New Vine Logistics Closure Forces Wineries to Scramble for Logistics Services

The abrupt closure of New Vine Logistics due to “financial crisis,” as reported by WineBusiness.com today, begins a new chapter in how wineries will fulfill direct sales to consumers. The several hundred wineries currently using New Vine Logistics must, at a minimum, scramble to service their winery direct orders without interruption. If these wineries are unable to easily access limited production wines already stored at the New Vine facility, this may prove to be a particularly difficult challenge. The wineries that are fortunate enough to use other methods of fulfillment for their direct orders should make sure they fully understand the implications of this event for their business as well.

The New Vine story provides a link to the article “Getting Wine to the Consumer,” which offers a non-comprehensive list of logistics service providers, classified as Consolidation/Logistics companies, Transportation companies, Case Goods Warehouses, Fulfillment Houses, and Common Carriers. Another link to the related article “How to Select a Third Party Fulfillment Center,” provides additional information on logistics choices that need to be made in the wine business. These articles offer a good start in the process of thinking through an optimal wine logistics strategy.

The message for all wineries is not to take logistics for granted. Working through the complexities of what to do in-house and what to outsource, let alone which companies to use for outsourced services, requires significant expertise. The first task for wineries is to determine whether they have adequate expertise to make these critical business decisions alone. If they do not, then deciding where to get help in evaluating logistical alternatives is critical. Many elements are involved in running a successful direct to consumer shipping operation, including allocating available product, picking and packing accurately, billing, complying with a myriad of state regulations, financial and regulatory reporting, timeliness, and cost.

Poorly thought through fulfillment can have significant impact on a winery’s sales, profitability, and customer satisfaction. Making the appropriate decisions and investment, in addition to picking the best business partners, should not be taken lightly. The wineries that heed the “wakeup call” and take the appropriate steps to ensure that their logistics strategies are appropriate for their business will be more successful than those who ignore this event and just continue with business as usual.

Van Ruiten Family Vineyards 2007 Old Vine Zinfandel Selected by Wall Street Journal

Congratulations to our client, Van Ruiten Family Vineyards, and winemaker, Ryan Leeman, for their selection by the Wall Street Journal’s WSJwine Annual Dozen 2009. Van Ruiten’s 2007 Old Vine Zinfandel was rated the best Zinfandel by the judges led by Hugh Johnson, world’s best-selling wine writer and most widely respected authority, Paul Lukacs of Saveur magazine, 2009 Sommelier of the Year candidate Joris Beijn and three other expert tasters.

The grapes used in this award-winning zinfandel are from 50-year-old vines – the first vines planted by winery founder John Van Ruiten. Leeman aged this big-bodied zinfandel in new American oak for 10 months to bring out deep notes of blueberries and cherries. The WSJwine selection adds to the 2007 Van Ruiten Zinfandel’s accolades: the wine also received a Double Gold medal and was rated “Best of California” Zinfandel at the 2009 Lodi International Wine Competition.

How Will Wineries Adapt to Changes in the Restaurant Business?

On April 30, Wine Spectator published a telling story on how restaurants are being forced to adapt to changes in consumer wine buying behavior. Two trends are driving these changes: first, consumers are trading down in the wine they drink; second, consumers are drinking more wine at home and less in restaurants. Restaurants are dealing with a significant decline in revenues as consumers trim their budgets by reducing the number of times they dine out. Many restaurants are reacting by decreasing their corkage fees, reducing plate sizes, emphasizing lower priced wines by the glass, and generally searching for ways to offer more value to their customers. Many restaurant managers are forcing sommeliers to sell from existing inventory to conserve cash, impacting wine sales for distributors and wineries.

For some restaurants, this situation will result in permanent changes in their business, creating opportunities for wineries who respond appropriately to these changes. Recognizing what restaurants will be buying when they replenish their wine inventories and having the appropriate product to satisfy this demand will be critical for capitalizing on these opportunities. Targeting the best restaurants and having the means to present their products to these restaurants will also be necessary to leverage the situation, as will educating the wait staff on the benefits of wines that reach restaurant menus.

Wineries must deal with other changes as well. Distributors can be expected to reduce their restaurant sales staffs in response to the decline in restaurant sales, making it harder for wineries to rely on distributors to push their products into restaurants. Retailers can be expected to buy more wine, but their price points will decline as they react to changes in consumer demand patterns. Retailers will try to offset the decline in average unit prices by pressing wineries and distributors for longer margins on items they sell.

In times like these, wineries would do well to remember the close relationship between danger and opportunity. Making good business decisions about deploying appropriate resources in support of a well thought out business strategy that takes into account the current realities of the market will result in new opportunities and new growth for wineries. The dangers wineries face revolve around their abilities to identify the right strategy and desired outcomes, to assemble the necessary resources, and to monitor the application of resources to achieve the outcomes.