Daily Swill for March 4-5

Daily Swill for March 4-5

Diageo is betting big on tequila. I think their bet is that it is a big category with lots of room for brands that pull. Jose Cuervo is the long-established player and Patron has re-invented the luxury segment of tequila. Don Julio and Avion seem to be battling for the price space between Cuervo and Patron.

Another example of the battles being fought all of the country — it is sad that these battles are fought in the courtroom instead of in the marketplace. In KY, this was a win for the 3-tier system and for wholesalers.

In more legal wranglings, the protectors of the Champagne brand are still attacking the writer that blogs as “Champagne Jayne.” Unfortunately, I understand. If a brand wants to protect itself, it has to be consistent. That said, I cannot understand why they haven’t reached an agreement since she clearly loves Champagne.

Santa Barbara keeps getting carved up into smaller, more specific AVAs. I think this benefits consumers in the long run.

Gary Vaynerchuk returning to wine (beyond just his investments)? Love him or hate him, Gary is a force for innovation and change in the wine industry.

In more local news which I am excited about, it looks like Jack London Square might get a boost in its development. I am hoping that in 10 years, we can go down to Jack London Square and it will be more like the Embarcadero in San Francisco, complete with a baseball stadium for the A’s.

Daily Swill for March 1-2

Daily Swill for March 1-2

I try to focus this blog on the big news in the industry. While other folks focus on producers, event recaps, changes in people, or interviewing key people… I want to focus on the events that drive long-term change. If you look at the landscape for the wine and spirits industry, I think of changes in the following categories:

  1. Acquisitions — transactions where brands and/or assets are changing hands
  2. Regulatory changes — typically at the state level
  3. Big agricultural events — climate change is one thing but
  4. Innovation — there is a lot happening in e-commerce, vineyard technology, etc. Wine is slow moving but innovation comes eventually.

It seems like Pennsylvania is perpetually in play for regulatory changes. It is a large market and it is one of the few markets that is controlled completely by the state. Grocery stores and convenience stores are particularly interested in change to the system while many lawmakers are hesitant to make changes that endanger the rather sizable revenue stream the flows into the state’s coffers. As a result, there is a lot of spending by the interested parties to influence changes. While it looks like there is some promising change (if you are in favor of stirring the pot), my guess is that it is still a long way to the finish line.

Catching up on the wine news

Catching up on the wine news

I took off a week from the blog for vacation but I wanted to catch up on the news while I was out.

Jackson Family continued their acquisition spree. Following the example of the Siduri acquisition, this time they acquired Captûre, a brand focused on Bordeaux-style wines and Chardonnay. Jackson Family has always been considered a real estate company with some great wine brands. After reading this interview with Adam Lee from Siduri, I think the motivation is a little clearer. Jackson Family has a lot of real estate but they have fewer successful brands. They have a bunch of great boutique Napa brands (Cardinale, La Jota, etc), Verite, and Hartford… but they must have realized that they need a few more brands at the high-end to put some of grapes they harvest. So they bought a Pinot Noir specialist and a Cabernet specialist – now they can plug in the grapes from some of those top vineyards into great brands. Plus, they acquire winemaking talent. At first, I questioned why a real estate company would shift its strategy but now I see that this is the complementary strategy.

The big grocery chains are making moves in big markets like Florida. The discussion in Florida is whether to allow grocery stores to sell liquor. The curious part of the discussion is that Publix opposes the idea while Walmart and Target are in favor. Publix has built an infrastructure of independent liquor stores so even though it may increase their sales to have liquor available in the same store, they likely prefer to keep the other big grocers out. Chains like Total and ABC are probably the most interested in fending off Walmart/Target/etc.

Treasury, one of the larger publicly traded wine companies, seems to be experiencing a turnaround. It is hard to know if they are actually turning around their business or just correcting some of the more egregious issues in their business (while benefiting from good currency situation), the positive press must buoy the employees and give them confidence in the marketplace.

