What in the World is Charles Smith Up to Now? A Visit to Jet City Winery

jet cityCharles Smith’s Jet City Winery is located across the street from historic Boeing Field in Seattle’s gritty but hip Georgetown neighborhood.

The building started life as a Dr. Pepper bottling plant. The public spaces reflect both the structure’s mid-century roots and Charles Smith’s signature aesthetic, with lots of glass, metal, and recycled wood. The cellar is sleek, efficient, and spotlessly clean.

Sue and I met up with veteran Wine Economist research assistants Bonnie and Richard a few weeks ago at Sisters and Brothers, a hip little restaurant that makes delicious Nashville hot chicken, fried green tomatoes, and other memorable southern fare just steps from the winery. The food was great, but that wasn’t why we were there. Our mission, following up on last week’s column, was to learn what Charles Smith and his team are up to  now and where they are headed in the future.

Technical Innovations

I became curious about Jet City Winery a year ago when I read an article about it in Wines & Vines that focused on the technical aspects of the winery. The author, Andrew Adams, interviewed Brennon Leighton, director of winemaking, and reported on many of the innovations and special features of the Jet City facility.

One innovation that especially caught my attention was a set of design features that minimized some of the “heavy lifting” aspects of cellar jobs so that women would not be disadvantaged relative to men. “It’s a pretty male-dominated world on the cellar floor,” Leighton told Adams, “and a lot of that has to do with lots of fairly vigorous, high-labor jobs. I really wanted to cut that labor down so anyone could do any job at any time.”
Our team found that this is just one example of the extreme attention to detail that is everywhere at Jet City.

brennanBrennon Leighton is one of Washington’s most respected winemakers. He was in charge of making the white wines (including some spectacular Eroica bottlings) at Chateau St. Michelle before moving to rising star boutique Efeste.  Charles Smith lured Leighton away, first as consultant and then as director of winemaking and viticulture, responsible for a dynamic array of wines. It was a successful move judging by the results.

It is a good thing that Leighton has a lot of energy, because his workload is pretty fierce. Although Constellation Brands has purchased the Charles Smith Wines portfolio that includes Kung Fu Girl Riesling and Boom Boom Syrah, for example, Smith, Leighton and the team are still hands-on involved and will help Constellation scale up production while maintaining quality.

A Winery with a Lot of Wines

There is a lot going on here (and lots of wines to taste at Jet City). The current Charles Smith lineup ranges from the Vino line of “modernist” wines made with Washington-grown Italian grape varieties on up to the iconic and collectible K Vinters single-vineyard wines.

It seems like Charles Smith is always up to something new and with the sleek Jet City Winery facility the pace of innovation seems to have accelerated. We found ourselves especially intrigued by three relatively new wine labels: Sixto, B.Leighton, and Wines of Substance.

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The Sixto wines are in part a response to the criticism that Washington has not produced very many great Chardonnays. Sixto Chardonnays highlight great fruit from a handful of carefully managed sites along with precision winemaking to produce surprising and distinctive wines.

B.Leighton is Brennon Leighton’s distinctive personal wine line.  Bonnie and Richard were charmed by Gratitude, which is inspired by the wines of Bandol,  and a Petit Verdot that we tasted from barrel (Richard left with a magnum).

The Wines of Substanace caught me a bit off guard. Charles Smith has sold wines brands before (House Wine to Precept, Kung Fu Girl and the others to Constellation), but this is the only brand he has ever purchased. Leighton explained how it is developing into something special. He casually suggested that we try to Sauvignon Blanc from the Sunsent Vineyard in Ancient Lakes and … wow! … what a great wine. More France than Washington. Unique.

A Lot of Wine in the Wines

Then he poured the Cabernet Sauvignon, which sells for $17 at the winery (I saw it for less at Costco) but tastes like a lot more. He talked about the special efforts that are made in the vineyard and the careful cellar work, too. A lot of time and trouble for a $17 bottle of wine but, Leighton explained, a lot of people can’t afford to spend $50 or $100 on a bottle of wine. They ought to be able to get a really good bottle of wine at a relatively affordable price.

Not everyone can afford to pay $17, of course, but if they can then this is the real deal. Or as Leighton commented, “There’s a lot of wine in our wines.”

