Wine Talks with Paul Mabray: Navigating the Digital Evolution of the Wine Industry

0:00 A glass of wine is a time capsule that transports you across time and space to a location. So you're tasting France from 10 years ago in a glass. You're tasting France from yesterday. So whether you're looking introspectively at what's. In the bottle, it is that. That kind of space time machine. Sit back and grab a glass. It's Wine Talks with Paul K. Welcome to Wine Talks, and we are in studio today in Monroeville, California. Beautiful day in Southern California. We're broadcasting all the way up the Napa Valley with Mr. Paul McBray. I'll get to the introductions in just a second. Wine Talks, of course, available on Pandora, iHeartRadio, Spotify, wherever you hang out for your podcasting, we are there and always sponsored by the original Wine of the Month club, now sporting the Sweet series, biodynamic and Napa series. But let's get to our guests because this is gonna be a ton of fun. We're gonna talk old times and new times and what's going on on the H here. This is Paul McBray, and he is president and CEO of Pix. Wait, Pix. Wine.

1:04 Wine. See, I sent you an email. I sent you an email And I put pix wine.com and that got all sent thing. But welcome to the show. Thanks for having me. It's good to be Paul Squared here on the show. It's nice. Yeah, that's right. Paul Squared. Yeah. We have a lot to talk about. We've got a lot of fun stuff to talk about in the industry. We want to talk about what's happening in the industry. And I want this to be sort of interesting for the people in the industry that we talk to every day. And I want the consumers to understand sort of what we're up against on the things that are happening every day and get a feel for your background and what your prognostication is, which I can't wait to hear, frankly. Yeah, no, no. It's the best time to be a consumer ever for wine, I think, ever in the history of the world. I think you're right. We're going to talk about the COVID effect and the post Covid effect, but you've had a storied history in the consulting side of this business as well as the digital side, because you looks like based on your experience here, starting at Nimon Coppola, the famed Francis Ford Coppola Winery, having bought one of the original wineries in Napa Valley, Right? Yeah. The old Gustav Niebaum, who is inglenook Winery that was owned by Hugh Blind. It got bought over and got turned into that kind of lower class wine.

2:19 But it was one of the original. Great wineries of the Valley. Inglenook, you know, he's a ship captain. Yeah. That's interesting. I forgot about the Hubland part of that. Which would have been one of the first, like sort of corporate takeovers, if you want to call it that, in the Napa Valley. Yeah. Huber Line was one of the first kind of corporate entities coming in with spirit side. Didn't they have Cuervo, I think, in that time? Yeah. Right. The other one was Nestle, came in pretty big and then Behringer, if you don't. If you remember way back when. So that's a great rattling of the cage here because the growth of the wine business is obviously phenomenal. A lot to do with the judgment of Paris. We'll talk about that a little bit. But back in those days, and I Remember featuring a 79 Charbonneau from Inglenook.

3:07 So that was before or after Francis Ford Coppola bought it? That was probably after he bought it. He bought in the 70s, but he bought the front end estate, the Inglewood estate. So he bought the actual house behind the est. The big property. And I think it was right. Somewhere around that time he bought the front end of the state from New Blind and then kept buying more of it over time. I'll have to look in the history books. Yeah, he loved it. He was popular. I remember buying the wine and it must have been like, well, I didn't. I bought it, so. And I didn't buy the company from my father till 1988. So the wine was already like 10 years in the bottle. But it's Charbono. Right. So you gotta, you gotta. Right. You gotta let it have 10 years. So going back to those days, you were mentioning that you were sort of the club manager. And, you know, my father handed me this sort of a binder full of things happening in the industry that. And I got to go back and pull that out. But 1988, he says here, you know, you're going to take this over. I bought it from him, actually. We negotiated, actually. And then he said, here's what I understand about what's going on. And I think for sure there were five wineries that seemed to have embraced this idea of a monthly club. A club where there's a direct to consumer concept. We didn't even call it that back then. Right. It was just part of the club. Right? Yeah. It was a wine club, and it. Was an extension of people just showing up in the valley and they realized that they could send them wine, almost like a paid tasting program. It was like a cash registering. And Earl Martin, who was the president, said, hey, everyone else is doing clubs. Go analyze the entire valley's clubs and let's build our

4:40 own. And it was a very unique wine club. It actually came with Pasta, a movie from Francis Ford Coppola, American Zoetrope magazine. So it was really kind of that first lifestyle package. And now it seems really innovative, but. It'S like plated plus wine today. Right. It's like all these new subscription and comedy things way back in the mid-90s. So pretty exciting. I can tell you. The shippers hated us. You know, you'd have long fettuccine or different pieces to pack. It was a fun time. It was a fun experience. Well, it certainly was a different time when it came to shipping, but I'm fascinated to hear this. I'm going to make a note about the subscription model, and we'll move it forward a little bit later, but certainly from the shipping side, and I'll Never forget this, UPS would pull up, you know, you did a 15 handwritten manifest, you know, with carbon paper, and, you know, if you threw 25 extra boxes in the truck, no one really even noticed or cared. And you pretty much shipped where you felt like it, not knowing that actually there were problems going on. And my wife just sat through a whole seminar yesterday with ship compliant, and there's all these new. So much more coming down the pike. We'll talk about that in a minute. But. But that was rather, you know, groundbreaking, even though there were a handful of other clubs, was that the idea that the winery can go direct to the consumer to the extent that they can get tasting room prices for their wines and augment the experience of being part of their experience. Well, let's go back in history a little bit even more about that. I mean, it was not only innovative in the sense that

6:12 they were trying. To connect with consumers, but the backlash from wholesalers back in those days saying, like, if you ship wine dtc, we won't carry your wines. Right. That was a real. Or they would say to the world that, hey, wines that we're going to ship from the winery would encourage underage drinking, that you wouldn't be able to collect taxes from them. There's no system to record this. And I'll give you another interesting anecdote that you'll like. So back then, the wine club Grew very fast. And they had almost library cards where they had the consumer's information written and they'd hand key in the credit card and it would take three weeks. Handkerchief in the kit card. We actually hired a guy, his name. Was Rob Crumb, and he wrote Access for Dummies. And he programmed the first wine club processing software ever for Nibaum Coppola that took those three and a half, four weeks of hanking and made it into 72 hours. And we thought we were superheroes, Right. So we were all part of this. Revolution of digitizing and changing those tools that opened up Wines west was the first fulfillment house, you know, if you remember that. Yeah, right, that's right, sure.

