Wine at Farmers Markets

In many of our presentations we talked about selling wine at markets, from outdoor food halls to music festivals. In reading about the laws that govern some of this commerce, I discovered that, just five years ago, California Governor Jerry Brown signed AB2488, a bill that allows farmers markets to offer tastings of wines and ciders. Of course, the bill included a few restrictions that I thought folks might find interesting:

• Wineries and cidermakers must apply for a permit through the Department of Alcoholic Beverage Control
• Wine and ciders must be produced from fruit grown and bottled by the winery and the tastings must be done by the permit holder, a family member or an employee
• Wine sellers may not sell more than 5,000 gallons of wine annually and may not serve an individual customer more than 3 ounces a day

Before this bill was passed, a "Type 02" licensed winegrower could apply for a “Certified Farmers’ Market Sales Permit” (Type 79) which would allow the winegrower to sell wine at farmers’ markets, as long as the wine was:

• produced entirely from grapes grown by the licensee
• bottled by the licensee

Though this was an exciting development, it's unfortunate that such a bill still precludes wineries who buy grapes, but otherwise produce and bottle their own wine from being able to engage directly with potential customers.

Source:

https://www.latimes.com/food/dailydish/la-dd-governor-brown-signs-off-on-wine-tastings-at-farmers-markets-20140710-story.html

https://www.dpf-law.com/blogs/lex-vini/new-california-law-allows-wine-tastings-farmers-markets/

Last Post

Ok, so I was supposed to figure out why Wine Sales spiked in 1996, but upon conducting some research, I couldnt find any compelling evidence. One potential theory I thought of was the economic recovery post the 1991 S&L crises, coupled with the explosion of the first tech boom, may have led to a huge upswing in wine sales and prices in 1996 that reflected a release of previously pent up "animal spirits". Not quite satisfactory, but a potential explanation.

So, without a good explanation, I will post quickly on two topics:

First, wine bars are a thing - I used to live by Union Larder on Union and Hyde street in San Francisco - which is a fantastic spot that serves wine by the tap. The wine was quite good and was paired with cheese plates, etc. With a broad selection available, these places may become the new yuppie bars, although unlikely to replace the dive bars and the beer. Which is why I really liked the champagne and wine on tap idea at bars, or for that matter wine in a can, as I think it is a great idea and for the younger drinkers will have mass appeal. Many of my contemporaries learned to drink liquor, like whiskey, scotch, etc., only because we werent as fond of beer (or didnt want to be associated with the brand implications) and there werent other compelling options.

Second, I just wanted to say how much I enjoyed this class, and wanted to take the time to thank all of you for making this such a fantastic experience. Learning and drinking wine with everyone in class was an unique experience. I had the pleasure of hearing from you about your love for wine and your individual motivations for taking the class. I enjoyed the probing questions for our speakers, and thought that the wide ranging discussions that incorporated not only wine, but also sales, marketing, strategy, economics, and sometimes even family politics, reflect the culture and atmosphere that comes with drinking wine. Maybe why even after thousands of years, humanity still clings to wine as its libation and social lubricant of choice. With that - I hope to see all of you around the table with a good glass of wine, and more importantly some new stories and experiences to share.

Wine Tasting on "the Island"

So most people right out of college go out to Long Island from Manhattan (and NYC) to summer in the Hamptons (or do the Christmas Stroll) and party their face off. But as we get a little older, that tends to hold less appeal. Instead, for one of my friend's 30th Birthdays last summer, we AirBnB a house on the North Fork in Greenport, NY. Greenport is much like the Hamptons was years ago - a quaint, middle states town, with fun bars, local shops, and other nifty spots. While a bit crowded, making a reservation at a restaurant or finding a spot at the cool American Beech bar, or getting into the large wharf parties at Claudio's is pretty relaxed. But even more appealing than the "scene" on the North Fork, are the wineries. As one drives out or back from Greenport (at the end of NoFo), one passes many idyllic wineries. Since it is in fact an island, and therefore gets wet, and gets very cold in the winter, the wines are not the best. Despite the wines not being as good as the wines in California (or on the West Coast generally), the relaxed nature of the vineyards provide a nice respite from the NY city life and a great place to decompress, celebrate, and drink decent wine with friends. Vineyards we visited include Sparking Pointe and Bedell Cellars for those that are curious.

The Great Hamptons Rose Shortage

Below is the link to a short article from Glamour (yes, I know), about the great shortage of Rose in the Hamptons in the summer of 2014. The Hamptons, known for their chic parties of the "who's who" of NY society has been a major consumer of the pink liquid in the last few years. That is why it became such an issue when the trendy restaurants and bars in Watermill, South Hampton, East Hampton and Montauk found their supplies of Whispering Angel, WattsUp, Domaines Ott, Summer in a Bottle, and similarly millennial-appealing names, found themselves running low.

These cleverly named Rose's not only drove an increase in instagram content but were staples of these local businesses' sales during their short summer season, helping drive the revenue that sustains these bars and restaurants for the rest of the year. Ultimately, the restaurants had to ration the pink gold and locales and people that had a hold of it commanded significant social credit, drawing customers and friends respectively. The fact that page six and glamour even ran articles about the shortage speaks to the varietal's meteoric rise and the social cache it has among the millennial cohort, and therefore its increasing importance within the wine industry.


Source: https://www.glamour.com/story/rose-shortage-anniversary

Birdhorse Wines - an enlightening adventure

As you all know, we worked with Tyler and his wonderful wine making partners on Birdhorse wines for our final project. When Tyler approached us about joining his group for the final project I was very excited. I figured it would be a great experience to take all the knowledge I had gained from class discussions and apply it. What we decided to do was basically build the Birdhorse team an investor deck / board update presentation. This allowed me to think through and work the entire spectrum of items necessary to launch (what I believe will be) a successful business. I had previously seen many investor decks and board decks, but never built one from scratch. For a consumer good, a space I had never worked in before, we brainstormed go-to-market strategy, marketing strategies, product-market fit, the products themselves (which varietals might be best for future years), sales techniques like limiting allocations of certain varietals, and of course, the unit economics and building out a fully working financial model based not on made up inputs or numbers in a case, but real expenses Tyler and co. have incurred over the last year+.

