A Napa Valley Retreat

If you ever feel like you need a break from school, Napa Valley is place to go. It’s close enough to feel accessible, yet far enough removed to feel like a real escape.


Last Saturday, I went to Napa with my three best girlfriends. It was a beautiful sunny day, and given it is the off-season, it was pleasantly quiet. Our first stop was a private tasting at Cardinale Estates in Oakville. The first thing that strikes you when you enter Cardinale Estates is the gorgeous grey, stone building that sits atop a hill. The tasting room has floor-to-ceiling windows that let the light flood in and the balcony has possibly one of the best views of the Valley. Our tasting experience began with a “welcome wine”. It was a Sauvignon Blanc called Intrada that is only available to drink on the premises of the winery and is not for public sale. We then sat down for an intimate lesson on the wines themselves. 

While we were being served a series of vintages from the Cardinale library along with an accompaniment of meats and cheeses, we were informed by our hostess that Cardinale only produces a single wine from each vintage, a Cabernet Sauvignon (with Merlot in the blend) and even this is in limited production. She told us that the typical production varies from about 2000 to 3000 cases per year and it is selectively distributed through the country. I was told that element 47, the restaurant I had dined at several weeks prior, is only sent 12 bottles of their wine per year! The Cardinale tasted fruity, with a mild tannin and a floral aftertaste. 2013, we were told was the best vintage, given the perfect growing conditions.  I bought one to age…but let's see if I can wait till 2027!

Our next stop was Archetype, where we ate a delicious brunch before heading to our next tasting at Opus One. A few weeks ago, we briefly read about Rothschild’s Californian brainchild which he created in partnership with Robert Mondavi. Starting at $450 a bottle, we sadly did not walk away with an Opus One souvenir, however we did have a taste of the 2012 and 2014 vintages as well as the Overture collection wine. Of the three wines, the Overture was surprisingly my favourite. It is the second wine in the Opus One collection and is a multi-vintage blend that is soft and easy to drink. The wines are aged in French oak and like Cardinale Estates, they only produce one vintage per year. Even if you don’t go for the wine, I would highly recommend everyone to check out the Opus One property, which looks like a futuristic space ship in the middle of a perfectly manicured green landscape.

To end the day we had dinner at Bistro Jeanty, an adorable little French bistro in St Helena town. It was an indulgent day of drinking and eating but after a stressful week of midterm papers and exams it was well worth it!

Looking Inward to Grow

Having read the case on Kingston Family Vineyards, I would like to propose an alternative growth strategy to the ones raised in the case. The quality of the Kingston Family grapes is founded on the sophisticated branding of their independent wine label — the success of each goes hand in hand. Thus, I believe it is of critical importance that the family continues to produce their wine label. As explained by Kosuge, the family could increase their production to 8000 cases per year without significantly increasing the cost of production by using their existing infrastructure. This increase in production is significant enough to make the Kingston winery profitable but also small enough to maintain the integrity of the premium brand and the high quality of the wine. Rather than focussing on exports however, I propose that the family focus on increasing their brand presence in the premium South American market.

As mentioned in the case, only 5% of the vineyard's sales being made in Chile. It seems to me that an enormous amount of the domestic market remains untapped and the potential to expand locally could be the logical next step. With their impressive reputation abroad as a premium Chilean wine producer, I believe the Kingston Family could do more to capitalise on their position as a domestic, home-grown vineyard. Not only would they profit from the increased margins of direct-to-consumer sales but they would also eliminate the costs associated with shipping and import taxes. An increased brand presence in Chile could have a flow-on-effect in other parts of South America where Chilean wine is popular, like Brazil.  

In order to increase their brand presence abroad, the Kingston Family vineyard should complement their renewed focus on the domestic wine market with a partnership with a well-regarded Latin American boutique hotel chain.  With a fairly nascent wine tourism industry in Chile, the Kingston family would be able to benefit from the first mover advantage and take advantage of the growing luxury wine tourism industry. While the capital investment for such a project would be significant, the long-term benefits of increased subscriptions, enhanced brand recognition and direct to consumer sales would outweigh these initial costs. By working with a reputable Latin American hospitality partner, Kingston Family Vineyards could potentially become a hotspot destination for international wine-lovers and local travellers alike.

Self-aerating wine bottle patent

With all the aerating paraphernalia out there, I started to wonder if a self-aerating bottle had ever been tried (or if it was possible). After some googling, it appears that a patent was filed in 2015 for one.

