In late summer of 2020, Steve Sangiacomo was excited. The vintage was shaping up to be an exceptional one. But then on 16 August, in the midst of a summer heatwave, a barrage of dry lightning exceeding hundreds of strikes per hour spread throughout the state, and within 36 hours 585 wildfires were burning, three of which quickly grew to hundreds of thousands of acres while funnelling smoke directly into Napa and Sonoma counties.
‘Our Chardonnay ended up being fine’, says Sangiacomo, ‘but we were only able to harvest about 10% of our Pinot Noir. We lost the other 90%.’ The Sangiacomos, one of Sonoma’s largest independent growers, ended up with only around 30% of their normal harvest tonnage.
His family was not alone.
‘In October of 2020, we did a comprehensive survey of our local grape growers to better understand the impact of the wildfires on the 2020 crop’, says Karissa Kruse, president of Sonoma County Winegrowers. ‘We were also able to estimate that we were only going to harvest about 10% of our county-wide Pinot Noir crop as grape growers and wineries were not going to risk producing a Sonoma County wine that was not up to our world-class wine standards.’
According to Kruse, the fires more than halved the value of Sonoma County’s harvest, resulting in losses of over $300 million.
Towards the end of August 2020 in Santa Barbara, away from almost all the smoke, Nicholas Miller’s phone began ringing off the hook. Miller’s family owns and farms the more than 900 acres (364 ha) at Bien Nacido Vineyards, one of the most prominent and well-respected sources of Pinot Noir, Chardonnay and Syrah in California.
‘It seems like everyone was calling to see if there were grapes available’, recalls Miller.
This article is my monthly column at JancisRobinson.Com, Alder on America, and is available only to subscribers of her website. If you’re not familiar with the site, I urge you to give it a try. It’s only £8.50 a month or £85 per year ($11/mo or $111 a year for you Americans) and well worth the cost, especially considering you basically get free, searchable access to the Oxford Companion to Wine ($65) and maps from the World Atlas of Wine ($50) as part of the subscription costs. Click here to sign up.
But I keep seeing people disagreeing with her sentiments online, and so I am compelled to pile on to her argument, but perhaps put things a little more forcefully than either she is inclined to do, or a little more frankly than the San Francisco Chronicle would be willing to accept under their masthead.
If you bring a bottle of your own wine to a restaurant right now, you are a complete jerk.
Yes, I mean that with all my heart. I was even tempted to use stronger language than “jerk,” but I’m trying to keep this somewhat civil.
I would hope that most restaurants would simply abolish their corkage policies for the moment, as The Morris here in San Francisco has so intelligently done. But if for some reason the restaurant has not, you are still being unbelievably insensitive and selfish if you bring a bottle of your own wine to a restaurant between now and June 15th (or whenever your local municipality fully reopens for business without COVID-19 restrictions).
Frankly, none of us should be bringing bottles of wine to restaurants for many months to come, if we truly want the restaurants we patronize to survive and thrive.
I love corkage, but now is not the time
I am one of the strongest advocates for corkage policies you will ever meet. Remember, I’m the guy who got into a public spat with Delfina owner Craig Stoll 15 years ago about the idiocy of having a corkage policy at Delfina but saying he could not afford to have one at Pizzeria Delfina right next door.
Corkage exists because the vast majority of the profit margins at a restaurant come from their beverage program. A well-run kitchen can generate profit margins of 2% to 7% on food costs and labor. A typical beverage program can generate 20% to 40% margins.
Consequently, bringing a bottle of your own wine to a restaurant robs the restaurant of a huge portion of the profit they would make on your meal had you purchased wine from them, and so corkage fees help them recover some or all of that profit.
Corkage, of course, is also an attractant. An incentive, if you will, for wine-loving people to come to your restaurant. And most restaurateurs want wine lovers as patrons because studies show that even when they bring their own wines, they tend to spend more than your average diner.
But all of that describes the restaurant industry under normal circumstances. We are about as far from normal circumstances as you can get.
One in four of the people unemployed due to the pandemic works in restaurants. More than 125,000 independent restaurants around the country have been forced to close permanently because their owners couldn’t afford to keep them open and tens or maybe hundreds of thousands more are teetering on the brink of insolvency.