I found the experience to be extremely rewarding, not just because I learned a lot about launching a wine brand, but because I felt for the first time at this school like I had a hand in the launching of a business end-to-end (with the exception of actually making the wine, I guess), something I had not done in my previous work experience or any other class to date. In doing the project I also became convinced that Birdhorse has a unique and compelling story with founders who understand the millennial mindset and can appeal to them in order to sell their wine. It doesn't hurt that the product was great too! Overall, I am convinced Birdhorse will have no problem selling out their stock, and I had a great experience in helping in a small way!

Crimson Wine Group

Crimson Wine Group (ticker: CWGL). Look it up - it is a publically traded wine company (trades OTC I believe) that is a holding company for several wineries, including in Napa, Sonoma, Oregon, Washington, and other locations on the West Coast of the U.S. The company was a spin out from Leucadia (which bought and is now Jefferies), the holding company for Joe Steinberg. The company owns some premier brands, such as Pine Ridge and others, and while it produces wines and continues to make money, the real asset of the company is in the land it holds.

As a stockholder, I attended the annual meeting in Napa last summer (anyone who holds shares can too). First, contrary to Ilana's post early this quarter, they do pay dividends in wine :) (or at least they provide several free bottles of wine, in addition to tastings, for their shareholders who attend). More important to many of the discussions we have had about owning vineyards during the quarter, however, is that several shareholders at the annual meeting asked whether or not Joe planned to sell off the land and split the vineyards up. The reason being that the land is currently held on the companies book at the value purchased, something like $50mm, whereas current market rates would place the value of the land alone at $300 - $350mm. With the stock currently trading at only $200mm, many investors have bought the stock hoping that a savvy investor, such as Joe Steinberg, plans to sell off the assets, which would create significant upside for a currently "undervalued" stock. That said, my observations from the meeting are that owning the vineyard is much more of a hobby and passion - Joe, like others, probably likes to own the vineyard for sentimental and bourgeoisie reasons, rather than as an opportunity to generate immediate value through financial engineering. While I am sure Joe, or more likely his heirs, will eventually execute the plan many investors would like to see happen to generate significant returns, it is probably not happening any time soon - making this much less likely of a stock for immediate appreciation, and more of an exercise in trying to time the market (and Joe or his heirs' whims).

Bottigleria - Heaven in Venice

First, a shout out to Taylor, who's post about living in Paris and his experience with wine inspired me to write this post.

In the summer of 2011, I was living and studying in Venice, Italy. Up to that point I had mostly drunk wine at family events (usually at least halfway decent bottles), or extremely cheap crap in my freshman year at college. My wine pallet was due for significant expansion. That summer I became familiar with some of the nicer Italian styles, which have become some of my favorite since, such as Amarone, Chianti, Sangiovese, Barolo, Barbaresco, and many more. Though I tried some of these nicer wines, the truth was I had very little money for such purchases, so I drank these wines rarely. Much more common, and to some extent much more enjoyable, were my wine excursions to the local bottigleria on the island of Giudecca, a short walk from where I lived.

Bottigleria loosely translates to bottlery if such a word existed, or more easily understood, bottle shop. The bottigleria would bring in wine by the cask and unload it at the crack of dawn from small barges straight into the shop. I would love to watch the flurry of activity in the early hours of the morning, from the fruit vendors unloading their supplies into their carts and stores, to the fisherman offloading their catch to the local merchants, to the coffee shops just opening their doors to accommodate the flurry of business men and women who would be shortly inbound for Italians' favorite morning ritual.

I digress from the wine. The bottigleria would sell us the wine straight from the cask. We would bring our 1.5L water bottles that were always with us, line them up under the tap, and open it up. Filling the water bottle only cost 2 euros when I lived there. 2 euros for 1.5L of wine, what a deal! More meaningful though was how the wine tasted. It was fresh, unaged, rough, raw, and real, it came straight from the country side. It was as if you could taste the Veneto dirt in which the vines grew. Given how much wine we drank the price was an appeal too. I often think about how great the wine was and the phenomenal memories I made while drinking wine in Venice that summer. Cin Cin!

Let me clarify wine & food pairing - Hydrophobic

I may have slightly mispoken during Alder Yarrow's presentation (which I thought was great), but one of the winemakers I have visited in Napa provided a chemical explanation for wine and food pairing, as well as general wine enjoyment, that I found extremely compelling. As we all know, the best way to make a small fortune in the wine business is to start with a larger one - and for Mr. Hendry, that is exactly what he has done. He is an accomplished engineer, having owned and worked for many large corporations, but continues to grow and produce wine on his family's vineyard as his passion. When I visited, he showed us many of the ways he continues to try to innovate in the wine production process, bringing in newer scientific methods to supplement many of the traditional methods for production.

One of the most interesting insights he had, however, was that wines, particularly good red wines, have many tannins. What he then discussed was that tannins are in fact highly hydro-phobic. What does this mean? Hydro-phobic, from those who remember their cellular biology, means that a compound is phobic or hates water, such as the inside of the double lipid cell-memberanes that exist in each of our cells in our bodies. As we all of course recall, the way that membrane is structured is such that the hydrophillic ends point to the inside and outside of the cell, the areas that are water filled, while the hydrophobic ends point towards each other to prevent water from passing fluidly through the cell memberane, such that our cells can control the amount of water in them at any given time. Why is this important? Well typically when people drink a lot of red wine, they then drink water in order to try to sober up and continue being able to taste the wine. Given that tanic wines are hydrophobic, however, I learned that drinking water would not work, since the hydrophobic tannins, which line our tongue after drinking red wine, would simply repel the water. Instead, as Mr. Hendy suggested, we eat olive oil or other foods high in lipds (also hydrophobic), and since "likes attract", this would mean that the hydrophobic lipids in olive oil would bind with the hydrophobic tannins on our tongue, thereby stripping them away. This would permit one to drink more red wine and continue to experience the complexity and taste. Take one step farther - he logically concluded that the reason why red wines and more fatty meals, such as red steak, often pair well together is that the fats, or lipids, in the steak peel the tannins off the tongue, allowing us to taste the wine more, and vice versa, even enhancing the flavor of the other.

So while Yarrow may have been right that there is no strict pairing of foods and wine, at least from one smart chemical engineering wine-maker, it would seem to make sense that the pairing of foods and wines with the right balance of chemicals should make each more enjoyable. But I leave it up to all of you to test it over your break.

