SVB Wine Report — We’re Gonna Need a Bigger Boat

It’s that time of year again. We just finished the live-cast of the SVB Wine Report, the preeminent source of street-level wine business intelligence available today. In it, Rob McMillan expertly offers his insights and forecasts to help guide the wine businesses into tomorrow. I truly look forward to this event every year, not only because I get to share the stage with Rob, Amy Hoopes and a new guest every year (this year was Dan Leese from V2 Wine Group — what a great guy), but also because of the elevated conversations we have before, during, and after the show.
This year’s exchanges were particularly interesting and the underlying sense I picked up from everyone is that we are entering a crucial and defining crossroads in the consumer economy and the US Wine Business.
Yeah, I know what you’re going to say. Research = boring. This is a different animal though or in this case, a different fish, as I’ll explain.

Consistent Messages

Every year the report weaves in a movie to make the reading more interesting. This year the movie theme was Jaws, so wading in a little deeper I came away with these continuing trends:

1. The wine industry continues to steer itself to unsustainable producer and pricing growth.
2. Direct to consumer has become a necessity of survival for small wineries and increasingly important for every single brand, even the big ones.
3. Fads come and go. Predicting the next one is nearly impossible.
   Routes to market are closing and increasingly more difficult to penetrate.
4. We are woefully under-resourced in trained professionals for DTC and digital.
5. The industry is without adequate retail and direct software solutions.
6. Despite reports from other sources that place millennials as the salvation of retail trade, they don’t matter for luxury wine yet and are just becoming more obvious under $15 bottle prices.
7. A cottage industry only 20 years ago, the domestic wine business is no longer immune to the larger forces around us like the crosscurrents from world economies, trade barriers, the labor market, immigration, international trends, substitutes like craft beers and cannabis and even Presidential politics. When we talk about wine today, we have to view in in the context of everything else surrounding it.
8. We continue to succeed — almost despite ourselves.

New Takeaways

1. The industry is finally talking about DTC. ALL. THE. TIME.
2. The shift from product to experience for luxury wineries is fully embedded into the narrative.
3. The critical next shift needs to be from tasting room experience alone, to user experience at the point of connection (retail, restaurant, home).
4. The ever-increasing bottleneck of getting wine to market is reaching a breaking point. Disrupting the three-tier system is an inevitable but the path isn’t yet predictable.
5. The industry’s fatigue and frustration at not having the right tools has become untenable. There is a revolt brewing and the industry leaders are tired of fighting over who has the better shovel. They are ready to organize and force change.
6. Presidential politics with immigration are playing a significant role. There aren’t enough seasonal skilled laborers to handle the work required and the problem is on a path of no return.

This is a report you have to download, digest and savor. You will be hooked. If you have any questions at all please don’t hesitate to post them here or tweet to me (Paul Mabray) or Rob McMillan— https://www.svb.com/wine-report/