Winemakers (like artists and authors) often have big egos, and while Brennan Leighton has strong ideas, there is an appealing humility to the way he operates. His idea of wine is to work diligently in the vineyard and then let the wines express themselves in the cellar. His success with both large production projects like Kung Fu Girl and small lot wines like Sixto and B.Leighton speaks for itself.Wines of Substance-Landing-Page

So what’s ahead for Charles Smith’s wine universe? We’ve got new projects in the works, Leighton told us. But I can’t tell you what they are. So I was only a little surprised when, a couple of weeks after our visit,  Charles Smith announced a major re-branding. “Wines of Substance” is now the name of the umbrella company that includes K Vinters, Sixto, Vino Casasmith, Substance, B.Leighton, and Charles & Charles.

Is this the new direction that you couldn’t tell us about, I asked Brennon, or just part of it? “Part of it,” he said, without offering any hints. Hmmm. It will be interesting to see what is revealed when the next Charles Smith shoe drops!

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Thanks to Brennon and everyone at Jet City Winery for your help and hospitality. Special thanks to Bonnie and Richard for their incisive questions and analysis.

Here’s a video where Charles Smith talks about his Jet City Winery project.

The Genius of Charles Smith and the Land versus Brand Wine Wars

What do you know about Charles Smith? He’s a marketing genius! Where does he get his ideas? Do you know what he is going to do next?1029780x

We were in a restaurant in Yountville, the heart of the Napa Valley, talking with one of the valley’s best winemakers. There was a lot to discuss, but our friend was pretty focused. He was fascinated by Charles Smith.

And that’s not really a surprise. Charles Smith has a reputation as a premier brand builder, a marketing genius. That’s not the whole Charles Smith story, but it is how some people think of what he is and does, especially after the 2016 sale of his Charles Smith Wine (CSW) brand lineup to Constellation Brands for a cool $120 million.

Smith came to Walla Walla to make terroir-driven wines. His first vintage was 330 cases of the 1999 K Syrah made from grapes grown in The Rocks vineyard area supplied by Cayuse winemaker Christophe Baron. The wine was so good, according to an excellent Wine Spectator profile, that it convinced local bankers to help finance the operation. Bankable wine? Quite an accomplishment.

House Wine to Kung Fu Girl

K Syrah is a clever, memorable wine brand (think “Que Sera Sera”), but the commercial branding story really starts in 2003-2004, when a killing frost hit Walla Walla and winemakers like Smith had to scramble to get grapes or bulk wine from other parts of Washington to give them something to sell to pay the bills.

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Smith seized the moment to launch the Magnificent Wine Company and its House Wine lineup. The popularly-priced negociant wines with the fun labels sold out. Everyone needs a house wine — House Red, House White, and so on. Sales quickly scaled.

Precept Brands invested in House Wine in 2006 and purchased the brand outright in 2011. The current lineup includes House Red, House White, Steak House, Fish House, and other House wines packaged in bottles, boxes, and cans.

Charles Smith Wines came next — continuing the House Wine philosophy of giving people what they want in a simple but stylish way, but a step or two up the wine market ladder. Boom Boom Syrah, Velvet Devil Merlot, Eve Chardonnay, Chateau Smith Cabernet Sauvignon and who can forget Kung Fu Girl Riesling — each wine had its own personality and offered buyers lots of quality per dollar.

These CSW wines have two things in common. First, they have distinctive graphic design elements provided by the talented Rikke Korff, who has handled all the design work for Charles Smith since the beginning. The labels are instantly recognizable and always make me smile. Nothing like the staid chateau drawings or cute critter images that many wines feature.

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The second common feature is that the wines are good and good value. Kung Fu Girl Riesling, the best-selling wine in the line and a frequent recipient of “Top 100” wine awards, sources grapes from the exceptional Evergreen Vineyard. It’s the real deal.

The Modernist Wine Project

There are a lot of ways to think about the CSW wine program, but the winery website likes to call it part of a “modernist” project. The idea seems to be to look at consumers as they really are and then give them a product that satisfies their needs. This means wines that are ready to drink upon release, that are balanced and taste good with food or without it, and that are affordable and carried to market on a relatively simple message relayed through exciting graphical design.

The genius of Charles Smith was to put all of this together — the wines, the message, the design, the marketing — and to get the project rolling in 2006,  just before the Great Recession hit the United States. The CSW wines offered recession-shocked buyers an opportunity to trade over to a more casual idea of wine, not just to trade down to something a bit cheaper. Mix all this with a lot of hard work in the vineyard, cellar and on marketing and it is no wonder the wines were so successful.