Wasps and wine making

I was reading a blog when I came across an interesting fact: wasps (the insects) play a key role in wine making. I had previously just thought they were annoying bee lookalikes who stung me in the muggy Augusts of my childhood. Alas, how wrong I was! It turns out that one of the main yeasts used for wine making is saccharomyces cerevisiae, which grows naturally on grapes. The fungus which lends the wine much of its flavor, dies off each winter. The fungus however, relies on wasps for preservation.

The adult wasps ingest the fungus before it dies off, then return to their nests to share masticated fungus with their larvae, thus ensuring that both the adult wasps and larvae have the fungus within them. The larvae and any surviving adult wasps then return to the grapes as the grapes begin to grow again in the spring, and the fungus is passed back to the grapes, allowing the wine to get its delicious flavor.

Source: https://www.celebrationswineclub.com/little-known-wine-tidbits/

Screw Tops

From what I have learned over the last several years from winemakers and others, the use of the cork is, these days, solely due to the nostalgia for the old ways. The common critique of the screw top is that it does not allow the wine to age vs. the cork, which due to its cellular structure, both helps seal the wine and also allows for a certain exchange of oxygen that helps wines continue to age. Screw tops, however, can and are now being made with micro-holes in them, that actually allow for the same exchange of oxygen. Furthermore, not only is this now possible, but because the screw tops are manufactured, the exact rate of exchange can be calculated, meaning that aging wine will be much less of a crap shoot, and much more of a scientific process, for the wine makers and for the consumers. While maybe a little less romantic than going into the cellar, grabbing an old bottle, and praying to the wine gods that it is still good, a more disciplined and exact approach should make the experience better for everyone, without sacrificing the aging that some of the great wines are able to continue to do once they have been bottled. Finally, screw tops are much cheaper than corks, and so while it may currently seem to be "lower" quality, there are many advantages and limited downside (other than perceived quality) to using a screw top with aeration.

Stellenbosch - an update

Matt and I did our midterm project on the emerging wine region of Stellenbosch, South Africa. Last week I was reading the New York Times, and to my surprise I found this article about Stellenbosch,  its wine, and its pivotal role in South African politics:   https://www.nytimes.com/2019/03/09/world/africa/stellenbosch-south-africa.html

It turns out Stellenbosch is an independent region that is dominated by rich white Afrikaners who own the wineries and tend to associate with the far right wing of politics in that country. They have enjoyed a life of good education (Stellenbosch is home to one of South Aftrica's most elite universities), Pinotage, and relative luxury. Until recently. Lately, their countrymen from the Eastern Cape Province, a mostly black and impoverished neighboring district, have migrated to Stellenbosch and begun erecting shanty towns on the winery land in an attempt to claim it for their own. The movement is being led by a man who goes by the name "Madiba" (like Nelson Mandela before him). The settlers have run out of options and land in the region where they came from, but the Afrikaners believe they are invading the territory as a political plot to overwhelm the vote and change the current vote. What makes it more interesting, and controversial, is that much of the land was granted to the Afikaners in long term leases by their pro-apartheid prime minister days before Mandela worked the deal to end apartheid. Furthermore, much of that land is actually publicly owned, but is on 50 or 100 year leases to the winery owners. This leads the settlers to believe they have a right to the land as it was granted improperly and should be available for public needs, but the government has been hesitant to be seen instituting land grabs, leaving the situation at a painful standstill.

As it stands, the environment is very tense, with the squatters unwilling to move, and at times becoming violent. The man they called Madiba spent six weeks in jail over an incident in which protesters threw bricks at the municipal building. The Afrikaners are considering selling parts of their land where the shanty towns have sprung up to avoid further violence, but there does not seem to be a resolution yet. Overall, this is a much more nuanced and updated view of the political situation surrounding Stellenbosch than our midterm research or presentation discussed, and provides an important consideration before any tourist makes Stellenbosch their next wine destination. 

WineInStyle

Selling the company, particularly to unknown investors comes with several risks. In order to determine whether or not Eberhart should sell, there are a few things that would be necessary to know about him, and, if he wanted to sell the company, about structuring the deal.

First, Eberhart probably should not have brought on the young new investors, who pushed for the new CEO, which also came with a desire to grow more quickly (or at least not brought on the CEO when the business was growing well already). While a standard playbook, it was clear (at least from the case) that the CEO, while experienced in growing a large brand in Japan, didnt have the dedication to the business to attract the right customers or grow the business organically. As such, by the end of 2006, the business was facing a precarious cash situation, that by 2007 was forcing Eberhart to consider selling the business to unknown investors.

For Eberhart, he first has to think about whether or not he wants to continue to own the business, and thereby be willing to potentially jump back in to more active management, or if he would rather sell the business and walk away with his share. If he really cared about the future of the company, he should probably not sell the business, but if he wanted to spend more time with his family and was comfortable with selling the business with the hope that with new investors, Khoo could grow the business, then a sale might be right.

Once Eberhart had made the decision of sale or no sale, he would have to be very careful about structuring the transaction properly. Given there is limited information about the new Japanese investor group, he should require a wire for a fairly large percentage of the company with the remainder to be placed in escrow pending final diligence. The key would be to make sure the money was already transfered (and preferably into a legitimate institution), such that as long as Eberhart and the company approved the sale post diligence, the purchase consideration would be immediately transfered.

All this to say, that based on the information provided it feels like Eberhart is less engaged with the business, should agree to sell, but should not make it immediate (or at least request the consideration be placed in escrow with limited recourse for recall by the new investors).

Cork Dork

Corks have been a part of the wine drinking experience for millennia.

In recent years however, winemakers have begun to shift away from natural cork to plastic, rubber, glass, or screw-tops - leaving us wine drinkers to wonder what the future of cork may be.

Cork comes from the bark of the aptly-named cork tree, and can be harvested once every few years while keeping the tree alive.

Cork has traditionally been an excellent solution for sealing wine bottles. It is flexible but tends to retain its shape, allowing it to be pressed into small bottle openings and then expand to seal them. It is ever-so-slightly porous, keeping liquid in but allowing a trickle of air in and out, so the wine can gently age.

But cork also poses issues. Cork is notoriously sensitive to "TCA" - a condition that can occur when certain bacteria or fungi naturally found on cork become exposed to chlorine, weakening the wine aroma and leaving behind a musty, "wet cardboard" smell. When a wine is "corked," TCA is usually the culprit.