The Independent Restaurant Coalition estimates that repairing the damage done to the industry would take $120 billion. Only with the passage of the recent stimulus have roughly $36 billion been allocated to support restaurants. Where and whether the other $80 billion will come from is anyone’s guess. Some people estimate that by the end of this year as many as 40% of America’s restaurants will be wiped out.
If we love restaurants and the experiences they provide, we should be doing everything we possibly can to support them at this time, as I wrote recently.
We should be trying to help the people who own restaurants and the people who work in restaurants maximize their margins. We should be tipping like billionaires, and we should be ordering alcoholic beverages from off their lists and not bringing our own.
It’s about economics, but it’s also about respect
Many restaurants have been stuck with an inventory of wines that they paid for long ago, but couldn’t sell much of for the past year. In some cases, in order to support the wine industry, maintain relationships, and retain coveted allocations, they have had to keep buying wine during the pandemic even though they had little or no way of selling it.
All that wine represents an incredible drag on the bottom line of a restaurant’s business. And while some of the wine will gain in value and attractiveness, a significant portion of it will not. Think about the 4 cases of $25 2019 Napa Sauvignon Blanc that the restaurant sells for $50 on its wine list that has just been sitting there this past year. Right about now, the 2020 vintage of the same wine has likely just been released, making that other four cases of wine quite unattractive in comparison. Just ask any restaurateur how easy it is to sell past vintages of wines that consumers expect to buy in current vintages and you’re liable to hear an answer that contains more than one expletive.
Buying wine off the list from restaurants we visit is incredibly helpful to them economically, but it is also a show of moral support. It’s a tacit acknowledgement that we as diners are trying to help them succeed.
Just as bringing your own wine sends the complete opposite message.
Bringing a bottle of wine to a restaurant right now says quite clearly, “Drinking what I want to drink from my own stash is more important to me than your survival as a business.”
I don’t care if the restaurant has a corkage fee and you are more than willing to pay it. I don’t care if you’re willing to double the corkage fee voluntarily. Bringing your own wine to a restaurant now is just plain insensitive and rude irrespective of the actual economics of your specific dining situationor the generosity of your tip.
This is about sending a message. This is about respect.
The hospitality industry has literally bent over backwards trying to survive, and at the same time so many have managed to persist in delivering a modicum of the service and comfort we have come to expect from them, all under a positively unimaginable set of constraints and challenges.
We wine lovers need to suck it up and use our presence and our pocketbooks to send a message to the restaurant industry: we want you to survive and thrive again.
Because if we don’t, they might not.
Fuck corkage for a while, people. Let’s give the restaurant industry all the help they can get, and be happy to do it. It’s quite literally the least we can do.
As humans, we’re evolutionarily engineered to fear change. And for good reason. It often presages hardship in some form, whether social, emotional, physical, or economic. Certainly, we’re all experiencing both fear and hardship in many ways at this moment, even if (and I count myself among the number of extremely fortunate) we’re simply working from home in our pajamas with a well-stocked kitchen and wine cellar. Watching the economic toll the pandemic takes on the entire economy has been heartbreaking, and in particular its effects on the wine business and hospitality industry.
Where the wine industry is concerned, much has been made of the realities that were forced upon 95% of American wineries almost overnight when tasting rooms, restaurants, wine bars, and retailers all closed their doors to the pandemic. To those of us watching from afar, that was a kneecapper. To those in the industry, it seemed a slash across the jugular.
In every major crisis, there is the moment where it is upon us, in which we often freeze in fear. Then there is the moment we react, driven (often by adrenaline-fueled desperation) to compensate for the change. And then there is the moment, where we first have a slight bit of perspective on just what it is we are going through, regardless of whether the crisis itself is over.
For the American wine industry, that first brief moment of perspective may have been yesterday, when Rob McMillan, Executive Vice President and Founder of the Wine Division of Silicon Valley Bank hosted a video conference entitled “State of the Wine Industry – Special Edition.” McMillan is perhaps one of the foremost analysts of the American Wine Industry and his annual State of the Wine Industry report is required reading for anyone interested in American wine. He brought several expert guests along to spend an hour analyzing the first real tranche of data that exists about the actual effects of the pandemic on the industry.
