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.
Thursday, February 21, 2019
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/
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?
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.
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.
Wednesday, February 20, 2019
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/
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/
Setting up shop in China
When I was reading the Wine in China: The Wild West of the
Far East case I was thinking about the rules and regulations that are required
to be in accordance with in order to legally set up an operation in the Chinese
market. This was primarily a thought because a vitamins business that I worked
with before school had to effectively exit the Chinese market because of new
regulations that made it very challenging for foreign health food products to
enter China. Also, having just finished reading Shoe Dog and learning about the
about the difficulties that Phil Knight and Nike faced when setting up operations
in China, it was particularly top of mind.
It didn’t take long to realize that creating a wine business
in China is not an easy task either.
·
Taxes
o
VAT: 17%
o
Custom duty: 14%
o
Excise tax: 10%
·
Steps
o
Signing agreement with Chinese importer
o
Registering company with AQSIQ
o
Registering label
§
Labeling requirements
·
Name/brand of product
·
Ingredients list (Sweeteners, preservatives and
added color – legal in the case of fortified wine only – must be declared)
Exempt for products made of one ingredient.
·
Net volume (ml): This should be marked as ‘net
content xxx Ml (ml)’ for bottle sizes under a liter, or ‘net content x Liters
(l)’ for bottle sizes over a liter. For packages up to (and including 200ml)
the minimum print height is 3mm. From
200ml up to and including 1 liter, the minimum print height is 4mm. For packages greater than 1 liter the minimum
print height is 6mm.
·
Alcohol content (%): The alcohol statement
should be in the ‘Alcoholic strength xx.x% vol’ format.
·
Production date (yy/mm/dd): The date of bottling
is required on Chinese labels.
·
Producer/Distributor/Importer (Name and
address): The name and address of the Chinese agent, importer or distributor
must be shown on the label. The name and address of the producer is not
mandatory, however if included does not need to be translated into Chinese
characters
·
Country of origin: A country of origin statement
is mandatory. Importers will usually request a Certificate of Origin to confirm
this claim.
·
Minimum durability date: Wines with an alcohol
content of 10% or less are required to include a minimum durability date.
·
Product Type: (i.e. Grape Wine, ‘red’, ‘white’,
‘sparkling’, ‘semi-sparkling, ‘fortified’, ‘sweetened fortified’, etc.)
·
Sugar content (g/L)
·
Mandatory Warning Statements: The following and other warnings must be on
the bottle in Chinese: "Excessive drinking is harmful to health" or
"Pregnant women and children shall not drink". For beer in glass bottles also add "Do
not hit; it might cause explosion of the bottle".
·
Required documents
o
Commercial invoice
o
Customs Value Declaration
o
Freight Insurance/documents
o
Packing List
o
Insurance Certificate
o
Certificate of Origin (for distilled spirits and
malt beverages only)
o
Certificate of Health/Sanitation (for distilled
spirits and malt beverages only)
o
Certificate of Authenticity/Free Sale (for
distilled spirits and malt beverages only)
o
Consolidated Wine Export Certificate (for wine
only)
·
Licensing and registration
o
Must submit an application to the Exit-Entry
Inspection and Quarantine Bureau
The Passion Index
We've discussed investing in wine using traditional methods, such as investing in a wine business through the stock market. Yet, there are other methods for investing in wine. Rare coins, luxury cars, and fine art - these are just a few examples of items that make up what some investors call the "passion index". These tangible assets act as direct alternative investments that - like any other investment vehicle - after purchase appreciate (or depreciate) in value over time. Interestingly, wine is a non-trivial category in this space. It even has it's own exchange: the London International Vitners Exchange.
You might ask, what drives the valuation of a bottle of wine? Essentially, supply and demand - that is, the rarity of a bottle relative to other wines and the shifting demand for it as a collector's item. If done right, parking one's assets in expensive wine bottles can actually be a smart move (as high as 50% returns in some cases, with commiserate risks). However, wine is not a fast-turn or cheap investment. One can expect to wait between six and ten years for a bottle to significantly appreciate. Further, getting started in the wine investment space is not cheap - a first investment costs at minimum ~$8000.
Interestingly, startups have been shaking up these traditional barriers to the investment wine space. Cult Wines, for example, essentially acts as an index fund for wine - spreading participants assets across a diversified portfolio, managing portfolios towards risk preferences, and insuring bottles. Indeed, if one is knowledgeable about the space, wine investments are certainly not the worse way to spend your investment dollars.
You might ask, what drives the valuation of a bottle of wine? Essentially, supply and demand - that is, the rarity of a bottle relative to other wines and the shifting demand for it as a collector's item. If done right, parking one's assets in expensive wine bottles can actually be a smart move (as high as 50% returns in some cases, with commiserate risks). However, wine is not a fast-turn or cheap investment. One can expect to wait between six and ten years for a bottle to significantly appreciate. Further, getting started in the wine investment space is not cheap - a first investment costs at minimum ~$8000.
Interestingly, startups have been shaking up these traditional barriers to the investment wine space. Cult Wines, for example, essentially acts as an index fund for wine - spreading participants assets across a diversified portfolio, managing portfolios towards risk preferences, and insuring bottles. Indeed, if one is knowledgeable about the space, wine investments are certainly not the worse way to spend your investment dollars.
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