a private operating company. The shareholders of the private company then exchange their shares for the public one.

Why go public via an RTO?
There are multiple benefits, including:
  • RTOs minimize the execution risk of an IPO because the value is pre-determined and voted on by shareholders
  • Lower cost (may not need to pay an underwriter)
  • Typically faster than an IPO
  • Lower regulatory review requirements / public scrutiny 
What US cannabis firms have recently gone public in Canada?

  • Green Thumb Industries (Cannabis CPG) 
  • Wikileaf (Seattle-based online cannabis directory)
  • POSaBIT (maker of hardware for cannabis companies to process payments)
  • MedMen (LA based retailer)
  • Haborside (California-based retailer)
Why Canada?
Canada legalized marijuana on the federal level in 2018. As a result, Canadian banks are able to provide capital and there is little legal risk for companies based there.

What exchanges do they trade on?
Most cannabis companies are traded on one of three exchanges: TSX, CSE or TSXV. All cannabis companies with US operations trade on the CSE:
  • CSE (Canadian Securities Exchange) - most common exchange for cannabis companies; has lower listing and reporting requirements than TSX and TSXV and will allow cannabis companies with US operations
  • TSX (Toronto Stock Exchange) - Major exchange with strict listing rules, similar to the NYSE; will not allow cannabis companies that operate in a country where cannabis is illegal.
  • TSXV (TSX Venture Exchange) - serves as a public venture marketplace for small cap companies (like the Nasdaq Capital Market or OTC markets in the US). Currently lists 40 cannabis companies, including Delta9