7:15 That's fascinating because when I was laughing, My father's 92 now, and I saw him a few weeks ago, we were laughing about. We had binders, and every binder had a sleeve for a customer. And he had bought an embossing machine. So he would fake, effectively fake the credit card to the extent that it was. You could emboss a. You know what they used to call it, a validator. You know, we used to slide the thing across at the. At the department store. You know, if you're buying something, they would slide that across and emboss the. The credit card slip. So every customer of ours had one of those homemade embossed credit cards along with the. An address of the same, same method. And we would hand validate the address. So, you know, it's interesting that you. That you talked about this access thing. Well, let's go back to the wholesalers for a second. I used to have to fake my way into the wholesaler spirits wine. The wholesaler spirits warehouse. What's it called? Wholesalers Association Wines and Spirits, wswa. So they did not want to see me around there. And I used to have a friend, Tom Gosh, in the business, and he would give me his badge and then I'd gonna sneak around and just hear what they're saying. Because the lobby group and I want the listeners to understand this. The lobbyists for the liquor industry and the wine industry is very, very strong. And that seems to be loosening a little bit. But it's all leftover prohibition things, including the fact that I want to get a liquor license now here, and I can't. A third

8:46 party has to get it because prohibition didn't allow you to manufacture things and sell them retail at the same time at that point. So that's just interesting. It is changing. You probably sense that that stranglehold is not quite as strong as it was, of course. It's been what, 50 years, 30 years. Yeah, it fractured in 2005 with Grant. Yeah, it fractured in 2005 With Grant Home. And that was the first domino. And it's just the beginning of the dominoes and it's accelerating and I think Covid will even accelerate it more. Not just in technology but in the regulations. I mean the consumer is going to get what they want at the end. Of the day, even as much as. You lobby, you know, over time. Yeah. So you're talking about software and the first program, which is great because I've been doing a lot of research. I've had, I can't tell you how many demonstrations I've had on software. And when I bought the company in 88, in 1993, I put it on its first network computer system. You know, it was novel, I think it was. Right.

9:53 And I, and we've, I've evolved this subscription model behind the scenes here, the database over the years I wrote part of it with the guy that designed the software. And as I've looked around trying to find a replacement and a front end for the web, I have not found anything is capable. Now I understand my thing is clunky because it's old school, but as far as its functionality, as far as what it does and the granularity of the selections, the way the system thinks, I have not seen yet. And we're rewriting it now with the premise of what we know works for what we do and then modernize this, the technology and get a customer facing website and all that. But I'm fascinated by the idea that some of the stuff that we've thought of in 1993 hadn't been thought of yet or hasn't been implemented.

10:41 Have you seen some of the latest things out there and what's going on with these pieces of software? Well, for sure, I mean I was the guy that drove them. I mean, in 2002 I founded Wine Direct, which was the First e commerce SaaS omnichannel software solution. So it was wine club processing, it was E commerce and it was point of sale all integrated in one. And it was groundbreaking. I used to knock on winery stores and say guys, there's this thing called the Internet. We're going to sell the wine. And they're like, oh Paul, you're so cute. Come back when that Internet fad goes away. And here's a funny wine club processing story. Credit card gateways had never seen transaction loads like we were putting together. So we had, you know, hundreds of wineries sometimes processing in the same day, which, you know, means thousands upon thousands of people's credit cards. And we get calls from the gateway saying, you know, or, you know, the policing. Are you trying to spoof credit cards and rob people? And they turn us off all the time because they thought we were like this big puppy mill of stolen credit cards that we were processing math that. Was early on in this concept. Right. I mean.

11:48 Well, you're going to go back that time. That's interesting because. Go ahead. Yeah, but the modern stuff is great. Commerce 7. If you haven't checked them out, they do an amazing job off the shelf. Yeah. They may not be suitable for your kind of business because you're probably pretty mature and you've got some parts kind of codified and hardened that you're going to have trouble breaking loose. But they're the best of breed right now. Yeah, it is. Yeah. I would say part of it is we're used to what we're doing. And so, and I understand it right, you're in the technology business. I owned a software company for years which was not in this industry. But it's hard to break loose from the manual system and implement it when you got to think differently to make things more effective. But I think the consumers demanding more Amazon like service and capabilities and that's very hard for a small company to put together and compete and well, especially.

12:41 I mean, look, fighting against Amazon is a losing battle, necessary. So we should take what's smart from them. And because we're a luxury good product, we should fight asymmetrically. We have different advantages that they don't have about how we can present service or how we can do things that the consumer wants different. And so I'm looking at you right now. You have that nice bottle of Opus wine on your table. The consumer doesn't want. Is that showing publicly. I should. I'm kidding. But they don't want coming in a hot truck. They don't want a yellow tag on their door. They want to get that wine when they want to pay premium for that, for that quality of wine. Right. Our case of that or two cases of that. So we have to remember that we're different and we can play differently accordingly. That's a good point.

13:24 Well, you've got the experience to understand that. I mean, you were the first and any podcast. I've done over a hundred and talked to some old timers that even remembers the term. Virtualvineards.com yeah. And people don't know that listener that that was the predecessor of wine.com and I had the luxury of. And maybe you were there, I don't know. I went to two seminars. One was from the finance side where they were looking for the money to, to make this work and the other was the marketing side where they had discussed what they were doing to, to the Southern California Direct Mail Association. And one of the things that was fascinating back then and maybe you can reflect on this. I had four customer service reps and one IT guy. This is 19 whatever virtual vintage was shopping and they had four IT guys and one customer service person. And I've never forgotten that ratio flip and not understanding it really because the Internet was new and you know. But didn't they burn through a couple of slugs of a couple hundred million dollars each before they landed on their feet as wine.com? So both they merged with wineshopper.com who. Raised hundreds of millions of dollars from.