Reports of Our Death Have Been Greatly Exaggerated
The data presented offers a somewhat startling picture that, at least on the surface, suggests that rather than the bottom dropping out of the wine industry as many of us feared, in fact, the wine industry is doing better than it was projected to do before the first news of COVID-19 hit the airwaves.
But let’s unpack that a little before we get too excited. The data presented on this video conference by Danny Brager, Senior Vice President of the Nielsen Group’s Beverage Alcohol Practice came from the scan data collected at grocery stores, chain liquor stores, and other larger retailers who report sales data to Nielsen. That means of course, that unless a winery’s wines are sold in such outlets, they are not included in any report of sales.
And what do those sales data say? That instead of the basically flat (zero) growth projected for American wine sales this year so far, sales are instead up 28% in volume and 31% in value over the past 9 or 10 weeks. Panic buying of wine was a real thing, folks. Of course, ask your average 6ooo-case-production winery in Dry Creek Valley if their sales are up 28% in the last 8 weeks, and you’d be thankful you’re forced to do so from six feet away, lest you get a fist in your facemask.
Succumbing, Surviving, or Thriving in the Pandemic
The fate of smaller wineries in this time of upheaval depends, and will continue to depend on just how digitally savvy they were, or how digitally savvy they are becoming in the face of the new realities being thrust upon us all.
Beyond the shocking increase in wine sales numbers, perhaps the most interesting single slide presented in McMillan’s conference was his analysis of the direct-to-consumer channel mix of smaller winery sales before and after the pandemic thanks to data from VinSuite (an e-commerce provider that powers e-commerce and back-office systems for the wine industry). Or in less business-speak, where and how smaller wineries are managing to sell wine to their customers in this crazy time.
The green box on the left is pre-COVID-19 and the green box on the right is post COVID-19. Pay attention to the size of the blue and purple areas in particular. Blue represents POS (Point-Of-Sale — i.e. Tasting Room), purple represents e-commerce sales and green represents phone sales. What you see is that in the space of two weeks, most wineries dramatically shifted their sales channels to e-commerce, phone, and their wine clubs. That is, those who had the capability to do so.
Here’s another look at the same data, but this time as gathered through a survey conducted by McMillan and Silicon Valley Bank:
The above graphic demonstrates the truly remarkable shift that some wineries were able to make under extreme circumstances.
The Lessons That Need To Be Learned
You see, you can’t shift business to your e-commerce channel unless you have one. You can’t call your customers and sell to them on the phone unless you know who they are. You can’t send promotions and drive sales into your wine club unless you run it with something other than pencil and paper.
During the webinar, McMillan showed this devastating, but not particularly surprising chart:
More than half of the wineries that McMillan spoke with don’t have anyone, even part time, whose job it is to answer the most basic questions about that winery’s customers — who they are, what they care about, when they buy, what they buy, etc.
This pandemic has made concrete the adage of desperate times and the desperate measures that become required. If you can believe it, in desperation, many wineries actually picked up the phone and called their customers (in addition to customers calling them, of course). They knuckled down and (gasp) sent promotional e-mails to their winery club members (and maybe even the thousands of people who were lapsed winery club members). Maybe they gritted their teeth and offered up free shipping on their web site.
And what happened? They drove 50% more sales from their wine clubs. They took phone and e-commerce sales from 3% of their business to 26% of their business. Yes, some of these numbers might represent more of what “happened” to wineries rather than their ability to effectively execute, but the lesson to take from it remains unchanged: many of the things that wineries were forced to do in the pandemic they could have been doing all along.
Which brings me around to the question in the title of this piece. Will wineries learn from this pain and the extremity of today’s circumstances, or not? Here are some (not all) of the crucial lessons that this pandemic has to teach.
You must have a modern, functional, mobile-friendly, e-commerce web site
Selling online is the new normal and is non-negotiable. When customers show up on your web site to buy your wines or join your wine club, they have to be able to do so quickly and easily.