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It is well known that I admire this sort of genius. The subtitle of my 2011 book Wine Wars referenced the “Miracle of Two Buck Chuck.” It was indeed a miracle that Fred Franzia and his team at Bronco Wine and the smart folks at Trader Joe’s markets could give millions of Americans the confidence they previously lacked to try and enjoy wine. Charles Smith built upon this foundation with great success and in a particular “modernist” way, first with House Wine and then the CSW brands.

The modernist project continues. Smith will consult with Constellation Brands on the CSW portfolio to help it scale up successfully. And then there is Vino, which was not part of the Constellation Brands deal, a tasty lineup of Washington-grown Italian-varietal wines that are instantly recognizable as a Charles Smith product by their label design and offer an unexpectedly sincere homage to the Italian origins of their grapes.

The Pinot Grigio, for example, has minerality you won’t find in a lot of other wines of this type and the Moscato will remind you a bit of a nice Moscato d’Asti. These wines probably don’t have to be this good to sell at their price points. But they are.

The Battle of Land Versus Brand

It would be easy to typecast Charles Smith as a brand guy in the battle of Land versus Brand. The fact of the Constellation Brands purchase offers some evidence. After all, Constellation is famous these days for paying big bucks for brands that have no vineyards or wineries attached to them.  The Meomi brand was purchased for $315 million and The Prisoner for $285 million, for example.k_syrah_beautiful

Viewed in this perspective, Charles Smith’s experience with House Wine and then the CSW brands seems to typecast him as a very successful brand-spinner — a genius at the game as my Napa Valley winemaker friend pointed out. And what you would expect from Smith is more of the same.

But there is more to Charles Smith than brand-building. The K Vintners wine that started it all back in Walla Walla has evolved into a rather interesting collectiomn of single-vineyard wines (Land not just cool Brand), exploring the possibilities of Syrah and Viognier with side-trips to Sangiovese, Tempranillo and Malbec. An all-Chardonnay line called Sixto offers single-vineyard wines plus a multi-vineyard blend.

Washington’s Randall Grahm?

And so the question must be asked, is Charles Smith Land or Brand? The answer seems to be both, which makes him a complicated person (and maybe more of a genius than my Napa friend realized). Is Charles Smith Washington wine’s answer to California’s Randall Grahm? I dunno. What do you think?

To find out what Charles Smith is up to these days and maybe learn about what comes next we paid a visit a few weeks ago to his Jet City Winery near Boeing Field in Seattle to learn about a particular vision of Land and Brand. Come back next week to see what we discovered.

New “Wine by Numbers” + Analysis of Global & US Wine Market Dynamics

 

wbnA new edition of Wine by Numbers was released a few days ago and it is required reading for anyone interested in global wine market dynamics. Wine by Numbers presents current data about global wine exports, imports and patterns of trade. It is a free resource provided by the Unione Italiani Vini, the Italian wine association.

Who Buys? Who Sells?

This special edition provides more data and deeper analysis, including essays by leading figures in the Italian wine industry about some of the most important export and import markets. Carlo Flamini of the Corriere Vinicola, which publishes Wine by Numbers, asked me to write an introductory essay for the “Who Buys” issue.

My essay presents a “Big and Hot” analysis of global wine market dynamics based upon the Wine by Numbers data. I invite you to download the pdf and check it out along with the rest of this valuable publication.

Writing the Wine by Numbers essay got me to thinking that it might be time to update my “Big and Hot” analysis of the U.S. market, so today’s column is part of an occasional series here at the Wine Economist where we analyze recent U.S. retail sales data looking for interesting and important trends. The data this week comes from Nielsen reports on U.S. off-premise table wine sales for the 52 weeks ending on April 22, 2017 as reported in the July 2017 issue of Wine Business Monthly.

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Here’s how “Big & Hot” analysis works. The idea is to look at which parts of the market are big (in terms of total sales) and which are hot (or not) based upon rates of growth, both over the 52 week period and in the most recent 4 weeks covered by the data.

Sometimes as we see below, big and hot are the same, but sometimes they are very different. There is often something to be learned in either case.

Big and Hot Price Points

The overall U.S. off-premise market for table wines as measured by Nielsen grew by 3.5 percent in the 52 weeks of this study, but grew at a faster 6.1 rate in the final four weeks, showing some welcome acceleration that might be related to  Easter and Passover holiday wine sales.

