Marketing

Question 1

Consumer outreach

Answer 1

“The consumer sits at the end of the supply chain, and yet it is his/her buying power that drives demand.”

What drives consumer brand awareness:

• PR + Advertising
• events
• digital platforms (incl. social media)
• hospitality
• trade education (indirectly)

Question 2

PR campaigns

Answer 2

Include:

• Writing and sending press releases
• Organizing events and trips for journalists (this has variable effectiveness. In Europe, pay for play is more common while US writers may accept invitations and not write anything)
• Advertising (a more controlled means of ensuring coverage in a target publication)

Question 3

Advertising costs

Answer 3

• Full page 4c ad in Wine Spectator - $33,000
• Sotheby’s paid wine-searcher $5,000 to have their ad align with key search terms, reaching targeted consumer seeking top Burgundy and Bordeaux
• Google Ads: pay per click
• Social Media

(in China is Weibo or WeChat)

Old School:

• build a website (using Squarespace), scalable cost
• write a newsletter & capture emails (free-ish)
• direct digital sales (market dependent)

Question 4

Other PR costs

Answer 4

• Consejor Regulador de Jerez, 1 year contract with Colangelo $250,000 for US promotion
• Thurner PR charged Tenuta di Trinoro $10,000 each for media tastings in Zurich & Monaco

Large Scale Consumer Events:
Pebble Beach: $25,000 for a dedicated seminar, $5,000 to include one wine
Nantucket: $750 table fee + cost of wine and travel

Collector Programming:
A Matter of Taste, Wine Spectator Grand Tour, NY Wine Experience: $7,500 per winery + travel costs and wine

Charity Auctions (donations)

Themed Events:
Volcanic Wine Tasting, La Paulee, La Fete du Champagne – all cost wine and travel

(Note: European wineries can use subsidies to offset costs)

Question 5

International Market facts

Answer 5

• according to Wine Intelligence, China is world’s largest AND fastest growing online wine shoppers. 49% of adults buy wine online compared to 25% in UK and 11% in US.

Question 6

Hospitality

Answer 6

• enotourism rising around globe
• Beasejour-Becot in St. Emilion received 1.6 million tourists in 2017
• According to Wine Australia, there was an increase of 7% international visitors for wine sector from 2017 to 2018 (mostly from China, UK, US)

Tour examples:
$40 deluxe tour at Flaneur in Willammette
24 Euro tour and 3 wine tasting at Castello di Monsanto. 10 Euro more for their top experience.
Promontory - $200 normal private 90min
abbreviated non-private tasting 9am Saturday $50

• In US, 2018, over $3 billion in DTC sales (cellar door, wine clubs, etc)
• In Europe, sales and hospitality generally kept separate but this is changing (ex. Guiberteau vs Huet)

Question 7

Consolidation

Answer 7

Constellation: buys Meiomi for $315M, prisoner for $285M, Schrader for $60M
- and just sold 30 brands and 6 wineries to Gallo for $1.7B - mostly lower end brands

Italy:
- Bertani bought Puiatti, Ferrari bought Bissol, Bellavista bought Sella and Mosca

Question 8

Climate Change

Answer 8

Changing and erratic climate affecting wine production world wide

• Col d’Orcia put 15% of non-2014 into his Brunello (legal max) AND made no riserva (was a cool rainy wet disease laden year)
• Frost + Hail:
  
  • 2016 Chablis down 40% (frost)
  • 2017 Loire down by as much as 90% (frost)
• Fire
  
  • 2017 Napa difficulties
  • 2018 Wagner cancelled many S. Oregon fruit contracts (2,000 tons)
• Other
  
  • Trimbach: no botrytis
  • Selbach: no ice wine

Question 9

International Trade Relations

Answer 9

• US/Mexico relations straining labor
• Chinese tariffs. Turnbull paid $30K on dry goods fees for 2019 bottling
• Brexit causing insecurities in ZA market and in BDX futures pricing
• Chinese/Chile trade agreement dropping tarriffs on 98% of items took place May 1, 2019
  
  • in 2017, 24% of Chilean exports were to China

Question 10

Private Wine Labels

Answer 10

Winery Advantages:

• economic benefits
• flexibility to buy in
• flexibility of harvest/grape/fruit sourcing
• Brand over appellation might mean sourcing outside of appellation

Winery Disadvantages:

• no brand visibility
• association with “cheap” wine
• price pressure
• loyalty

example: Rocca della Macie makes the Head to Head Red Blend Rosso Toscana IGT for the Olive Garden.
Turnbull makes a Kirkland Cabernet for Costco

Distributor Advantage:
- Guarantee case sale and placement, pre-sold

Distributor Disadvantage:
- price pressure, low margin

Retail Advantage:

• Consumer can’t price compare.
• revenue generating, covers lower markups on other competitive brands

Retail Disadvantage:

• lower quality?
• customer supply and demand

Question 11

DTC

Answer 11

DTC = cellar door, winery website, wine club, hospitality & event

Pros:

• More margin
• Direct connection with consumer/intimacy
• Consumer data

Cons:

• Legal constraints (direct shipments of wine illegal in: Singapore, Utah, Ontario)
• Bad feelings on part of distributors
• time and energy to implement
• interstate DTC shipping only allowed in US after 2005 supreme court case. This jumped DTC sales from 2% of total sales to over 10% as of 2018

Price fixing:
- Hirsch Bohan Dillon $39 to wine club, $44 average on wine-searcher

Example: Macari in Long Island sells over 50% to wine clubs and from cellar door

Example: Bartolo Mascarello: customers come to cellar at set time or forfeit their access

Example: Ryme/Massican pick-up parties

Example: VinConnect recreates the DTC experience for Americans who want European wines. Work with wineries to navigate shipping and legal hurdles, collect emails and create mailing lists

Mailing Lists:
- can move undesired (by distributors) formats (such as magnums), back vintages, and off vintages

example: Castello di Monsanto produces a varietal Cabernet their importer does not want to sell, they sell it direct. Also Corison with her Gewurz.

Question 12

Intermediaries

Answer 12

Intermediaries = agents, distributors, wholesalers, sole traders, brokers, sometimes even retailers

What do they provide?
relationships, sales force, marketing

How do they make money? commissions and margin. This drives up consumer cost.

Example: US 3-tier market
Example: April Collins broker in TX, adds $ to bottom line but provides on-the-ground presence in large and powerful market

Question 13

Supply chain

Answer 13

Why does the supply chain for wine differ from that of other grocery/ag products? There are social, legal, economic and historical reasons.

Question 14

Hong Kong

Answer 14

• In 2007, slashed wine tax from 80%-40%
• In 2008, got rid of it altogether
• timed with US market crash, shifting of auction market to HK
• According to Wine Spectator, in 2017 the city’s auction market sold nearly $100Million
• From 2007 - 2018, imported wine increased by four times to $792million USD