Orin Swift Wines: A Secret Love, Met Again at Plumpjack Squaw Valley

I’ve had a secret love with “the Prisoner”, a wonderful red wine from winemaker Orin Swift. I’ve been keeping it a secret for far too long, because, as you know, I rant about high alcohol wines. This is clearly a high alcohol wine, but I can’t help loving it. Ever since wine afficianado Lou Phillips poured some for me at a bistro dinner in Truckee a few years ago, I’ve been captivated. I can’t say the same for my dinner companion of that long-ago evening, but that is a whole other series of stories, this one tagged on the keyline, “Is that all there is?”


Thus, I couldn’t miss the PlumpJack Café winemaker dinner this autumn that featured wines from Orin Swift Cellars. A few years ago, the great winemaking palate behind the Orin Swift brand, Dave Phinney, sold two brands to Huneeus Vintners. One of the brands was The Prisoner. Why does this matter? Because even though Phinney sold the brands and inventory, Phinney remained as winemaker; he retains ownership of Orin Swift Cellars and its other wines. So that great palate is still blending this delicious red wine for all of us who love it. Kevin Fox, who was presenting the wines at the PlumpJack , is the assistant winemaker.

Prisoner pairs with Ahi

The 2009 Napa Valley red wine, “The Prisoner”, was paired by Plumpjack’s executive chef Ben “Wyatt” Dufresne with a Hawaiian Ahi served with bacon confit marble potatoes, truffle salt gel and a porcini-blueberry vinaigrette. The cherry, cassis and black fruit taste is dominant throughout from first sniff to first taste to finish, and the tannins are so well integrated in this wine that I experienced them as very soft. It’s a dark red wine. Add the velvet of American and French Oak, and you’ve got a great big lush wine with a massive entry. Plumpjack has a good program for these high alcohol wines (The Prisoner is 15+ percent alcohol ) by offering 3 ounce and 6 ounce glasses. The Prisoner is $7 for 3 ounces, $14 for 6 ounces.

Papillon & Filet

The 2008 Papillon Red Wine, Napa Valley, is a finely tuned Blend of Cabernet Sauvignon with just a touch of Petit Verdot, Merlot, and Cabernet Franc. The 2008 is their fourth vintage of Papillon, and features grapes sourced from Howell Mountain, Saint Helena, Rutherford, and Oakville. Chef Wyatt paired it with a Durham Ranch filet mignon, accompanied by Montgomery Cheddar Mac n’ cheese. The pairing was perfect, as this is a bit more of a serious wine with good cellaring potential too. Deep red in color, aroma is classic Napa Valley Cabernet Sauvignon: cedar, rose petal, hints of soft French oak. A nice ripe raspberry and boysenberry flavor to begin, and as it opens up, there is cherry, plum and cassis. 15.5 percent alcohol. $10.50 for 3 ounces, $21 for 6 ounces.

To end on a sweet note, the cardamom opera cake with huckleberry sorbet was paired with the 2009 French wine from Orin Swift’s project there, the “D66” Grenache. The winery and vineyards in Maury, France are in the outer Roussillon very close to the Spanish border and nestled in the Pyrénées-Orientales. These vineyards were planted 60 years ago, and the blend of fruit (Grenache, Syrah, Carignan) results in a wine that is a dark opaque red color with aromas of toasted oak, ripe blueberry jam and dried rose petal. There’s a minerality and acidity that give this wine a nice long finish. 15.2 percent alcohol. $7 for 3 ounces, $14 for 6 ounces.
PlumpJack Café at the Squaw Valley Inn, 1920 Squaw Valley Road, Olympic Valley CA, holds an outstanding series of winemaker dinners, and its wine list and regular menu are spectacular too. Reservations: (530) 583-1576 More information at www.plumpjackcafe.com.

Top Wines as an Asset Class handily Out-perform Gold, Oil and Equities

"Drinking fancy wine is so last decade. In today's speculative markets, produce from the world's great chateaux is leaving other "hard" assets in the dust. London's Liv-Ex fine wine exchange's index of top 50 wines rose 57% for 2010. That easily outperformed gold's 29.8% rise, converted to U.K. pounds to be on an equivalent basis with Liv-Ex's index, or oil's 15.1% increase, also converted to pounds. As for equities, the FTSE 100, for instance, was up just 9%.

Liv-Ex attributes the price surge to heavy demand from—you guessed it—China, as well as some other Asian countries. Given extreme supply constraints and a surge in the world's megarich, the fine wine 50 index is up 269% over five years.

If the market turns, investors mightn't find the asset as liquid as they would like. But, for now, the lesson seems to be that those wanting to make some greenbacks should target reds or whites."