14:41 Kleiner Perkins which was a big vc, and Jeff Bezos. So they had a partnership with Amazon. Wine shopper did virtual vineyards. They both bought and elevated prices, bought the URL, wanted to come and merge and burn through probably about 400 plus million dollars together. And then that went completely kaput like everything else. And I think that there's a lot of stories of why that happened. I mean a lot of that infrastructure that they built is the infrastructure that the industry uses today to do three tier or dtc, whether it was the technologies or the warehouse fulfillment centers. The other piece is there was a. Pretty bad cultural clash between those two organizations. They were psychologically different types of businesses.

15:26 Meaning that the virtual vineyard guys were amazing wine buyers and stewards and the wine shopper guys were a lot of brand managers and wholesaler district managers. So those are like the opposite mental model in the same building. And I'll never forget one day we were in the streets fighting like almost like Backstreet story. We were knives in the, in the alley and the next thing you know we're seeing the cucles next to each other. So it was a really weird west side story. Digital west side story, huh? Exactly. West side story. Sorry. Yeah, yeah, it was. Well that's interesting. You know we, we all, we all saw the, the. Not just with virtual vineyards or wine.com or lots of dot com debacles. I remember somebody coming to my father in law's and wanted to sell early on in the Internet custom furniture building online you can design your own furniture and get it built. And that probably didn't work either.

16:20 But it's fascinating to me that here we are in 2021 and it took the pandemic to bring many, many people to the web to buy wine. And as you probably have seen and all of us are starting to witness, yeah, we're not going to have that same sustained spike that Covid brought to us because people aren't shut in anymore. However, it's not going back to the previous levels because there's some trust now that you can get good wine on the Internet and you can have a guarantee, you can have customer service. And my theory is, and maybe you. Can. Shed light on this, my theory is that took a long time to come around from the time the dot com bust of virtual venues. In other words, if nobody really understood.com back then, and then trying to buy an emotional product like wine that it took 40 years to get, it's not really a theory. But to get 40 years forward for us to or 30 years to be confident in that, is there more of that to come?

17:29 So when I first started Wine Direct, I would have never thought that shoes would beat wine as a category online. Zappos proved us quite wrong with $1.3. Billion right in that piece. I think wine's problems were multifaceted and. I think that that was part of the issue. So we can always talk about the regulatory hurdles that caused it, the permitting. And retailers didn't get the same licensing as wineries, so there was no access point. As Granholm opened up, it was also. About the apathy that most of the wineries had towards E. Commerce was also a hindrance to that, meaning that we were getting double digit growth in either volume and then obviously in dollars after that.

18:12 And so why change that? And in 2009, when we had our first kind of big hiccup with the recession, everyone switched to dtc. But DTC meant tasting room and our innotourism at every juncture across all of the the major wine regions, whether it's Napa, Sonoma, Santa Barbara, Oregon is huge. They have a huge volume of people going through there. So why care about E commerce? Why feed that horse when you're getting fed every day by this huge volume? I think that the stats, depending on who you talk to, Napa gets 2.9 to 4.2 million people a year that come through this valley. That's a pretty good feeder pool, to be honest. If it wasn't broke, why fix it. On the winery side? On the retailer side, they've definitely suffered from being left behind. They did not get to Follow us in gran home. We actually abandoned them, the wine industry and just said, hey, we're going to do it for wineries and retailers figured ourselves out. The bad news for that is that or the good news actually, to be honest with you, is we prove wrong everything that the wholesalers were saying. They said, oh, there's going to be unreach drinking. Oh, there's going to be no permanent. Oh, there's going to be no taxation. We built that infrastructure. And the retailers grant home check is in the mail. I think's coming soon, I promise you. You know, that's I've always said and this I'm going back 20, 30 years. Fine. You know, if the wholesalers got a problem with this, let us pick a wholesaler and pay a, pay a fee to, to just, you know what I say, a competition fee, because that's what they're worried about, right? All the we know the excuses that they gave the government, the government's

19:45 about underage drinking, all that is a bunch of hogwash. They just want to protect their base grit. Okay, I'll pay you. You know, if you don't carry my brand, I'll, I'll pay you something just to filter through your system. Just let's just do it. Why, why restrict the consumer access when it's just a political, you know, stonewall. Well, you said something about the, the, the model up in Napa, and I, I had a conversation with the Napa Valley Register beat writer for the wine business just before COVID I mean, I think, I think it was early March last year or late February. Name is Sarah Clearman. And I thought it was going to be this great writer. She's a good writer. And I thought we met at the Oxbow and I thought it was gonna be this glorying article about Paul Calum Carey and what a great guy I am. But I don't think she ever wrote the article actually. But she was asking me questions. And the questions that she was trying to, to understand for herself was how are we going to help these small wineries that have to charge $150 a bottle because the cost of grapes is so high in Napa right now. And you know, how do we get them to digitally market because many of them are relying on tasting or traffic. Unless she was prognosticating what was going to happen with, you know, COVID 19, I don't know because it was just not really on the horizon yet when we spoke. But her comment to me was fascinating. What she said, we're just learning how to chat here.

21:07 And I thought, okay, this is interesting because we're really farmers, right? I mean, if you want to live the lifestyle of a wine owner and a winemaker, you got to be a farmer. So if I'm a farmer, what do I know about putting somebody in front of a monitor and waiting for the chat button to ring so I can have customer service? And so we kind of hatch that out a little bit. Yeah, I think I actually bumped you out of that article because I was in the article about the taste here. Holy cow. Maybe not. But you say that about farmers. And yes, there is a large group of farming that's involved in wine. But the reality of most winery ownership, they're gentlemen farmers. I mean, look, they were barons of industry in another industry, great CEOs or doctors or venture capitalists and now bought properties. And they have people that farm. They don't. Or maybe there are.

