Tuesday, July 05, 2005

Over offering...

While thinking about how some smaller producers are getting bought & sold to larger companies (though not as often as larger wineries), I had some thoughts about how to make small wineries more profitable.

First, don't over offer wines.
One of the items that I think led to the Viansa sale was it's wide portfolio of varietals. It never managed to create an image of "specialist" like say Ravenswood or Ridge has for Zinfandel, Kistler has for Chard, or Silver Oak for Cabs.

Sure these wineries offer other wines, but they're disciplined in how they do it. At the end of the day when you think of these wineries, those varietals jump into your mind, even though you may have had another wine from them which was really good. And although the other offerings they have are good, the don't compete with their main seller. By gaining a reputation for a certain varietal or style, your winery can attain that niche crowd following that otherwise won't be drawn to you.

Second, don't dilute your image with endless bottlings of the same varietal.
Rosenblum would be the prime example here. I don't remember ever having a Rosenblum Zin I haven't enjoyed, but other than a handful of their vineyards, I can't recall too many of the names - sometimes there are just too many - I believe they have 55 total offerings! And while they're all good wines, it's hard to really see the reasoning behind having say 40 different Zinfandel offerings, when the winery would be served with a lot less, with limited production of showcase wines and two or three larger blends playing a supporting role.

Certainly there's a point to be made about demonstrating your creativity and abilities...but with Viansa it always seemed to distract from the ability to make a solid statement about who they were and how consumers identified with them (notwithstanding the whole problem with Cal-Ital wines).

In addition, its key for a small winery to develop a very strong wine club and retail sales business. These sales come at full price as opposed to the wholesale sales which are 50% of retail. Many small wineries actually lose money in the wholesale market but are convinced that they need to be in that side of the business. I don't think many of them need to be.

I think most of them would do best by working the direct (wine club and retail) end of the business harder, then they should next try selling direct to retailers in California (avoiding the wholesale pricing and instead getting about 75% of retail price), finally, they should sell in limited large markets outside of California (New York, Chicago, Miami, Dallas, etc.) through a broker in each state. Finally, as a last resort should they consider selling through wholesale distributors as this is usually only profitable for larger wineries or those who are able to maintain a dedicated sales force to sell their wines as distributors don't really perform that function any more. They have basically become "order takers" who charge 25%.....


Blogger Batscout said...

You have an exceptional blog. I agree wholeheartedly with your assessments of Viansa's Ossidiana, and the Rosenblum Zinfandels. I've had several offering of the Zinfandels that I really enjoyed but can't seem to find them again because I can't remember which vinyard. It doesn't help to remember the label's appearance or color because they have about a dozen with the gold color and about a dozen with the ruby red color, etc.

Thanks for your blog. I hope to remember it and become a regular visitor.

October 13, 2006 11:25 AM  

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