You Must Know Who Your Prospects Are: Get An E-mail From Everyone
You can’t build relationships with people you can’t talk to, and you can’t sell wine to people you can’t reach. For most of the wine industry, the only list of e-mails that seems to matter day-to-day is the list of people who are actively buying wine off their mailing list. That’s because many wineries don’t make an effort to get contact information from different types of customers — those who stop by a tasting room, for instance. Even worse, many wineries have huge lists of customer e-mail addresses that they do nothing with. As if somehow when someone decides to cancel their club membership they can never be contacted again. And these days, it’s not just e-mail addresses. You want phone numbers, too.
You must know who your customers are, what they’ve bought, and how to contact them
A spreadsheet of customer names doesn’t cut it. You need a database that lets you do that voodoo-like thing called CRM, Customer Relationship Management. It’s a pretentious, business-y term, but what it means is keeping track of as much information about your customers as you can so that you can answer questions such as: which customers are most valuable? Which customers are most in danger of going away? Which customers are most likely to buy the latest offer? Which customers are your best advocates?
You Must Actually Build Relationships With Customers
You really find out who your friends are in a crisis. Most wineries have a purely transactional relationship with their customers. They make offers, customers buy, they say thanks, and maybe offer some perks for loyalty. But how many wineries ever communicate to customers without something to sell? How many actually reach out to get to know their customers better beyond their preference for white over red? Very few indeed. Which is why it felt strange as hell to be getting e-mails for the past few weeks from wineries expressing “best wishes for my health and safety in these trying times” along with an offer for free shipping on half cases. Relationships are the currency of today’s world and the basis for building long-term value in any business. For any winery that needs to sell direct-to-consumer they are essential.
You Must TURN Customers INTO Advocates
There’s nothing in the world of marketing with higher ROI than word-of-mouth. Most wineries have scores, even hundreds of loyal fans who can easily, happily be conscripted to spread the word. Amy Hoopes, President of Wente Family Estates, shared an anecdote during the webinar about getting a branded postcard from a friend during her shelter-in-place. It was a postcard that a winery had given to its most loyal customers with the hopes that they’d send it along to friends to connect from a distance. In addition to a pretty picture of the winery, it contained an offer for her to use that friend’s member-only price to try a bottle of wine, and her friend happened to be recommending the Sauvignon Blanc. She bought a couple of bottles, liked it, and bought a case. For the price of a printed postcard and postage, they sold 14 bottles of wine and started a new relationship.
You Must Provide Value
One of the biggest conundrums presented by the pandemic surrounds the idea of lowering prices. What should wineries be willing to do in order to get a sale in the most trying of times? “Don’t discount if you can afford it, you will be much happier on the other side of this pandemic,” suggested Paul Leary, Founder and Principal at Assemblage Consulting Group, during the discussion. Once people have paid $45 for your Cabernet, they are not that excited to pay $55, no matter the circumstance. Yet this crisis is a buyer’s market. Just look at some of the comments on the list of winery DTC deals I posted here on Vinography. Some consumers feel that a single-digit discount simply wasn’t enough, and unfortunately Amazon has ruined us all against paying for shipping. There are no easy formulae for creating a perception of value, but economics teaches us that it is required to make a sale.
You Must Stay On The Dinner Table
“We have an opportunity here that we will never have again in our lifetimes,” said McMillan towards the end of the session. “Our entire country has been forced to have family dinners. And guess what, they want to have wine with it.” Earlier in the session Max Heinemann, Wine & Spirits Client Manager at Nielsen shared statistics showing that for those consumers who have ordered alcohol to go with their takeout meals, 60% have also purchased red wine and 50% have also ordered white wine.
“We’ve established new habits,” continued McMillan, “and guess what? They’re not going to go away. Companies have figured out that working from home works. We’re going to have 2 income families with both people home by 5 PM, without the time required for a commute.”
Those people are going to sit down to a family dinner together with far more regularity than ever before. Our job is to make sure they’re drinking wine.
* * *
It is not, in fact, true that the pair of Chinese characters that make up the word crisis also include the character for opportunity, despite a nearly infinite number of English-language motivational speeches to the contrary.
But even though we fear change, it can still be the best thing for us. Especially if we’re willing to learn from it.
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