Dave Matthews - Dreaming Tree Wines

Confession: I've been to over 30 Dave Matthews Band ("DMB") concerts. Obsessed? Perhaps.

Given my fandom, I was delighted earlier this week when a friend brought over a bottle of Dreaming Tree Wine (named after a song from a 1998 DMB album) - a $13 bottle of Cabernet Sauvignon from CVS Pharmacy - crafted by winemaker Sean McKenzie and Dave himself.

I was delighted by the quality of the wine - and it appears to have the attention, albeit with mixed reviews, of many others, with a 4.3/5.0 rating on TotalWine and a 3.7/5.0 on Vivino (~17K reviews!).

Dreaming Tree is the only celebrity wine I've tried - upon further research, it appears Dave's celebrity does wonders for the brand's marketability - with Sean McKenzie remarking that the company expects that about half of the company's customers are DMB fans, or at least are aware of the Dave Matthews connection. 

What could possibly motivate a multi-hundred-millionaire musician to take on a business endeavor as a winemaker? The connection for Dave seems to have started based on his American roots (he's originally from South Africa) in Charlottesville, Virginia (also home to UVA Darden), which has a few beautiful vineyards - and, upon my own time exploring the town - a very prevalent wine culture. Beyond his roots, other motivations appear to be from a similar drive to create experiences and community (similar to bringing people together at his concerts) and sustainability, with over $1M donated by Dreaming Tree Wines to environmental causes.

Do you have a favorite celebrity wine (list here)? And was your motivation to buy based on celebrity? Amidst the noisy world of wine brands, I expect celebrity wine-branding to continue to serve as an effective edge in marketing and distribution.

Sources:

https://www.dailynews.com/2018/09/19/dave-matthews-fans-can-drink-his-wine-the-award-winning-the-dreaming-tree/

www.dreamingtreewines.com

http://scottsseafood.net/theriver/new-featured-wines-from-the-dreaming-tree/

Forget Kylie, Lebron is the real MVP.

Over the last 9 weeks, we've heard plenty about how millennials aren't buying expensive wines.  This new generation values experiences over things, and it's going to kill winemakers.

[Cue ESPN 30 for 30 voice]

What if I told you there was still a luxury market where each product sold for hundreds of dollars?  That one of the greatest influencers that drove this market just moved to one of the largest media markets?  And that he also happened to be a fan...of high-end wine?

Here's a listing for a Lebron 16 King Court Purple Nike basketball shoe.  It is listed for $1,100.

Here's a listing for a bottle of 1996 Chateau Lafite Rothschild.  It is listed for $1,000. 

Now admittedly, the value and pleasure derived from these two items is different.  You can wear the shoes repeatedly and you can only drink the wine once.  Yet I would argue there is an untapped opportunity here by the wine industry.  ESPN and the Wall Street Journal have both documented how many NBA stars have become avid wine aficionados, particularly for high-end wines.  Many of these stars command millions of social media followers and have a proven track record of selling a relatively cheap good produced in limited quantities to their fan base for obscene margins.  Both markets rely on scarcity value to drive up the price of certain products, and huge secondary markets exist to resell goods that haven't been used or consumed.


I'm not saying it's a guarantee you can convert sneakerheads into oenophiles, but why wouldn't you try?  After all, as Lebron ages closer to retirement, the fans that grew up with him may find their own tastes evolve and seek new ways to spend that disposable income.  Elite wineries should be devising ways to get their bottles onto his Instagram as soon as the Lakers are officially out of playoffs. 


Reference articles:

http://www.espn.com/espn/feature/story/_/id/22358028/the-nba-obsession-wine
https://www.wsj.com/articles/the-lebron-factor-who-drives-wine-trends-today-11552053545?mod=hp_listb_pos4

Unboxing Winc (Pt. 2)

An impressive four days after I placed the order, my Winc box arrived with three bottles of wine priced at $13 each.


Reasonably easy to carry and open. Box has a handle and insert-snap closure


Comes with a fun magazine - Wines of the world from A to Z


Bottles are protected with molded pulp inserts (fully recyclable, which is nice)

First impressions:

• The aesthetic appeal of the bottle packaging was a bit of a letdown, especially in comparison to how stylish the website itself is. The bottles came without foil capsules, the label design on these bottles is simplistic almost to a lazy degree
• On the wine itself - have only tried the L'Atelier de Sud Grenache/Syrah blend. Organic, red-fruit and light spice
• Tasting companions described it as "completely inoffensive" and "nice enough" 
• Very easy to skip next month's delivery through the website on mobile

Would completely consider ordering again in a couple months after I work through other bottles still on my shelf! If you're curious... don't mind my shameless plug here for a $22 discount code (I'll get a $15 credit on your first shipment) 

Wine InStyle - Too many unanswered questions

Eberhart has two main issues:
1) He needs cash to support growth
2) He wants to find a way to spend more time in PA and stop overlooking operations in Japan

At first, he alternative of taking the deal with the Japanese investors seems very attractive. However, the downside is too big and I don't think he should take it. There are so many questions around each of the advantages the proposal has, that it seems too risky.

