Sunday, October 17, 2010

NV Harthill Farms Cabernet Sauvignon, California

Terry post:

Bottom Feeder Series

This begins my review of wines which are priced at $5.00, or less. These are the bottom shelf dwellers or found in discount bins everywhere: they are the wines which we generally avoid. For the next few weeks I'll subject myself to sampling these low-cost wines. So here goes.

There is something called the "halo effect". Wikipedia describes the effect thus, "The halo effect is a cognitive bias whereby the perception of one trait (i.e. a characteristic of a person or object) is influenced by the perception of another trait (or several traits) of that person or object. An example would be judging a good-looking person as more intelligent."

I point out the "halo effect" as I sampled this Whole Foods wine one Saturday evening as I watched my Auburn Tigers dis-assemble the Arkansas Razorbacks.

My impression: Light red in the glass - quite pale for a Cabernet Sauvignon. Cherries on the nose when sloshed in the glass but nothing else. No acidity. No tannins. The wine is one-dimensional offering with cherries standing alone without any backbone. Unappealing. Not recommended.

Okay. "Halo Effect" wasn't an issue with this low-priced offering from Whole Foods, but I'll be mindful of the issue should I sample more wine during the remainder of the college football season.

$4.99 at Whole Foods, Reston Virginia

~ Terry post

Thursday, October 14, 2010

Wine Bonding

This past weekend my brother, Terry, visited Iowa to see mom, who for the past year has lived near us in Vinton, and to spend some quality time wine-bonding with me.

As we were preparing a taco feast for a house full of my sons friends on Friday night I opened a bottle of Traminette I made in 2009. Some may know Traminette as the signature white wine grape of Indiana. Traminette, like its Gew├╝rztraminer cousin, is spicy and floral and delicious and grows well in parts of the Midwest. This particular Traminette is a lightly sweetened (about 1% residual sugar) and was cool fermented in order to bring out its floral and tropical fruit qualities. We bonded over two bottles.

Crystal blue skies, and near record warmth, welcomed us on Saturday and after removing my Wrangler soft top we headed off on a winery road trip. We planned to make four stops: Sutliff Cider, who makes some of the very best hard ciders I’ve ever had, ultimately was scratched from our list because of time constraints. So our first stop was Cedar Ridge Winery and Distillery, located between Cedar Rapids and Iowa City.

Not long ago Cedar Ridge Winery and Distillery was located in downtown Cedar Rapids but because of the devastating floods of 2008, they moved their operations to their nicely situated vineyard location. From the highway Cedar Ridge is a beautiful building surrounded by vines and situated atop a hill. Once inside we were greeted by the tasting room manager, who was multi-tasking tastings for a full tasting room.

The tasting room was nicely adorned and we were treated to a full tasting, including a few sips of three of their spirits: bourbon, brandy, and a lamponcello. The red wines were a combination of California sourced and locally grown grapes. The St. Croix was one of my favorites – a challenging grape to make into good wine. Their locally grown white wines were all pretty good. My favorite was probably the Brianna, although it was a little sweet for my taste, but a nice wine.

Our second stop was going to be Ackerman Winery in the Amana Colonies but the town was so busy on this beautiful day that we couldn’t find a parking spot. Generally, when people think of Iowa wine they think of Amana wines – meaning, sugary fruit wines. Much has changed throughout the state but in Amana there are still fruit wines. And if you want to taste spectacular fruit wines, wines whose essence captures the fruit it was conceived from, then you need to taste Ackerman wines. The Raspberry wine is a perfect example of how to make fruit wine and was a 2010 Gold Medal winner at the Iowa State Fair.

The final stop of the day was at Fireside Winery. (Disclaimer: I am the winemaker assistant at Fireside Winery). I wanted to take my brother to the winery where I work and give him a thorough tasting and a tour. We ended up sitting on the back porch area with a bottle of Vignoles and appetizer.

Cassie, the marketing manager, was our tasting room attendant during our visit. She provided us with a full tasting of their wines. Terry said he really liked the Seyval Blanc and Vignoles. After our tasting I took my brother on a tour of the winery and gave him a barrel sample of the, soon to be released, Zinfandel. It was very good!

After a day of Jeep driving and winery-hopping we finally got back home, dry-eyed, sunburned, and pooped-out! Dinner was simple, we were tired, and as we sat on our back porch we waited patiently for the clock to reach 9pm so we could, with some degree of dignity, say it was bed time. 20 seconds after the top of the hour we were all headed to bed!

What a great day of wine bonding!

Tuesday, October 12, 2010

It’s What You Don’t Know That’ll Hurt Your Wine Business.

Brad Post:

Ask most winery owners how much they know about their customers and you’ll likely get the same response I frequently hear: “I know my customers pretty well”. Moreover, most winery owners also claim they know the preferences and kinds of experiences visitors have at their winery.

Or at least they think they do.