And just a reminder to everyone:

What does it take to make a small fortune in the wine business?

Answer: Start with a large fortune… and even then it doesn’t always work out.

Vacation over, the daily swill is back

Vacation over, the daily swill is back

The west coast ports are back open. Yippee! Seriously, I am guessing a lot of folks celebrated this news with champagne or drinks… it is crazy after all of that posturing that they came to an agreement three days after the Labor Secretary (of the USA) came to intervene. It makes me wonder what was stopping them from negotiating in good faith earlier in the process.

Premiere Napa Valley set a record for funds raised at its annual event. While that isn’t especially newsworthy, it is indicative of the current economy, especially for affluent consumers. Almost $300 per bottle is pretty astonishing considering what you can buy if you went out into the market – like this or this. I am surprised there isn’t a similar event for Pinot Noir at this point based on its popularity among collectors.

Petaluma Gap is creating an AVA. This makes sense as wineries have been touting the “Petaluma Wind Gap” as a point of differentiation for many years. For buyers of Sonoma Coast wines, it has been obvious that the Sonoma Coast AVA would eventually be carved up into a lot of smaller AVAs. That is what drives the West of West group to differentiate itself as well.

Illinois is really protecting its wine retailers and distributors. First, there was the news that a lawyer was using a technicality (are shipping charges on wine taxable?) to collect hundreds of thousands of dollars as a whistleblower. That action was targeting out-of-state wineries. Last week, the state’s Illinois Liquor Control Commission went after out-of-state companies that do not have licenses to ship to Illinois — this is primarily retailers. It is important for both people in the industry and consumers to know that the rules for wineries and retailers are different. While wineries can feasibly ship to ~40 states in the US, retailers can only legally ship to ~15 states without going through the 3-tier system.

Daily Swill for February 9

Daily Swill for February 9

Gallo is launching a new liqueur. Yeah, yeah, seems like a single product release isn’t big news… but when Gallo test-markets and product and then decides to launch it nationally, they think they are on to something and that frequently leads to Gallo taking market share. It is a liqueur based on vodka, which is probably leveraging the vodka from the New Amsterdam brand. Liqueur is a category that is probably ready for some consolidation and less fragmentation – it has thrived on-premise and I am guessing Gallo will eventually makes this a retail oriented product.

There is a new AVA in Oregon. Not in Willamette but on the other side of the state. Very few people know that the Walla Walla Valley actually extends into Oregon and that some of the most critically regarded wines are from there. Specifically Cayuse has its primary vineyard in Oregon and its winemaking facility there. I wasn’t surprised to hear that the US had approved a new AVA which is named the Rocks District of Milton Freewater (which I hope everyone defiantly names the Rocks District). The Rocks District is a sub-AVA of Walla Walla. It was surprising to read that Cayuse will not use the AVA on its labels. I am not sure if they really don’t like the US process for determining an AVA or are just concerned that other wineries don’t yet meet the same quality standard.

While Rob McMillan from Silicon Valley Bank generally had very positive outlook for wine in 2015, it looks like there are some equally well-qualified naysayers. John Gillespie is predicting a tough year for wine. At the Unified Symposium, it sounds like Jon Fredrickson also warned the audience there was trouble on the horizon. So to break it down, here are the assumptions on either side:

  • If you believe in the optimistic viewpoint, you buy that the general positive trends in the economy and the increasing disposable income for upper middle class buyers will fuel more wine consumption, especially above the $15 price point.
  • If you believe the pessimistic viewpoint, you believe that millenials (especially those under 30) are not major wine consumers and that the sub $10 wine market is already trending down due to increased competition from craft beer and craft spirits.

I would bet that both sides agree on the premises of each other’s assumptions, but they disagree on the severity of the pressures on either end. To say simply, it is all guesswork at some point.

Daily Swill for February 6

Daily Swill for February 6

Another relatively slow news day, so I thought I would start by talking about why I am writing this blog. A friend asked me the best question yesterday — she said, why are you writing this blog? Are there other blogs like it? How is it different? I love this type of direct question.

