Vinebox: Positive Innovation or Long-Term Negative?

After yesterday’s class and Olga’s lovely pitch about Vinebox, I could not stop thinking about the implications such an innovative product would have on the wine marketplace. 

Firstly, I thought about how someone like Courtney Kingston could benefit from this service. On the surface, it seems like great exposure. Kingston values quality, and direct association with other high-quality wines in the Vinebox would likely bolster consumers’ association of Kingston’s wines with high quality. Furthermore, given the issue of accessibility Courtney Kingston discussed, this would be a seemingly unprecedented means of getting Chilean wines to the living rooms of people everywhere. Because Vinebox pursues low-cost social media marketing that has thus far proven successful, Kingston Vineyards would have to worry less about heightening exposure while also gaining the attention of millennials and even Generation Z consumers who frequent social media platforms and utilize them to influence consumption. 

However, in thinking about how much Courtney and her family emphasize the farm and the passion with which she described what made that property so special, I realized that the traditional wine consumption experience, in-person tastings and all, cannot be replaced effectively—at least not yet. Vinebox, while not fully negating the stories and taste profiles of the wines included in their boxes, trivializes wine consumption in favor of accessibility. Language on Vinebox’s website, for example, includes statements such as “Experience the difficult to pronounce grapes of Sicily grown on the slopes of an active volcano as you veg out on the couch - did you know Nerello Mascalese tastes like Pinot noir and Nebbiolo had a love-child?1.” Sure, such language makes wine more approachable and colloquial enough to be inviting to any consumer, even those not well-versed with wine. But is this not to the long-term detriment of wineries and winemakers whose diligent craft, dedication to detail-oriented practices, and storied histories are worth further appreciation? Wouldn’t this model diminish the need to tour wineries, join wine clubs, and sit through more formal tastings, in turn putting a dent on both tourism and appreciation for wine regions garnered through experiences that often translates to long-term purchasing? While I may be taking this wine purist thing way too far, something doesn’t sit right with me when I see a package on Vinebox’s website entitled, “12 Nights of Wine - Naughty.” 


On a more practical note, I question how genuinely useful Vinebox is to wine brands. Does it make customer retention more difficult when consumers are faced with so many choices right in front of them (9 different wines from different regions in one box)? The product seemingly promotes the combined enjoyment of these wines, making differentiation increasingly difficult for the average consumer who may still be developing their wine palate. Will wine lists at restaurants, where wines are often separated by region, no longer be enticing? Are patrons going to enter restaurants with their Vineboxes (say goodbye to on-premise markups and corkage fees)? 

1. https://www.getvinebox.com/pages/faq

Wine Beers


We've talked a lot in this class about how Millennials (like ourselves) tend to favor exploring new wines to repeating the classics. But this doesn't just extend to the types of wines Millennials drink -- it also includes the number of types of alcoholic beverages we enjoy. According to a study by the IRI (a market research group), Millennials drink 3-4 different kinds of alcohol at home per month. They're not just wine or beer people.

One way I've seen this trend in action in the wine-adjacent world is in wine-beer hybrids at breweries. These can take a number of interesting forms. Here are some of my favorite examples:

Over the summer, I had Baron Corvo at Right Proper Brewery in DC, which is brewed in French Oak barrels usually used to age wine. The result is a beer with some the tangy complexity you expect in white wine. Weird, but lovely.

When I went to school in Boston, I often drank Bantam Wunderkind Cider, which is fermented with champagne yeast. I can't get my hands on it outside of MA, but the crispness and funk that comes from the champagne yeast is fantastic. It's not apple juice that someone shot CO2 through. It's like champagne that happened to made with apples.

I also finally tracked down a bottle of Midas' Touch this year by Dogfish Head. That's a beer brewed using the 2,700 year old recipe found on the tomb of King Midas. It's a beer-wine-mead made with muscat grapes and served in a white wine glass. I didn't actually enjoy it that much because it's semi-sweet and the taste is so out there that I found it difficult to focus on the food I ordered with it. But I thought it was a fascinating idea.

This is an exciting time to be a beer and/or wine enthusiast. The market is craving more complex beverages and producers are delivering. I'm excited to see what's next!

Attracting The Right Visitors


I was very intrigued to hear how Kingston Family vineyards thinks critically about what groups of people it gets into its tasting room, as the economics of a tasting room visitor are a loss to the estate (an acquisition cost that only pays off for populations of visitors that convert into buyers or wine club members).  For example, we heard that for Kingston it does not pay to attract Swedish tour visitors because they couldn’t sell to them internationally. 