Blockbuster, the now defunct video store, once thought the same thing. All it took was one disgruntled customer, who later built another more responsive enterprise (i.e., NetFlix), to run the former video rental business into the ground and out of business.

Paying attention to our customers and understanding their experiences is crucial to keeping a business running effectively. We know our customers – or at least we think we do, but more accurately, we know our “regular” customers.

What do we know about those visitors who never return?


When I was living in Seattle and working at a marketing research company, as research analyst, a challenger to the prominent Seattle coffee giant asked us for help. This new coffee business surely understood the market, just like winery owners do, but they asked us to delve a little deeper and to help identify possible unmet needs.

They understood the business of coffee. They understood they didn’t know everything about their customers. They understood there was a possibility of an untapped market segment they might fill. They asked for research help because they weren’t market research experts.

Ultimately this new business challenger successfully invaded the market space formerly held by the coffee giant and has seized market share. Using qualitative and quantitative research methodologies we were able to uncover dissatisfied customers and key into a new, formerly untapped segment.

It’s what you don’t know that’ll hurt your business.


The danger of believing we know everything about our customers may be our biggest potential pitfall. In the winery business we do everything: we grow and harvest the grapes, run the fermentation operations, do our own bottling, and transport and sell our wines.

Focus on the Fundamentals of Wine.

Wineries should focus on winery related activities not on research. In the computer programming trade there is a maxim that goes like this: garbage in, garbage out. The same adage works for the research business: poorly designed research yields and questionable findings.

Professional researchers understand the complexities of conducting social research. Consumer behavior research requires a comprehensive set of tools that include qualitative methods: interviews, observation, and focus groups; and quantitative methods: survey research (mail or Internet), and even experimental designs (e.g., which communication program is most effective or which label design will sell more wine).

Building a long term research program to assess consumer satisfaction is fundamental to a winery business. Knowing what your customers love and sometimes more importantly, what your visitors do not love, can make the difference between success and failure.

Just ask Blockbuster.

Saturday, October 9, 2010

Two Easy-to-Use Financial Analysis Tools for Mid-West Wineries

Terry post:

Over several glasses of Traminette the other evening my brother and I discussed the decision-making process that is used by winemakers: What grape to plant? Should I buy more hardware? Do I host social events in the vineyard?

That conversation got me to thinking about the low-cost tools which are readily available to assist the winemaker in making business decision.

Two powerful tools are Net Present Value (NPV) analysis and Return on Investment (ROI). Both are quite simple to create and evaluate but don't let their relative simplicity stop you from using them.

Net Present Value is a good tool when you need make one choice from a series of options. Let's compare a situation where you have three options: Option 1 provides for a uniform series of increased profits. Option 2 provides for a large immediate profit followed by no additional profits and Option 3 provides for no profits in the near term with a large profit in the out-years.

Net Present Value does not simply add up the values in the cell - it discounts the value of future cash flows by a user-defined discount rate. (Note: I always use 4.25% in any NPV analysis as this rate is a historical average from 1929 to the present.)

Using the NPV workbook function in MS Excel (=NPV(Interest Rate, Value1, Value2, Valuen)) you are able to evaluate the PRESENT VALUE of all three cash flow streams. In this case, Option 1 turns out to be the most profitable choice among the three choices. Option 3 is the least advantageous as its payout is deferred the longest and the impact of the discount is the greatest.

Return on Investment is a way to calculate the profitability of an investment. In order to calculate the ROI you need two pieces of information: 1) Total Return, and 2) Cost of Investment. Let's use the numbers in the NPV calculation and add the following information: the cost of investment for all three choices was $450.

The ROI calculation is as follows: ROI = ((Total Return - Cost of Investment)/ Cost of Investment).

The total return for Option 1 is $552.75 and the cost of investment is $450. Working through the equation we have ROI = (($552.75 - $450)/$450) or 22%. For Option 2 it is ROI = (($525.68-$450)/$450) or 16%. For Option 3 ROI = (($448.60-$450)/$450) or -.03%.

In this example Options 1 and 2 provide a positive rate of return with the ROI with Option 1 having the best return over the 5 year period. Choose Option 1.

Bottom line: Both NPV and ROI provide powerful insights into business decisions with a few simple steps.


~ Terry

Wednesday, October 6, 2010

2009 Morgan Sauvignon Blanc, Monterey California

Terry Post:

Summer Wine Series

Okay. Okay. Technically I shouldn't be including this Morgan Sauvignon Blanc in the summer wine series as it is no longer summer. But, I bought this wine a few weeks back with the intention of writing about it when it was summers. So, I'll include it under that technicality.

I have a slight bias here as one of my all time favorite wines is the 2005 Morgan "Double L Vineyards" Pinot Noir, Santa Lucia Highlands, California: it is nearly a perfect pinot noir. But, I digress...

My impressions: Light straw color in the glass. Typical Sauvignon Blanc impressions on the nose including citrus, pears, grass and more than a little minerality - most noticeable on the finish. Minerals, acidity and grass on the finish. Very nice.

