1. Rabobank “2020 Alcohol E-Commerce Playbook” (full market data report)

Analyst Bourcard Nesin takes a deep dive into the unrealized potential of the e-commerce channel for the U.S. bev. alc. category.  Pegging the business at $2.6bn in 2019 and growing at 22% YOY, one has to wonder why the category hasn’t been exploited more, particularly in regard to brands exported to the U.S.

It’s true that the America’s labyrinthine regulatory system can be hard navigated, but the reality is that the spirits, beer and particularly the wine category lags way behind other CPG categories in terms of e-comm sales (e-Marketer data reported 4% penetration for bev. alc. vs. 50+% for books and shoes. And that spells opportunity.

The industry is facing a flurry of new challenges now including  global economic upheaval from the coronavirus in China and the morass of tariff brinksmanship ensnaring the U.S. and E.U.  And that’s added on top of the existing barriers resulting from major consolidation at the wholesale tier (Top 10 wholesalers now control 74% of the business per data from Impact Magazine.)

Nesin segments the opportunity into four categories:

• Online Grocery
• DtC wine sales, including both winery direct to consumer (permitted only for domestic wineries, but that door may be opening in the near future for imported brands)
• Alcohol marketplaces such as Drizly, Instacart, Minibar Delivery, Vivino and ReserveBar
• And online pure-play liquor retailers

But, let’s cut to the money shot on why e-comm is the brass ring:  the average retail price for a bottle of wine in a traditional brick and mortar liquor store is around $10…online purchases are averaging $38/bottle.

There’s lots more in the article but I love this quote:  “Only a few  forward-thinking organizations seem to understand this fact and are investing enough in their e-commerce capabilities.”

The big conclusion?  Stop whining about how hard it is and be innovative in route-to-market strategies.

2. Silicon Valley Bank (SVB) 2020 Report (full market data report)

This one is very focused on the domestic market, but it also contains a whole bunch of really interesting and useful data and charts that help quantify opportunities. Author and guru Rob MacMillan doesn’t shy away from describing the headwinds facing the industry.  In case you haven’t noticed, there’s actually a glut of grapes in the domestic U.S. market.  But by the same token, he highlights the tailwinds propelling it.

There’s been some arguing between data suppliers on whether the U.S. wine market is flat or declining slightly.  The key point here is that it doesn’t matter.  Absent significant growth trends, it’s a zero-sum game and taking a share of the market from existing players has to be the driving strategy for small and midsized producers of wine for sure but also the craft beer and spirit suppliers.

The report points out that one of the big drivers is going to be DtC.  Keep in mind that domestic U.S. wine producers can legally sell direct to consumers in some 45 states.  That channel is blocked for imported brands, for now, a recent Supreme Court case opened to door to challenging the e-comm status quo, particularly as it applies to wine.

Given the abysmally low penetration of DtC in bev. alc. in the U.S., it’s pretty clear that the opportunity for growth lies in innovation and hitting the competition where they ain’t.

In the case of spirits the reduction is dramatic: from $13.50 per proof gallon to $2.70. For wine, the net effect is a credit reducing the tax from $1.57 per wine gallon to $1.07 per wine gallon. Importantly, they’ve also increased the ABV limit from a max of 14% to 16%, and included naturally sparkling wines.

What will this mean?  Imports will suddenly become a lot more desirable to the entire Three-Tier system, because the new law effectively frees up margin, and allows imported brands to compete on a more level playing field with domestics.

To be clear, I’m not a beverage alcohol attorney and I don’t even play one on TV. But, I know a good deal when I hear one. I’m sharing the information as I understand it and have pasted below some links to help affected companies figure out exactly what this “Special Rule for 2018 and 2019” means to them.

TTB is working feverishly to develop the rules and guidelines for administering the new law, and just issued initial guidance.

A couple of things to keep in mind:

1. This is not a forever benefit, it expires Dec. 31, 2019.
2. Export producers should recognize that the credit applies to the entity that pays the tax, which is usually the importer, not the supplier.

For more information visit Bevology website.

The International Bulk Wine & Spirits Show promises to deliver exactly what it says. A unique opportunity for everyone involved in the production, shipping, processing, marketing, buying and selling of bulk wine and spirits to come together in one place. Each part of the supply chain has its own needs, opportunities and challenges and the IBWSS is the place to address them.

None more so than the buyers of national retail chains tasked with sourcing, and selling the right wines for their customers. Here’s how the IBWSS can help them and their needs.