This growth was not distributed uniformly over all price segments. This WBM Nielsen report aggregates price data by three dollar increments ($0-$2.99, $3-$5.99, etc.) up to $14.99 and then $15-$19.99 and $20 and above. The Big price segment measured by total expenditure is $3-$5.99 followed by $9-$11.99. The data suggest that the market is increasingly bifurcated  — the $6-$8.99 price segment between the two Bigs is actually shrinking. A tale of two markets?

Value wines are still Big and probably always will be, but they are not especially Hot. The fastest growing price segment is $15-$19.99, where total expenditures increased by more than 10 percent for the 52 week period. Wines priced $20 and above were “Hot Hot.” Sales shot up by 17.6% in the final four weeks of the reporting period. Amazing!

Big and Hot Imports

The Nielsen retail data reported here show that domestic table wines account for about 72 percent of total off-premise sales. Imports are somewhat stronger in restaurants and in the sparkling wine category, too, and if these sales were included the split would be more like 70% domestic and 30% import.

Italy is far and away the largest import wine source in these data (and growing faster than the overall market)  followed by Australia, New Zealand, and Argentina. France, which is only #5 by total sales, leads the hot parade, however, with 15% growth for the year and more than 25% 4-week growth. New Zealand, which normally is top of the Hot table, grew almost as fast followed by up-and-coming Portugal.

While Australian sales were essentially flat (an improvement over their dismal performance in recent years), Argentina, Chile, Germany, and South Africa had falling import sales in the Nielsen data.

Big and Hot Varietals

Conventional wisdom has it that American consumer reach for wine based upon brand, price, and grape variety. Chardonnay is the Big grape variety, accounting for 18% of all wine sales in the Nielsen table. Growth in Chardonnay sales rose slightly less than the overall market in this period. Cabernet Sauvignon, however, is only a little behind Chardonnay after a Hot surge and will soon take over the top place.

Sauvignon Blanc is the hottest grape variety, with 10.8% growth. Pinot Noir and Pinot Gris/Grigio are also growing while many varietal wine types (Merlot, Syrah/Shiraz, Malbec, Riesling, Zinfandel) have flat or falling sales.

Where is the growth going if not to these classic varietal wines? Look to the next category, which I call the Wild Card wines.

Big and Hot: The Wild Cards144318l

The Hottest categories in today’s market are those wines that defy the conventional wisdom. Consumers are supposed to be drawn to the security of varietal wines, so it is a bit of a surprise that the “Red Blend” category is so Hot, growing at more than twice the rate of the overall market during these 52 weeks. “Sweet Red Blends” are even Hotter, with sales rise at more than triple the overall market growth rate.

The conventional wisdom also holds that pink wines are a pretty narrow category and that is true in part. Sales of White Zinfandel, once a really Hot pink wine ticket, fell by 5% in this period.

So the Rosé wine boom comes as a bit of surprise. Sales of  Rosé table wine selling at $8 and above per 750ml rose at a startling 61.7% for the year and 84.2% for the final four weeks of the survey period.

That last number (84.2%) is especially interesting and not just because it is so big. Remember that these Nielsen data cover the period that ended on April 22, 2017, so the final 4-week period included parts of March and April.  Rosé wine was long thought to be “summer wine,” but these surging sales came in early Spring. Maybe Rosé is a Thing now, and not just a summer Thing?

Economists like numbers like these, but what’s the story behind them? Come back next week and I will try to tease out some broader implications.

The Name Game: Porto, Napa Diplomacy and the Fortified Wine Dilemma

portoThe Association of Port Wine Companies roadshow passed through Seattle recently and Sue and I were fortunate to be invited to attend the Porto and Douro Wines Tasting, a ceremony initiating several local wine trade representatives into the Confraria do Vinho do Porto, and a festive dinner hosted by the winemakers.

The events, which involved wines and representatives from eleven Port houses, had two main purposes. The first and most obvious was to introduce or re-introduce local restaurant and trade people to the Porto and Douro wines and to establish or renew relationships. In other words, this was a sales call and I will talk about this aspect next week. But first I want to discuss a secondary purpose: economic diplomacy.

Protecting the Brand

Champagne and Porto have two of the world’s most valuable regional wine “brands.” Sparkling wines are made all over the world, but Champagne can only comes from the Champagne region of France. Ditto Port wine and the Porto region.

