Cooper’s Hawk Winery Leverages Its Unique Business Model

July 28, 2020 By Mike Veseth in coronavirus, new normal, restaurant wine, wine, wine markets 4 Comments

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It is time to circle back to check in on one of America’s most innovative wine companies: Cooper’s Hawk Winery & Restaurant. Cooper’s Hawk has carved out an unexpected market segment (it is too big to be called a niche) and built a loyal following. Can its unique business model continue to thrive in today’s challenging wine business environment?

Cooper’s Hawk by the Numbers

The numbers are impressive. The big winery in Woodridge, Illinois produced 675,000 cases of wine in 2019, according to Wine Business Monthly data, making it the 29th largest wine company in the U.S. — just behind Hess Family Wine Estates and ahead of Wente Vineyards in the U.S league table. Grapes come from the main U.S. vineyard regions and select international sources.

The wines are sold exclusively through a 43-location restaurant/tasting room network that supports what might be the largest wine club in the world with nearly 450,000 members. That takes my breath away.

I first wrote about Cooper’s Hawk Winery & Restaurant in a 2018 Wine Economist column. I was impressed with the vision — bringing wine country (and wine!) to consumers located far away from California vineyards. Customers enter through a “Napa-style” tasting room that includes a gourmet foods market space. The upscale casual restaurant features Cooper’s Hawk wines by the bottle, glass, or flight, with carefully-chosen pairings suggested for each menu item. Wine club members can pick up their “wine of the month” at the tasting room, giving them an opportunity to sample other wines and to dine in the restaurant.

The thing that excited me about Cooper’s Hawk Winery back in 2018 was the fact that they were successfully engaging consumers in a new way and obviously building interest in wine in general while expanding their own customer base. Bringing a taste of wine country to the local mall or other nearby location might not work for everyone, but it obviously resonates with a lot of folks who can’t get to wine country themselves but still want a bit of that experience.

Epic fail: Sue and I have so far failed in our resolution to experience a Cooper’s Hawk restaurant first hand, but that makes sense in a way when you think about it. We spend a lot of our time in wine country, which is exactly where Cooper’s Hawk is not. So we were excited when we received an invitation to attend a celebratory virtual tasting of Cooper’s Hawk and other wines.

Go Big in Chicago

The occasion for the celebration was the announcement that Cooper’s Hawk’s new flagship location Esquire Chicago received a 2020 Best of Award of Excellence recognition from Wine Spectator magazine. The 23,000 square foot facility features a 50-foot high wine tower and offers guests 1200 different wine selections. The list includes the Cooper’s Hawk wines, of course, but also hundreds of other wines from wine producers around the globe, which is a first for Cooper’s Hawk.

I suppose you could say that Esquire Chicago and the tall wine tower is at least in part a reaction to some of the key wine market trends of the last few years. Consumers have shown a willingness to broaden their comfort zone of wine styles and, via premiumization, to stretch the budget a bit, too. If the goal of the Cooper’s Hawk organization is to unlock consumer passion for wine by simplifying choice and controlling quality and value, Esquire Chicago aims to provide opportunities to turn the flame up a notch or two. Accordingly, the wines we tasted in the virtual seminar included two wines from Bordeaux and two Cooper’s Hawk California blends.

Thankfully there was no attempt to create a “Judgement of Paris” result. The purpose wasn’t to probe whether Cooper’s Hawk wines are better than those from Bordeaux, but simply to taste and enjoy different wines of similar general types much as an Esquire Chicago guest might do in a tasting flight. Perfect. So we sampled a left-bank Bordeaux, Chateau La Tonnelle, alongside a Cabernet-forward Cooper’s Hawk Lux Meritage blend made from Mendocino-sourced grapes. Then we tried Chateau Coutet from the right bank along with a Merlot-forward Cooper’s Hawk Napa/Sonoma blend called Camille Proud, a special creation of CHW’s Master Sommelier Emily Wines made to honor powerful women role models.

The wines were all very good and, because they were still pretty young, even better when we returned to them over the next two days. If these are representative of the kinds of experiences that Emily Wines and Esquire Chicago sommelier Jordyn Sotelo create, then I think their guests are in good hands.

How important is the Wine Spectator restaurant award? Those who attain it are obviously proud, but there are doubters, too. There was even a case of a hoax a few years ago when someone faked an application for the award and fooled the Wine Spectator staff. My opinion is this. There are wine enthusiasts (like you, perhaps) who seek out restaurants that take wine seriously and offer interesting wine choices. A Wine Spectator award is a way for the restaurant to signal consumers of their interest in and commitment to wine. In a world of asymmetric information (the famous “market for lemons”) such signals can be very valuable.