Source: OVERHEARD on the Wall Street Journal Online, Thursday January 6

The Best and Brightest Inquiring Minds... Want to Know

Once in a while, we're privy to the thought processes of a well-trained brain trust in the wine industry. Slap me down if you must, but I think that a peek inside the Harvard MBA thought process is highly instructive, especially when it comes to articulating what a collective of experienced executives in the wine industry consider to be the biggest challenges today.

On September 8 at Vineyard 29 in St Helena, owned by Harvard MBA Chuck McGinn (Class of 1978), 20 graduates from 1961 onward, met to discuss the following Business Challenges. Pulled together by Scott Becker of Global Wine Partners, the preparations included polling the group for the pressing questions of today... and tomorrow.

The resulting questions are below. In the next few posts, I'll give you a glimpse into the thought processes. The questions are tough, there may be no unequivocal answers, but there will be provoking opinions. Just like being back in the classrooms of Aldrich Hall! (Interested in the thinking of the person who posed a particular question? SEND ME A COMMENT WITH YOUR RETURN E-MAIL, and I will ask them directly)

1) The wine world is experiencing significant uncertainty about future growth due to deterioration in the macroeconomic fundamentals and a deleveraging credit environment. When will the market recover, what will the future growth environment look like, and how can prudent wine companies manage their way to future success?

2) Is the statement that more bottles of wine are being sold this year over last year true and that it is just the price that has dropped? If so, is this a permanent reduction in the value consumers place on wine or only a temporary aspect of the current economy?

3) When the crisis is over, will the consumer be the same?

4) We won't be in a recession forever; consumers will move up the value chain again; millenials with continue to respond to social media promotions and this is generating a huge base of new wine consumers (thank goodness!). HOWEVER what will be with all agribusiness-related companies forever is the challenge of water -- where to get it, who controls it, how to manage it, and technologies to conserve it. I'd like to hear how YOUR WINE-RELATED ENTERPRISE is weighing in on this issue and/or what you are in fact doing about it. How should we as "leaders" get involved? Or is it too hot to handle?

5) It is a common challenge to better understand customer behavior within the various levels of the market. For those of us with personal passion for the unique subtleties and complexities of world-class wine, should we be concerned that growth in consumption of $40+ / bottle appears to be increasingly attributable to luxury goods marketing rather than appreciation of quality and quality standards? Regarding quality, are consumer preferences dividing between wines characterized by power versus those characterized by nuance? If so, is demand in one category outpacing the other? How has culture shaped these preferences and does it differ in the US versus Europe and Asia?

6) The business challenges we're facing stem from the impact of current economic conditions for small wineries (4,000 to 50,000 cases). These wineries are our clients and target clients. They are facing price compression (higher priced brands lowering their prices to combat declining sales) and assortment "freezes" (distributors and retailers either reducing or eliminating the addition of new suppliers to their assortments). What can the small winery do to survive in this environment and how can we tailor our own services to better meet their needs?

7) How long will the expensive, inefficient, selective three-tier distribution system prevail against the rapidly accelerating consumer and trade (retail and restaurant) demand to seek their own options in the wine products they carry and/or consume?

8) How do wineries gain markets and access to consumers in an industry where Federal, state and local regulations have been established for decades favoring the xclusive three- tier distribution system?

9) Our wine company, celebrating it’s 5th year anniversary, is working diligently on its plan for the next 5 years. The company has grow from zero revenues to revenues north of seven figures in its first five years by focusing exclusively on wine quality by owning and controlling the key inputs of wine: vineyard, barrel, and winemaking. However, it does not own any winemaking assets such as a production facility and related equipment. Given the large capital outlays required for real estate and the increasing cost and sophistication of equipment, is (will) the production model for wines in the $25-50 price point continue to resemble the past whereby each winery has its own stand alone production facility? Or can winemakers and consumers accept that production assets will be shared across various wineries? Is now the time to lock in low cost production assets or do we remain capacity flexible and fixed cost free?

Who was in the group? The guest list includes wine businessmen from all walks of the industry -- grapegrowing, winemaking, distribution, marketing, finance, and organizations large and small, with current and past affiliations that represent the full spectrum of involvementLook at http://harvard-in-wine.blogspot.com/2009/09/hbs-in-wine-meets-in-napa-sept-8.html

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Avoiding the “Little Shop of Insurance Horrors”: Flashing Yellow Light for Winery/Vineyard Owners!

Risk management should not be in the hands of the “Little Shop of Insurance Horrors” around the corner from your winery. Yet this is exactly what has happened in parts of the USA where wineries have popped up in remote areas in states such as Iowa, Illinois, Minnesota, and Wisconsin. The result is an incredible “coverage gap” that puts winery and vineyard owners at great financial risk.