When producers in other regions use these terms generically, they potentially dilute or devalue the brand. It is easy to see why this might be a problem. Trade treaties have enabled Champagne and Porto to assert their intellectual property rights here in the U.S., but with pre-existing commercial use “grandfathered” in. Thus Gallo legally sells inexpensive Andre’s California Champagne and Fairbanks Port.21344

Not all of the grandfathered brands are high volume value wines. Prager Royal Escort  Port, made from Napa Valley Petite Sirah grapes, sells for $90 per bottle for the current 2009 vintage release. It may not be real Porto Port, but it is a wonderful wine.

Champagne, Port and the other key regions would obviously like to see there brand rights more strictly enforced and they hoped to accomplish this as part of the big Transatlantic Trade and Investment Partnership Agreement (T-TIP) that has been in negotiation between the U.S. and the European Union for some time.

Shifting Political Winds

But the political winds have changed directions (in case you haven’t noticed) and big trade agreements are now pretty much off the table. The incoming Trump administration seems more likely to dismantle existing trade deals than to encourage new ones. The political environment in Europe is no sunnier.

Even a fairly straightforward trade treaty with Canada nearly collapsed at the last minute when officials in the parliament of the Belgian region of Wallonia raised objections. Reminds me of The Mouse that Roared.

Facing this political roadblock, the Porto producers have turned to the art of persuasion — diplomacy. Thus the photo above, which shows George Sandeman at the October 27 Confraria induction ceremony in San Francisco where Boyd Family Vineyards, Freemark Abbey, Jessup Cellars and Schweiger Vineyards were welcomed into the Brotherhood of Port to honor their commitment to respect the traditional use of the Porto brand.

The Napa-Porto Connection

Napa Valley Vintners was also recognized for their work to protect place names. Napa has particular interest in this issue because the Napa brand itself is very valuable and, like Champagne and Port, is at risk of being diluted in various ways. It is no accident, therefore that the Joint Declaration to Protect Wine Place Names and Origins,  which an increasing number of regions are embracing, is also called The Napa Declaration on Place. Porto and Napa were founding members of this initiative.

I asked George Sandeman (the handsome fellow in full Confraria regalia in the photo above) about the situation and he noted that “Napa producers switched away from Champagne on a voluntary basis long ago.  Now nobody in Napa Valley produces Champagne, even though they legally may do so according to US law (those grandfathered in the 2006 Wine Accords).  The producers in Napa have made that change as a show of respect to the Champagne region.”

“There has been discussion for several years of doing the same for Port,” he continued, “and now the first handful of Napa producers voluntarily made a switch away from the term “port” to something else, even though they weren’t legally compelled to do so.  It was a sign of respect to Porto and the Port producers, but also an acknowledgment that it is important to “walk the talk” when it comes to respecting and protecting winegrowing place names.”

Not Port: The Name Game

One problem that the makers of Port-style wines face is “the name game” — how to describe their products and market them without using the forbidden terms. It is a tricky business. Poking around our little cellar, for example, I found two examples of winemakers who make interesting wines and work hard to stay inside the lines.mfw

Hedges Family Estate, for example, makes very small quantities of wine from traditional Port grapes (plus a little Cabernet Sauvignon in the example we have). The back label clearly identifies itself as “Fortified Wine,” which accurately describes the process and is one possible generic descriptor of these wines. Unfortunately, the terminology also emphasizes alcoholic strength and not everyone will see that as a positive.

Mosquito Fleet Winery makes a fortified wine called Griffersen Reserve from Touriga Nacional grapes . As with Hedges, the term “Port” is carefully avoided on the package. Small print on the back label describes the product as “dessert wine,” emphasizing sweetness and the after-dinner occasion instead of alcoholic content or production process. This is accurate (at the winery you are served a taste in a small dark chocolate cup– yum!), but is obviously also vague and somewhat limiting as a category.

If you called either of these wines Port they would be easy for consumers to understand. The diplomatic initiative to protect the Port producers’ brand would be more effective if someone could find a generic term that works as well for these wines as “sparkling wine” does for wines made in the Champagne style and method. The lack of such a term means that honest efforts to respect Porto’s rights in theory frequently fail in practice. While Hedges and Mosquito Fleet won’t call their wines “Port” nearly everyone else does when they refer to them.

What’s the best way to honor and protect the Port brand while also allowing U.S. producers to identify and successfully market their own fine wines? The name game continues.

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Seems like Shirley Ellis could solve the Porto name game dilemma.

 

Restaurant Wine Lists: Are Restaurants Leaving Money on the Table?

wine-list-waiterLast week I wrote about the concept of the Overton Window and speculated about what it might be able to tell us about the constantly evolving wine market. This week I follow up with an interesting study that finds a kind of “Overton” effect in restaurant wine programs and suggests that many restaurants may be leaving money on the table by the way they bind themselves to a particular narrow wine “window.”