Navigating Uncharted Waters

Any advantage is worthwhile in the current market environment. Although we did not talk about it during the celebration tasting, the shadow of the conoravirus pandemic is hard to avoid. This is a difficult time to be in the restaurant business and not the best time for in-person tasting room sales, either. And, of course, Cooper’s Hawk has uniquely combined these two now-problematic areas to define its business model. Sounds like a recipe for trouble, doesn’t it?

But that doesn’t take into account the huge wine club, which seems to be proving itself even more important than before. With almost 450,000 members, the possibilities for engagement though virtual tastings (like ours, but scaled up considerably) are pretty much endless. And curbside pick up of wine club shipments and to-go restaurant meals, too, where allowed, ought to cushion somewhat the economic impacts while fostering relationships with sheltered club members.

So triple congratulations to Cooper’s Hawk: for their flagship Esquire Chicago restaurant, for the Wine Spectator recognition, and for their remarkable achievement in keeping so many club members engaged with wine during this difficult period.

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Thanks to Cooper’s Hawk for inviting us to the virtual tasting and to Emily Wines and Jordyn Sotelo for leading the discussion. Fingers crossed that readers everywhere will be able to safely visit CHW and enjoy their hospitality in person before too many more weeks have passed.

Long, Slow Road to Recovery for U.S. Wine

July 21, 2020 By Mike Veseth in coronavirus, economic crisis, Economic impact, wine, wine markets 4 Comments

23-sep-2 How long will it take for the economy to get back to normal? That’s the question I am asked most often these days, where “back to normal” is code for conditions at the start of 2020, before the coronavirus pandemic and the recession it has produced.

Try to Keep It Real (Compared to What?)

The answer to this question depends on how you look at it. If you are thinking about a world without concern for virus contagion, face masks, and social distancing, the answer might well be “never,” but only time will tell.

Economists often distinguish between “monetary” and “real” economic factors. If you think in monetary terms — stock market valuations, for example — we are already most of the way back. Our modest Wine Economist retirement account is pretty much back to its January 1, 2020 level thanks in part to a few trillion dollars of Federal Reserve and federal government stimulus, which has done a lot to prop up valuations.

But if you are looking at the “real” economy, where output, jobs, and incomes are what count, then the scene is not so serene. A recent report by The Economist Intelligence Unit is titled “A Q3 recovery, what Q3 recovery?” and it warns that the hoped-for big economic bounce in the third quarter of the year is no longer likely. Other business news reports that appeared over the weekend tell a similar story. Here is a link to a summary of the EIU report.

Down the Drain?

The EIU projects that when all the dust settles the U.S. economy will shrink by about 5% in 2020 compared with the previous year. That performance is roughly on par with forecasts for Japan, Canada, and Germany, The other G7 nations will envy a mere 5% decline. The EIU projects that growth rates in the UK and France will be closer to minus 10%, with Italy’s situation a bit worse.

How long will it take for these countries, which are all important wine markets, to return to their pre-pandemic levels of economic activity? The EIU projects that the U.S. will get there first, but not until Q3 of 2022 — about two years from now. Japan, Canada, and France will be next, hitting the pre-pandemic level in Q4 2022. Full recovery for the UK will wait until Q4 2023 followed by Italy (Q3 2024) and Japan (Q4 2024). Long road. Slow progress.

In general, the EIU reports, output in the G7 countries in Q3 2020 will be about the same as it was in 2016. Four years of growth down the drain.

Economic forecasting is an inexact science, or maybe a black art, so you cannot bank on these specific numbers. This is especially true right now given the unknown unknowns about global public health, economic policies, and potential election surprises. But the fact that conservative estimates now suggest a long, slow economic recovery is something we need to digest.

Wine’s Particular Challenges

There are special concerns for the wine industry. An economy isn’t like a train, where all the cars are connected and move at the same speed. Different sectors adjust at different speeds and sometimes move in different directions. While wine is influenced to a great degree by overall economic trends, some particular paths to market are especially influenced by the coronavirus pandemic.

On-trade sales and DtC sales via tasting room visits will likely be slower to recover than retail sales, which we can see now as California has closed down indoor dining and cellar door operations for the second time. And this isn’t the feared “second wave” of infections — that isn’t expected until fall. This is just the echo of the first wave.

It is also important to remember that our 2019 “normal” wasn’t a terrific situation for wine. American wine was challenged by slow growth of demand, supply that was so abundant that vines needed to be pulled, and growing competition from other countries as well as other beverage alcohol categories. Curse you White Claw! U.S. wine producers need to do more than recover volumes, they need to adapt to evolving reality, too.