In as recent as 2005, anywhere from 5-10% of wine bottles might have been "corked" to some degree. Recent processing technology and changes to the cork supply chain have dropped this number to 1-2%, but even this sort of spoilage is a burden winemakers would rather not bear. In addition, cork can be expensive, and cork prices fluctuate over time.

Many winemakers are breaking with tradition and using cork alternatives to seal their bottles. Plastic or rubber stoppers can somewhat resemble cork, but no longer run the risk of developing TCA. Screw-tops typically form a tight seal with the bottle, keeping the wine from aging but providing a convenient, inexpensive solution ideal for fresh young white wines not meant to be aged. Even glass stoppers are becoming in-vogue, particularly for roses, as they are elegant and also easily recyclable.

But cork still has its merits. As the "big cork lobby" - a real thing - points out, cork has benefits in addition to allowing wine to age. It is an all-natural product, avoiding the petrochemical compounds found in plastics that may leech into wine if aged for a number of years. It is sustainable, made from trees while allowing them to remain planted. And it just adds to the pleasant overall experience and tradition of opening up a nice bottle of wine.

Ultimately, cork's fate may rest, as all things in business do, on the fickleness of consumer opinion. Do "millennials" care about real cork? Only time will tell.

Decant

Decanting - pouring wine out of a bottle and into a separate, usually much wider container - is a common part of the wine ritual. "Wine is a living thing," they say. "It must be allowed to breath."

So what does it mean for a wine to "breath"? Decanting allows a wine to be exposed to oxygen, supposedly slightly oxidizing and revealing deeper aromatic subtleties, shifting its texture and mouthfeel, softening tannins, and generally improving the flavor.

But decanting is not without controversy. So-called "scientists" quibble with the idea that wine's chemical compounds could change so rapidly, in such a way that would actually noticeably alter the drinking experience.

There are some theories, however, as to the true effects of decanting.

Decanting can get molecules in the wine "moving," potentially more readily releasing volatile aromatic compounds that will make the wine's smell more apparent.

Decanting may allow sulfurous, carbon-dioxide, or yeasty fumes to escape more readily, leaving behind just the fruit scent.

For older red wines, decanting also definitely helps bitter sediment drop to the bottom, and avoid being poured into a glass.

So decant or not. It's up to you.

Foil, Foiled

So much of our modern world is shaped by vestigial design elements from a bygone era - echoes of traditions and solutions to problems past, no longer with practical purpose but left to exist, innocuous, benign, but somehow still just there.

Ashtrays on airplanes. Floppy disk "save" icons.

Why, I wondered, do we have foil covering the top of wine bottles?

Traditionally, as wine bottles were stored in ancient caves, rarely touched or observed for years, even decades, wine corks proved tasty treats for weevils, vermin, and other pests that don't pair so nicely with an aged cab.

Foil caps served to protect the cork, and wine, from invading species. Though once made with lead, today's foil caps are typically aluminum or plastic. They also will have a small hole punched in the top, allowing a bit of airflow to the cork and thus allowing the wine to gently age.

Thanks to the miracles of modern pest control, we've largely done away with the risk of cork invaders in our wine cellars. But the foil still remains, now just a standard, forgotten aspect to wine bottle design.

Leftover Wine

I spent two months living in Paris this past summer, at culinary school and generally embracing my millennial pre-business school eat-pray-love moment. The Parisians are a curious folk: at once laid-back yet uptight, carefree yet intense, liberal and flamboyant yet deeply protective of their culture and way of life.

One night after a friend's family dinner party, I stayed to help clean up. Thinking I was making myself useful, I began cleaning dishes. I washed the pots. I washed the plates. And then I got around to collecting the leftover wine glasses strewn throughout the small apartment.

One still had a few sips of Bordeaux left in it. As I moved to dump it in the sink, the grandmother, previously idly tidying up, whipped around, grabbed my arm, looked me straight in the eye, and said:

"On ne jette jamais le vin."

One never throws away wine.

She grabbed the glass - its owner having departed hours before - and knocked it back.

So it has become my life motto, my guiding principle both in the metaphorical and the literal sense, my "when life gives you lemons": one never throws away good wine.

But what to do with leftover wine, other than pound it like grandma fratstar?

Turns out there are a number of options:

- Cook with it! I've found nicely structured wine can last at least a few days in the fridge, maybe a week, if you replace the cork, and still be fine to cook with.
- Turn it into vinegar! With a bit of live, unfiltered vinegar, you can turn that red or wine bottle into red or white wine vinegar. Combine vinegar and wine in a glass carboy, cover with a cloth (don't seal!), and let sit for a couple months. Vinegar!
- Turn it into jelly! With a bit of pectin and sugar you can turn leftover wine into a delicious jelly dip. Goes great on a cheese plate or with dessert.

Or, you know, just finish the wine you open.

WineInStyle - Sell Sell Sell

Eberhart is faced with a tough decision, but to me the decision seems simple. For a moment, let's forget that we are at business school and that the question from the case should be addressed from a business standpoint, then the conversation becomes easy. I think Eberhart should sell the business, after first vetting the investor group, in order to both get some cash and to be able to spend more time with his family in Palo Alto and not concerned about his business and tied up capital in Japan. That being said, I think it necessary that Eberhart does his due diligence on the investor group to ensure they are legitimate and not scamming him, and to ensure that they will continue to build his brand in the future. The sum of money is also not insubstantial, at a time when spending time with his family is important.

If this investor group turns out to be illegitimate, he should still seek out new investors for the business, as exiting the business would also give Khoo more independence without the former CEO, Co-Founder and largest shareholder looking over his shoulder. Additionally, the business appears to need more cash to continue supplying to larger customers as well as to expand headcount. It is clear that Eberhart cannot continue to fund this expansion, and it is necessary to find an investor who can fund the expansion. Which leads me to believe he either needs to take another partner with deeper pockets and take dilution himself, but I believe it would be much easier and align more with his life goals to sell the business to the investor group, assuming they check out.  

Wine Dives

The Ridley team's observation that 80% of draft beers are drank by men in bars really struck me as a huge opportunity. It's true that many popular, crowded, and/or dive bars do not offer wine for logistical reasons (keeping bottle inventory, constantly opening new bottles when crowds are large and demanding, dealing with wine glasses, wasted wine, etc.). I love the idea of wine on tap for these reasons.