In case you don't want to read the full patent document, here are the highlights (and here's the patent document - http://pdfpiw.uspto.gov/.piw?Docid=09067703&homeurl=http%3A%2F%2Fpatft.uspto.gov%2Fnetacgi%2Fnph-Parser%3FSect1%3DPTO1%2526Sect2%3DHITOFF%2526d%3DPALL%2526p%3D1%2526u%3D%25252Fnetahtml%25252FPTO%25252Fsrchnum.htm%2526r%3D1%2526f%3DG%2526l%3D50%2526s1%3D9067703.PN.%2526OS%3DPN%2F9067703%2526RS%3DPN%2F9067703&PageNum=&Rtype=&SectionNum=&idkey=NONE&Input=View+first+page)

The claims for the consumer is essentially that the consumer believes the self-aerating wine bottle to have added value. The claims for the brand is primarily around "brand buzz", and for the maker it's the ability to charge a premium.

I'm interested to know why this hasn't really taken off. My immediate reasoning would be that a self-aerating bottle would only be appreciated by consumers who are sophisticated enough that they would know and appreciate the difference of aeration. These consumers likely are buying higher end wine, and perhaps actually appreciate the ritual of aerating wine manually.

The other end of the wine industry seems to be going faster toward cans than toward self-aerating bottles and the like. The added cost of a self aerating bottle likely wouldn't be worth the price premium, and wouldn't be competitive against the Underwood type canned wines.

Perhaps the self aerating bottle is stuck between these two segments - the high end is too high end for it, and the low end is moving in the other direction.

That being said - there seems to be a strong market for those aerating attachments. This seems to suggest that there is a consumer who likes a quick aeration of their wine (aka, appreciates the difference but isn't concerned with it being very fancy) . Curious to hear people's thoughts on whether they'd pay a small premium for a self-aerating bottle!

Honing your nose

In class, we discussed strategies for describing wine aromas and tastes. Alyssa's strategy was simple: "only describe ones with tastes that you've experienced before." Since then, I've still been curious how sommeliers develop the ability to sense exotic berries, cut hay, or even "cat pee". Do they specifically seek out these things in order to taste and smell them? Do they bring all of these things into wine school? (not a rhetorical question – I'd actually love to know if that is the case).

In any case, I recalled this discussion when I stumbled upon companies that actually produce tasting and smelling samples that are often referenced in wine tastings. Wine Aromas is one such company that has several aroma kits, such as one including 54 common wine aromas, one including 54 whiskey aromas,  and on that has 12 "wine faults" aromas to help you determine when something is wrong with a wine. Maybe worth checking out for those of us who can't find these aromas elsewhere!

Wine and the NBA

It seems like the following article about wine consumption in the NBA is getting a lot of attention: http://www.espn.com/espn/feature/story/_/id/22358028/the-nba-obsession-wine. I found three aspects of the article particularly interesting:

First, the sheer popularity of wine in the NBA. Some of the players are even taking team-sponsored vineyard visits:

Second, the article's introduction focused on a group of Cavs players visiting the Mayacama winery. I hadn't heard of Mayacama before, but it seems that the winery is a Napa Valley staple. They only offer three wines on their website: a 2013 cabernet sauvignon, a 2013 merlot, and a 2003 cabernet sauvignon. I think the ability to purchase older wine directly from the vineyard is intriguing, and given the price ($250 vs. $150 for the 2013 cab) I'd also like to note that the vineyard is earning a 5.25% annual return just for cellaring the wine. Of course, this assumes that the 2003 cabernet sauvignon would retail for $150 years ago, which is a big assumption. Even so, the return strikes me as reasonable if you have the room to cellar the wine.

Third, various winemakers were impressed by the detailed and sophisticated nature of the NBA players' questions. These clearly aren't mere dilettantes. Carissa Mondavi offers the following analogy: "NBA players are the product of so many unseen hours spent perfecting so many hidden details, all leading to the moment when the ball is tossed in the air. So too is wine crafted against countless variables -- the weather, soil, harvest, tanks, the barrels and blends, the delicate alchemy of it all -- until, one day, the cork is pulled. For both to shine, it takes so much work no one will ever see." The precision needed for winemaking has a corollary in the intense focus that drives elite athletic performances!

Machine Learning in Wine Marketing?