The Backstory

Briefly, the Overton Window is a concept taken from the world of political analysis. It refers to the range of public policy options that are deemed generally acceptable at any particular moment. Political success, according to this theory, is all about either embracing the window to gain public support or finding ways to shift it in the direction you favor.

Financial Times columnist Tim Hayward applied the Overton Window concept to restaurant food. He noted that many creative chefs find themselves constrained by the customer Overton Window and the need to have “safety food” options like hamburgers, simple fish and chicken dishes, etc. so that customers feel comfortable coming to the restaurant.

If you choose to ignore the window conventions, you risk losing customers and ultimately your job. Hayward speculated that the most successful chefs stick to the window, but work on the edges to express creativity without leaving their customers behind.

I had more to say about this, of course,  including some comments about giant hairballs, so you might want to read last week’s column if you haven’t already done so.wine_beer

Wine Versus Beer and Spirits

The Overton Window is a new concept for me, but learning about it instantly reminded me of research that my friend James Davis did for his Master of Wine thesis, “Understanding consumer attitudes to large wine-brands as a purchasing cue in the United Kingdom (UK) multiple on-trade: a comparison of value and premium multiple outlets.”

The thesis is suitably complicated and probes many questions. I am going to simply (and probably over-simplify) and focus on just a couple of the results.

Davis wanted to understand the difference between wine programs in value restaurant chains (such  as Wetherspoon’s and Harvester  in the UK) and premium restaurant chains (such as Wagamama and Carluccio’s) and while he did not use the concept of the Overton Window, I think you will probably see why I think it applies.

Davis noted that when it comes to popular brands of beer and spirits, consumers expect to find them in both value and premium restaurants. The beer and spirits lists of the two types of restaurants aren’t identical by any means, but popular brands that are available in the shops are likely to be found in both types of establishments. This is consistent with the concept of staying within the consumer comfort and acceptance window.

Davis noted that the conventional wisdom is that wine is different from beer and spirits when it comes to popular brands. Widely-distributed wines like Hardy’s and Jacob’s Creek are likely to be found in the value outlets, but are not typically found in the premium segment. In other words, the restaurant wine windows are assumed to be much different. His research of the chains’ wine lists generally confirmed this finding, indicating that the restaurants treated wine a bit different from beer and spirits in terms of the types and range of brands on offer.

So, if you are following me so far, it seems that restaurants may be using their wine lists to communicate their identities (as value versus premium) more than they do with beer and spirits. Interesting, but is wine really so different from beer, spirits and food? Are the value and premium wine windows so very different?survey-says

And the Survey Says …

Davis then surveyed consumers and he found that many of them would have ordered wine at the premium restaurants if there had been a popular brand on the list. In other words, the windows in the two types of establishments may not be so distinct as conventional wisdom suggest.

Perhaps restaurant wine should be a little more like restaurant beer and spirits  and not try to create its own special window?  To quote from Davis’s thesis: “Premium outlets that do not list any large wine-brands are missing out on sales according to the findings of the consumer survey and also the wine-list review.”

This seems to me to be consistent with Tim Hayward’s hypothesis about restaurant food. Consumers want those safety options and you ignore them at your peril. Given that a widely available “safety wines” might be pretty popular (think Kim Crawford Marlborough Sauvignon Blanc, for example, or Mondavi Napa Fume Blanc) I am not sure about the logic of avoiding them entirely, even if you want to construct a list that probes the creative boundaries or defines an image.

How Different is Wine?

As I said before, Davis explores more topics and provides more analysis, but this is where I will stop. My purpose is simple: maybe we should re-examine what we think we know about what works best for restaurant wine.

I’m not recommending that fine dining establishments limit their wine lists to what a consumer can find a Kroger’s or Tesco, just suggesting that broadening the list to include more popular (and probably cheaper) wines that fall squarely within the generally accepted wine window might improve wine sales while making customers happy, too.

If a restaurant is willing to offer a gourmet hamburger to give nervous customers something to hold on to, maybe there should be more similar wine choices available. Many do this, of course, but sometimes it seems like all the attention is on other parts of the wine list.

I have written many case studies of different industries over the years and one thing I have found is that each sector confidently  believes that it is different from the rest. And of course important differences do exist. But it is wise not to ignore potential lessons from other product categories, especially when consumers see them as part of the same experience as they are likely to consider restaurant food and beverage choices.

