Pour it on!

Lodi already is big in producing premium varietals for the value and premium segments of the market. Building new brands around winegrapes sourced in the District is a critical brick in the foundation of our future.

After years of quality improvements, grower education, the elimination of some growers reluctant to change, and even the death of some die-hards, Lodi-Woodbridge is starting to reap the potential rewards. While the pain of change during the past few years has had some of us shaking our heads and wondering how it pays to compete with Napa and Sonoma.

The reality is Napa and Sonoma can't put a great tasting wine at an affordable price on all the American tables that want one. Lodi-Woodbridge cannot do that either. Finding our place is critical to the future.

At some quality point, together with a quantity and price point, Lodi-Woodbridge will flourish. Finding that place first will pay handsomely to the first growers to reach this optimum point.

That is our challenge. I think we are up to it.

P

SARS affecting the Wine Industry?

No, not the deadly Asian pathogen, but the dreaded corporate Strategic Asset Re-allocation Syndrome.

Infection is inevitable beginning with the largest, publicly held wine companies and ultimately affecting nearly all of us. The initial symptons are the business analysts and accountants, responding to shareholder concerns or pressure begin talking in acronyms like ROI, ROA, IRR. The dreaded diagnosis generally comes back that our Return on Assets is abysmal. Our Return on Invested capital is below peer group and our cash flow stinks. Couple that with an improving outlook, sales growth, advertising getting traction, new packaging and distribution opportunities and you have a full fledged case of SARS.

Generally the cure begins with shedding slow growing or limited brands through sale or discontinuation. These "cats and dogs" fill valuable voids in the needs of our customers in the good times and drain valuable scarce resources in poorer times. Next comes a comprehensive review of all of the brands and their structure and opportunities in the market place. Again, those with limited growth potential, has-beens or never-will-bees are shed like last years grape must. Some are sold, others are traded and still others are discontinued and show up at the dollar store as a close out.

Finally, the analysts bring up the "brick and mortar". This is a tough one becaue it is hard to quantify the value a winery obtains from owning vineyards, wineries, visitor centers, gift shops and associated assets. We know there is lots of cash tied up in these assets and we know debt associated with them is a drain on the cashflow. But, these are the assets which we fall in love with and find ourselves can't living without. Eventually, the "bean-counters" make their sale and these assets are put on the block to be sold and the syndrome has run its course.

In the end, understanding what business we are in is a very helpful thought process. We make wine, we sell wine. We don't need vineyards, wineries, etc., to do that. The concept of the "virtual winery" is grasped anew and with it the infection is cured until next time.

Once more we have stronger, more nimble players ready to tackle new opportunities. We have a cadre of new-comers, ready, willing and eager to challenge the industry to new heights and we have some who have exited the industry. And like any established industry we have a few who have watched from the sidlines content to observe the game and avoid the risks of play.

What a great industry.