We talked a lot in class / in blogs about the wine shopping experience: consumers are often overwhelmed by the plethora of brands and have a difficult time making a choice. There are just too many options. Even if a consumer knows roughly what she is looking for (e.g., California Cabernet Sauvignon or Burgundy Chardonnay), chances are that she will still have to decide from a dozen or dozens of brands in her preferred price range.

However, at the end of the day the consumer has to make a purchase decision. So how does she actually selects a bottle of wine amidst uncertainty and lack of information? The possible approaches are:
a) Pick randomly ("I'll just try this bottle for no reason")
b) Consult someone at the store / online ("Let me ask the wine specialist / Vivino")
c) Go with her "gut" ("This bottle looks interesting")

I'd like to dive a bit deeper into approach c). What is the "gut feeling" of a customer, and based on what is the gut feeling formed? More specifically, if a consumer looks at 10 bottles of wines from the same region / grapes at the same price, what would influence her gut feeling?

The most straightforward hypothesis is that label design, when all else are equal, heavily influence consumers' purchase decision. I think it would be very interesting to use regression analysis / machine learning to understand the specific factors that drive consumer adoption. Several factors / regressors to consider in this analysis, for example:

Brand name:
- Length
- Binary variables for category (e.g., has name of location, has animal, has family name, has number...)
- Language (English, French, German, not a real word, etc.)

Label design:
- Brand name font and font size
- Color scheme (number of colors, background color, dominant color(s), etc.)
- Center image category (estate, nature, grape, animal, human, coat of arms, signature, no image, etc.)
- Center image style (watercolor, oil painting, sketches, modern art, wood-carved, etc.)

Label information:
- Grape varietal shown
- Vintage shown / vintage year
- Appellation / AVA / geography shown

There are other nuanced but important decisions to make for this experiment. For example:
- Do we want to include price as a regressor, or run experiment on wines at the same price?
- How do we separate brand name impact from pure label design impact? Should we run experiment of lesser-known brands only?
- How do we categorize the "emotion" invoked by label design?

It would be interesting to see if any data scientist or startup company can dig into the science of wine label design and reveal the obscure trends in consumer preference.

Relating a Wine’s Label with its Seal: The Movement toward Screw Tops

Listening to both Yoav Gilat and Terry Wheatley’s comments regarding their wine labels and the level of detailed consideration that goes into the labeling, I began to wonder about how much weight is placed on the decision of sealing the wine with a cork versus a screw cap.

There are many important considerations when making this decision beyond just branding and marketing. According to James Foster, senior winemaker at Cupcake Vineyards, the decision is largely dependent on the type of wine (not necessarily meaning the quality of the wine). (1) For example, Foster uses screw caps for sauvignon blanc and pinot grigio because it more effectively seals the bottle of wine, preventing oxygen from entering the bottle and better preserving the wine. (1) He chooses cork or synthetic cork, however, for chardonnay and red wines, which improve with the small amount of oxygen that cork allows to enter the bottle. (1) In addition winemakers are starting to abandon cork because of issues of cork taint, which causes the wine to develop a moldy and musky taste. (2) Some studies say that cork taint effects as many as one in ten bottle of wine. (2) Frustrated by frequency of this issue, some wineries have even moved to 100% screw caps to eliminate the problem all together. (2) While there are numerous scientific reasons for opting for screw caps over cork, consumer perceptions could still be controlling the winemakers’ decisions. (1)

Screw caps are a more economical option for winemakers and were first adopted by winemakers producing cheaper wines. That plus the diversion from the traditional cork created a perception among consumers that screw top wines were cheaper and of a lesser quality than corked wines. Still, winemakers have increasingly been choosing screw tops over cork. In the 1990s, 95% of wine was sealed with cork but that number dropped as low as 62% in 2009. (2) The broad adoption of the screw top combined with its ease of use has been gradually changing its perception.

Considering the thought and resources involved in creating a wine label, I wonder how wineries choose to make labeling decisions and sealing decisions together as opposed to independently. Does the type of seal change a labeling strategy? Or are most wineries that choose to target customer segments with modernized labels relatively unconcerned with the consumer’s hesitation to select a screw top bottle?

Sources:

(1) https://www.npr.org/sections/thesalt/2014/01/02/259128689/cork-versus-screw-cap-dont-judge-a-wine-by-how-its-sealed

(2) http://www.bbc.com/news/business-41319135