The winery business is unique. Insuring a winery against loss requires a thorough knowledge of the nature of this business. Most often, however, new winery owners often call upon their corner insurance office to bind a commercial policy for them. Since there is not a winery in every community or county, these well-meaning agencies were left to scramble to put something in place, even though these policies were not intended specifically for wineries and vineyards. That’s presented a big problem.

It’s not easy to make sure that winery operators understand the difference between “what they have” and “what they need”. By working with state winery associations, however, there is a chance to educate both operating wineries and those planning to open, about the need to understand all the aspects of their operations where risk enters the picture.

Every year I do an annual tour of state winery association conferences in the Midwest. This year, there has been one remarkable discovery: over 70% of the wineries in operation do not have a proper commercial policy in place for their winery business! And with a very substantial growth predicted over the next 3-5 years, winery operators need to be educated as soon as possible.

How can we fix the coverage gap? This is an important question, because just one weather-caused failure that takes a winery out of business will cause anxiety with existing winery owners and dissuade newcomers from entering what can be a thriving, exuberant, profitable business.

Convincing underwriters to provide coverage for such winery risks is a lot of work. It means that an agency has to hand-hold risk control professionals and take them to wineries so that they can see firsthand what this growing Midwest winery industry is all about; wine production, vineyards, receptions, gift shops, grape stomps, volunteer grape picking, music among the vines, etc.

For the past few years, our group at Tricor did just that, and now we work on behalf of our Midwestern wineries with four regional carriers with comprehensive winery programs and one national carrier with specific winery/vineyard coverage. Working with dedicated professionals who understand the winery business is a winery owner’s best bet for managing risk.


Guest blogger Chuck Andracchio manages the Hospitality Insurance Program for TRICOR Insurance from his office in Dubuque, Iowa. He counts over 30 wineries in Iowa, Illinois, Minnesota and Wisconsin among his clients. Not satisfied with insurance programs offered to wineries of the Midwest, Chuck motivated regional carriers to enter the unique industry of winery insurance. You can reach him at 1 800 556 5441, ext 1444, or by email to candracchio (at) tricorinsurance.com

Marketing, and Leading, Through the Fear Cycle

"How Frank or Deceptive Should Leaders Be?"

What a great come-on! Who wouldn't read an article with a title like that? Particularly when it comes from that font of managerial wisdom, the Harvard Business School "Working Knowledge" newsletters that are designed to keep the grey cells moving. In addition to transparency, the need for high ethics, and the importance of smiling through the Fear Cycle, B-school experts continue to beat the drum of marketing experience and have this to say about Leading in a Crisis: Be aggressive in the marketplace!

Jim Heskett, Baker Foundation Professor emeritus at HBS, set this up as a discussion forum. You'll want to see the whole string -- with remarks from Directors and department heads of major companies like Saint-Gobain Weber and Intuit and Motorola, to officers in the Ministry of Commerce in Pakistan, to the all-important "anonymous" responders. Click here to read it all

The comment No. 4 by Ryan Schon caught my eye. He wrote, in part, "I don't think there's anything wrong with leaders acknowledging that we are in a fear cycle right now but that capitalism and entrepreneurship will prevail."

Yes, we are in a fear cycle. As of March 3, 2009, consumer confidence and business sentiment are at historic lows, according to a chart developed by UBS based on data from FactSet.

But here is the what you should really pay attention to, and it is lucky number point 7 in the article authored by Bill George in the online Wall Street Journal on March 5, titled "Seven Lessons for Leading in Crisis".

"Be aggressive in the marketplace."

Just how do you do this? Actually, I am not going to tell you anything you don't already know.

First, DO NOT CUT your marketing budget. However, you might want to bring it closer into line with the consumer groups who are still spending (read: Millennials). And there are cost-effective distribution strategies you can pump up right now, such as doing ride-alongs with your distributors and meeting those wine selling foot-solders known as store and restaurant owners. A little creativity goes a long way in advertising and PR (um, how long since you've tuned up your graphics and messages?). Coordinate the elements of your program closely; it's no time to waste your dollars by letting your attention slip.

And, smile. Smile a lot. If the stress has been great, practice smiling in the bathroom mirror until the face muscles go there automatically and the laugh lines reappear.

Just one last thought on transparency by management -- whether you are a winery owner or marketing manager, or a CEO or sales director for a supplier company -- pay attention! Because down there at No. 32 on the discussion is my favorite, from Scott W. Ventrella, Managing Director of the Center for Corporate Ethics. "Under no circumstances should a leader attempt to deceive or mislead members of their organization. That said, it is incumbent upon leadership to present the facts but not dwell on the negative (or draw premature conclusions no matter how dire the situation). Fueled by vision, hope and optimism, great leaders over time have energized and inspired people to see beyond "hopeless" situations -- without compromising their own
integrity.”