I paired this with a filet of salmon, which I poached in the wine with sliced oranges. It was wonderful.

Second thoughts: Like a lot of people I have grown weary of pedestrian Chardonnay's and am sampling other white wines to find something else to take it's place. Sauvignon Blanc's, such as this offering from Morgan, provides a more interesting interpretation of the dinnertime wine. With a strong acidic backbone, a stony minerality and a pleasant nose this Morgan is pretty much dead-on as the sort of dining partner with which I could become accustomed. Highly recommended.

$14.99 at The Wine Seller, Herndon Virginia

~ Terry

Saturday, October 2, 2010

What Blockbuster has to tell the Wine Business about the Frailty of Market Dominance

Terry post:

Blockbuster, the movie rental company, recently filed for bankruptcy protection. This is something which seemed utterly
impossible for a company once valued at over $8 billion dollars. For those of you who were napping here is a quick summary of Blockbuster's decline:

1985: First Blockbuster store opens in Dallas.

1994: Viacom acquires Blockbuster for $8.4 billion.

1997: Reed Hastings returns Apollo 13 to Blockbuster six weeks overdue, and is dismayed by the $40 late fee.

1998: Reed Hastings founds Netflix.

1999: Viacom holds Blockbuster IPO, valued at up to $4.8 billion.

2000: Blockbuster declines several offers to purchase Netflix for a mere $50 million. Instead, the company signs a 20-year deal to deliver on-demand movies with Enron Broadband Services, a subsidiary of Enron.

2001: Enron files for bankruptcy amid accounting scandal.

2003: Netflix posts first profit, earning $6.5 million on revenues of $272 million. Redbox launches a kiosk rental service.

2004: Blockbuster enters online DVD rental market. Netflix CEO Reed Hastings tells analysts in an earnings call, "In the last six months, Blockbuster has thrown everything but the kitchen sink at us." The following day, Hastings receives a package from Blockbuster. Inside: a kitchen sink.

2005: Blockbuster launches a marketing campaign touting its new "No Late Fees" policy. Subsequently, 48 states launch investigations into the program, charging Blockbuster with misrepresenting its late fee policy to customers. Blockbuster settles for $650,000.

2006: Blockbuster, now valued at $500 million, surpasses its goal of two million subscribers for its online platform. Netflix reaches 6.3 million subscribers by December.

2007: Blockbuster hires new CEO Jim Keyes, formerly of 7-Eleven. Keyes decides to roll back the company's Total Access plans. "Clearly our spending on that one channel was exceeding our returns," he said during a company earnings call. After losing a half-million subscribers in the third quarter, Blockbuster announces it will no longer report its subscriber count.

2008: Blockbuster CEO complains about Netflix in an interview: "I've been frankly confused by this fascination that everybody has with Netflix...Netflix doesn't really have or do anything that we can't or don't already do ourselves."

2009: Blockbuster rolls out Blockbuster Express, its kiosk system designed to compete with Redbox.

Looking at the summary one thing jumps out at me: distribution channels - let me explain. Blockbuster, Netflix and Redbox are all about distributing the same content via different channels. Each company sells essentially the same product (movies) via different means to the same end user. Blockbuster's wildly high valuation in the 1990's was a reflection of how dominant they were at brick and mortar distribution at that precise moment in time.

Blockbuster
was the brick and mortar channel leader, followed by Netflix which dominates the on-line channel (or electronic distribution) and Redbox which is smaller (less costly) footprint version of Blockbuster.

So with a 1000:1 advantage over Netflix or Redbox why did Blockbuster fail to innovate?

Most wine reaches the consumer via a three-tiered distribution system: distributor, wholesaler and retailer. Each layer of the distribution system adds a pass-through cost of some sort to the product without adding perceptible value. Moving a case of wine can easily be done from the winery to the consumer without benefit of costly distributors or wholesalers.

You need only consider how Amazon web services are changing distribution for many small to mid-sized companies.

Amazon Small Business Services has become, effectively, the market maker for many smaller companies acting as retailer and distributor. "Amazon allows businesses to use Amazon’s own order fulfillment and post-order customer service infrastructure, and allows Amazon.com customers to receive the benefit of Amazon.com shipping offers when buying from third-party sellers who use Fulfillment by Amazon." So who needs a distributor and wholesaler when Amazon can do it all?

Well maybe. The Federal and State governments see the sale of alcohol products as a revenue generator and while, currently, wine products don't fit the Amazon model there is no saying that in 30 days or in 2 years that the political landscape will be more supportive of small business - even ones which sell wine.

Blockbuster failed to innovate when they had every opportunity to do so. They had size and market dominance but failed to innovate as business conditions changed leaving the door open for Netflix and Redbox to eat them alive.

Bottom line: Companies with overwhelming market share can become complacent and fail to innovate. Small businesses must innovate and take market share when market conditions change. The challenge for small wineries is to determine what market conditions benefit small, nimble business and to maneuver themselves to exploit those conditions.

~ Terry