Customer experience: An Aussie abroad

The obligatory 'Euro Trip'

Australians are notorious travelers, and I often encounter them even in the most remote, furthest flung parts of the world. This is perhaps driven by our remoteness from the rest of the world, and the desire for Australians to 'see what else is out there'.

It is customary for many young Australians to take a trip to Europe. This trip often takes place at a key 'coming of age' moment (either between high school and university, or between university and full time work). 

In my case, I traveled in Europe in 2013 for nine months between college and starting work. Two memorable moments of this trip were my visits to two of Europe's wine regions: Burgundy (Bourgogne) in France, and the Duoro Valley in Portugal. These two experiences shaped my relationship to wine.

Burgundy

I arrived in Burgundy with my girlfriend halfway through my European adventure. We were in our early-mid 20's and were still developing our palate for wine. We were also slightly disheveled in our dress after traveling for an extended period.

We excitedly called some wineries and tasting rooms to see if they were open. We made appointments where necessary. However upon arriving at almost all of these wineries we were met with what (felt) like looks of disgust. The purveyors looked us up and down and (seemed) to think "Who are these scruffy, young, uncultured tourists? They clearly have no money to spend, so why should we bother with them?".

Several vineyards told us they were closed and could not see us--this was despite the fact we had phoned ahead and they'd told us they were open. We also saw older, wealthier looking couples merrily walking in and out of these same vineyards carrying cases of wine. We felt bitter and resentful--we weren't excited to drink Burgundy wine anymore.

Eventually we found a local gentleman who would serve us. He was a teacher at the local sommelier school, and he walked us through a private half-day course on wine tasting, and on interpreting the local naming and labeling conventions. This gentleman salvaged our Burgundy experience for us.

Duoro Valley

Later next month we arrived in Porto in Portugal, and planned to take a tour of both the tasting rooms in that city, and the wineries in the nearby Duoro Valley. Porto is famous for its (eponymous) port wine, of which we both had never tried and knew nothing about.

Upon touring the Duoro Valley we were pleasantly surprised by the warm welcome we received by the various wineries. And a local tour guide even took us to a tiny, dusty hole in the wall (filled exclusively with elderly men) where the bartender offered us a tasting of 100-year old tawny port for what felt like only a handful of Euros.

The value of customer experience

Since visiting Burgundy, I have had a begrudging relationship with French wine (‘it is snobby, overpriced, overrated’); since visiting The Duoro, I affectionately seek out the wineries I visited when scanning a wine list (‘they are quality and value for money’) and I’ve developed a taste for Port.

This has taught me the value of customer experience: a tasting or visiting experience can make or break a customer’s impression for a lifetime.

Wente - why didnt it become Monsanto?

A slew of posts from me, as I've been a bit delinquent, but this is a short one.

So, I asked the question in class, but I still wonder, why didn't the Wente family patent their strain of the Chardonnay, the Wente Clone.

Monsanto is a massive, U.S. agricultural and agrochemical company, which was bought by Bayer last year in a $66Bn merger. The reason I mention Monsanto is that they have been producing genetically modified strains of corn and other agricultural products for decades. In addition to creating such strains, they have also been patenting these strains as proprietary inventions. While Monsanto is an unpopular name among the general public, they have been using GMOs and now new gene editing technology, such as CRISPR to create new strains of crops for decades. They are then able to sell these crop strains to other farmers and reap substantial financial benefits. There was even a Supreme Court case (too many legal references, I know), upholding their patents in 2013 and their right to control the distribution, sale, and use of such products.

One wonders why the Wente family, with its extremely popular chardonnay clone, never patented their own genetically modified strain. Perhaps being a wine grower in a small community means something different and leads to more humanistic tendencies than a pure profit seeking company. Had the Wente family had the foresight, however, they might be able to extract large rents from all the wine growers across the state who make the very popular Chardonnay with the Wente Clone (then again, that might mean higher prices for all the white wine drinkers out there). Any way food (or rather cheaper Chardonnay) for thought.

Legal Opinions are No Fun

Ok so this post is a little bit stale, having sat in my drafts for a while, but here it goes:

In class two weeks ago, we heard about the 21st amendment's 2nd clause, the three tiered system, and Granholm v. Heald (including meeting with the lawyer who argued it in front of the Supreme Court - no small feat and a true honor to get to hear from her). When discussing the ability of the federal government to regulate beer, wine, and liquor under the commerce clause, many thought that was unfair and that the rules were complex and out-dated.

The history of Supreme Court ("SC") rulings regarding the Commerce Clause, however, yields a much more complex history. In the early 1900s, the courts operated under the decision of the Lochner case, known as the "Lochner Era", where the SC used the Due Process Clause of the 14th amendment to protect economic rights, i.e. freedom to contract. This meant that state laws establishing minimum wages, limiting the number of hours worked, or price floors were illegal. It would also have meant that imposing labor standards, such as maximum hours for women, would have been illegal (but the courts justified protecting women as they were viewed as a separate class at the time). This changed during FDR's presidency and the New Deal. After FDR threatened to pack the court, the SC upheld a law enforcing minimum wage under the theory that the constitution does not protect freedom to contract, only the inability to deprive someone of their liberty without due process of the law.