I also see canned wine (go Sarah and Kendra!) as a way to sell into wine demand in these types of bars. One of the most popular apres-ski spots on Park City Mountain, Pig Pen, historically has not sold wine, likely because it is so hectic in there. This year though I saw friends drinking Underwood canned wines and observed the busy bartenders literally throwing the cans across the crowd to people ordering wine. There is also a cultural stigma on ordering wine in dive bars and canned wine is a great way to "blend" into the scene as if you're holding a beer can. 

I hope to see more incremental or innovative ways of tapping into those of us who love visiting spots like the Nut House, but sometimes want a pinot, not a pint!

Wine In Style

Eberhart's goals are two-fold: (1) He wants to continue transitioning out of an executive role in WineInStyle and more fully hand over the reigns to Khoo, who has proven to be a successful CEO and (2) Support Khoo's operating and growth goals which certainly require a cash infusion of some sort at the current rate of scale.

If these are both true, Eberhart should sell WineInStyle. I do agree that Eberhart needs verification of the investors' legitimacy first, but if they prove to be strong investors it is time for Eberhart to move on. He will make a great return and be able to pull away from his management time and trips to Japan. Khoo will have the opportunity to take WineInStyle to the next expansion chapter on his own accord and with his local expertise.

WineBNB

In one of our recent classes we spoke about Airbnb's impact on the local hospitality landscape in places like Napa that have traditionally relied on tourism to the region to drive winery visits and tasting room sales. Though we noted that visitors, especially millennial consumers, are increasingly buying wines by the bottle and consuming from the comfort of a sofa or backyard, I believe there's an opportunity for vineyards to leverage the Airbnb platform.

Airbnb has been investing heavily in it's Experiences business, in which hosts sign up to offer visitors intimate, unique and creative, local experiences. At the beginning of 2018, Airbnb announced that it planned to Expand experiences to 1,000 new destinations by the end of year. Often, experiences are hosted by local individuals who want to share their passion for activities like photography, hiking or cooking. However, wineries could tap into Airbnb's growing popularity by marketing their tasting experiences and vineyard visits to consumers through listing on the platform.

On the site today, one can find opportunities for tastings in cities like London, Paris and New York, some of which feature experiences as simple as a trip to a local store followed by a guided tasting. Listings in Napa and Sonoma include food and wine walking tours, as well as visits to small tasting rooms. However, established and storied wineries, like those we saw in class, are notably absent. These wineries should leverage their brands and their often breaktaking vineyard properties to attract visitors to the area who otherwise might not be familiar with them or inclined to visit.

Source:

https://press.airbnb.com/airbnb-doubles-down-on-experiences-expanding-to-1000-destinations-and-adding-new-categories-in-2018/

Blue Apron Blues

Prior to the GSB, I spent three years working at Blue Apron, the meal kit delivery company. (Note, all comments that follow are my own interpretation and in no way reflect the position of the company.) In addition to its core product, which features pre-portioned proteins, produce, dairy and pantry ingredients along with step by step cooking instructions, Blue Apron also offers a monthly wine subscription service. Many of the wines are delicious, and are produced in partnership with vineyards or wineries located throughout the West Coast, Old World regions like Spain, France and Italy,  and New World regions like South Africa and Chile.

In order to sell direct to consumer, Blue Apron is registered as a winery and distributes to consumer's homes under its own license in all states where it operates. Operating as a winery allows the company to offer high quality wines at an attractive price point of $65.99 per 6 bottle shipment, or just over $10.00 bottle. As has come up a few times in class, Blue Apron wines clock in at smaller bottle size than the standard format: 500ml (which is enough for 2.5 glasses) v.s. 750 ml (which is enough for 4.5 glasses). The idea is that 500 ml is the perfect size for one or two people looking for just enough wine to accompany a meal.

Blue Apron wines come with beautiful tasting notes that detail the flavor profile of each wine, as well as what types of Blue Apron recipes/food flavors they best pair with.

Despite being a high-quality product offered by an established consumer food brand, Blue Apron's wine program has had limited success. I interviewed the program's director, Evy, to better understand why. Here are the themes that emerged:

1. Customers want choice: When the wine program first launched, customers received a monthly shipment of six wines (3 reds and 3 whites) but did not have any choice over the varietals or source regions. Although Blue Apron's back-end systems were eventually updated to allow customers to swap bottles in and out of their delivery, and to give customers the option of ordering a box of all red or all white wines, the program still did not take off. Evy shared that, while customers reported enjoying the wines, many wished they had the option to order as few wines as one or the option to reorder their favorite wine, options that Blue Apron's supply chain and tech infrastructure unfortunately do not support. Moreover, given the company's subscription model, it most constantly balance tradeoffs between variety and inventory costs/turnover.

2. Limited avenues for customers to try the wines: Blue Apron is not able to serve wines on premise at its own events (such as pop-ups), and has had limited resources to work with partners to serve it's wines at bars, restaurants and food markets. As such, there is no way for prospective customers to try Blue Apron wines, or even get a sample bottle, before signing up for a subscription account and committing to six bottles. This creates a high barrier for customers who are curious about the brand but are on the fence. Moreover, these challenges make it is difficult for the company to effectively communicate the quality of the wines.

3. Legal restrictions around referrals: Regulation prohibits customers of companies like Blue Apron from setting up automated referral systems in which customers can enter a friend's email address, click a button, and automatically direct their friend to the site and the account set-up flow. Instead, the laws dictate that the customer must actively and personally write a referral message (although it would be permissible for them to do so via the Blue Apron website). In other words, Blue Apron would have to rely on customers literally writing messages to their friends to recommend the wines, a far less efficient form of "word of mouth".

4. Limited technology resources: Not surprisingly, most of the company's in house technology resources are focused on the core meal-kit business. However, for the wine team, this reality has meant limited resources for back-end and front-end innovation that would enhance the consumer experience, and better allow Blue Apron to compete with companies like Winc, Wine.com and the like.

In short, a combination of business model decisions, logistical challenges, legal restrictions and limited technical resources have created significant headwinds for an otherwise excellent product.

Do our genetics dictate our wine preferences?

In class, we've discussed how discovering one's taste for wines is more about the journey than about the destination. In the class about the role of the critic, Alder Yarrow went so far as to call out the mere notion of "proper" food-wine pairings (e.g., red wines + red meat) as "malarkey" (great word). In short, though we've granted that differences in quality are real, we've largely concluded that wine preferences are subjective and inherently personal.