Pros?
-Access to cash. Who are the investors? Do we have any guarantee that they are not competitors seeking to elimite Wine InStyle? Aren't there any other ways to increase cash?
-Quality time with his family. Does Eberhart want to continue with growth at the expense of losing the mission and values of the company he started? Is he willing to put at risk the respectable reputation that he obtained through Wine InStyle?
-Vote of confidence to the japanese CEO. Is the CEO who has only been around for 2 years ready to continue growing the business under new management? Will he be able to deal with the different challenges that may come up in the future?

Given the questions analyzed above and how hard it seems to come up with a mitigation plan for these risks, I think he should not take the deal. However, if Eberhart's incentive to go back to his family is so strong, the only way I could see this happening is with a certification.

Wine InStyle - take it or not?

After a long journey building his company and navigating both the Japanese and the Californian wine market, Robert Eberhart grew Wine InStyle, reaching sales of $4.1M in 2017. Robert Eberhart is now in a key decision moment. Should he take the deal or not? The answer is not obvious, like everything in life there are pros and cons.

Why should he take the deal? First, it would provide the company with access to cash, which is key for Wine InStyle to support its rapid growth. Second, Robert would be able to free up his time and spend more quality time with his family and in Palo Alto, which for him seems very important. Then, taking the deal would also give back liquidity to Robert and the other early investors. Finally, the company seems to be in good hands of a Japanese CEO, which makes sense given the Japanese business culture.

However, there are some reasons why Robert should not take the deal. In fact, it is not clear that the bidding is able to keep growing Wine InStyle (with the necessary cash) while maintaining the mission and values of the company. Moreover, there are doubts whether the bidding group is a rival who wants to eliminate competition and destroy Wine InStyle. Finally, Robert may consider other alternatives to provide the company with cash (e.g., cutting costs).

The decision depends mainly on whether Robert wants to leave Japan and move back and for real to Palo Alto. If so, he should sell but he should mitigate and have a plan for the reasons why he should not take the deal stated above. For instance, he should make sure the company is going to maintain the CEO and ask for certification.

Influence in Wine: Lebron or Parker?

Who drives wine markets today?  It’s a core question we have been discussing in the last few classes as we have talked about the role of the critic.  With this question hanging in my mind I was thrilled to stumble on the below article in the Wall Street Journal the other day: The LeBron Factor: Who Drives Wine Trends Today.

The article chronicles how influence in the world of wine has largely shifted over the past 20 to 30 years.   In the 1990s and early 2000s, influence in the world of wine fell solely to large name critics and more so than any other to our friend Robert Parker.  By the beginning of the 2010s, however, Parker’s influence began to wane as more and more prominent wine critics and wine publications popped up across the internet and entered the influence fray.  Today most wine drinkers seem to care only about the scores a wine has received (97 points!) and pay little attention to the people who are actually giving these scores.  People usually cannot think of a single wine professional who they most look to and instead focus solely on the data.  Enter Vivino, CellarTracker, and other online mass rating platforms that can give people the crowdsourced numbers they want. 

The most interesting recent turn in the game of wine influence is no doubt the entrance of major celebrity influencers like Lebron James or Kim Kardashian.  Lebron (who actually seems to have pretty good taste in wines loving high-end California Cabs and fine Italian Wines) can often push sales with a simple Instagram post.  Kim can do the same as she did with an Instagram story featuring a bottle of JNSG Rose Cru that doubled the brand’s number of followers on the platform.  This recent turn gets me thinking why consumers are willing to trust these celebrities who seemingly are not wine experts when it comes to wine selection.  Perhaps it gets back to why people are drinking wine in the first place.  Maybe it doesn’t ultimately come down to getting the highest quality wine (and let's be honest, lots of wine is delicious).  Maybe it ultimately comes down more to filling emotional and status needs for many millennials and showing the world you are drinking a bottle of Lebron approved wine likely serves that need better than sipping on a Robert Parker favorite.  

https://www.wsj.com/articles/the-lebron-factor-who-drives-wine-trends-today-11552053545?mod=hp_lead_pos11 

WineInStyle - Hell No!

The answer to should Eberhart sell is in the title.  Eberhart has built a fantastic, respectable business (although I disagree with his decision to antagonize the Yakuza) and clearly found a following in Japan after relaxation of regulations around wine sales.  He fundamentally understands the customers' buying habits and has now installed a savvy general manager in Michael Khoo.  Every good business needs more capital but how you source that capital a la the Robert Mondavi case matters.  I believe the key to a successful raise is in protecting against the downside.

In this case, he knows literally nothing about these investors.  The only thing worse than a mid-tier investor is an unknown one.  Even without donning a tin hat, there are multiple nightmares that become reality.  The worst scenario is that these investors are effectively a front or shell for some competitors eager to buy and kill off the business.  Another likely scenario is that these investors are hobby investors who enjoy the appeal of wine but may destroy value instead of creating it.  Either way, what is described as a private-equity style majority buy-out should be carefully vetted, diligenced and scrutinized.  Based on my personal finance experience, I would expect that a business that has shown clear growth, margin expansion and market opportunity would excite and attract private investors in the U.S., despite the Japanese incorporation.  Japan represents a stable, mature international market that many are familiar with and should not require onerous covenants or terms for a potential investment.