For the purposes of this class, however, there are several laws and rulings that were passed regulating agricultural products that the SC upheld, which are not dissimilar from the laws regarding production, distribution, and sale of alcoholic beverages. In midst of the Great Depression, several laws were passed to limit the production of agriculture, such as wheat, milk, etc. In 1942, in the case of Wickard v. Filburn, the SC upheld the Agricultural Adjustment Act which limited the amount of wheat a farmer can grow, which was intended to control supply and thereby stabilize prices. Filburn argued that he should be allowed to produce additional wheat outside of his quota for personal consumption by his family and his livestock. The SC disagreed and upheld the law, stating that if he and other farmers all did the same thing, then in aggregate their additional production would impact consumption and impact the market (what became known as the "aggregation principle"). Therefore, even though the production did not enter the "stream of interstate commerce", the behavior would impact the overall market in aggregate and therefore could be regulated.

In the case of conflicting state vs. federal law, the SC can act as a good arbitrator, such as in Granholm, but in other instances, Judicial Activism may not be as favorable when Congressional Acts that many support are overturned. In Granholm, the class was clearly excited for the SC to overturn what was an apparent conflict between state law and federal law, whereby State law tried to advantage in-state producers and sellers, over out-of-state producers. The SC, as we know, held that this was in contradiction to the Commerce Clause and that the 21st Amendment was not regulating interstate commerce, only creating a uniform system by which all states, and those businesses within them, had to operate. While we may applaud the SC for its decision in Granholm, there are other cases in the modern era of interpretation of the Commerce Clause, where the SC overturned various Acts as not substantially related to the Commerce Clause. In U.S. v. Lopez, which ushered in a modern era of interpretation concerning the Commerce Power of Congress, the SC overturned the Gun-Free School Zone Act and held that Congress could not prohibit the possession of firearms in school zones, as there was only an attenuated link to interstate commerce for guns, and therefore an inability for Congress to regulate them near school zones under the Commerce Clause.

So while we may think that Congressional laws regulating various economic products across states should not necessarily exist, such as in the case of alcohol, there is a long history of why it may be necessary and why, in the case of Granholm, the use of the Commerce Clause is helpful in order to overturn discriminatory State laws towards out-of-state producers.

Wine ads for a new generation

Well that Super Bowl was a real yawner...The ads surely kept us all glued to our seats though.

One wine ad by [yellow tail] made its way to dozens of markets:

This represented quite a shift from the company's 2017 ad, which was called by many as the "worst ad" of the Super Bowl:

I'd bet [yellow tail] at least did some research on what it takes to appeal to the mass wine consumer, and there appears to be a clear attempt to go after the fun-loving millennial, similar to what we might expect from a Bud Light commercial (apparently 78% of Super Bowl viewers say "beer [is] an important part of their gameday experience").

[yellow tail] represents a departure from other wine ads, such as Brokenwood, which shoot for portraying the purely authentic:

Or try Rutherford, or Jacob's Creek. They love piano and dramatic imagery of wine bottles:

Or how about he most boring ad ever made:

There might be a lesson: if a market is dominated by ads that don't target millennials, therein lies an opportunity. Take it from [yellow tail], who has grown into one of the biggest wine brands in the world by targeting a new kind of consumer, one ready for affordable, playful consumption.

Wine-Tech: B2C and B2B Wine Technology Businesses

Entrepreneurs far and wide are trying to cash in on building products for wine consumers (B2C) and winemakers / retailers (B2B).

On the consumer-side, two themes stand out:

• Wine Preservation
• Subscription Wine Services

And, on the B2B side:

• Inventory Management
• Winery Management

The consumer businesses seem to be attracting far greater venture funding, given the large market opportunity versus the limited market within the B2B wine realm. 

If I were budding entrepreneur in the space, the B2B businesses seem potentially interesting if purchased through a search-fund model. Also, there appears to be a gap in the market for wine-focused marketing solutions --- as we continue to hear in class, winemakers have very specific needs when it comes to marketing their products; it seems like there might be an opportunity to build a niche product or services business in this segment, particularly if the entrepreneur (me?? you?!) can build a database of wine consumers & preferences over time and action them through online marketing or through direct mail.

Here's a list of some companies playing to both sides of the space:

B2C

• Coravin - bottle opener / aerator - $62M raised
• L18 Holdings - subscription wine service - $131M raised
• Winc - subscription wine service - $42M raised
• Penrose Hill - personalized wine subscription - $7.3M raised
• Plum - wine pouring / preservation - $9M
• Kuvee - wine pouring / preservation - $6M

B2B

• Drync - inventory software for alcohol retailers - $4.4M raised
• Orion - winery management software
• WineSoftware.com - winery management software
• WMDB - winemaker's database / winery management software
• Wine Management Systems - winery management software

Sources:

• https://pitchbook.com/news/articles/you-had-me-at-merlot-vcs-investing-in-a-new-vintage-of-wine-startups
• https://www.cbinsights.com/research/wine-tech-startups-to-watch/ 
• Angelist
• Crunchbase

Riedel and Zalto

When we received our Gabriel-Glas wine glass (it’s awesome, by the way!), someone told me that the glass was too heavy to be considered “high quality.” 