22:00 There is still a good subset of the world that do farm. But it's a synergy between business and farming. I think that the problem is that we've been so product focused and maker focused that we're not seller focused. I think that's the key. We focus on what great wine we make, but once you make it, you gotta sell it. And that's the part we've left behind. And I think that that's the growth of the industry. And, you know, the fragility of the. Wine tasting room model has been exposed for some time. I'm sure you watched Robin Millen do Silicon Valley Bank Report. Every year that model has shown its. Fragility through fires, earthquakes, brownouts, you know, and over, you know, the lack of the tasting remodel, how it's doing, seeded tastings. We knew it was weak. It was the perfect storm, though, of COVID plus fires. It showed us we can no longer depend on it. We have to go broaden our search for E commerce. So that's that great awakening between wineries now knowing they can sell and it's successful for them. They actually see the proof. Consumers knowing that they can buy and retailers selling and saying, look, let's start getting more aggressive about breaking down these barriers and finding more interesting ways is the beginning of the golden age of wine online. That's what Covid really has catalyzed. And it's just going to get better. I mean, it's like an engine that starts, right? More and more people are investing in it. You're going to see more and more competitors coming into it, but also more knowledge sharing, more expertise, better tools so you can talk about Commerce seven.

23:27 They'll get better. Maybe they'll be able to adapt for your model quickly because more people are adopting it and using it, making it better. Well, we started from scratch. We're using of all the E commerce platforms, the one that I thought was the most comprehensive with Be Loyal as far as what we do business, and then putting a WordPress over it and then of course, all the connections. And it's interesting with getting a little digitally geeky and database geeky. I was talking to the guys at the wine exchange down here, which they're wonderful marketeers and good pallets. And we were talking at a lunch and he's like, yeah, it's cool the way these things work, right? You've got this database, you tie in all these services like ship compliant or UPS or your credit card billing company.

24:16 The problem is those guys don't talk to each other. So you've got to write something around the idea that if possible, the UPS person needs to talk to another piece of the software that's tangential part of your database. And that part is a very important piece of making these things function properly. But we won't get into that granularity. But I got an interesting scenario for you. I was on a panel for USC business school, gosh, for a couple years now, and I was sitting between two completely opposite wine theories or philosophies. The guy on my left was a friend of mine from college. He owns the winery Hammersky in Paso Robles. He hosts weddings and chapels, and he's got tours and he's got the tasting room. And we all know how hard that is, right? It's you, all the pieces are moving. And the right side of me was a gentleman that had just started a brand, and so he was renting, alternating proprietorship. He had an O2 somewhere and he was, you know, renting the barrels and renting the winemaker and all that. And beautiful, beautiful wines, but inherently very expensive just because of the methodology for making the wines. If you and I did that one of those two today, which one would you give a chance to make to actually turn a profit?

25:39 Yeah, tough one. That's exactly. Everybody's going to rush out after you answer this and try and do it. So you go, well, look, I mean. Neither of them are the right answer. I mean, the right answer is what is. You know what my answer would be? Which one of those brands is trying to reach consumers in Boston and Austin that are not getting on the plane and flying to Paso Roland Place to Taste their wines. Right. How are they going to touch a. Consumer in South Beach, Florida, or Anchorage, Alaska, and be able to let them buy their wines? And how are they communicating their value exchange? And I think whether that's a luxury expensive product, that's $150 suggested retail price, or it's a good story of a farmer or the hammer skies, which is good wines. I mean, it doesn't matter. The reality of it is they have to get out past the taste room. The chasing room is not a sustainable growth model. It's a limiting factor. It's a stupid model. I mean, it's cool. If you can't sell wine, it's the most effective model. Right. If you can get someone in front of you in the taste room in a beautiful setting that.

26:42 Hey, doggies. In their office. Yeah, beautiful setting. You know, a little drunk with their loved ones. Yes. If you can't sell wine doing that, you can't sell wine anywhere. Right in that piece. So. And it's a dumb model because you're asking people to get on a plane and come to you and then ship the wine home to them to acquire them as a customer. That's a really ridiculous concept. Is that any dumber than some of the state laws that. I think most of them are gone now, but for a while there, that in order for you to receive wine at your state, you had to have visited the winery in the first place. I think. That compounds the dumbness and. The stupidity level goes to 10 at that point. Yeah. Well, there's a scenario right now that's happening, and I think what you're saying, and part of it is, and this is your specialty in this industry is brand building, which is a hard thing to do in any industry, you know, particularly when you've got try and get shelf space on the retail side or, you know, a house poor at a restaurant. Those are hard things to do with the competition that's out there, particularly with the consolidation of some of the wholesalers and their books are getting thicker and they're sending people to Hawaii, you know, to spiff you if you sell 10 cases or something. It's very hard for you and I, as an upstart winery to get the presence that we want.

27:59 And so there's a. There's a group out there. Let's just talk about the category. I mean, yeah, there's no other product in the world like wine with that. That much competition for mouth share and stomach share, meaning that, you know, what was 160,000 new wines are coming this. Year to the TTV. Think about that. There's not 160,000 types of milk under 60,000 types of butter or bread or cereal. And it compounds because it doesn't go bad. Right. The wines stay good. So next year it's not 160,000, it's going to be 320,000. And then it goes on. Yes. Some of the white wines degrade out, but like right now, I estimate there's about 1.2 to 1.4 million products for sale in the United States. Everything from some old port from 1919 to, you know, a bota box. Right? Yeah.

28:46 Actually the other day I had a wooden 3 liter Bordeaux box and I thought it's brilliant packaging. I don't know if it's. But it was actually a wooden box with a bladder inside of it. So what do you make then of. Of a consumer walking into Vons, as I do quite often in Hermosa beach, and every single wine has a shelf talker and it's either got us rating on it, which is like, you know, you know, a whole nother industry we can talk about, or the discount price based on, you know, six bottles or whatever it is is. I mean, what does a consumer do when they see this? Yeah, it's paralyzing. I think that's the problem. That's what one of the things that I'm trying to solve is. It's a tough situation. Right. How do you help people make a decision and discover.