First hand experience

The IBWSS has been set up to provide a platform for buyers to talk face to face with producers, brokers and suppliers at each stage of the bulk wine and spirits supply chain and share experienc-es on where the pressure points are and what new opportunities there are to capitalise on.

Practical advice

Talks, seminars and workshops at IBWSS have all been set up to provide buyers with key practical advice on both the buying, technical and legal aspects of working in bulk wine. Like what you need to cover in any supplier/buyer distribution agreements, what questions you need to ask your bulk wine supplier, how to manage annual currency fluctuations and how to capitalise on new bulk markets.

Global show

One of the key selling points of IBWSS is that it truly is international. The chance to hear directly from producers and wineries in all the key main wine producing countries about the state of this year’s harvest and to get the competitive edge on where the best value grapes will be over the coming year.

Developing exclusive and private brands

With increased pressure to hit key price points whilst keeping wine quality high, then buyers are going to be expected to look more at developing their own exclusive and own label brands. IBWSS provides the platform to make the contacts with the right businesses and people to help you get new private label brands to market faster than the competition.

Bottling and shipping partners

The quality of bulk wine now makes it arguably, at certain price points, a better product than one bottled at source. But it means working with the right logistics companies, shippers and bottling plants to ensure the wine tasted at sampling stage are the same quality as the wine that ends up in a bottle on shelf. Buyers can make use of the exhibition hall at the show to find the right supplier partners to work with.

Discovering bulk spirits

The IBWSS is the only event of its type that brings the world of bulk wine and spirits together. The bulk spirits market may not be of the scale of its wine counterpart but there are exciting new opportunities and the IBWSS provides buyers with a unique platform to discuss them.

Understanding the consumer

Understanding and engaging with the average consumer has long been the wine industry’s achilles heel. Buyers at IBWSS will have the chance to hear from leading consumer, marketing and advertising experts on what they see as the key consumer trends of today and tomorrow and how wine and spirits buyers can capitalise on them.

Get involved with the International Bulk Wine and Spirits Show in South San Francisco Conference Center on July 26-27. Learn all about Private Label, Bulk Wine, Bulk Spirits and Contract Bottling Business.

Source: Mad Men

When I first moved from the agency side to brand management, I held an onboarding meeting with my new advertising agency.  The “manifesto” I shared with them is still a philosophy I follow in agency and client relationships today:  Astonish each other with performance, and reward each other with growth.

Agency and Client Relationships — Goals for Both

What the client should expect from the agency:

1. Leadership:  Understand the end user, the client and all points in between as though you were pitching the business every day.  Because you are.
2. Listen:  We were given one mouth and two ears for a reason.  No matter how many awards you’ve won, honesty and humility will get you a lot further than hubris.
3. Take the lead technologically: Adapt the creative process to capitalize on new media and marketing tools.
4. Commitment:  Wash windows willingly.
5. Quality:  Good enough isn’t.  Materials should be as polished and error-free as if they were a formal presentation to pitch the business.  They are.
6. Timeliness:  Fifteen minutes early is on time.  On time is late.  Late is unacceptable.
7. Fiscal responsibility:  Treat the client’s money as if it were the agency’s…it is.

What the agency should expect from the client:

1. To appreciate, protect, and run great advertising and communications, even―especially―if it makes you a little nervous.
2. A sense of respect and trust supported by an understanding of the agency business and how its people are motivated.
3. Clear, consistent, and constructive direction.
4. Be open minded, decisive, and willing to take risks.
5. Question data. Just because it’s labeled research doesn’t mean it’s true.
6. Explore “what if?” and “why not?” before saying “no.”
7. Say thank you, publicly, for a job well down.

Originally posted on Bevologyinc blog.

A lot of folks look at the words “story” and “narrative” as synonymous, but they are most decidedly not.  Both have their uses, but it is important to understand the difference. 

The story is simply the sequence of events, with a beginning, middle and end.  A narrative tells those events in a way that creates a dramatic effect and response.  Further, great narratives are usually open ended and invite the reader to become engaged, participate, and personalize an idea.

So let’s look at an example of how I turned my story into a narrative.

Here is my story

I spent the first decade of my career in PR and advertising.  I began to acquire an interest in wines and took a couple of courses at the local university.  My job included a fair amount of travel, and I discovered another passion – to learn about other places, cultures and people.   During the most recent years of my career I have been in marketing spirits and wines, with an emphasis on helping brands enter and succeed in the US market.  With my consulting company, Bevology Inc., I am able to combine my passions for wine and travel with my expertise and experiences in marketing and act as a guide to help wine and spirit producers who want to break into the US market.

