Thursday, May 20, 2010

Solitude in the Vineyard

Brad Post:

This time of the year there is a momentary lull in cellar activity providing enough time to return to the vineyard work.  Yesterday, a gorgeous, blue-sky, day with a light breeze and perfect springtime temperatures, was my day to work in the vineyard.

The Brickyard Hill Vineyard, whose name was as you might imagine, was derived from an nearby old brickyard that sat adjacent to the vineyard.  On this beautiful day, three of us were roving through the vines, row after row, removing suckers (i.e., the unwanted shoots sprouting up from the trunk and other undesirable locations) and securing the cordons (i.e., the horizontal "branches" of the vine from where shoots grow the fruit) to the wire.

Gloved and dressed in early summer gear, in one hand I hold a pair of pruning shears, while in the other hand a tool designed to dispense plastic tape to coax the cordon to grow along the wire.  This awkwardly engineered tool resembles a freakishly large stapler on steroids.

Walking up and down the rows, removing suckers by flicking them off or when too large, cutting them with my pruning shears is meditative.  The late winter pruning, cutting back last years growth to prepare for this years is looked at again to make sure the plants are poised for optimal fruiting.  Adjust, tape, snip, and move on.  Next plant. Adjust, tape, staple, snip, and move on.

Each of us work at our own pace, beginning at the end of a row and working our way down. Some are more experienced and breeze through the vineyard while others are thorough and move more slowly (at least that's what I'm telling myself).  We speak infrequently.  Mostly quiet in the vineyard.

I can hear the red wing blackbirds in the distance and the sound of excavators moving the dark Iowa earth where the winemaker is building his home.  Another five or so acres will be added when his house is built adding to the nearly 13 acres in production.

Springtime in Iowa is rejuvenating and hard work in the vineyard is soothing.

Sunday, May 16, 2010

Cash in Circulation, The Coming Inflation and How it Matters When Setting Price and Establishing Market Share in Iowa Wine

Terry post:

Excuse me if I wonk-it up just a bit.

A few days ago, my brother posted an inquiry on his Facebook page regarding the merits of charging an entry fee for people to listen to music at a vineyard. His question was whether it was "right" or not to charge $5 per vehicle to listen to live music and , perhaps, sample or buy a bottle of wine. The responses were all over the board with some individuals strongly in favor of free admission and others, including this author, who saw it as an imperative to charge an entry fee.

It got me thinking about value. The value people place on things and the calculus each of us apply to a decision to buy or not to buy.

Cash in circulation (CiC) is a measure of the physical amount of, well, cash in circulation. The Chairman of the Federal Reserve (e.g. The Fed) Dr. Ben Bernanke is a smart guy, a really smart guy and a student of the Great Depression. Years ago long before he was the Chairman he cited a paper by Milton Friedman which defined the principle cause of the enduring depression was the tightening of credit and that the impact would have been reduced had fiscal policies been loosened and liquidity added to the market. Subsequently the press has come to call Dr. Bernanke, "helicopter Ben" given his support of Friedman's theories and his own comments about his willingness to throw dollar bills out of helicopter to increase market liquidity.

During this recession he has been true to his words and has hasn't just thrown dollar bills: he has shoveled dollar bills. Between the end of 2008 and now CinC has tripled. That's right. There are three time the amount of cash being exchanged between individuals like you and like me and those folks involved in commercial enterprise. This is where inflation comes in.

The classic definition of inflation is, "...too many dollars chasing too few goods". And, what have we all observed over the past few months? First the amount of dollars in circulation has tripled. Secondly, overall production has decreased as demand has fallen through the floor. We have primed the pump with dollars and decreased the goods available to buy.

Making maters more interesting is the increasing reliance of this Administration of the opinions of Mr. Paul Volkert. For those of you whose memory doesn't include the late 1970s, Mr. Volkert was the Chairman of the Fed during President Carter's administration and was not adverse to inflation. It was under Mr. Volkert's Chairmanship that I held a 13.5% home mortgage: something to think about.

That we have not seen inflation take off is a sign of how soft the economy remains.

So, you may ask: What does this have to do with the wine business in Iowa?

Were I the owner of a winery I would follow the maxim of any business in a recession: I would work like hell to maintain, or grow, market share. I would do the things which would make my company stronger than my competition when the recovery takes place and pent-up demand is applied across the market.

For instance, IBM has spent more than $8 billion dollars in Research and Development since the recession began. When the market firms up they will have new products and service ready for a waiting market.

As a vintner I would be: 1) Looking a expanding capacity by acquiring land or putting that land which I already hold into full production. When inflation comes the price of assets (including land) will increase as the value of the dollar decreases. 2) Experimenting with new varietals, blends and developing new products. 3) Aggressively examining every single dollar which I spend to ensure that I am not bleeding unnecessary expenses. 4) Trade profit for market share by reducing the retail price of my product. The goal in any recession is to survive.

Bottom line: The physics of money demands that inflation will return. The savvy business person will survive the downturn and prepare themselves for the inevitable (inflationary) recovery.

~ Terry

Wednesday, May 12, 2010

2007 Trimbach Riesling, Alsace France

Terry post:

Summer Wine Series.

Customers are always right and when I was Wine Director at Restaurant 219 we selected several Riesling wines for the list to suit the wants, needs and desires of our diners. We had some that were overly sweet and some which were just right.

Visiting the Restaurant again a few weeks ago I had the pleasure of sampling the 2007 Trimbach Riesling. In a word: fantastic.