A similar dynamic is occurring currently in the St. Helena wine region in CA.  Government bodies in the region are pushing to expand a biking path through several vineyards in the region in order to promote tourism.  However, the vineyards who would have to accept the path on their land are not necessarily excited about this proposal (and in fact some are pushing back).  Not only is the path possibly disruptive to the land (due to possible litter or vine damage), but the path also serves casual bikers who are much less likely than other customers to buy on-the-spot wine, and also demographically less likely to join the wine club or buy big ticket items (since they trend younger and less affluent). 

Extrapolating from these examples there seems to be value in demographic analysis of tasting room attendees to determine (a) who are the highest value populations, and (b) how can you identify them and target them with marketing?  For many small-operation vineyards this type of analytic capability may not be available, but it would seem this may offer an opportunity for a third-party service provider to provide this service.  Is anyone aware of a service business that performs this sort of function for tasting rooms, or know of any wineries that are implementing cutting edge know-your-customer tools here?

LMR's Recent Acquisition Highlights the Need for Scale in Napa


Following last class, I was curious about Long Meadow’s strategy to acquire different vineyards and brands through Napa. Their most recent acquisition was of the well-respected Napa property Stony Hill Vineyard in August 2018. This acquisition was interesting for two reasons. First, it highlighted how the changing Napa landscape has reinforced the need for scale for vineyards to operate profitably. Secondly, Long Meadow Ranch bucked the recent trend of buyer profile as a (relatively) boutique, family-owned vineyard.

Stony Hill Vineyard is a well-respected producer of Chardonnay in the Napa Valley and had been family-owned and operated for the last 70 years. However, the vineyard’s lack of scale precipitated the sale. Sarah McCrea, part of the selling family, said, “It’s just very hard as a small winery to get attention from distributor.” Smaller wineries such as Stony Hill have had to lean on the more profitable direct-to-consumer distribution channel as the three-tier system increasingly favors larger volume vineyards. This has hampered financial performance which prevented the family from making much needed capital investments to the property.

Long Meadow Ranch’s also represented a different buyer than typical recent Napa transactions. As more family-owned vineyards have sought capital, larger corporations (e.g., Constellation from the Inniskillin case) and private equity firms or other investors have emerged as the typical buyers. A family-to-family transaction (with Stony Hill retaining a piece of equity in the combined entity) represented an outlier. It will be interesting to see how successful Long Meadow Ranch will be at utilizing the Stony Hill brand and property in conjunction with its larger core properties and the Farmstead restaurant. How will it cross-sell between its property and monetize its unique story and brand? Or will it dilute the overall story and make it more difficult to tap in to Farmstead’s 240k annual visitors? I am interested to see how this unfolds and whether it may set a new trend for an “authentic” multi-branded vineyard acquisition strategy.

References:

The Rise of Juice Pairings

A few years ago, I was taken out for dinner at a high end Montreal restaurant by my boyfriend at the time for my birthday. He had a surprise in store for me after dinner and had asked me to refrain from drinking the habitual glass(es) of wine I would have with a meal of this calibre. I was a little disappointed, but reluctantly agreed despite his refusal to explain why. This was the night I delightedly discovered juice pairings.

Juice pairings are exactly what they sound like: a series of carefully prepared non-alcoholic cocktails to accompany a meal. If you haven't heard about them, you should pay closer attention as several Michelin-starred restaurants (e.g. Eleven Madison Park in NYC or Clove Club in London) are now starting to offer them across North America and Europe.

The business rationale sounds very compelling to me. Wine pairings are great, but they come with many limitations. Expecting mothers, teetotalers or young adults accompanying their families on culinary journeys all sound like the perfect target market for this new trend. In a world where molecular cuisine is also taking an increasing amount of space, they allow chefs to experiment with even more interesting and exciting textures and flavours. Finally, juice pairings can also help an increasingly health-conscious group of consumers take a night off from alcohol. To be clear, I do not expect juice pairings to ever pose a real threat to the traditional wine pairing, but I think it will be a nice addition to an increasing number of dinner tables in the future and would help restaurants increase their profit margins.

What do you think? Would you order a juice pairing for your next night out? How important will this trend be in the next 10 years?

Carl

P.S: In case you were wondering, the surprise was an escape room followed by an outing at a cocktail lounge. We won the escape room by 30 seconds despite it being designed for teams of 4+ people, and I conceded to him that he was right. We would likely have not been able to make it through had I had some wine beforehand.