This comment triggered my curiosity about what traits make glassware “high-quality.” In particular, I’ve always wondered about two brands that I've often seen associated with “high quality” - Riedel and Zalto. Riedel, I’ve heard about for some time, and Zalto is one brand that I’ve been seeing more recently at high-end restaurants.  

I did not realize that there would be so many factors, beyond price point and weight, that affect the “quality” perception and stemware purchasing decision. Some factors that I was surprised by: the specific wine (and vintage) that’s going into the glass, shape of the “bowl” and how that affects the aromas, “breakability,” height of the glass and the corresponding aesthetic appeal (i.e. “stumpiness”), circumference of the stem, thickness of the glass’s rim, the “sparkliness,” and so forth. 

In summary, both Riedel and Zalto reviews emphasized their “lightness” (which contrasted with the “sturdy” Gabriel Glas glass we are using) and appeared to be comparable with each other. Based on online reviews, Riedel was more versatile than Zalto. Zalto is even thinner and lighter than Riedel, but comes with the catch of being much more "breakable.” 

Pasted below are some Riedel/Zalto review highlights, in the event you ever find yourself in the market for expensive, high-end stemware. 

Riedel Vinum: (2 for $49 on amazon)

• “Stem’s ideal weight, balance, and most important, the rounded shape of the bowl...yields a broader spectrum of fruit aromas and suppresses the undesirable notes” (Yoon Ha, Sommelier of Benu)
• “More expensive than our main pick, but it’s an elegant, thinner all-purpose glass…The elongated tulip-shaped bowl did an excellent job enhancing the aromas fo both red and white wines. Though this non-leaded crystal glass (Fortified with lead oxide alternatives to make it more sparkly) appears delicate, its surprisingly durable and dishwasher safe….Laser-cut rim provides a thin edge” (Wirecutter)

Zalto Denk’Art Universal: (1 for $62 on amazon)

• "Zalto is an extremely light glass, with an extremely delicate stem…Wine glass from Austria, known to be “Graceful and well-balanced.” When picking it up, the glass feels so light and the stem is so delicate.” 
• “The glasses really bring out the best in wine… particularly love them for Champagne. You can really pick up all those complex aromas from Champagne without losing the bubbles!” 
• “Both red and white wines showcased unbelievably well in this glass….sparks brilliantly under the light, and its delicate stem is pulled the thinnest out of all the glasses we tested…ideal for special occasions or when enjoying your favorite vintage."

Sources: 

https://www.bonappetit.com/story/zalto-wine-glasses

http://winehog.org/clash-of-the-titans-riedel-vs-zalto-vs-riedel-23430/

https://www.eater.com/2018/8/27/17725292/best-wine-glasses-red-white-sommeliers-recommend

https://thewirecutter.com/reviews/best-wine-glass/

Dana Estates

Kingston Family Vineyards reminded me a lot of Dana Estates in Napa Valley. Both are small, high-quality, family-owned, and hospitality-oriented. A recent visit to Dana in August 2018 included cheese and cracker pairings with the wine tastings, as well as an unsolicited tour of the facilities. Given the parallels between the two vineyards, I did a little more digging into Dana.  

Hi Sang Lee (the founder of Dana Estates) began cultivating wine knowledge through an import business. Initially, he led an import business for wines into South Korea. At the time, Korea had (and still has) a strong drinking culture, but primarily in the form of beer and soju - and not, wine. 

In 2005, Lee opened a vineyard in Napa Valley with the help of vintners - Philippe Melka, Chris Cooney (winemakers) and Pete Richmond. He purchased the old Livingston-Moffet Winery and set out to create a high-quality wine. 

He took a “responsible farming” approach. Dana Estate vineyards are farmed on a vine-by-vine basis, and production is low - usually under two tons per acre. During the first few years, they produced under 500 cases. 

More recently, Dana Estates received their first perfect score - 100 points on the 2007 Lotus Vineyard Cabernet Sauvignon by wine critic Robert Parker. They sell directly through mailing lists, and now, through some major distributors such as K&L. A recent searches showed their high-end wine Dana Estates priced at $490, the mid-end “Onda” at $200, and low-end “Vaso” at  $85. I’ve also recently seen Onda and Vaso on flights, flipping through the duty free magazines. 

I was surprised by the parallels between Hi Sang and Courtney’s businesses - starting with a growing knowledge in importing, partnering with a renowned vintner, focusing on direct-to-consumer distribution channels, investing in organic / “high touch” grape-growing, and gaining popularity (and huge price hikes!) after receiving high wine critic scores. I’d be curious to see how many other small, family-owned vineyards take a similar approach. 

Sources:

http://winewarehouse.com/dana-estates-napa-valley-story/

http://www.napawineproject.com/dana-estates/

https://www.klwines.com/Products?searchText=dana%20estates