Simple Pleasures

So it is important and even inspiring to see how active many in the wine industry are in adjusting to what they think the new normal will be. Joana Pais, director of communications and public relations for Sogrape, the important Portuguese producer, told me in an email about the wine tourism situation in Porto and the challenges she and her colleagues face.

Travel to Portugal was booming before the pandemic and wine tourism in Porto and the Douro benefited. These travel flows collapsed during the spring and are only slowly rebuilding. “It is true that tourism is scary slow,” she writes, “but let’s face it as an opportunity to rethink the purpose of hospitality and work on developing truly incredible experiences, enjoying the simple pleasures of life!”

She’s right about that and more. As I wrote in Around the World in Eighty Wines, wine’s great gift is its ability to give us pleasure. So long was we keep that front and center wine’s future is secure. But the challenges we face on the road to the future are daunting. The next two to four years will test our collective resilience, but I hope they also excite our imaginations.

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I am already starting to think about what wine market situation will be in January 2021 when the next Unified Wine and Grape Symposium takes place. The conference and trade show will be virtual this time around, reflecting the reality of the pandemic and the uncertainty that must necessarily cloud plans for large gatherings. It will be different, that’s for sure, but there are opportunities, too.

Bastille Day Reflections: Libertè, Ègalitè, Rosè

July 14, 2020 By Mike Veseth in wine, wine brands, wine markets 3 Comments

Rose aurore Today is July 14, France’s national day — Bastille Day — and it is a good moment to consider Rosè and the democratization of French wine and wine in general.

One thing that I like about Rosè is that is symbolizes to a certain degree the classic values of freedom (libertè) and equality (ègalitè). There isn’t any fixed recipe for Rosè. Winemakers have considerable liberty in choosing grapes, blends, and styles. And Rosè levels the playing field a bit, too, allowing less well-known regions to compete with the elites.

I have friends who tell me they just don’t like Rosè — and I believe them — but which Rosè offends them? There are so many different styles that it seems like there would be something for everyone. If you don’t like Rosè maybe you just haven’t tried the right one yet. Sue and I have sampled Rosè wine all around the world (see this list of global Rosè wines of note from the recent Decanter wine competition) and enjoyed pink wine’s diversity of hues, flavors, and aromas.

Libertè, ègalitè

French wines are traditionally identified by place, a practice that privileges a few elite regions and their wines. Bordeaux. Burgundy. And especially Champagne. This is not an accident. As I wrote in my book Money, Taste, and Wine: It’s Complicated, the appellation system was more or less invented by Champagne producers to protect their sparkling wines first from copycat wines produced elsewhere and then from sub-standard quality wines made at home. Only Champagne was Champagne, which consigned many first-class French sparkling wines to the third class carriage.

The famous Classification of 1855 established a pecking order for Bordeaux wines. It is not a big stretch to move to the idea that wine in general is rank-ordered, with the most famous names at the top. France has lots of different wines (even more different wines than cheeses, if that is possible), but they are not equal, at least in the marketplace.

This situation is changing. The popularity of Prosecco has weakened Champagne’s hegemony. Besides, the joyous gatherings where special corks are popped are fewer and smaller in the age of Covid-19. Bordeaux, which priced itself into irrelevance in some ciercles, has descended a bit with softer prices flowing out of this year’s unusual en primeur circus.

The Pink Wine Boom

But the biggest force in the growing democratization of French wine is Rosè. Sales of French Rosè were booming in the U.S. before the crisis and continue to be very strong. Indeed, French wine today rides on a pink wave. This is apparently true even within France, where reports suggest that pink outsells white wine in French supermarkets. Incroyable!

Yes, I know there is a hierarchy within the Rosè world. Provence is a first among unequals in the opinion of some. But even taking this into account, I think that Rosè is the wine of French democracy. What is Rosè after all? It is not a region (Rosè is made all over France and the world). It is not a grape variety, either. Rosè wines from all over France and sometimes all over the world are often displayed together in shops and supermarkets, giving humble appellations and obscure grape varieties an opportunity to compete on their own terms, which does not happen very often in the world of wine.

An Arrogant Frog?

carte-domaines-paul-mas-2017 Three wines that we received from Paul Mas illustrate these points very well. Les Domaines Paul Mas is an ambitious family wine business rooted in the South of France. Paul Mas reminds me of Jackson Family wines in California. Jackson is best know for its high-volume Kendall-Jackson wines, especially the popular Chardonnay. But when you look more closely you see a collection of focused, high quality wineries that together explore the complex possibilities of the region’s terroir.