Where Riesling too often has the reputation of being overly sweet and abundantly fragrant, Trimbach provides a graceful and understated contribution to the genre.

My impression: Light golden in the glass. Apple, peach and citrus on the nose. Crisp. Clean. Not sweet at all, holding with a moderately acidic backbone to make for a food-friendly wine. Enduring long finish with apples and peaches. Highly recommended.

Second thoughts: Rieslings are often done poorly with vintners bowing to the temptation to create an overly sweet and overly floral offering. It is the restraint and the grace of this wine which rewards the drinker and for which I find so appealing. There is a lot of great stuff going on here, and it is not at all loud or clumsy in the process.

This is the wine equivalent of Audrey Hepburn descending the stairs in the movie, "Breakfast at Tiffany's". And, like all things Hepburn, it is not to be missed.

$18-$20 at retail.

~ Terry

Monday, May 10, 2010

What Goldman Sachs Can Tell us About Aggregating the Sale of Iowa Wines

Terry post:

It is nearly impossible to pick up a newspaper or watch the evening news without the alleged misbehavior of Goldman Sachs being pushed into our faces. They, it seems, were able to play the market and make money on the sale of real estate tranches without regard if the market value increased or the market value decreased. Sweet.

Absent from all reporting which I have read has been any mention of how challenging that proposition truly is. Most investment bankers take positions on one side and hedge the other: it appears that Goldman was "all in" on both the puts and the calls.

The wine industry operates in a challenging patchwork of state and federal rules, regulations and laws. The three-tiered marketing channels (distributor, wholesaler & retailer) act as a filter to limit broad market access by smaller vintners as economies of scale are required at the distributor level. Without sufficient inventory to spread over the distributors territory they won't give you a second look. Small wineries suffer most under this marketing schema.

Investment bankers such as Goldman Sachs don't always own the product which they are selling: that is one way to hedge risk. Wineries, on the other hand, almost always own the product that they sell: all risk is carried on the shoulders of the vintner and his/her family. A good year can be wildly profitable while a bad year can be disastrous.

How than can small wineries in Iowa replicate the financial success of Goldman Sachs - and avoid jail time for that matter?

Think of scale. Small wineries have to find a way to look and act big. Think of the aggregation which Goldman Sachs performed with the real estate which they bundled and sold. The took lots and lots of small mortgages and packaged them into something large which appeared to have low risk and high profitability.

What then is the wine analogy? Aggregate and self-representation.

If I were an Iowa vintner I would create the wine equivalent of the real estate tranche:
  1. I would create a corporation to bundle and represent Iowa wines to distributors. This would be the corporate entity which could, by aggregation, create the volume of wines which are interesting to the distributors.
  2. I would select a handful of wineries careful to choose a focused array of varietals and regions within the state. Iowa still hasn't identified it's trademark wine. The selections in the wine tranche needs to be wide enough to cover the state, yet narrow enough to maintain quality.
  3. I would also direct-market the product in a similar fashion to the California Wine Club. Establish a two-bottle monthly distribution to those who have visited tasting rooms of the wineries in the aggregation.
Bottom line: As long as small wineries think small they will remain small. Growth will require innovative marketing practices acting in parallel with the development of high quality products.

~ Terry

Sunday, May 2, 2010

Lips as Sweet as Strawberry Wine

Brad Post:

The Two Wine Brothers recently began writing about summer wines with my older brother leading the way. His reviews have included pieces on Vermouth, White Zinfandel, Sauvignon Blanc and Chardonnay. My contributions to the Summer Wine Series will focus on Midwestern wines.

Few things remind me more of the beginning of summer than a trip to a strawberry farm and my first review captures the pure essence of that. When I was much younger and living in Belding, Michigan I used to find occasional work as a field-hand in nearby strawberry farms, bending over I'd pick one for the owner and then I'd pick one for the worker – yum!  This wine takes me back to those wonderfully rose-colored memories, strikingly similar to the rose-colored hues of the wine I am about to describe.

Few wines elicit such romantically inspired verse as does strawberry wine – “lips as sweet as strawberry wine”.

This Strawberry wine is the winner of a Silver Medal in the 2009 Mid-American Wine Competition and was crafted by Breitenbach Winery. Located near Dover, Ohio, Breitenbach makes a wide assortment of wines and is well known for creating lovely fruit wines in addition to their traditional line of grape wine.

You want a fruit wine to deliver fruit aromas and flavors and this NV Breitenbach Strawberry American Wine provides heaps of it! Moreover, you want your strawberry wine to look, well, to look like strawberries and it does! Potent fresh strawberries on the nose and in the glass, rich and thick legs suggest a sweet wine. My palate was pleasantly surprised with a blast of STRAWBERRIES in a gorgeously balanced, just the right amount of sweetness (6% residual sugar) and acidity. RECOMMENDED! 

This summertime strawberry sweetie is the kind of wine that arouses the poetic side of me and so I’ll end this posting with a short poem by “The Flowing Pen”:

Strawberry Wine
A seductive potion to bring me bliss
As I drink it off of your sultry lips
And your fingers intertwine with mine
Lust brought forth from strawberry wine

A taste that pales the sweetest nectar
As I lie in your arms lost forever
Two bodies joining like moon and sun
Passion drives us until we are one

An aphrodisiac some could very well say...
Who ever knew that love would feel this way
I'd like to sit and drink with you one more time
Toasting love and laughter with Strawberry Wine


Cheers my friends, enjoy all that summertime has to offer and I hope you’ll take time to seek out the Midwestern wines I suggest.