Happy Thanksgiving

Be sure to raise a glass of California wine during the next few days.

A couple of things to be thankful for:

1. Poor weather which reduced the potential grape crop and probably reduced the the duration of the current economic trough in this industry.

2. A weaker US dollar, allowing our domestic producers to gain some ground on our international competitors.

3. Growing consumer optimism which might give them the approval to pick up that little better bottle of California wine.

4. California vintners increasing wisdom to provide their customers a better price-quality value proposition.

5. The great State of California with its abundant agricultural resources and the use of some of them for our wonderful wine industry.

6. Family to share the aforementioned toast with.

7. Friends to give that bottle of wine to when you visit them over the next few days

8. Your health so you can enjoy that glass of wine and enjoy another tomorrow.

Happy Thanksgiving.

Wine whining!

The wine industry is entering the time of year when a substantial part of the full years sales occur. Most wineries will make or break their year in the coming 6-8 weeks as holiday cheer and revelry is spread accross the land.

There are some good signs for the industry. Wine pricing has been coming down as the wineries try to maintain market share through this weak period. There has been an uptick in consumer confidence and optimism about the future. The dollar has lost strength relative to our competitors currencies. There was a smaller than expected 2003 crush. Bulk wine inventories are down. New packaging, increased convenience, a smart new industry wide advertizing campaign is improving movement and depletion of supplies.

This is all coming together to help set the stage for a stronger industry in the future.

Record consumption
consumer demand growth

It all sounds so wonderful. Consumption growth has to be good? Analysis of the aggregate data suggests most of the growth is derived from imports making further in-roads into our "core" consumer. Couple increasing imports with the growth in super value brands, like two-buck chuck and we appear to this observer to be consuming ourselves.

Back when the industry could not meet demand, some of our more brilliant players began importing bulk wines to fill bottles. We as an industry opened the channel, increased the flow and then were surprised when the suppliers in Australia, France, Italy and elsewhere determined there was more value and profit in the transaction by bottling the product and putting it on the shelf-space created by "our US customers".

Can the rising tide be stemmed? That is huge question bouncing around board rooms through out the industry. A weaker dollar, tariff's, mergers, bad luck are all hoped for to assist the industry. Increasing demand through marketing seems to help our very capable competitors as well as ourselves. What is the answer? Consider product differentiation on an industry basis. Identify, develop, and promote those attributes in which we, the US industry has a competitive advantage. Develop those further that are sustainable advantages. Promote those attributes to the consumer directly to build core affinity and allegiance. Price our product with its attributes fairly and provide good value at every price-point in the category. Once we have these pieces in place, then extract value recognizing the need to reinvent ourselves on a five-year timeline to maintain those sustainable competitive advantages.

Here's to the industry exercising wisdom, prudence and good judgment over the next few years as we work our way out of this mess.

Wine grape harvest is fading in the fields of Northern California and with it the hopes and asperations of the vintage of 2003 will be committed to tanks, barrels and bottles for future evaluation.

It appears from our early assessments, the harvest is likely to be 12-15% short of last years production. For some varieties a blessing, for the industry a respite and for some growers, another chapter in the unfolding financial chaos wrought of excess supply, increasing imports, higher costs, lack of competitiveness and complacency by their winery customers.

The next few months will be interesting as the financial results are cast and the scope of these issues are clarified. Like any recovery, there is likely to be a number of participants who will not make it another year to enjoy the rebounding economics.

To those who are sitting in doubt, charge ahead. Rising tides raise all boats, even those with leaks. Get help, seek aid, be creative and keep going. No matter what, open to change and consideration on alternative solutions. If it didn't work last year, what makes you think it will work next year. Embrace the challenge as an opportunity to recreate yourself.