However, is it possible that our wine preferences are determined by our DNA? A company called Vinome has set out to answer this question. For a profile fee of $29.99 and a $40 DNA test, Vinome collects your self-reported wine-preferences and a sample of your saliva to and promises to "analyze your DNA and taste preferences, then match you with hard-to-find wines selected for your unique palate." Customers are categorized into one of eight groups with names like "Jam Dunk," someone who likes rich, jammy wines or "Bing is King," someone whose palate appreciates cherry and earthy flavors. The personalized report that customers receive also highlight the genes that influence one's perception of taste, and provides commentary on whether, for instance, one is predisposed to have a higher tolerance for acidic wines.

To taste wine's that match with their profile, customers can join Vinome's wine club or shop in their online store, with both channels promising access to unique, hard-to-find wines.

Critics question the legitimacy of the science behind Vinome's product, calling attention to the fact that some flavor preferences are learned (think: geographic variance in spice tolerance). However, some research has corroborated the possibility of genetics playing a role. Liz Thach, a professor of wine and management at Sonoma State University, published research showing that people form distinct groups of wine preferences based on natural characteristics including how many taste buds they have and how much saliva their mouth produces. She maintains however, that people can learn to like other flavors.

Maybe we should give Vinome a try and see how it holds up to our own intuitions!

Sources:
https://www.chicagotribune.com/bluesky/techandculture/sns-tns-bc-tech-culture-dna-wine-20180410-story.html
https://www.wineindustryadvisor.com/2017/06/30/vinome-dna-based-wine-experience

My Favorite TJ's Wine - Menage a Trois Midnight

Since I didn't have time to run to TJ's last week and buy everyone some bottles of my favorite TJ's wine, I figured I'd share it with you all here. It's the wonderful and very affordable Menage a Trois "Midnight" blend. 

I find the midnight blend to be a big improvement on the more well-known original "Menage a Trois". This one is 59% merlot, 16% cabernet sauvignon, 15% petite sirah, and 10% petit verdot. It's a dark and juicy wine, bursting with dusky flavors and ripe dark fruits. It's a total steal at $10-$12 a bottle. This particular blend of Menage a Trois is handcrafted in small batches, so sadly you can't always find it in the store. Admittedly, I find the branding of menage a trois to be a bit cringey. This is especially true on their website, where they REALLY milk the sexual innuendo branding: http://www.menageatroiswines.com/california-red-wine

Marketing content aside, this is a really great value wine, and in my opinion is by far the best of the menage a trois portfolio. If you see it the next time you're perusing the TJ's wine section, definitely grab a bottle or two if you like dark reds and you won't be disappointed. 

Wine and Climate

In Data & Decisions review this week, the professor highlighted a regression that was able to predict wine quality extremely well by looking simply at average growth season temperatures. This more than anything else was statistically significant in proving how good the wine was going to be. Is there really a magical temperature range that's the secret to great wine? And if so, is there any way you could build a mobile vineyard so you could truck it over to where the right climate was in years with bad weather?

To understand climate’s role in growing wine grapes, there are several factors to be considered:

• The weather and climate of the region
• The climate's suitability to different types of grapes
• The climate's seasonable and longer term variability
• The influence of climate change on all the above

Here are some cool charts that I found that dig into this in more detail. As we have learned, cooler temperatures yield more subtle wines, while hotter temperatures yield full bodied, fruity, sweet and higher alcohol wines. I'm guessing the study controlled for different grape varietals, otherwise I would imagine there are some biases in the results as quality cooler climate wines should in theory have gotten high marks as well. Another consideration would be where the ratings themselves are coming from. If the ratings used in the regression are coming from Robert Parker, for example, who prefers big, fruit-forward wines, then it makes sense that intermediate to warm climates would be the clear winners. Maybe there's a case to be made for educating wine drinkers more about what growing climates their taste buds prefer, so they can explore wines from the climate bands they like most, rather thinking about things just in terms of famous varietals and esteemed wine regions.

What makes for a great wine subscription?

According to CrateJoy, a purveyor of the "best monthly subscription boxes for everyone", a great subscription box has 7 components:

1. There is an existing community of enthusiasts 
2. The category is evergreen
3. The audience is looking to discover on a continuous basis
4. The need is recurring
5. The customer wants to make someone or something they love happy
6. The customer is sustaining an emotional connection
7. It’s a way of life

Is there a community of wine enthusiasts? Yes!

Has wine been around for centuries and will it be around for centuries? Yes!

Are people looking to discover new things about wine? Yes! 

Do people consume and drink wine frequently? Yes! 

Can you gift wine to others to make them happy? Yes!

Does wine inspire feelings? Yes!

Is wine drinking a way of life? Yes! (just look up wine art on etsy). 

So where do wine subscriptions traditionally go wrong? They fail to enable discovery on a continuous basis and they could improve the emotional connection. Quarterly wine subscription boxes tend to give people the same wines, in the same packaging year after year. This means when you open the box there is no joy of discovery or learning. It commoditizes the experience. If vineyards want to do something to reduce churn they need to find a way to make each shipment a unique experience from the last one. A couple tactics that come to mind are unique art, fun stories around the wine, partnerships with other vineyards to offer new wines, experimentation with new varietals, learning about how that year's box of wine is different from the last and so forth. By improving the wine box experience wine companies can increase discovery and improve emotional connection reducing churn in their subscription boxes. 

Champagne and Swizzle Sticks

While watching the final presentation on Ridley and thinking about how the carbonation in the champagne would be impacted by being poured from a tap into a large pitcher, I was reminded of something funny I learned about bubbly a while back. In the late 19th century, glass stir sticks were made for the purpose of removing the carbonation from sparkling wines, because the natural effervescence caused "indigestion" for some people, and burping was considered even more impolite back then than it is today.

These "swizzle sticks" were swirled around in the glass to get the carbonation out. The sticks had small perforations on them to create nucleation sites, which assist the physical separation of solid, liquid, and gas. (nucleation sites are also the science behind how the exploding mentos and coca-cola trick works). 

Swizzle sticks became more popular after the Queen Victoria and other fancy women of her era used the sticks to stir the bubbles out of their Champagne, thus preventing what was considered to be quite unladylike emissions of air later on. Eventually, though, the bubbles in champagne came to be viewed as something fun and special, to the point that today champagne bubbles are one of the main symbols of celebrations around the world! I know that I for one hate drinking flat champagne so I was very surprised to hear that this used to be the trendy, refined court lady thing to do. It goes to show you how much our drinking habits are dictated by what is considered cool or appropriate, even if it's at the expense of a superior drinking experience. 