29:29 Because really, wine, one of the reasons that there it's hard to have brand loyalty is it's easy, easy to be promiscuous. You walk into Vons one day you walk into a wine store the next day you go to a restaurant. You don't. There's so much selection that it's amazing that discovery is part of the journey in wine. And, and even if you find a blue chip brand you like, you're never always at the same place at the same time or you don't want to drink the same thing all the time either, so. Well, I'm glad you said that. It's an important part of consumerism. My wife buys Tide and she buys Woolite, and those are the brands that she trusts. Wine's a more emotional product than that. And if, you know, I've talked to my clients and people come into our tasting room and, and digitally speak with them about the idea of wine is a wonderful subject. You can learn as much as you want. You'll never stop learning. The MW that got their degree in 1964 is a totally different experience for the MW trying to get their degree today. There's so much more to know and that will continue to grow. But as a consumer, you can decide that I like this brand and I'm going to continue to buy it. And at some point, I think everybody sort of their palate says it's time to change, then we're going to look for something else.

30:42 And then we go to the shop. And then I got a shelf talker and a rating from James Suckling on everything there is. And it's hard to understand. And I think that puts a ton of value in not only a wine shop owner who's tasted the wines for you to help you understand your palate and guide you to something interesting, or the department manager of the store or your wine club purveyor who, whatever it is to help you sort of walk down the. Down the path. But it is an emotional product. Let me run this scenario by you. There's a group kind of trying to bring some caucus wines in. I'm Armenian and Armenians making wine. I mean, they found the oldest intact winery in Armenia 6,000 years ago, right. Somebody. Somebody left their shoes.

31:23 So. But this is an interesting scenario. And I had that conversation with the president of KJS the other day about it. It's such a different product that you can't come out of business school with your thesis and say you're going to apply this and take over the industry. Right. You can do all the things that you would normally do to sell a widget. You can do the videos, you can do the media, you can do the Facebook and do all the things you wanted to do. And you might get some traction. Somebody because you got a better widget than the other guy. But wine, that's a hard decision for me for somebody to make to change and to come into the industry. And this is happening.

32:03 I'm going to take over the network. I'm going to have my own wholesalers, I'm going to have my own salespeople, supplier reps on the street trying to sell this wine. It's not a popular area, it's not a popular grape. No one's even heard of it. And I'm going to try and get some traction with the consumer in the wine world by covering all the business school bases and then finding out that it doesn't really work. Well. I mean, the problem with using business school basics versus applying the context of wine is the situation in the context of wine has a lot of complexity, not only in the product selection the route to market, but also the consumer behaviors at different times. So, I mean, micro targeting and really profiling behaviors is key, but it's about discovery and introduction. Like you talk about, you know, that wine, it's very hard to. To try. Let's call it Canary Island Wines. Like, why would you try that wine unless someone introduced you to it and helped you discover why it was. And helped you understand why it had that kind of salinity in it. Right.

33:08 Why did you choose Canary Island? You know what? It just was an obscure place that makes amazing wines. That came to head in my head. Yeah. So just had one last week and I was floored by it. They're great. I'm having a colores tonight where I'm taking the team out to have a white coladas. If you've never had that from Portugal, though, like the smallest, most aba in the world. That's like going extinct. The beaches. It's amazing. Yeah. I have colossal. I have to go back and look at my tasting notes, but I was floored by this Canary Islands. Lubro Negro or Nero or I forgot the name of the grape, but I. I just bought it to put in my cellar because. And that maybe that goes back to what we were talking about, which is when I get home from work, I want a profile.

33:54 So we. We no longer say what's for dinner? We say what is in the glass. You know, what do I feel like drinking? And then we're going to try and cook around it or. Or doordash around it. But. But, you know, it seems that. And I've had this conversation with many people that the variety of wines and the variety of palates and the variety of flavors is now sort of guiding us. And usually with aficionados and foodies. You know, we're talking about what we're drinking first, rather before what we're eating. You know, I think that even you, as we are a spectrum as humans. I mean, like. So, first of all, wine is a big category. It's everything from alcohol delivery to existential. Experience in a glass. Right. That's what it is. And some days I know you and I have probably come home and you're like, I've had a long day and I want red or white, I want it cold, I want it tasty. And I don't care what it really is. It's just been one of those days. Other days I'm. I'm trying to introduce something to some friends. I want it to be really magical. And other days I just like a good palette Cleanser that's interesting to me, but not. Not crazy. And it matches the food.

34:58 So I think that we forget that we're not one dimensional either. Right. You're. There's not. An enophile. Is not always an enophile. Sometimes it's just red or white. Sometimes it's just bubbles. You know, bubbles too. A new part of my consumption regiment. After having Steven Spurrier on a call, tasting some Bride Valley and Giesborne English sparklers, I. I became a huge fan. And so now everybody looks at me like, what are you celebrating? I'm like, I'm not celebrating anything. Celebrating life. I'm just gonna have a glass of sparkling wine because it just part. It should be part of your regimen. I was looking at your PowerPoint presentation that you. Looks like you had put together for some Burgundian makers. Is that what that was for?

35:48 The one in Dijon a long time ago? Yeah, yeah, in Dijon. Yeah. It was your. There was no audio to it, but the points were rather valid and I understood where you're going with it. But have you seen an international difference in approach to the market? Because their shipping royals are a lot easier than ours and their palates are a lot different than ours. And it's part of their lifestyle from when they were a child. In fact, I just got done. You'll laugh at this. I do speak some French and I'm learning. Continue to learn. I was watching a video the other day. It was about as recent as 1981. The French law now prohibits wine at high school lunches. But until 1981, you could have a glass of wine at your lunch in high school. And I can't imagine that in Palos Vee's high school when I was there. But so it's pretty. That's pretty recent in my view. So their lookout on wine and their daily life is different than Americans. So what do you see as a difference in the industries and the marketing of wine throughout Europe?

36:53 So you can break the world into two kind of the new world old world pretty easily, and they behave differently accordingly. So in the. The old world is pretty reticent against. And they are much more farmers, but they're. They're reticent against direct to consumer. They're reticent against technology. And each of the individual countries are not very. They're not great explorers of wines. Not from their countries. Right. So France and Italy don't. Outside of France and Italy, they. They're changing quickly for sure. Especially since COVID the new World is definitely much more digitally savvy, much more trying to connect directly to the consumer and trying to understand who they are. Much more trying to find tools, websites, e commerce and everything.

