Social Lubricant

Last week, Jessica Kogan, from Vintage Wine Estates, lamented on why there isn't more press about the benefits of wine.

This got me thinking about an article in the FT that I read this summer, titled "Why drink is the secret to humanity’s success."

A summary of key points:

• The best predictor of happiness and longevity is the number of close relationships in a person's life. People with a good number of relationships are likely to be moderate drinkers; they're the type of people who will meet friends for a pint after work.
• Alcohol encourages us to open up and release endorphins "It isn’t just because alcohol causes people to lose their social inhibitions and become over-friendly with our drinking chums. Rather, the alcohol itself triggers the brain mechanism that is intimately involved in building and maintaining friendships in monkeys, apes and humans. This mechanism is the endorphin system."
• A study at the University of Oxford found that people who were regulars at a local pub were happier, more satisfied, and had more friends than both those who never drank and those who did not have a frequently visited local bar.

The article does not argue that alcohol itself is inherently beneficial. Drinking a glass of merlot alone in front of the TV, while perfectly enjoyable, won't bring you a lifetime of happiness. Instead, alcohol is a mechanism through which we forge meaningful relationships, and those are what make us happy in the long run.

So, on that note, who wants to meet up for a glass? 

Expensive Wine Tastes Better.... Kind of

Yesterday's class got me thinking about how wine is priced.  More specifically, one of us asked the question (I'm sorry that I forget who it was), "How does Far Niente decide where to price its wines. Some are hundreds of dollars and some are ~$50?" As I recall, the response to the question was about consumer WTP that is associated with a brand as powerful as Far Niente.

While I didn't expect Far Niente's $500 wine to be 10 times better than its $50 wine, I was a bit surprised to hear that the quality of the wine is all but a non-factor in the consideration of price for over $50 wine. So, I started reading online about how wine is priced and what correlation the price has to quality or consumer preference. I found this video to be a good summary (please watch till the end, rather than throwing tomatoes in the middle):  http://www.openculture.com/2017/11/expensive-wine-is-for-dupes-scientific-study-finds-no-strong-correlation-between-quality-price.html

There are a couple major takeaways from the video:
1. The distribution of wine awards is highly inconsistent.
2. The average consumer frequently prefers cheaper wine over expensive wine.
3. #2 is true, unless the person knows the price of the wine, then they like the most expensive wine the best.

It's amazing to me that knowing the price of the wine actually causes a noticeable change in the enjoyment/preference of the consumer. If I tell you that you are drinking a $100 bottle, you will like it more. I suppose this is obvious if you think of nice wine as a luxury good, but if you think about it was a beverage, it's nuts.

A case for luxury retail brand / wine partnerships in China

Thinking back to last week's case on Wine in China, I was reflecting on how French wine was described as "the ultimate status symbol among China's wine consumers." The consumer perception that Bordeaux and Burgundy wines are by default more high-end than wines from anywhere else in the word gives wine producers and exporters from these regions a huge competitive advantage. Given the preference in China for luxury, brand name products, I think that wines from other regions seeking to make a similar status-play in the Chinese market should consider a marketing partnership with one of the top international retail brands.

This is not to say that they have to go the LVMH route and actually get into both the luxury apparel and wine markets (though that has certainly been a winning strategy for LVMH). How about a Mumm Napa / Tiffany & Co partnership, for example? To be fair, when I first pictured this, I was considering partnerships with the most popular luxury brands in China (Chanel/Cartier/Gucci etc.) but I doubt these European-based companies would be too eager to align themselves with wines from the US. Perhaps this luxury brand affiliation strategy is not best for Napa wines then? Italy, on the other hand, could definitely move the market with a well-executed Versace or Gucci partnership. And just think how gorgeous the ads would be! The wines in question could even take a page out of Lafite Rothschild's book and use packaging tactics like placing the Chinese character for the lucky number 8 on their bottles. And why not on the luxury clothes as well? An exclusive line marketed directly at Chinese consumers that involves both exclusive wine partnerships and includes nods to important elements of Chinese culture could ignite demand and create status symbolism around many deserving regions beyond just Bordeaux and Burgundy.

What to learn from Mondavi in China

If you go to China's top supermarkets, you will see Mondavi dominating the wine section. This article highlights three key lessons to learn from Mondavi's launch in China in retail and online:

1. Content matters: creating stories, videos that bring the whole cultural experience online
2. Localization: including changing the tasting notes, replacing gooseberry which is not common in China, and adding lychee
3. Use big data to understand customers including age, gender, and other social and demographics characteristics for better targeting

More here:
https://www.alizila.com/three-things-mondavi-selling-wine-china/

Own your own AVA?

