Market Watch, September 2018

36 MARKET WATCH MARKETWATCHMAG COM SEPTEMBER 2018to market for beverage alcohol suppli ers Dick argues It prevents underage access and ensures tax collection We think direct to consumer models are most successful and effective with companies that work in partnership with the three tier system such as Drizly But retailers are seeking to change the laws in their favor and are working through their state legislatures to try and do so Over the past two years direct shipping legislation has been introduced in New York Connecticut Alabama Maine and Texas and lawsuits have challenged restrictions in Michigan Illinois and Missouri The technology is here to stay says Daniel Posner president of the National Association of Wine Retailers and owner of Grapes the Wine Co in White Plains New York Consumers want choice They want good selection and they want good prices They should be able to get that in 2018 Wolf of the WSWA also argues that the wholesale tier has expanded the range of wines available to consumers but acknowledges that theres limited space at retail for the markets ever expanding number of wines Theres more choice on the shelves today than there ever has been he says There are also more wineries than ever before and only so much retail shelf space Theres no shortage of wine in our inventories But there are now 8000 wineries whereas 30 years ago there were 700 Rob McMillan founder and executive vice president of Silicon Valley Bank Wine Division sees things a bit differently He notes that distributors have a constitutionally protected monopoly given that states have the ability to legislate the movement of alcohol within their borders The liquor wholesalers have done a good job of protecting that monopoly over the years he says But with out wineries being able to go direct we would have seen the collapse of a lot of small family owned wineries Creating ValueWith more wineries entering the DTC channel competition can be cutthroat Mondavi notes that Napa Valley alone has about 500 wineries fighting for customer loyalty I think most if not all of those wineries are vying for the DTC channel and some of them are relying almost exclusively on DTC he says Just getting consumers to come to your front door when they have so many choices today can be difficult Given that WX Brands Hayes says its incum bent upon wineries to differentiate themselves I think the tasting room needs to be unique you have to have something that sets you apart because of all the competition she says Beckham Estate Vineyard was feeling the competitive pressure of being one small winery in a sea of boutique players dotting Oregon wine country But Beck ham and five other Willamette Valley wineries recently formed a consortium called Hidden Cellars in which the wineries refer tasting room visitors to their partner wineries to raise their profiles Its a referral network Beck ham says Each one of us has a different style of wine If we get a customer in our tasting room who says theyve really enjoyed these wines and this experi ence meeting directly with the owner with the winemaker with someone who has put their heart and soul into this then we might refer them to one of our partners Knowing our neighbors and what they make is so helpful because were able to enhance our guests expe rience by sending them to the next place Its personalized Tasting rooms can also be used to try more experimental products with guests Reynolds suggests With our Walt wine brand for a number of years we had an offering called Pinpoint Extreme the name is actually an anagram for Pinot Exper iment he says Each year we would present a production experiment that was made in the winery and centered on something we were trying to learn about with that vintage We then shared it in our tasting room and with our wine club members We got to learn something and then shared our learning with our most ardent supporters Without a physical winery Cameron Hughes has to differ entiate itself in other ways One strategy is to connect with potential consumers through retailers outside of the beverage alcohol industry We do events all the time with retail part ners just not traditional retail Kogan says For example we might partner with Pottery Barn Well invite all the Pennsylvanias PLCB warehouse top wine sales have flourished since it legalized direct wine shipments Rob McMillan of Silicon Valley Bank Wine Division above says DTC has likely saved many family owned wineries