Phylloxera 101

What is phylloxera and why do we care?

Phylloxera is a almost microscopic pale-yellow insect that feeds on root and leaf sap. The deformations that they produce slowly cut off the flow of nutrients and water to Vitis vinifera grapes.

Since Phylloxera is native to North America, American grape varieties have developed protection mechanisms such as sticky sap that clogs the mouth of the Phylloxera nymphs when they tried to chomp down. Even if the nymph manages to chow down, the American roots cover them in a protective layering so the cut doesn't lead to fungal or bacterial infections.

Phylloxera is a winemaker house name because it almost led to the extinction of European Vitis vinifera grapes. In the late 1800s when a naive botanist brought American roots to Europe, Phylloxera hitched a ride. After being planted in European soil the insect took off chomping down on unprepared and unprotected Vitis vinifera plants. Supposedly the majority of the European wine crop was lost until they started grafting onto American rootstock such as Vitis Riparia.

Wine Honey

Most Vitis Vinifera grapevines are Hermaphroditic, meaning they have both the male and female flower parts and are able to self-pollinate. However, both wind and bees can aid in pollination. 

There are several downsides to using honey bees for pollination. For example, cross pollination will occur. Cabernet Sauvignon actually comes from a crossing of Cabernet Franc and Sauvignon blanc. Having honey bees do the pollination means some of your grapes might not be of as pure of a variety as you'd planted.

Secondly, if the vinyard is not sufficiently biodiverse the bees will start to suck the sap out of grapes that have cracks or punctures. If the vineyard is biodiverse and healthy this should not be an issue though.

Finally, if a big draw of your winery is the location itself. Many people are scared or allergic to bees. Having them around can create a less pleasant atmosphere.

So why have bees?

1. Biodynamic wineries often keep honey bees to help pollinate the wine. This is a more natural methodology and aids in fertilization. 
2. You get amazing grape honey that you can sell 
3. Honey bees are important to the ecosystem so keeping them is good for the world 

WineInStyle

It seems like there are three main areas of concern for Eberhart in deciding to sell WineInStyle:

• Personal: the case made it clear that commuting to Japan had taken an emotional toll on Eberhart's family. However, by bringing on a full-time Japanese CEO, Eberhart's time commitment to the company had been reduced. 
• Cash Crunch: the company is at a place where it needs to raise money to finance their expansion efforts. It is 2007 and financing from the United States is about to be difficult to secure. Theoretically Eberhart could look elsewhere for financing but it might be a very painful task. 
• Reputation of the company: Eberhart cares about the reputational well-being of the company he built and wants to leave it in good hands. 
• Profit: Eberhart cares mostly about profit. The last valuation of the company put it at $10 million, given the growth in revenues and market growth, it's realistic to believe the current offer is for $20 million or more. He has given away over 45% of the company. Assuming he owns 30%, this would be a generous payout of $6 million. Even if he only owns 20%, the payout would be $4 million. Given that he worked for 9 years (receiving a salary for only 2) he would get around half a million per year that he worked. This is not a bad deal. 

Given these factors, I recommend that Eberhart sell and invest his money after the financial crisis in the United States. Since he'll be cash rich going into a recession he will be able to make higher return than he might've been able to do on WineInStyle. 

Native American Wine Grapes

Most of the grapes we learned about in class all come from the same species, Vitis Vinifera. Now grown on every continent except Antartica, Vitis Vinifera was first cultivated in southeastern Georgia and spread by humans.

Vitis Vinerfa acounts for 5 thousand to ten thousand different varieties of grapes, including most of the grapes we're used to drinking. Pinot Noir, Cabernet Sauvingon, Chardonnay,  Zinfandel,  Carmenere, Sauvignon blanc, and more are all examples of Vitis Vinerfa varietals.

Vitis Vinerfa, however, is not the only species of grape. Vitis labrusca, Vitis riparia, Vitis rotundifolia, Vitis aestivalis, Vitis rupestris, and Vitis mustangensis are all grape species native to North America and capable of producing wine.

Vitis labrusca, a species native to Eastern North America, produces the flavor we typically think of as "grape". Varieties include: Antoinette (white), Catawba, Cayuga (white), Concord, and Niagara. Wines made from Vitis labrusca are generally quite sweet with a "foxy" musk that comes from methyl anthranilate.

Vitis Riparia is most famous for saving European grapes from ruin during the Phylloxera crisis. European grapes were grafted onto Vitis Riparia roots. Notable varities include Bacchus, Baco Noir, Elvira (white), Frontenac, Marechal Foch, and Triomphe d’Alsace.

Vitis rotundifolia is native to the Southeastern United States and is best known for Muscadine  or Scuppernong grapes. These grapes are high in anti-acids and have recently been show to reduce the build up of fatty liver, a major cause of obesity.

 Vitis Aestivalis is known as the summer grape and is native to eastern North America from Southern Ontario to Florida. The best known variety, Norton, is considered to be the oldest cultivated grape in the Americas. Norton is also considered high potential for fine American wines because it has a lower acidity, neutral, "vinifera-like" flavour profile.

Vitis Rupestris hails from the Ozark Hills of Missouri and Arkansas, but has been used for a number of French hybrids including Chancellor, DeChaunac, Aurore, Vidal Blanc, and Vignoles. Vitis Rupestris is known for doing well in sandy soils.

Finally, Vitis Mustangensi is known for the iconic Mustang horse. Native to the Southern United States, Vitis Mustangensi is considered to be bitter with high acidity. Not a lot of winemakers are currently using Vitis Mustangensi, but they could produce interesting wines.

Information from Wikipedia and WineFolly

Mega Purple: Constellation's Chemicals

I have heard that mass-produced wines, or cheaper wines, i.e. those under $6 or so at TJ's (we're talking Two Buck Chuck and Barefoot) have terrible chemical additives that you should avoid at all costs. I looked into this further and found out that there are over 60 federally approved additives for wine. Why!?