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A quick note about limitations. Davis’s study is obviously limited to those value and premium dining multiples that he studied in the UK and the consumers he surveyed there. Use caution in generalizing to other countries and other types of dining establishments.

Also please note (as if it isn’t obvious) that my concern here is increasing wine sales and the restaurants may be more interested in other things. Perhaps there is more profit (or faster table turnover) with beer or cocktail sales.

Hamburgers, Hairballs & Cabernet (Oh My!): Opening Wine’s Overton Window

windowI started thinking about the Overton Window for wine after reading Tim Hayward’s “Food for Thought” column in the Financial Times a few weeks ago (“The steak-and-chips straitjacket” March 26, 2016). Hayward was talking about food but I can’t help thinking about wine.

The Overton Window is a political concept named for think-tank guru Joseph P. Overton (it is also apparently the title of a 2010 political novel by Glenn Beck).

The idea is that at any given time there are policies that the general public finds acceptable and politicians and policy-makers who work within this window will find more success than those on the outside. The window shifts over time as conditions and attitudes change either on their own or in response to the work of political philosophers or entrepreneurs.

Creative Tension

Hayward clearly likes the analytical framework that the Overton Window provides (once you first learn about it, he says, it’s hard to stop thinking in these terms) and his FT column attempts to apply it to the restaurant scene.  Many fine dining restaurants like to define themselves by their creativity, he writes, but they risk straying outside their customers’ Overton Window. It’s a difficult situation.

Add a fancy hamburger or steak-and-chips to the menu, he says, and you’ll make your customers very happy because they will know that they can always find something to eat. But will you lose your identity in the process and become just another place with good steak and chips? But, on the other hand,  can you afford to ignore the economic benefits of providing widely popular “safety” options?

Hayward knows the British restaurant scene very well and he argues that the Overton Window has broadened quite a lot over the years, which has made it possible for creative chefs to provide a wider range of interesting foods. A good thing!

But he reminds us that the window’s “straitjacket” still holds. Wander too far outside its constraints (without that hamburger or other “safety dishes” to anchor you) and you risk being a critical success but a market failure. The most successful chefs, he argues, don’t think “outside the box” (to mix metaphors, but you get the idea), but rather work at the edges of what is generally acceptable, keeping creativity alive if contained.

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Like a Giant Hairball?

Hayward’s analysis reminds we of one of my favorite management books, Orbiting the Giant Hairball by Gordon MacKenzie. For MacKenzie, corporate bureaucracy, which defines acceptable policy, is a giant hairball and if you don’t fight against its gravitational pull you will be sucked into mediocrity.

But you need that pull to anchor you. Without the hairball and the discipline it imposes, creative people fly off into the cold reaches of outer space (and chefs, I suppose, fly off to bankruptcy court).

The trick, MacKenzie concludes, it to strike just the right balance and to orbit the hairball rather than zooming off into space or crashing into the hairball’s oily net. I think we all know people who suffered the two sad polar fates as well as some lucky ones who got the orbit balance just right, which I guess is equivalent to working happily and profitably around the edges of the window.

Windows and Hairballs in Action

My purpose in talking about windows and hairballs is to try to apply these flexible concepts to wine much as Tim Hayward has done for food. But before I go there it is necessary to circle back to base a bit. The Overton Window was conceived as a political idea and MacKenzie’s hairball was all about business in particular and organizations generally. Before we apply these concepts to wine, we should ask if they still apply on their home turf?

The political climate here in the United States is chaotic, with challenges from the left (Bernie Sanders), the right (Ted Cruz) and … well, where exactly is Donald Trump coming from? Has the Overton Window of acceptable ideas expanded (as Hayward suggests at one point in his column) to include all of this, which amounts to nearly everything? That’s not a window, it’s more like an amphitheater!

Or maybe the problem is that the population has fragmented and there is no single window any more, but rather a mosaic of windows that don’t really connect. Switching frameworks, has the hairball just lost some mass, so that the orbits are wider and more eratic? Or has it collapsed leaving us lost in space?

Isn’t This Supposed to Be About Wine?

Hayward is interested in how and why the restaurant menu Overton Window has expanded and why some previously exotic items are now clearly in the frame (think sushi, kimchi and kale) while others remain locked out (he cites cerviche, for example). We could ask the same sort of questions about wine. I know that Riesling fans always wonder when a broader audience will discover their favorite wine and move it more toward the center of the window.