Paul Mas is a little bit like that. You might know it best in the U.S. for its popular Arrogant Frog wines. Labels feature a snooty but suave wine-drinking, beret-wearing frog. The wines were fine when I first encountered them, as I recall, but the marketing was the thing that caught my attention. Arrogant Frog is still with us (there is a Chateau Arrogant Frog) and better than ever, but under Jean-Claude Mas’s leadership the firm has grown and focused its attention on the specific terroirs of Languedoc and Rousillion. We tasted and appreciated several of these wines when we visited Languedoc and Roussillon two years ago. So we were pleased to get the chance to focus on the pink wine portfolio.

Three Shades of Pink

We tasted three very different Paul Mas Rosè wines. The first is the Côté Mas Rosè Aurore, a blend of Grenache, Cinsault, and Syrah with the IGP Pays d’Oc designation. You get a full liter of this fun wine for about $12.99. Full of flavor, the packaging (see image above) emphasizes casual elegance and screams “picnic.” Picnics can be rustic or elegant and this wine would work either way. You would not regret opening this bottle on a warm day in the company of friends (social distanced friends, of course).

Next came Chateau Lauriga, a Syrah and Grenache blend, AOP Côtes du Roussillon, with a retail price of about $20. Lighter, more elegant, a very different take on Rosè, which is as it should be since both the blend and the terroir are different. A bit more serious, too, if you know what I mean.

We enjoyed both these wines with early summer meals, but our favorite was the Domaine Lauriga Le Gris. I’m not sure what made this wine stand out, but we just loved it. Could be the grape variety, terroir, or maybe the older vines (43 years old) made the difference. Le Gris is 100% Grenache Gris, designated IGP Côtes Catalanes. At about $14 per bottle, it sits comfortably in the Rosè market sweet spot.

A Mind of Its Own

Do you see why I associate these and other Rosè wines with libertè and ègalitè? Speaking of libertè, there’s one more Rosè wine I want to tell you about.

liberte Our friend Caro Feely (author of several excellent wine books), invited us to zoom into a virtual tasting with members of Chateau Feely‘s wine club. Chateau Feely is a biodynamic estate in Saussignac, about an hour from Bordeaux. Caro’s books document the challenges and satisfactions Caro and family experienced as they worked endless hours to make their vineyard sustainable in every sense. I recommend the books to anyone who is thinking about buying a vineyard to winery.

The subject was Rosè and the intimate internet audience was pleased to sample two of Feely’s fine Rosè wines, an experience that might have changed how they think of Saussignac, Rosè, or both. One of the wines especially caught my attention.

It is called Libertè. Made with native yeasts from Cabernet Sauvignon grapes (one of the approved varieties for Bergerac AOP), the wine exploited its freedom by taking an unusually long time to complete fermentation, thus earning its designation. It is a wine with a mind of its own. Everyone agreed that Liberty’s taste is something special.

So please raise a glass of Rosè and join me in a toast. Libertè, ègalitè, Rosè!

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If you want to know more about Rosè you should read Elizabeth Gabay’s recent book on the pink wine revolution. Here is our review.

Einstein’s Law & Washington Wine

July 7, 2020 By Mike Veseth in Washington wine, wine, wine education 2 Comments

Einstein said that everything should be made as simple as possible … but not simpler. At some point further simplification loses the essence of whatever is being studied. I am pretty sure that he was talking about physics, not wine, but I think the concept applies here as well.

I was reminded of Einstein’s Law when I learned about what the Auction of Washington Wines is doing to try to spread the word about this region’s dynamic wine scene. Usually the auction is an in-person event and so the impact is limited a bit by attendance constraints. This year, however, they’ve gone virtual, which opens up expanded possibilities. And they’ve partnered with the world-class story-teller, Karen MacNeil, to spread the word, simplify the story, but not too much.

The Signature Grape Syndrome

The temptation to violate Einstein’s law is strong. Wine people look at the success of New Zealand and Argentina,. for example, and decide that a single signature grape is the answer. I have argued that a signature variety is no silver bullet and, in any case, what grape variety would Washington choose? Riesling makes sense. Chateau Ste Michelle is the world’s largest producer of Riesling wines. Merlot had proponents for a while (pre-Sideways).

Cabernet Sauvignon was the recent favorite, but too much was planted both in Washington and parts of California, and it is not the easy sell it once was. And there are lots of other contenders including Syrah, Grenache, Cabernet Franc, and rising Tempranillo. No one grape variety rules them all … or should.

Washington’s wine diversity is a blessing for consumers, but a problem for marketers. No wonder the Washington State Wine Commission went to the other extreme in choosing a new logo. Some of my wine friends admire the austere graphics, but I think it simplifies too far. What story does it tell? Einstein would not approve, although I am not sure what alternative he’d suggest. He’d probably just pour another glass of great Washington wine and leave it at that.