The Effects of War on Wine

In researching the history of wine in Croatia and Montenegro, I was struck by the impact that occupation and war had on the wine industry. Sometimes, these occupations would occur with relative ease (who could've guessed Napoleon/the French would've been pro-wine?) and other times they would lead to vineyards being burnt to the ground (such as under Communist rule). This lead me to look at the effects of World War II on the wine industry in Europe at large.

Given the importance of Italy and France to global wine production (not even taking into account otherwise the important producers of Germany or Spain), you might expect global production to have tanked in the period of 1940-1945. The truth is much more complicated. It turns out that even war cannot completely eliminate the desire for good wine. As Stefana Williams notes in Decanter magazine, "In 1942 alone, the Germans made a single purchase of one million bottles of the most expensive wine from [Bordeaux]."[1]

"Hurray!", you might be tempted to say. "Wine is the great equalizer! Not even war can stop the universal love of wine!" However, it must be noted that by this point, much of France had become occupied and "Weinführers" (meaning literally "Wine Leaders") had been established with the directive to guarantee production to Germany. [2] As a curious byproduct, the German love of wine and subsequent control of the wine industry developed into an unexpected source of intelligence intelligence. When the Germans were set to invade Egypt in 1941, the Allies were tipped off to such a move by an large order of Champagne being ordered to be shipped to "a very hot country." [2]  Maybe the Germans would have been better off burning Champagne to the ground. But, not even they could resist the allure of good wine.

Sources:
[1] "The War Years", Decanter https://www.decanter.com/features/the-war-years-249258/
[2] "Champagne during WW2: From Vines to Victory", Decanter https://www.decanter.com/features/champagne-during-ww2-from-vines-to-victory-245881/

That’s How Many Swimming Pools of Wine?!

While I was researching my emerging wine region, I came across a Decanter article about a wine spill that happened last week in California [1]. What caught my eye was the fact that there was initial concern that the vat had spilled 97,112 gallons (367,000 liters) of wine. This prompted two initial questions: 1) Conceptually, how much liquid are we talking about? and 2) They can fit that much liquid in a single vat?!

To answer the first question, I broke it down step by step:

  • Assuming all the wine was destined for your standard sized bottle, that’s 489,333 bottles or 40,778 cases. 
  • Assuming 56 cases in a pallet, a 20 foot shipping container can hold 10 pallets and a 40 foot shipping container can hold 20 pallets. However, the Wine and Spirits Shippers Association claims that the average 20 foot container only holds 504 cases and the average 40 foot shipping container holds 1064 (both configured at 56 cases/pallet) [2].

So that puts the initial spill estimate at 81 20 foot containers or 39 40 foot containers worth of wine. That seems like a lot, until you realize that the liquid itself would take up approximately 15% of the liquid volume of an Olympic size swimming pool [3].

Now that I had conceptualized how much liquid had escaped, I wanted to learn more about vats and how much wine they held. A quick search led me to the fact that as a layperson I could order a 8000 liter wine tank [4] or a custom made 60,000 liter barrel [5] online. At the larger size, the estimate for the escaped liquid would be approximately 6 vats. These large vats can be wooden or, more commonly, steel or concrete. The vats are used to store wine temporarily or can also be used to age wine in the right conditions. While this is what I could find online for vats, I would imagine that an industrial grade vineyard might have vats that were even larger than the 60,000 liter barrel, so it didn’t seem like too much of a jump to say that this was a spill from a single vat.

And what happened with the spilled wine? You’ll be glad to know that the actual amount of wine that escaped the property in the spill was 45,000 gallons (170,000 liters) or approximately 226,667 bottles/18,889 cases/38 20 foot containers. The winery is working with authorities to determine the potential impact to the Russian River and surrounding waterways. Because of recent rain, the impact on the river has been somewhat diluted, but California Fish and Wildlife is still monitoring it [6]. In the past, wine spills into rivers have reduced the oxygen concentration and hurt or killed fish, but to date that doesn’t seem to have happened in this case yet.

[1] https://www.decanter.com/wine-news/california-wine-spill-russian-river-431117/
[2] http://www.wssa.com/membership/faqs
[3] https://www.livestrong.com/article/350103-measurements-for-an-olympic-size-swimming-pool/
[4] https://winesvinesanalytics.com/features/article/51235/How-Big-Is-Your-Barrel
[5] http://www.thevintnervault.com/category/612/Oak-Vats.html
[6] https://www.winespectator.com/articles/spill-at-rodney-strong-winery-sends-thousands-of-gallons-of-cabernet-into-river