The cost to produce wine has risen over 17 percent in the past decade (California grape prices increased over 46 percent). Large wineries have been turning to chemical additives and other technology to keep up the pace of demand for cheap wine with a "quality taste" and lower overall costs.
For example, mass-produced wines often pass through huge steel vats with hundreds of gallons of wine and are infused with oak extract, chips, or a liquefied product to create the flavor of real oaken barrels, for instance.

The worst process I discovered though is the addition of mega-purple or mega-red. Mega-purple is concentrated syrup made from Rubired grapes and is a thick goo that winemakers use to correct color issues. It can change a bottle from a "weak salmon blush to an appealingly intense crimson" and ensure consistency. For scale: in 119-liter barrel, 200 milliliters is all you need.

Little surprise that mega-purple is made by Constellation Brands. Most winemakers will not admit using it, but industry insiders say that even high-end winemakers have used it to earn better ratings and prices.

https://www.smithsonianmag.com/science-nature/science-behind-your-cheap-wine-180962783/
https://www.wired.com/2014/04/how-to-make-wine-taste-good/

Using Fiverr for wine bottle design – takeaways & lessons

For our final project we comissioned artists on Fiverr to design bottles for us and like wine you get what you pay for. Here are some thoughts on the experience:

• Samples are generally an artists best work. Know that their samples are the best quality you could possibly receive and be okay with that. 
• Color selection is key. Make sure to show them shades and colors upfront otherwise you will be surprised by red and black color combos. 
• Leave weeks of time for revisions. The first couple drafts will likely not be what you're looking for. 
• Overall Fiverr is great because it's very cheap. We spent $7 with a couple artists to get a number of potential logos, but it is probably best if you already have an idea and need someone to iterate on it. 

Naming Wine Brands for Millenials

For our base marketing class we had Alexandra Watkins as a speaker to teach us how to better name products. Given all the creative wine brands we saw this quarter, I wanted to use her playbook for how to create wine bottle names that appeal to millennials. 

A good name should be suggestive, have meaning, convey images, have legs and arouse emotion. 

• Suggestive --> reminds people of your brand (list of adjectives around your brand to inspire it)
• Meaningful --> customers understand it without explanation
• Imagery --> people better remember names they can associate with places or images. Make the name easy to remember.
• Legs --> reinforce the name through other products (Duckhorn was a great example of this) and places such as your tasting room. 
• Emotional --> the brand makes you feel something positive such as joy or warmth. 

Brand names should avoid names that are difficult to spell, copycat another brand, limit brand growth, annoy the consumer, are boring, only insiders can undertstand, and are difficult to pronounce. 

I

Using KPMG's "Meet the Millenials" guide and other online sources I created a stereotype of millenials. 

• Digital Native
• Curious
• Accepting and embracing of difference
• Love balance and flexibility

Based on this information I came up with a couple names to capture millenials. 

• Bottled Sunshine
• Open Air
• Velvet Blush
• Velvet Dark
• Rosebush Blush
• Rosebush Red
• Cartless Horse
• Wild Weekend
• River Weekend
• Body Electric
• Moonlight Liberation
• New York Native
• Outdoor Summer
• Blushing Pony
• Redtime
• Sunkissed Blush
• Dark-Kissed Red
• Summer River
• Winding River
• Roseleaf Blush
• Roseleaf Red
• Andante
• Fuga
• Warm Blush
• Acoustic Red
• Jack & Rose
• Riding Hood Red
• Picnic Wine
• Sunshine blush
• Bottled Weekend
• Liquid Weekend

 

Artist Bottle Labelling

In 1924, Jean Carlu, the 1918 Designer of the year, created an original work of art for the Chateau Mouton Rothschild vintage. Carlu was known for his clean lines and created a cubist sheep.

Wine and art go together and it's not surprising that Chateau Mouton Rothschild was one of the first wineries to create a tradition of an annual original artwork to commemorate each vintage. AFter a hiatus, Rothschild started the annual vintage artwork program in 1945.

Famous artists that have featured their artword on Chateau Mouton Rothschild include:

• Salividor Dali for their 1958 vintage. The surrealist gold sheep he drew for the bottle was considered "child-like".
• Joan Miro for the 1969 vintage. He drew a large bright red grape with blue and yellow colors as a nod to the Rothschild Family racing colors. 
• Marc Chagall for the 1970 vintage. He depicted a mother feeding grapes to her child and a bird eating grapes off the vine. 
• Wassily Kandinsky for their 1971 vintage. He painted an abstract piece that belongs to his "archetectural" era. 
• For the 1973 vintage, the year that Pablo Picasso passed away, Rothschild with permission from the Picasso family estate used one of his paintings that they already owned to decorate the label in homage to him. 
• Andy Warhol for the 1975 vintage. Inspired by Baron Philippe, Warhol created a label with different images of the famous Rothschild. 
• Keith Haring designed a satirical Dancing Rams artwork for the 1988 label. 
• Jeff Koons for the 2010 label drew a vessel in silver over the famous Pompeii fresco the Birth of Venus. 

Information from Chateau Mouton Rothschild's webpage. 

The World's Worst Wine?

There are a lot of posts on this blog about the world’s most expensive bottles of wine or the world’s highest quality wine, but I recently got thinking in the other direction: What is considered the world’s worst wine?  Googling around produced some quick, incredibly cheap winners like the fortified MD 20/20, jug wines like Carlo Rossi, traditional boxed wines like Franzia, and really anything made by yellowtail.  A Bloomberg article that did a special on Trader Joe’s and Walmart wines picked out the Walmart Winemaker Selection Sparkling Rose ($13) as particularly bad given its sweet, gummy aftertaste. They also highlighted TJ’s Charles Shaw Shiraz as tasting like burnt matches.

  Those findings were a helpful start, but I wanted to dig deeper and find a more legitimate, supposedly reputable wine that was absolutely terrible.  Ultimately, the best and most prominent example of awful wine I could find was not actually the fault of the winemaker, but rather the cork put on the bottle.  In the mid-80s, a famous wine producer named David Bruce was gaining a name for himself in the Chardonnay game.  Unfortunately, his 1985 vintage was plagued by a complete case of cork taint that made his wine almost undrinkable by the time it hit consumer’s tables.  It seems that the corks had originally been for Robert Mondavi, but were rejected as bad and the producer, not wanting to make a loss, turned to a less experienced winery to make his sale.  Bruce was essentially driven out of the Chardonnay business when customers lost all trust in the brand, but thankfully he was able to switch gears and his now known for fine Pinot Noir.