Happily the new logo is part of a useful package of resources to help wineries tell their (and Washngton’s) story. And I don’t think anyone will mistake WA wine for the logo of Wawa, the Pennsylvania-based gasoline and convenience store chain.

Washington Wine Storybook

Karen MacNeil and the Auction of Washington Wines have to simplify, too, but virtual platforms allow more depth and detail. They’ve organized a series of on-line interviews and tastings, each with a particular theme. Wines for each session are available for purchase.

A webinar on Washington wine “trailblazers” (originally web-cast on June 18 but you can still watch the video) brought together pioneers Allen Shoup, Rick Small, and Marty Clubb. Shoup, Small, and Clubb have seen the Washington industry grow from just a hand full of wineries to over 1000 producers. MacNeil begins the conversation by asking, did you always know this was going to be a success? Good question. Click on the image to hear their answers.

The second webinar, which first appeared on July 2, focuses on the next generation, giving a sense of the dynamic of this young industry. Andrew Januik, Rob Mercer, John Bookwalter, and Caleb Foster are featured.

Next up (on July 16, so you still have time to place your wine order) is a program on women in Washington wine featuring Leah Adint, Lisa Packer, and Jessica Munnell. The status of women in the wine industry is one of Karen MacNeil’s particular concerns, so this session is an opportunity to add this important issue to the mix. Hopefully future programs can explore issues of diversity and inclusion in even greater depth and breadth.

Three Ps: It’s Complicated

Other programs in the series will explore the topics of terroir (Red Mountain) and grape varieties. There’s no way they can tell the whole story of Washington wine any more than the previous sessions could, but they aren’t likely to violate Einstein’s Law, either.

Sometimes complicated things need to be understood in complicated ways, so there is plenty of room for future webinars to examine the great diversity of Washington’s “Three Ps,” the people and their distinctive visions, the places (the varied terroir), and the plants (the grape varieties that thrive here).

Wine, Recession & the Fed-Ex Effect

July 2, 2020 By Mike Veseth in coronavirus, economic crisis, Economic impact, recession, wine, wine markets Leave a comment

bot The impact of the evolving coronavirus recession on the wine industry is complicated. It seems like you get a slightly different story depending on when and where you look. One way to think about this situation is to analyze other industries where the impacts might be easier to discern. Fed-Ex, the package delivery giant, offers several potential insights.

Business is Booming, But …

How is Fed-Ex doing in this environment? A recent report from The Economist newspaper provides some clues. You’d think that business would be booming, since so many consumers have turned to on-line shopping and home delivery in the past few months. Of course there is competition to consider. United Parcel Service is a strong competitor. And Amazon.com has developed its own package delivery service. But there is plenty of delivery business to go around. So Fed-Ex must be doing well, right?

Well, yes and no. Home package delivery is booming, but bring those boxes to your front door is a high cost part of the business. And the costs of protecting the workers who process the packages have increased, too. So the business surge has put pressure on margins.

And the most profitable part of the business — which is bulk shipment to businesses — has actually fallen as overall consumer spending has decreased, reducing the pull-through effect. Higher margin deliveries to businesses and retailers have been only partly replaced by lower margin deliveries to you and me.

Fed-Ex announce quarterly earnings after market close on Tuesday of this week. The MarketWatch.com report noted that

Commercial volumes were down significantly due to worldwide business closures, but there were surges in residential deliveries for its FedEx Ground business and in transpacific and charter flights for FedEx Express, which required incremental costs to serve.

The company also incurred in about $125 million in increased operating costs related to personal protective equipment and medical and safety supplies for its employees, as well as additional security and cleaning services to protect them, it said.

Quarterly earnings were well below the level of a year ago, but much better than analyst expectations. The company’s stock rose in after-hours trading. It sounds like
Fed-Ex is managing the unavoidable big squeeze pretty well under the circumstances.

Lessons for the Wine Industry

Can you see how the Fed-Ex effect relates to wine? It isn’t a perfect parallel, but the surge in supermarket and on-line wine purchases is one side of the coin — like the boom in Fed-Ex home delivery — and if we focus just on that we end up drawing the wrong conclusions.

Higher operating costs and stagnant overall sales, when lost on-trade business is taken into account, are the rest of the story for wine. Depending on where your business is in wine’s market constellation, you might find yourself doing quite well or, like Fed-Ex and many other firms, caught in a squeeze.

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What’s that gizmo in the photo above? Well, Amazon.com is experimenting with drone delivery. Fed-Ex has tested an autonomous delivery robot.