37:38 The other ones are used to selling to, you know, negociant who sells to an importer, who sells to a wholesaler who sells to. So the amount of layers, they just want to make the wine and sell it differently. And then there's some cultural differences. Like until recently in Italy, if you ask people in Italy about E commerce, they didn't want to use E commerce because they didn't trust it. Even though it's the same country. They didn't have a trust level that that person was going to send them the right thing or that's changing. But there are all these different cultural barriers that occurred from this. This is the way we've done business for hundreds of years. Essentially. That's, that's, you know, what the whole response is right there. This is the way we've done it for hundreds of years. Right. The famed chef Joaquin Splashao who started the Patina group and he just is now making wine in the Provence on a domain cala and he was telling me the other day, you know, he signed on with a German direct to consumer company and they're killing it with his wine and he's, you know, whatever he ships to America is a hand sell. And it's, of course it's west coast and rose's not big here yet, it's getting bigger. But there was a huge difference in the, in the viability of the market in Germany compared to Los Angeles even, which I thought was pretty fascinating. You know, I was, my wife was talking about. Yeah, I mean. Well, I don't know, I'm sure you've seen it, but it seems to me all the great regions in the smaller

39:09 regions of the world now are making some kind of rose out of their indigenous grapes. And so you get wonderful array of character in rose from Tuscany to Bordeaux to Purat. I mean, it's fascinating to taste and I'm enjoying it actually. Getting a chance to span the globe doing that. I don't think they have time to talk about canned wines or plastic bottle wines, but we'll try. My wife was listening to the SHIELD compliance seminar yesterday and they're talking about some of the rules that were changing out there. Winery direct versus retail versus three tier. All the stuff that we're used to talking about in a lot of wineries. Now apparently states, apparently Michigan stung somebody and you know, caught them not selling Only the brands that they make that they're coed to. And I started to think about this. The cola for the listeners is the federal registration of the brand and the label and all the pertinent information that goes with that. And it gets assigned to you as a winery. So only you can produce that wine unless you assign that cola to somebody else. So it's sort of the legal link between what's in the bottle and what's on the label and what you're buying.

40:24 So a lot of states now are saying, we're going to allow wineries to ship direct. So if you have a cola, if you have a O2, you can make a wine. And then all of a sudden, of course, and it seems more popular now than it has been, you can buy. You've always been able to buy juice. The Wine Institute used to say about 95% of wine is not bottled by the estate, something like that. Maybe I'm wrong with that and you can shed some light on that statistic. But it seems like now the state legislature, the point I'm trying to get to are kind of forcing everybody into some kind of branding, private labeling ways to get wine into that state where we require you to go buy juice from somewhere else. If I'm a retailer and I want to sell wine to Michigan, I have to have the control of the wine, the legal control of the wine. And so I might just go out and buy some juice, put in a bottle, brand it to my brave vineyards and ship it in.

41:23 Is there a shift in what is on the shelf because of that? Trying to net out that whole comment. We've been making a transition towards private label control label for some time. I mean, if you look at us versus the uk, they did that a long time ago. I think we were. Yeah, I mean, they're like 70% private label, 30% branded. And we were the opposite, you know, or less. Even less so. And look, there's a lot of value in that piece. There's margin release. There's interesting trust. You know, they trust you as a retailer, they trust you as a thing. But I don't think it's a regulatory thing. I think it's more just an adjustment of the market in general. They're trying to understand how to keep their brands. I mean, if you're a retailer and you build all these brands and they don't allocate it, they don't give it. To you, you know, you're not making. That, you don't have equity in that to sell later on.

42:08 Whereas if you own that brand as your private label, it becomes a part. Of your asset base. Right? That's right. Yeah. And if you sell a lot of it, then it's even a bigger asset. Right. You can just sell the brand off and keep the retail shop. Right. You just made a big. So, I mean, there's a lot of. Interesting things, which is its own sort of industry. Yeah. Because I pitched this idea and you said it already, that wine can be an existential experience. And I tell stories all the time about it with my consumers. And we want that to continue. We want people to feel something Right. When they have a glass of wine. A good glass of wine makes you feel something, makes you connect to the earth. It makes you shut down for the day. It makes you think, it makes you talk. I mean, whatever it is. Right. Sometimes you talk too much, but whatever.

42:55 But there is an ethereal value to a glass of wine that's different than all over the beverages. Can you define that? Because I have a hard time defining why is that different for a glass of wine than a glass of Jack Daniels or even a craft beer? So a glass of wine is a time capsule that transports you across time and space to a location. So you are tasting France from 10 years ago in a glass. You're tasting France from yesterday. And oftentimes you're doing in a social situation mostly that you're engaging with someone else. So whether you're looking introspectively at what's in the bottle, it is that, that kind of space time machine that you're traveling through that and understanding how Veracitates or Australia or New Zealand, you're experiencing the different place and also, like I said, a different time. It came from the past right on that piece.

43:52 And then the fact that it is a social beverage is the social beverage. Right. You're not outpouring Jack Daniels with all your buddies. You have a bottle. You don't drink a whole bottle of Jack Daniels. If you do, it's a bad day. The wine is meant to share a vehicle that's built at the right alcohol level, at the right size level, perfectly suited for sharing at a meal. Doesn't it seem like then I'm sure you deal with this all the time with friends and family that aren't in the business, that so much of the conversation at the dinner table will come around to the glass of wine. I mean, you might be a real estate person talking to the wine person talking to somebody that sells mattresses, but if you're having a good glass of Wine, the bottle gets passed around. They look at the label, they read the back, and all of a sudden, the conversation is on wine. Because they want. People are inquisitive about what it is.

