Monday, March 1, 2010

Wine Purveyor Critical Success Factors

The bursting of the domestic real estate bubble, and the attendant impact on world financial markets and domestic employment, has had significant knock-on effects for metro-Orlando wine purveyors. The massive decline in real estate and affiliated jobs, coupled with belt-tightening on the part of those still employed, has resulted in up to a 50% reduction in pre-crisis wine sales, according to Jay Smith of Cavanaugh's, and has knocked out the middle of the market leaving a two-tiered market consisting of a $15-$3o component and a "cautious-collector market." Within this straitened environment, however, a few purveyors seem to be doing better than the majority. What are the factors that are causing these purveyors to experience relative success in the face of so much adversity?

The first of these factors, as I see it, is a very high level of owner enthusiasm/passion. And this cannot be faked. If the owner has a passion for wine -- not selling wine, but a passion for wine -- then he/she manifests that in discussions with customers/prospects and they want to be a part of that energy. Customers of that owner begin to drink the Kool Aid and spread the gospel of the second coming of the "wine child." Owners like Adam (Wine on the Way), Andrew (Wine Barn), Bill (Elusive Grape), for example, manifest this trait.

A second critical success factor is community-building. If the only interaction with the customer centers around taking money out of his/her pocket/pocketbook, that is not a strategy for winning a loyal, long-term customer. The establishment of horizontal and/or vertical communities is a key strategy that ties the customer to the facility. An example of a vertical community is Wine on the Way's Board Meeting. The community here is horizontal in that high-end collectors get together in a no-pressure, no-sales environment to share a passion that they have for good food and good wine. Customer appreciation for being included in these types of events has positive long-term implications.

A third critical success factor is what I call "margin volumerization.' In this scheme, the purveyor shifts the firm's focus from a per-bottle margin to a focus on the total margin derived from a particular program. The margin on a particular bottle could be significantly lower than normal but that in itself could drive volume which, in turn, drives higher total margin.

A fourth critical success factor is "collector care." A typical collector places high value on things such as access to hard-to-get wines, special deals, invitations to trade-only events, and access to wine notables when they come into the Orlando area. These are the kind of perks that you do not get at Costco and is some of the value-add that bridges the gap between the prices that these giant retailers can sometimes bring to the market. Wine on the Way and The Wine Barn excel in this area.

An area that I see as being under-exploited is customer wine storage. In Florida, it is essential that wine that is not drunk immediately be stored in some type of a refrigerated facility. Improperly stored wine is a poor investment plus drinking it can permanently scar a potential wine consumer. Purveyors need to understand their customers storage capabilities, or lack thereof, and encourage purchase of relevant storage if none is utilized. By preaching storage, and facilitating storage acquisition, the purveyor does a public service and can lock in short-term (acquisition) and long-term (replenishment) purchases.

1 comment:

  1. (The first of these factors, as I see it, is a very high level of owner enthusiasm/passion)

    What???? Your saying Cavanaugh is the not the poster child for this??;)