2010: More Than A Milestone, A Turning Point
As much as we love to wax lyrical about the many romantic aspects of the wine industry/lifestyle, underneath it all this little endeavor of ours is a commercial enterprise with a very real bottom line.
We've used the word "milestone" a lot this year because we celebrated a pair of significant anniversaries in 2010. But what really made this year historic for us had less to do with those backward glances than with the forward movement we achieved as a small business.
The wine industry, like most others, has undergone a tremendous amount of change over the last few years. Three phenomena in particular have impacted us in profound ways during this period: (1) the rapid evolution of social media and related technologies; (2) a volatile but ultimately survivalist economy; and (3) the increasingly convoluted machinations of the distribution sales channel. These compounded elements have demanded unprecedented bobbing and weaving from a business management standpoint.
As we've navigated this changing landscape, technology has worked in our favor (see: Twitter & Facebook), and the economy has kept us on our toes (see our hallmark Napa Valley zinfandel, now in its seventh straight vintage with no price increase). But the demise of distribution as a meaningful sales channel for small producers has been a curve ball that's changed the game.*
Given these circumstances, our micro size and private family-held structure have been virtues, allowing us to remain nimble enough to keep pace with the ever changing demands of our industry. From the vine to the press to the tank to the barrel to the bottle to your glass - not until that cycle is complete have we begun to scratch the surface of meeting our goals.
And that is why you are the very heart of the matter, dear lover of our wines. None of what we do - the farming, the winemaking, the hospitality, the outreach - none of it means anything without your continued discovery, enjoyment, and desire to share in the Brown Estate experience.
In order to better nurture this precious ecosystem in which we thrive with your support, during the course of 2010 we made a number of upgrades to both our systems and our manpower, not only changing e-commerce and fulfillment providers, but hiring three new employees on the business side of things. "Three new employees," you may say to yourself, "how cute!" But remember that there were only four of us running the business in the first place!
These internal changes and the extensive recalibrating they have entailed represent what for us has been the most significant growth spurt in Brown Estate's 15-year history. And so it is that we toast 2010 not merely as a year that witnessed major milestones for us, but as a year that embodied them.
Thank you for continuing to be a part of this adventure with us, and we wish all of you a healthy, prosperous, and exuberant 2011!
___________________________________________________________________
*Interested in the gruesome details re: distribution's downfall? Write in below and we will be happy to fill you in! [Update: Details posted in comment string below (in two parts).]
We've used the word "milestone" a lot this year because we celebrated a pair of significant anniversaries in 2010. But what really made this year historic for us had less to do with those backward glances than with the forward movement we achieved as a small business.
The wine industry, like most others, has undergone a tremendous amount of change over the last few years. Three phenomena in particular have impacted us in profound ways during this period: (1) the rapid evolution of social media and related technologies; (2) a volatile but ultimately survivalist economy; and (3) the increasingly convoluted machinations of the distribution sales channel. These compounded elements have demanded unprecedented bobbing and weaving from a business management standpoint.
As we've navigated this changing landscape, technology has worked in our favor (see: Twitter & Facebook), and the economy has kept us on our toes (see our hallmark Napa Valley zinfandel, now in its seventh straight vintage with no price increase). But the demise of distribution as a meaningful sales channel for small producers has been a curve ball that's changed the game.*
Given these circumstances, our micro size and private family-held structure have been virtues, allowing us to remain nimble enough to keep pace with the ever changing demands of our industry. From the vine to the press to the tank to the barrel to the bottle to your glass - not until that cycle is complete have we begun to scratch the surface of meeting our goals.
And that is why you are the very heart of the matter, dear lover of our wines. None of what we do - the farming, the winemaking, the hospitality, the outreach - none of it means anything without your continued discovery, enjoyment, and desire to share in the Brown Estate experience.
In order to better nurture this precious ecosystem in which we thrive with your support, during the course of 2010 we made a number of upgrades to both our systems and our manpower, not only changing e-commerce and fulfillment providers, but hiring three new employees on the business side of things. "Three new employees," you may say to yourself, "how cute!" But remember that there were only four of us running the business in the first place!
These internal changes and the extensive recalibrating they have entailed represent what for us has been the most significant growth spurt in Brown Estate's 15-year history. And so it is that we toast 2010 not merely as a year that witnessed major milestones for us, but as a year that embodied them.
Thank you for continuing to be a part of this adventure with us, and we wish all of you a healthy, prosperous, and exuberant 2011!
___________________________________________________________________
*Interested in the gruesome details re: distribution's downfall? Write in below and we will be happy to fill you in! [Update: Details posted in comment string below (in two parts).]
posted by sk at
3:41 PM
Friday, December 31, 2010
|
6 Comments:
Congrats on a successful 2010. Have been a long-time fan of your Zin and just picked up a bottle of your Chaos Theory yesterday - anxious to try it. I'd be interested in hearing the gruesome details about what happened with the industry's distribution channels.
Wishing you continued success in the coming year.