44:43 Well, it's by nature also a complex product. Right. It's not a simple product. It doesn't have a simple taste profile. I mean, there's so much difference in different bottles of wine and different varietals, from Pinot Noir to Syrah, from Sauvignon Blanc. And even within the varietals, there's so much variation that it's always an adventure. It's that discovery component. And, you know, what hits your nerves in that discovery piece is also part of that inspiration. And you're like, wow, I've never tasted gooseberry. Or I've never. This is like stone fruit. What is a stone fruit? And it kind of. So these are. When you find those flavor metaphors in your mouth and you're like, wow, that's. Something I didn't expect. Or something. Or it's. It's almost like Ratatouille, the children's movie. Where he goes, the aha moment. The aha moments. Right. And that's. That's what the mat is. And that's. It is fascinating about wine.

45:35 Now, you say that. That you can. You can continue to have those aha moments, like what I had with the Canary Islands Red. All of a sudden it's like, aha. I've never tasted this before. Hard to describe. Some people are better at than others, but you sense something, and that creates that moment. Going back to the business side just for a second. Sure. I had a great interview with Mike Houlihan of Barefoot Sellers, and I've told the story a few times, but isn't it great? And he came into my office in 1989 trying to sell this Chateau Lafitte, you know, the Lafitte of California. And I thought. I literally thought, when he walked out of the place, one of the stupidest thing I ever heard of. Right now, it's the biggest brand in America. So that tells you how much where I'm coming from. But he made a good point. And this is kind of goes back to the shelf talker thing. It kind of goes back to the. The private labels. I mean, almost any name that's got Ridge Creek, Napa, Sonoma, Cliff, you know, they're all taken, right? So we're starting to see all these crazy names that are showing up on shelves, as well as labeling and merchandising. And it is merchandising. And we are in the business to sell things. And a winery wants to sell its wine so it can make some wine next year. So let's not, you know, take our eye off the ball, what we're trying to do. But he was told by the buyer at Lucky's, you know, the old market chain, I want to be able to see your label from four feet away when somebody's walking up to the wine section. And that's how he came up with stealing the name from Barefoot Bynum with this foot on

47:05 the label. So simple, you know, white background, blue foot or whatever the color was. And I can see it. And it turns out the guy never bought it from him. But are we not barraged with branding and labeling and colors and embossing and foil tops? And, I mean, now a lot of glass is changing in shape. You're seeing all kinds of contorted bottles and things. And what's. How's that playing out to the consumers? Look, everything is branding. I mean, look from the regions, naming themselves regions so that you can understand. What the value you're getting from Bordeaux or Burgund. There's always been branding. You know, the reason that the Lafittes put their name on it was that wine was their brand from the beginning, and it represented a quality level and the transformation that you're seeing. Yes, there's not the same creeks, but, like, the world of wine has changed from, you know, the aristocrats owning wine or landowners in Europe to real human beings. Normal kind of, you know, American dream here in Cal and then spreading across the world. And of course, we're trying to find different ways to touch the consumer that makes them happy. I mean, you and I are old enough to remember critter labels. You know, there was a whole trend for just years where there was like, koalas and kangaroos and dogs could believe dogs, emus and, you know, raccoons. It was everything. Like, I think what we're trying to find is what hits the nerve ending of a consumer and, you know, one of the greatest brands, and I'm not saying necessarily the quality of the juice in the bottle, like

48:37 the Prisoner is one of the most magical stories of a wine in history. Right? You know, Dave Finney and those guys made a wine that was a California blend that had an SRP that was equal to a single, you know, vineyard or an appellated cabernet here. And now that is. What did they do? They hit the nerve of a consumer. It's not even about the flavor profiles. All of the GESTALT of those things. Together, the label, the name, what was in the bottle, and it worked. You get. So I guess somebody wines here on Tuesday, and you catch a label once in a while or a name where they've sort of tried to. And this is interesting part of branding. And I'm going to touch on one last subject then. It looks like we almost got 45 minutes under our belts already.

49:22 But the innocent bison, you got all these names now that they're sort of trying. They're sort of, in other words, in the back of the mind of the winemaker, of the proprietor, they're thinking, oh, maybe it's the name the prisoners what made the successful. And it's partially true, but so much as sometimes just luck, blind luck in branding and getting on the street. But, you know, there's a lot of knockoff names, you know, the fugitive, innocent bystander, all this stuff. And you kind of look at it go, okay, I understand what you're trying to do, but that really isn't the point. It's something else that it made this. This successful and kind of evidenced by this. And this is the business part. And maybe I just heard from a retired Gallo, you know, guerrilla marketer back in the day, and I was making a comment about Snoop Dogg's Cali Red, and it was front and center, the best spot on the shelf the other day at the market. This is about, I don't know, during COVID sometime. And I walked in the market, I go, what is. I mean, come on, we know what this stuff is, right? It's criminal mind, sugared up, whatever, but whatever.

50:22 And, but right front, you turn your head, I'm six foot two is right there. So it's the best spot in the shop. Two weeks later, I went back and it was on the bottom shelf. So I couldn't decide whether it was bumped down to the bottom shelf because it wasn't selling, or some guerrilla marketer, AKA Gallo style, just came and moved it. I'm sure I'm not asking for an answer, but both of those scenarios could have happened, right? Yeah, but I mean, look, that. Look, I'm not soup dog of the wine. And you're right, it is a flavor profile. It doesn't match my palate, but it's a million cases this year, so. Right. And let's, let's talk differently like that. Introducing people to the category is what? Like someone like Michael Hulan. Whether I liked his wines or not, which I didn't, but I love the man. I would never drink barefoot wines Myself personally. But it introduced a whole category. Center home White Zinfandel brought so many people to the category. And some of those people moved up and that's what we need. We know more of that entry level because we're not fighting against each other. We're fighting against hard seltzers. We're fighting against other alk bev beverages that consume our mouth share and stomach share.

51:30 That's a really good point. We're competing against those new beverages and white Zinfandel. My dad had met Bob Trincaro the day about the week he made that stuff and was like, didn't know what to do with it. And here that was really the door opening for many people to drink wine in the first place. And now. Yeah, that's right. Bartle and James. I was talking to San Antonio guys. I was talking to San Antonio friends. It was the Riboli brothers and they're, you know, great friends of mine. And they of course presented to the Stellarosa and we were talking about it. They're doing, I don't know, rumors are doing 3 million cases. I don't know if that's true or not, but he made the comment and I bought it when it first got here, and I'm talking about 20 years ago. He said, you know, it took us 20 years to do that. You know, here's a wine that's sweet, it's got a nice package. It's very indigenous looking to the Lombard region of France, of Italy.