So to answer those questions — honestly, I am writing this blog to document my thoughts for people who might want to get a new perspective on wine news. I follow lots of blogs and get many newsletters related to wine, plus I have a Twitter feed filled with interesting personalities from wine. There are digests with links to lots of stories and a couple of good newsletters that do interviews/get “breaking stories” — notably Shanken News Daily and Wine & Spirits Daily. But as I sift through the various sources of wine news, I wanted one that called out the stories that spoke to me. And my goal is to call out those stories while also calling out why they matter.

For today, just a few stories:

Drizly is expanding its drinks delivery service to Baltimore. This isn’t that big of a deal as a stand-alone story but it is worth watching all of these businesses — Drizly, Lasso, Minibar, Booze Carriage, Swill — they are expanding rapidly and eventually there will be a shake-out. I don’t have any inside information but I would be interested in hearing about their long-term game plans. Are they planning to differentiate with superior superior service with their own fleets? Or will all of these virtual armies of drivers (Uber, Lyft, Postmates, SpoonRocket, Drizly, etc) use the same drivers and compete on some other plane?

At Unified, there was a session focused on the confusing array of regulations related to direct-to-consumer wine businesses. I didn’t attend the session but it sounds like a bunch of highly knowledgeable people reminding the attendees that the wine industry is backwards and you have to watch your back at all times. If you are wine supplier, you need to make a decision — are you going to follow the letter of the law or hope the TTB doesn’t catch you. While it is hard to feign innocence about shipping laws, the laws about usage of social media don’t make much sense. What to watch for: will the TTB update their regulations to add some common sense?

This may be personally more relevant but it is an interesting development — Dominio del Plata, one of larger wineries in Argentina focused on $10+ wines, has changed national importers. Dominio del Plata‘s brands – Crios, BenMarco, Susana Balbo – account for over 100,000 cases sold in the USA. Big changes like this don’t happen frequently because they are tumultuous for the brands. It would be interesting to see the data to determine if changes like this lead to long-term growth. When you change importers, you also change distribution networks. Most likely, the winery will lose significant sales in the first year because the existing distributors will replace their current placements of the wines with other wines they offer and it takes a little while for the new distributor to train its sales team and distributor sales teams. That said, Dominio del Plata and Folio must believe Folio’s distribution network is a better fit long-term and Dominio del Plata’s brands will benefit from being the only Argentine brands in the Folio portfolio. Note: I worked for Vine Connections, Dominio del Plata’s prior importer.

Daily Swill for February 5

Daily Swill for February 5

The west coast ports (e.g. Long Beach, Oakland) have been problems for importers/exporters for the past half year, but apparently it is getting really bad. I am sure the port operators are just looking for ways exert pressure on the longshoremen to force the negotiation process. Why it matters: for wine and spirits, a lot of product comes into the west coast ports. If they close, it will cause issues especially for California exports and for smaller importers that do not have as much flexibility / resources to re-direct imports through other ports around the USA. It is usually a short-term problem but it could become a major issue.

Epic Wine & Spirits has made a couple of moves in the past week. First, they added a notable Burgundy producer in Albert Bichot. Then they added Wilson Artisan Wineries. Wilson is a company that has been rolling up boutique producers, mostly in Dry Creek. No doubt Bill Foley (the new owner of Epic) respected this strategy. Why it matters: California is the largest wine market in the USA and probably one of the largest in the world. It is dominated by two distributors – Southern Wine & Spirits and Young’s Market. Wine Warehouse is a key competitor but smaller. The rest of the competition is smaller and fragmented. Bill Foley and Epic seem to be trying to join the big boys.

I mentioned this project a couple times in the past couple days, but it looks like it is going to be a contentious “battle” for the Wagner Family and Sonoma residents. As I mentioned, I think this is relevant because Meiomi is one of the hottest brands out there right now.