Here is my narrative

My wife and I were vacationing in Italy and went to a small restaurant recommended by the clerk in a wine store.  The décor was faded pictures tacked on the walls, mismatched chairs and cheap flat forks, but the food smelled great.  We were seated right next to two older Italian gentlemen.  I, of course, used my best Spanish (yes, Spanish…it’s closer to Italian and it was either that or just speak English louder) to order a nice bottle of red.  The wine was fantastic; after all, we were in Italy, on the vacation of our dreams, how could it be anything else?   The two gentlemen were clearly not impressed by us or our wine selection.  We were Americans intruding in their neighborhood restaurant, spoke lousy Spanish in Italy, and couldn’t even order a decent bottle of wine.

They insisted we try theirs, which they had brought with them in a brown paper bag.  Wow, turned out our wine was not so great after all.  By the end of dinner we had learned that they were old friends who dine together every Thursday evening and have done so for decades.  They left a few coins for the waiter, and the bottle of wine for us.  That was 12 years ago, and I think of that dinner, those two old men, and their fabulous red wine every time I embark on a new journey with a new winery hoping to make it in America.

So marketers, your challenge is to figure out how to articulate a brand’s narrative in a way that’s so meaningful and motivational that it makes people, smile, laugh and maybe even cry.

Originally posted on Bevologyinc blog.

As always, actually visiting the vineyards gives one a tremendously better insight on the region, the wines and the people who make them.  In the case of Prosecco it’s all about “location, location, location.”  DOC and DOCG Vineyards are located in the relatively small area between Conegliano and Valdobbiadene, particularly those vineyards on the steeper slopes and on the top of the hills.  This is a moraine area where glaciers from the Dolomite Alps scraped the landscape to primary rock and left stony soil as the ice melted.  Erosion has further weathered  the hills to primary rock and stones.  Clay from the hills has moved down the hillsides and the flat plain of the Piave river.

Vineyard exposure plays an important role in quality as well…south facing slopes with vines draped over the spines of the hills paint a beautiful picture.  But that beauty is undermined by the challenges of working those hills…they’re too steep for tractors, and practically all the labor is hand; even down to the digging of holes for fence posts and contouring the rows for access, moisture retention and to minimize erosion.

Corresponding to the vineyards are the thick, brushy forests filling the north-facing hills and the too-steep-to-farm slopes.

While it may seem Prosecco has exploded onto the American wine market (and the UK market as well), in my opinion it isn’t truly an overnight success story, but rather something that has been gestating for a while, and waiting for a breakout event—Americans drinking sparkling for events-other-than-celebrations.  It’s a niche that Champagne can’t fill because of the cost, and frankly, the (lack of) residual sugar in the styles most commonly marketed in the U.S.  Sparkling wines produced by the Methode Traditionale method fall into the same category.  Asti Spumanti is too sweet, and relevant only to an older generation. But Prosecco hit the “sweet spot” of the modern American palate with RS levels from 9-24 g/l of RS.

It was embraced not only by the oft-mentioned Millennial age cohort, but a broader market, and particularly women, who have found it to be something they actually like much better than the go-to Chards and Pinot Grigios to which they had previously gravitated.

The “trend” that we’ve seen is really a manifestation of the power of the internet, the importance of discovery, and the ability to share these discoveries much more widely via social media.

So what makes great Prosecco.  Well, as usual, place plays the primary role…the hilltops of the DOC and DOCG regions, so look for the words Conegliano, Valdobbiadene and Prosecco Superiore on the label.  And for the top tipples, look for Rive which indicates the name of the municipality or village where the grapes were grown.

The wines are made from minimum 85% Glera grapes, a local nomenclature only recently established  as the legally accepted name to distinguish the wine from the former name of the grape variety (prosecco).

The bubbles come via the Charmat bulk process which yields a wine that can be retail priced in the U.S. from $11 to $20.  And we’re seeing introductions of higher level marques such as Rive and Cartizze at even higher price points, still Charmat-produced.

So I’d like to shout out a big thank you to CIA and ICE for hosting the trip, to the wineries we visited:  Drusian, Le Carline and Ronfini and the guest houses we stayed at Le Noci and Althea.

Originally posted on Bevologyinc blog.