Comments on: Uncorked: The “New Normal” in the Wine Industry http://www.newbizviews.com/2010/02/08/uncorked-the-%e2%80%9cnew-normal%e2%80%9d-in-the-wine-industry/ Focuses on entrepreneurs, innovative business models, emerging secular trends and new approaches to fields like finance, social enterprise, media and business policy Thu, 26 Aug 2010 15:54:01 -0600 http://wordpress.org/?v=2.8.4 hourly 1 By: Will Dressflix Destroy the High-Fashion Industry? « NewBizViews http://www.newbizviews.com/2010/02/08/uncorked-the-%e2%80%9cnew-normal%e2%80%9d-in-the-wine-industry/comment-page-1/#comment-116 Will Dressflix Destroy the High-Fashion Industry? « NewBizViews Mon, 05 Apr 2010 13:59:51 +0000 http://www.newbizviews.com/?p=930#comment-116 [...] via online platforms will erode the image that these luxury labels have carefully cultivated. As previously discussed in NBV, wineries are dealing with the aftermath of discounting as customers “mentally knock down” the [...] [...] via online platforms will erode the image that these luxury labels have carefully cultivated. As previously discussed in NBV, wineries are dealing with the aftermath of discounting as customers “mentally knock down” the [...]

]]> By: Joanie Hudson http://www.newbizviews.com/2010/02/08/uncorked-the-%e2%80%9cnew-normal%e2%80%9d-in-the-wine-industry/comment-page-1/#comment-29 Joanie Hudson Wed, 10 Feb 2010 17:02:19 +0000 http://www.newbizviews.com/?p=930#comment-29 There are a few unique challenges that wineries face in that regard to making less wine every year (in a similar fashion to clothing manufacturers including less pieces in their lines). First of all, wineries that have their own vineyards have a certain quantity of vines that produce fruit each year. That fruit is going to be produced no matter what. Making less wine from that estate fruit wouldn’t solve the problem. Also, many wineries are locked into 2-4 year contracts with growers, so they are compelled to get fruit from those vineyards as well. Producing too little wine can also be risky, particularly if the winery sells their wine through a national or state distribution system. Since competition is so intense, wineries risk losing important placements that they have worked hard for if the wine runs out before they have the next vintage available. This is why many small wineries work with allocation systems in retail accounts and restaurants, carefully monitoring what is sold where, so that they are able to provide their distribution channel with a continuous cycle of placed wines. Some wineries that purchase fruit are deciding to make less wine from 2008 and 2009 harvests. This does help to ease the backup. Restaurants are reacting strongly to the challenging economic times. Inventory is backing up, and the more expensive bottles ($20 and up retail) are basically frozen at many establishments. Since these bottles aren’t selling, they aren’t buying from distributors. Distributors are relying on the sales of lower priced bottles and by the glass placements for their commissioned incomes. Also, since credit is limited, restaurants are not able to keep as much inventory in stock (from what I understand). Restaurants are responding by lowering their mark ups, lowering corkage fees (the charge when guests bring a bottle of their own in), and buying more value wines from distributors. I was at a restaurant the other day that had a small section of their wine list under a “reserve” category. The wines weren’t selling, so they changed the heading to “favorite picks,” and the wines started depleting, demonstrating the stigma people have against overspending on wine right now – consumers are searching for value on restaurant lists. I am so interested to see if this permanently changes the way restaurants mark up wine on their lists… There are a few unique challenges that wineries face in that regard to making less wine every year (in a similar fashion to clothing manufacturers including less pieces in their lines). First of all, wineries that have their own vineyards have a certain quantity of vines that produce fruit each year. That fruit is going to be produced no matter what. Making less wine from that estate fruit wouldn’t solve the problem. Also, many wineries are locked into 2-4 year contracts with growers, so they are compelled to get fruit from those vineyards as well.

Producing too little wine can also be risky, particularly if the winery sells their wine through a national or state distribution system. Since competition is so intense, wineries risk losing important placements that they have worked hard for if the wine runs out before they have the next vintage available. This is why many small wineries work with allocation systems in retail accounts and restaurants, carefully monitoring what is sold where, so that they are able to provide their distribution channel with a continuous cycle of placed wines.

Some wineries that purchase fruit are deciding to make less wine from 2008 and 2009 harvests. This does help to ease the backup.

Restaurants are reacting strongly to the challenging economic times. Inventory is backing up, and the more expensive bottles ($20 and up retail) are basically frozen at many establishments. Since these bottles aren’t selling, they aren’t buying from distributors. Distributors are relying on the sales of lower priced bottles and by the glass placements for their commissioned incomes. Also, since credit is limited, restaurants are not able to keep as much inventory in stock (from what I understand).

Restaurants are responding by lowering their mark ups, lowering corkage fees (the charge when guests bring a bottle of their own in), and buying more value wines from distributors. I was at a restaurant the other day that had a small section of their wine list under a “reserve” category. The wines weren’t selling, so they changed the heading to “favorite picks,” and the wines started depleting, demonstrating the stigma people have against overspending on wine right now – consumers are searching for value on restaurant lists. I am so interested to see if this permanently changes the way restaurants mark up wine on their lists…

]]> By: Kimberly Stromberg http://www.newbizviews.com/2010/02/08/uncorked-the-%e2%80%9cnew-normal%e2%80%9d-in-the-wine-industry/comment-page-1/#comment-27 Kimberly Stromberg Wed, 10 Feb 2010 00:30:44 +0000 http://www.newbizviews.com/?p=930#comment-27 Thanks for the great post Joanie! I can’t wait to use the term “blowing out” at my next dinner party. One question I have on the piece relates to the statement that “New fruit must be harvested, fermented and bottled every year in the fall, and the cycle can’t stop just because the previous vintage’s sales have halted.” I understand that you cant shift the cycle due to seasonality, but isn’t it conceivable that wineries could cut back on the number of varieties they develop in a given vintage (the same way that <a href="http://www.nytimes.com/2009/09/15/fashion/15REVIEW.html?_r=1" rel="nofollow">many fashion lines </a>are cutting the number of pieces in a given collection)? This would probably help the inventory issue, and might even put pressure on consumers to buy the older versions. My guess is that wineries have been reluctant to go down this path because of 1) fear of competition and 2) brand image — you can’t be the only Napa winery without a 2009 Cabernet Sauvignon… I would also be curious to know how restaurants are reacting to the “new normal.” Are they simply selling more at a lower price point, or have they actually taken the step of revising their wine lists to offer cheaper options entirely? Thanks for the great post Joanie! I can’t wait to use the term “blowing out” at my next dinner party.

One question I have on the piece relates to the statement that “New fruit must be harvested, fermented and bottled every year in the fall, and the cycle can’t stop just because the previous vintage’s sales have halted.” I understand that you cant shift the cycle due to seasonality, but isn’t it conceivable that wineries could cut back on the number of varieties they develop in a given vintage (the same way that many fashion lines are cutting the number of pieces in a given collection)? This would probably help the inventory issue, and might even put pressure on consumers to buy the older versions. My guess is that wineries have been reluctant to go down this path because of 1) fear of competition and 2) brand image — you can’t be the only Napa winery without a 2009 Cabernet Sauvignon…

I would also be curious to know how restaurants are reacting to the “new normal.” Are they simply selling more at a lower price point, or have they actually taken the step of revising their wine lists to offer cheaper options entirely?

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