Another application would be to look at the choices that wine shops and supermarket wine managers make when they decide which wines to stock and which to leave off the shelves. Some store selections are very conservative, sticking to the most widely purchased SKUs from the best-known makers, while others push the edges a bit.

Perhaps wine stores that go bust are, like Hayward’s über-creative chefs, guilty of pushing too far outside of the window, leaving their customers with an inadequate supply of “safety wines?”

But, inspired by Hayward’s analysis of create chefs and their steak-and-chips dilemma, I am particularly interested in thinking about restaurant wine and the choices restaurants make in compiling their wine menus. Come back next week for some interesting analysis.

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I couldn’t find a cool image of an Overton Window for wine, so I used this photo of the Berry Brothers & Rudd window in London when it was decorated with giant corks.This is a memorable image and a reminder that Berry Brothers must understand wine’s Overton Window very well to have stayed in business in their iconic shop at 3 St James’s Street since 1698.

The “Big & Hot” Guide to Best-selling U.S. Wine Brands

wv082015The August 2015 issue of Wines & Vines magazine is full of interesting and useful information as usual. One article that caught my eye provides IRI off-premise wine sales data for the top 20 U.S. wine brands. What are the best-selling off-premise brands? What’s hot (and what’s not)?

Bigfoot Barefoot?

The best-selling brand in the IRI league table is Gallo’s Barefoot, which accounted for an incredible $622 million in sales in the 52 weeks ending on June 14, 2015. That’s 5% more than the previous year in value terms and a 7% increase in volume. Congratulations to Gallo on their great success with this popular-priced ($5.64 average) wine. It is commonplace to say today that the sub-$9 wine category is in a slump, but Barefoot is the obvious exception to the rule

Sutter Home from Trinchero Family Estates is #2, but a long way back at $356 million sales. The rule does apply here — value is down 2% on the year and volume is down 3%. The Wine Group’s Franzia Box is just behind with $325 million in sales on the year, flat in value terms and down 5% in volume.  Franzia’s average price per 750 ml equivalent is up 11 cents to $2.17 compared with Sutter Home’s $5.25.

Who are the other big players? Here are the remaining members of the top ten listed in  order: #4 Woodbridge by Robert Mondavi (Constellation), #5 Yellow Tail, #6 Kendall Jackson, #7 Beringer (Treasury), #8  Chateau Ste Michelle, #9 Cupcake (The Wine Group), and #10 Mènage à Trois (Trinchero).

The next ten largest brands includes four Gallo product lines (Gallo Family Vineyards, Apothic, Carlo Rossi and Livingston Cellars), four from Constellation Brands (Black Box, Clos Du Bois, Robert Mondavi Private Selection and Rex Goliath) plus 14 Hands from Ste Michelle and Bogle Vineyards.

Clearly the Big Three companies (Gallo, Constellation and The Wine Group) dominate the list, but note how Trinchero and Ste Michelle punch above their weight. Kudos to Bogle for their success, too.

Hot N Cold Brands

The biggest wine brands are not always the hottest brands and the IRI data reported in Wines & Vines bears this out. As noted above, many of the top brands are experiencing slower sales in value terms including Sutter Home (-2%), Yellow Tail (-5%), Gallo Family Vineyards (-2%), Carlo Rossi (-3%), Clos Du Bois (-2%), Mondavi Private Selection (-4%), Livingston Cellars (-5%) and Rex Goliath (-4%).

These declines are matched by some spectacular gains elsewhere on the wine wall, often at much higher price points. Mènage à Trois tops the Hot List with 24% growth in value and 23% increase in volume, continuing its incredible market run. Black Box is right behind with 23% value growth. Gallo’s Apothic is next 21% value growth.

Continuing down the Hot List (among the 20 largest brands) is 14 Hands (+17%), Bogle (+15%) and Chateau Ste Michelle (12% value growth).

When you’re hot you’re hot, I guess. While Beringer and Clos Du Bois  have experienced falling average prices according to IRI (-11 cents per bottle equivalent for Beringer and -27 cents for Clos Du Bois), Mènage à Trois has seen its average price rise by 10 cents while Apothic’s average price holds steady at $9.58.

Remember that these are data for off-premise sales only and all data sources have limitations, so draw conclusions cautiously. Thanks to Wines & Vines for publishing this interesting snapshot of the U.S. wine market in transition. What will the final picture look like? Stay tuned to find out.

Speaking of Hot N Cold …