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Editor's Letter

 

Thriving in a Slowing Economy

November 2008
 
by Jim Gordon
 
 
In the past month, news about the American economy has sunk from bad to worse. At the same time, many wineries confirmed that their sales are softening, if not dropping. As experts in government, banking and the stock market talked about the worst financial crisis since the Great Depression, it seemed like a good time to look around for anti-depression measures for the wine industry.

I interviewed an assortment of growers, winemakers, marketers and financial types and asked them what grapegrowers and vintners can do, on the one hand, to maintain or increase sales, and on the other, to contain or reduce costs.

Take a deep breath

"Here's what I am telling my clients," said CPA Jeff Sully of Dillwood Burkey & Sully in Walla Walla, Wash. "Take a conservative stance on investments. Before you buy anything significant, ask yourself again, 'Do I really need to spend the money on this?' Take a deep breath and ride the storm out."

Don't lower your price

Elliott Stern, COO of The Sorting Table, a marketing and sales company in Napa, said an important thing not to do is to lower your price to try to move cases more quickly. During 35 years in the business, he has lived through multiple earlier recessions. "Wineries with luxury products can't lower their prices, because if they do, they totally reposition their products and they'll never recover." Instead, increase your marketing efforts in innovative ways. Connect with your local appellation group for collective marketing efforts. If you do lower your price, get something for it, Stern said. Offer enhanced margins to accounts that agree to publish an article about you in their catalogs, newsletters or e-mail newsletters.

Consider a second label

Ron Barrett of Kinkead Ridge Vineyard and Estate Winery in Ripley, Ohio, said he already watches his expenses closely. "Most small wineries, in one way or another, are pretty good at cost management. Nobody I know here has money to burn." One tactic he hasn't needed to use, but believes could help in a recession, is creating or extending a second label to move wine more quickly. "If a winery was really faced with a tough situation where inventory costs were getting out of control, a second label could be useful," Barret said. He and partner Nancy Bentley already bottle a second label, River Village Cellars, which is priced at two-thirds the retail value of their $18-$20 estate grown Kinkead Ridge line. The lower-priced label is easy to sell, he said, adding that if a winery uses a second label to soak up lesser quality lots of wine, the main brand wines will benefit.

Go out with a full load

Tom Shelton is vineyard owner and winemaker for Bordeleau Vineyards & Winery in Eden, Md., which opened its tasting room doors in June. Before becoming a grapegrower, he was in the poultry business at Perdue Farms and remains involved with the poultry firm Case Foods. "You really need to buy well and be very sensitive about costs," he said. "In poultry we think about payloads. If you send a truck out, make sure you've loaded as much on there as you legally can. The same thing applies to the wine business. Don't go out in your van or pickup with a short load. Try to schedule things better, or maybe say to the customer, 'Let me bring you 15 cases instead of 10, and I'll let you share in the savings.'"

Cooperate on purchases

Michael Mondavi is the "founder and coach" of Folio Fine Wine Partners in Napa, Calif., which imports and markets wine made by others, as well as producing California wine. He advocated a new practice of interdependence among smaller players to market their wines, but also to reduce their costs. "We as independent growers and wineries have to be focused on the supply chain as well. Why couldn't two-dozen wineries form an informal co-op, go to a supplier company and say they now represent 1 million cases and want to buy glass? Aren't they going to get a better price than any of the wineries would alone?"

No one I talked to, on or off the record, advised cutting corners on grape or wine quality. Fewer spray passes, less leaf pulling and cheaper barrels all seem to be off the table, at least for now. If you would like to share your own strategy for thriving during a recession, please e-mail me at jim@winesandvines.com.
 
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