Bubbly, Champers, Sparklers, Fizz – when consumers are looking for sparkling wine, they are no longer simply being offered French Champagne. Other country’s products, like Italian Prosecco, Spanish Cava and US Méthode Champenoise are flooding the market.
In April, I gave a presentation at the 2016 Sparkling Wine Symposium in Oregon and here are a few of the interesting details from that presentation.
According to the Organisation of Vine & Wine (OVW), France accounted for 22% of the sparkling wine production for 2013 with Italy and Germany close behind at 20% and 16% respectively.
The category, has seen an increase of 40% since 2003 to 200M cases annually in 2013 representing 7% of global wine production.Not only is more sparkling wine being made – more wine is being drunk.
In the US, sparkling wine consumption has doubled from 2003 to 2013. A report from the Wine Institute states that in 2014, 80 California producers shipped 9.4 million cases to US markets alone. In 2013, for drinkers in foreign markets, Germany lead with 34M cases and France and Russia followed with 23M cases each. Overall, from 2003 to 2013, sparkling wine consumption has increased by 30%.
For producers & winemakers, there are some barriers to entrance in this market – most notably production costs (especially for Méthode Champenoise) & global competition but sparkling wine lovers now have more options by price point, style of wine and country of origin than ever before. Cheers to that.
Happy Small Business Week! I have been thinking a lot recently about the fact that most wineries are part of that quintessentially American story: entrepreneurship. What better time to acknowledge that fact than during a week dedicated to celebrating the vital role of small businesses in our economy and our culture?
There are almost 9,000 bonded wineries in these United States. Yet, approximately 90% of the wine consumed in the US last year was sold by the top 10 companies. This means that the American wine industry is principally made up of very small wineries selling locally produced wines directly to customers in their communities. In other words, winery owners are small business owners.
To celebrate their week, I am offering to those hearty souls – the American wine entrepreneur — a few of the success-strategies I have observed over my 30-year (!) career working with small business owners:
- Know Your Numbers It is surprising but not uncommon when I work with a winery to find that the owners do not know the actual costs of producing their wines, and most importantly do not know that cost in relation to what the product is being sold for (net, of course, of sales incentives and other direct selling costs.) It is a boring but necessary part of running a wine business to understand which products are working, and which are not, in the only sense of the word “working” that should matter to a business owner: profits.
- Do Not Fall In Love Being passionate about your winery is an important component of selling wines in a crowded marketplace. However, the successful business owner makes rational decisions. I have great admiration for a client of mine who has tried twice to launch products based on a varietal he loves working with as a winemaker. But twice the wines have failed to take hold in the marketplace. And so for a second and final time he has effectively “shot the product in the head” and moved on.
- Be a Businessperson First, Winemaker Second I like to say, somewhat tongue in cheek, that I can tell a winery that is run by a winemaker by the number of SKU’s it has. Back in my commercial banking days, a client called me during harvest, very excited, to say “I have an opportunity to get some incredible Syrah grapes… What do you think I should do?” To which I replied, “It is better to let your business plan guide your grape purchases, than to have it the other way around.”
- It’s About Selling, People Wine quality is necessary. Authenticity and a compelling “story” are important. But it’s selling that separates the men from the boys in this industry. And by “selling”, I mean (see above) getting your wine(s) into the hands of the end consumer at a price that allows you to pay your bills, reinvest in your business, and make a good living.
It has been an honor throughout my career to work with the entrepreneurs who are such a vital part of the American story. These are the people who generate two out of three new jobs in our economy. In the wine business in particular, with its capital intensity, regulatory hurdles, and stiff competition, those who choose to take a chance and set out to start their own company are real economic heroes.
So to all of you, keep fighting the good fight!
A friend of mine and I were exchanging e-mails a few weeks ago about the mounting financial difficulties of Robert Dahl, the winery owner who became famous last week for murdering one of his investors in a vineyard just south of where I am sitting. My comment then about the people who create these types of financial disasters was, “it’s sometimes hard to distinguish between the stupid and the corrupt.” I think we have our answer now with regard to Mr. Dahl.
There is no shortage of crooks and con artists in the American business landscape, (see CNBC’s ‘American Greed’ – Napa Valley addition coming soon) but I do think that there are some special aspects of the wine industry that make it particularly attractive to the type of person who prefers to take money from others rather than trying to earn it. First, these are communities with a lot of wealth, populated by many people who have come from other places. A stranger showing up with a story of financial success is not unusual here. Then there is the allure of owning a winery. For a con artist to separate experienced investors from their money, they need to have (or create) a circumstance where normal caution might be set aside. A beautiful winery in a bucolic setting, alcohol and good food can certainly set the stage.
As an advisor to winery owners selling their companies, I have developed an instinct for identifying a con, in order to dismiss them as a prospective buyer. Here are some of the hallmarks of a person not to be trusted:
- Name dropping
- Comes with a story of success and spins a tale of fantastic opportunity
- Appears wealthy
- Wants to use other people’s money (or property)
In the world we live in today, avoiding being taken in really only requires a healthy skepticism about the stories strangers tell us and access to the internet.
For example, in the depths of the wine industry downturn caused by the financial crisis, I was working with the owner of a winery and vineyard that had been on the market for some time. He called me one day to say that he had been approached by some “investors” interested in leasing the property. A simple Google search turned up an SEC indictment of one of the parties for investor fraud. Tellingly, they had perpetrated a scheme involving a leased property. Conversations with real estate brokers throughout wine country revealed that these investors were talking with everyone who had a property that had been sitting on the market.
We usually think of a con artist as someone who operates on a personal level with small targets like little old ladies, not sophisticated business people like ourselves. The truth is that sometimes a crook can engineer a multi-million dollar fraud. For winery owners and investors alike, the old adage, “if it sounds too good to be true, it probably is,” should always stay at the back of our minds.