Best regards,
MP
One of the best things about moving to California has been the discovery of Brown Estate and the people there. It raised my interest in visiting Napa and other winemaking regions. Thank you and congratulations. Also would be curious to learn about the distribution problems for small producers.
Rakesh
Congrats on a very successful 2010. When I started with Brown, I leaned towards the Chardonnay. Now three years later, my favorite is the #BrownZin. I also enjoy your Chaos Theory very much and pull it out only for special occasions :). And, let me not forget how I love to pair the Betelgeuse with casual dining or take out. It really is the best! Thank you for producing one of the best wines out there and much success to your future. Also, I'm curious to learn all about your distribution challenges.
www.twitter.com/stacywash
Hello again all -
Thanks for your interest in the dynamics of the wine biz as they impact Brown Estate. Herewith, in two parts, the back story on distribution:
Prior to 2009, we were selling just over forty percent of our wine through distribution, with the other sixty percent sold direct to consumers. This was considered a healthy balance at that time – in fact, because we began selling our wines through our website in the fall of 2005 (when e-commerce was still a relatively new tool to producers), we actually were ahead in the direct-to-consumer realm. Many wineries had the reverse profile: forty percent direct and sixty percent distribution – and in some cases distribution up to seventy+ percent.
The economics of these channels are very straightforward: Distribution nets fifty percent of retail. So the most desirable scenario is direct-to-consumer. However, distribution is vital for getting wines to market so that new consumers in far-flung locales have a chance to discover new brands. (Bear in mind that when we began making wine in 1996, there was no such thing as shopping online!) The sweet spot between distribution and direct is based on production numbers and capacity for selling direct (which is far more logistically challenging than selling through distribution). In the balance is how much wine remains available for distribution.
When the economy tanked, distribution naturally contracted in response; consumers everywhere tightened up their spending habits, and distribution markets across the country reflected that. This was not surprising; it was merely reactive to the at-large economic climate. And because this phenomenon affected all producers who relied on distribution as a revenue stream, suddenly in 2009 there began a mad scramble to capture a larger direct-to-consumer share.
The interesting thing about the wine industry is that we compete less with other wineries for that direct-to-consumer share than we do with ourselves; our success correlates directly with our ability to connect with the consumers who discover and are wowed by our wines, and to keep them engaged. This is where many producers got tripped up when, in rapid succession, (1) social media caught fire; (2) the economy crashed; and (3) distribution went by the wayside. In our case, long before the advent of social media, our tasting room and wine club (which we launched online in the fall of 2005) were functioning as social networking hubs. And because we were doing everything ourselves from the get-go, we were in the habit of cultivating familial relationships with our customers – who in turn became our fervent advocates. Happily for us, we were able to seamlessly translate these dynamics to social media forums, which optimally work as word of mouth multipliers.
(cont'd. below)
(cont'd. from above)
All of this is just backdrop, though, to the point at hand. During 2009 distribution was hobbled by the economy. In response, significant reorganizations began taking place in the distribution realm. Large distributorships began consolidating, and in many instances they purchased smaller local distributors, who represented boutique wine brands but simply could not withstand the economic downturn. Now, where once our wines were hand sold by people with whom we had direct relationships, we became just another name on the winery roster of a big conglomerate distributorship. What this meant for a small producer like Brown Estate, moving seven, fourteen, maybe 28 cases of wine at a time into a given market, is that we fell through the cracks. Fortunately for us, consumer demand persisted; our challenge now was to “distribute” our wines ourselves – meaning to sell them direct to many more consumers. This new economy and its exponentially complicated logistics precipitated our need for more hands on deck.
The net-net is that in the fall of 2008 (a neat pun), the economy’s downward spiral triggered a protracted domino effect that essentially disabled distribution as a significant sales channel for small independent wine brands. The result was very simple: Recalibrate or perish. Following a horrendous 2009 that had all of us wondering just how much worse things could get, we spent 2010 collectively shifting our business models more heavily toward the direct-to-consumer stream. Much has been made of the role of social media in this process, but by and large it boils down to what happens at the brick-and-mortar level, in the service of which social media strategies can be employed to great effect.
At this writing, we are approaching what we consider an ideal revenue mix of eighty percent direct and twenty percent distribution. At this level we are not disproportionately dependent upon the fickle distribution channel, but we are able to maintain our placements on restaurant lists and retail shelves around the country, both of which are vital to our membership and revenue streams.
If this information gives you a little insight into the nuts and bolts of the business side of what we do, we hope it also illuminates why we hold our relationships with our customers so dear. It is not merely rhetorical flourish when we express our gratitude for your enjoyment, appreciation, and desire to share our wines with others -- we quite literally could not survive without you!
So once again, thank you for your continued support of our little endeavor!
Do you do any wine tasting events in the Pasadena, CA area? If so, I would like to host an event, for charity. Let me know. Thanks.
Rock
Post a Comment
What do YOU think?
Subscribe to Post Comments [Atom]
<< Home