52:35 It's certainly palatable. There are better Moscatos all over, more pedigreed ones. But this one people like and now this part I don't agree with. It's got blueberry flavoring and pompomuse and all kinds of different things, but people are buying it. But the point of that comment is that was a 20 year, you know, brand, you know, grinding it out in the marketplace to get recognition and now be very, very successful. Can it take that long or can it take a week? Well, it's all. I mean, look, they're lucky successes. There's all kinds. We don't know exactly what pops. Either a luxury brand or a general brand. I mean, look at Butter and Jam with John Truchard. I mean, that's what a great success story for him.

53:19 Huge, huge. Blew up. I mean, you look at Apothec, which is the opposite. Apothec was years of them sample testing it at Gallo and came out with a formula people like and their innovation on top of that, making even seasonal lines, which is something we've never seen before. I mean, you see seasonal candies, you know, during Halloween and, and they make the wines which is, that's not bad either. And what they find those, those seasonal wines, not only they didn't take or cannibalize from themselves, they added more to. The car during those periods of time. So this is good for our industry. I know people poo poo those wines, but we need more of those entry wines. And I think Gallo's really settled into their shoes saying we are the gateway to bring consumers to the market. You guys do what you want after that. Del is the same. The wine group, it's working. But yeah, and they do a good job at it. I mean, look, they're good humans. They, you know, they make, they train to do good guys sustainability. I mean the big wine could be really bad. And they're not. They're good. They're. They're trying to do the best they.

54:18 Can for our business and for, you know, the world. I had a great conversation with Pat Roney not too long ago and they're going public and he does a great job. I may even buy some juice from here in the future. The last question, what do you, you think media, Facebook media, video, GIFs, webinars. You think this is a must have for the future of marketing of wine from a winery? So I think that our job is to meet the consumer where the consumer is. And if they're using GIFs, if they're on video, if they're on Facebook, on their Twitter, it's our job not to make them come to us. It's our job to meet them where they are and to touch them where they're. And we do it at our own detriment by ignoring them. You know, I used to run a big social media company called Vintink and I can't tell you how many people would tweet or Instagram at wineries. They never answered because they didn't believe in Instagram at wineries.

55:14 If you take that metaphor and you apply it differently, you say, look, if you had a phone in your office called Instagram and it rang every day and you didn't answer it, is that really doing healthy thing for your business? That's a good point. Right? It's ridiculous. And so just because you don't believe in it doesn't mean it doesn't believe in the other consumers don't. So. So I don't know. The prioritization of those, how you grow into all those platforms over time is a different story. But the Reality of this is there are gigantic places where consumers are interacting with wine, and they're calling your phone. And if you choose not to answer, you do it to your own detriment. Let me just throw something out there. Then we'll call it quits and tell you my plans. I'm coming up, I think, in a couple of weeks. But that's a really important part, and it has a lot to do with the comment from Sarah Clearman about the chats. When Covid hit here, you know, I had customer service dropped on the phone. And we do email marketing, we do text marketing, and when we turn the phones off because Covid became too onerous, the sales volume spiked so fast that, I mean, literally, like three days after the 17th, it's like, wait a minute, what's going on?

56:20 We realized that we could handle four or five chats at a time, and when you can only handle one call. And so we've re. And everything's moving that direction anyway. People are used to being on their phone. They're used to texting an order. They're used to replying with one ball or two or 12. And now they're used to communicating via text. I'm not sure it's a good thing for human communications, but it's a good thing for business because one person can literally do four times the amount of work on the chat with a keyboard. And that was an interesting thing to find. Look, technology is just a scaling factor for more human connections. And let's also remember, we're not homogenous either. So different age groups, different people like different messaging and different platforms. Some people love call still. Some people love a catalog mail still. Deciding on who those customers are and their value to you and then using those tools is fundamental. And I think you're right.

57:16 Absolutely. My wife, she runs a winery, a boutique winery here in Carneros. And I'm always harping on her about more digital, more digital. She constantly reminds me. She's like, look, I have old boomers. Most of those people, you know, have a flip phone. Paul, you're asking me to text, so you need to calm down a little bit. I can't text my brother because he has a flip phone. And so he's right. But we have to. We have to balance our customer footprint and plan for the next generation and. Build infrastructure to support as each of. These platforms become more pervasive. And we can test what works best for those customers. Been a pleasure having on the show a wealth of information. I'm coming up on the Fourth for the Raymond Vineyards release of the new entryway and hang out with JCB a little bit.

58:06 Hopefully get a chance to see you or. I think I gotta fly up. I'm gonna fly up during the day in the morning and hang out. And I'll probably leave a Saturday afternoon. My wife's gonna be out of town. Well, maybe I should stay too, longer than. Huh. So I'll let you know if we get together. It'd be great to do get to see if not. I hope we can do this again. Yeah, both of those. Please let me know. I'm happy to host you and then have you a couple glasses of wine together. And I love John Charles. He's. He's one of my favorite people and he's great. Nice. You know, I did a podcast with him and I was in the Raymond pool house, which is incredibly, you know, French, and I was supposed to be interviewing Dan Knudsen, and Jean Charles was supposed to stop in and say hi and just sort of sit in the chair and talk a little bit. He ended up staying for an hour, an incredible conversation about Baccarat Crystal and the light and all his passion, and end up getting two podcasts out of the thing because then Thane stuck around.

58:55 We had another hour. So I was really appreciative of his humility to do that. And we, you know, he's a very interesting guy and, you know, obviously very knowledgeable in our. In our industry, so pleasure having you on the show, Paul. Thanks so much. Hope to see you soon. And I'll let you know what my plans are. Yes, please. Paul, great to meet you. I'm looking forward to. My pleasure. Thank you.