Mumbles of Protectionism

"It's just not a level playing field," commented one winery owner during a coffee-break chat at the Ahead of the Curve seminar in early March hosted by Napa Valley Grapegrowers. When the panelists took a look at the success of low-priced wines coming into the US market from such countries as Chile, Argentina, Australia ... the hackles went up.

Just to stir the pot a little, yours truly asked the moderator a question about the desirability of trade barriers in light of the erosion of market share in the value-priced segment prompted by these international players vis-a-vis US producers. WOW. What a hot potato! The question was rapidly deferred, termed "political" (it's not -- it's an economics question too, by the way), and no further public discussion took place. But plenty of coffee-break discussion resulted!

It is a Catch-22. The good article posted March 2 on Decanter.com: "US wine exports break $1bn" was a great summary of the situation. "Nearly 55m cases of wine -- 90% of it from California -- were shipped last year, up 8% on 2007. By value, exports rose 6% to $1.01billion according to US Department of Commerce figures, " cited the article. That certainly represents a big boost to California winemakers. On the one hand.

On the other hand, what can be done to help U.S. winemakers who should compete head-on in the value-price segment? (And they should compete, given the high growth there...)

It is a God-helps-those-who-help-themselves situation. Clearly the marketing promotion for wines from Chile, Argentina, Australia et alia is superb: Traditional advertising (wine region based) in lifestyle magazines, travel sections, big newspapers. Wine tastings here, there, everywhere. Development of wine tourism. Reviews. Tweets. Facebook plugs. Blogposts. Price Promotions. Endcap displays. Paid trips for wine buyers to those countries, vineyards, wineries. Jeez, how can a US winery compete?

Here are some ideas: Traditional advertising (wine region based) in lifestyle magazines, travel sections, big newspapers. Wine tastings here, there, everywhere. Development of wine tourism. Reviews. Tweets. Facebook plugs. Blogposts. Price Promotions. Endcap displays. Paid trips for wine buyers to those countries, vineyards, wineries. Sound familiar? The approach is called "fighting fire with fire".

That's the best way to level the playing field. Get on it and fight hard! Use the power of your industry associations and AVAs to develop programs that will help. One caveat: fight fast. You must be nimble and speedy in marketing during a recession.

Oh by the way, you might do more with your internet sales. After all, you've got the shipping advantage here...

GUEST BLOGPOST: Wine Importers and Today’s Conundrum of Foreign Exchange Rates

Wine importers have always had to deal with a great deal of uncertainty and volatility. Consider that February 2009 Euro rates reached a low of 1.2513 in terms of US dollars, while Euro rates only a year ago reached a high of 1.5239 (February 2008). How is a wine importer to plan for pricing product scheduled for, say February 2010? Will the Euro be up or down? How about the Aussie dollar? The South African Rand? The New Zealand dollar?

The answer is: nobody knows.

When you deal in a product that forces you to make some financial predictions, it feels like thin ice every day. This was certainly my experience as a foreign exchange broker for a number of years.

But I do, however, know exactly how much I will be paying if I purchase a forward contract.

For our example, we’ll use Euros. The spot Euro (if I were to purchase today for today's delivery) is 1.2700 to the US dollar. I can lock in a Euro payment for March 2010 at a rate of 1.2725, almost the same as today's spot rate (thanks to the US Federal Reserve’s current policy of near 0% interest rates). Does this mean I might as well wait until next year, since rates will be the same?

No!

The forward rate is not a prediction of what rates will be in the future, but simply a mathematical formula (based on U.S. versus European interest rates) and the resultant supply/demand factors. The purchaser must put up at least 10% of the total as margin.

I know that many importers never use forwards, and I also know that every importer who has used forwards has been caught on the wrong side of a forward contract. If I locked in the Euro at 1.2725 for February 2010 delivery, and the spot rate was 1.1600 in 2010, I would be upset that I had "speculated" and lost. On the other hand, if the Euro appreciates and the Feb. 2010 spot rate was 1.400, I would be elated at my smart prediction.

The truth, however, is that by not using forwards, the importer is indeed speculating, as his cost will be determined by the market on the day of payment.

My advice to wine importers: if your cost models make sense based on the forward rates, then locking in those rates will prevent any surprises on payment day. You’ll sleep better when you can plan your pricing structures far in advance.

Matt Esslinger consults with food and wine import and distribution companies on financial and operational issues, bringing a Harvard MBA plus 20 years of experience managing small to medium sized businesses in various industries. He is based in San Francisco. Contact him at gesslinger@mba1986.hbs.edu and via http://www.linkedin.com/in/mattesslingersf