I came across an interesting SF Chronicle article yesterday about a small AVA being up for sale for $3.3 million.  Looking at the map in the article, this plot of land looked significantly above where Napa and Sonoma are.  With our final projects, I began thinking how I might use a "large fortune to make a small fortune".  What we haven't discussed yet in class is the water consumption and how strategic of an asset it is (or whether the real estate agent is simply trying to drive a higher price).

With the major droughts in California over the past decade, at first glance this winery seems to have attractive traits to succeed.  What gives me pause is the latest owners selling after just three years.  Are there more challenges here than meets the eye?

Boozy Brotherly Angst

Reading the Mondavi Winery case, my jaw actually dropped when I read that in fighting over moving toward a new way of making wine, Peter accused Robert of stealing money from the company, and after being denied the apology he sought, Robert struck his brother and was barred from the business.

It immediately reminded me of an article I had read about a pair of twin brothers who both brewed beers and could not stand each other.

Their story is an interesting one - they grew up in Denmark, and until 2010 they worked together, not always harmoniously. Jeppe Jarnit-Bjergso, on the left, started a beer club and in 2005, opened a speciality beer store called Olbutikken. Mikkel Borg Bjergso, on the right, was the tinkerer who started creating craft beers, founding Mikkeller and becoming the marquee beer at his brother's store. It all fell apart when Mikkel opened his own bar in 2010, not far from the bottle shop, and began competing. Jeppe then decided to create his own brewery; he first decamped to Brooklyn, then cheekily named it Evil Twin. Legend has it they've hardly spoken since.

Evil Twin is all over the New York beer scene; Covenhoven, my local and wonderfully loved beer bar in Brooklyn, used to stock it all the time, and I've had a number of their generously high abv imperial stouts. Jeppe and his wife also operate a Danish restaurant and bar called Tørst that pairs their foods with his beers. I never saw Mikkeller beers as often in New York, but it turns out the Danish brand has physical presence on the west coast, with beer bars in both LA and San Francisco.

Until last year, both brothers were "gypsy" or phantom brewers - they borrowed space from other brewers to make their beers, rather than owning breweries of their own. As if to add another chapter to their rivalry, they both decided to expand operations at the same time, opening breweries and taprooms in 2018, and both doing so in Queens. Coincidence?

I find it striking (and disappointing on this side of the country) that they both plan to lean into making some New York themed beers that are only available in the state. How much of that has to do with developing a local brand and mystique, and how much of it is due to issues with distribution for a niche beer in the 3 tier system? I had never really thought about how beers make themselves available around the country before this quarter, and I'm looking forward to figuring out the answers to that question.

Let's Hear it for the Pinot

With good reason, Northern California wines are best known for their Bordeaux-varietal based reds.  As we all know and remember from lecture, these grapes are Cabernet Sauvignon, Cabernet France, Merlot, Malbec and Petit Verdot.  Since California, and specifically Napa and Sonoma, produce such high caliber wines of these varieties, it is known globally as one of the best producers of Bordeaux-varietals, often winning awards over similar wines produced in Bordeaux itself.

While that's all well and good for California Cabs and whatnot, I'd like to give some credit to a less celebrated California varietal that I believe is also producing amazing wines, just without receiving the same praise.  I've been fortunate enough to taste a few different Pinot Noirs produced in California in the last year, and am always surprised at how great of a quality I'm getting for the price I'm paying (and am thus surprised by the quality I'm getting for the lack of label notoriety).

Two specific wines that come to mind here are Rhys Vineyards (https://rhysvineyards.com/), which grows its grapes in the Santa Cruz Mountains, and Williams-Selyem (https://www.williamsselyem.com/), based in Healdsburg.  I had the chance to try a glass of Pinot from each of these labels (can't remember the vintage, sorry!) at family dinners over the holidays and was blown away by the flavor profiles of each.  This led me to do a bit of research on the two labels, since I hadn't really heard of either of them.

Both Rhys and Williams Selyem appear to be what are known as 'Cult Pinot Noirs,' which are Pinots that have extremely small and selective distribution lists and sell the vast majority of their wines through said distribution lists.  Not only does this create a scarcity of supply (and thus drive up price for those who can purchase either on lists or via secondary markets such as auctions), but it also (intentionally or not) perhaps quiets general consumer knowledge of a given wine.  While connoisseurs will know about the great cult Pinots regardless, I wonder whether being a cult Pinot can hurt your brands reach to the more average, everyday consumer.  And from a more macro perspective, could having some of the top Pinots of California be under this cult strategy ultimately be a major contributing factor to the Bordeaux varietals being far and away the most well known grapes that produces California reds?  Hard to say, but given how great these cult Pinots I've tasted are plus the fact that so few people have heard of them, I suspect there might be something that's worth unraveling further!


http://www.princeofpinot.com/article/2048/