Hospice du Rhone!
Paso Robles Wine Festival 2008 Musings and Photos

The challenges of running out of wine

We're not running out of wine.  Yet.  But, for the first time ever, I can see it looming. 

It's not a familiar position for me.  When we started, we made some mistakes in our marketing, the largest of which was neglecting to create a marketing plan.  We assumed that because we were associated with Chateau de Beaucastel, and we had confidence in our capabilities of making wine, our wines would sell out without us having to work at it.

Based on this assumption, we planted most of our vineyard fairly fast.  60 acres went into the ground between 1994 and 1997.  Another 20 acres went into the ground in 2000.  That meant that we grew from producing nothing in 1996 to about 4000 cases in the 1999 vintage to about 12,000 cases in the 2003 vintage.  Our marketing plan, such as it was, was to sell all this wine through wholesale without having to spend money to support the wines in the market through the traditional methods of market visits, wine festivals, distributor incentives, etc. 

We bottomed out in 2002, selling just 4000 cases wholesale while we watched inventory levels rise and knew that our production was growing rapidly.  Over the course of that year, we reinvented how we marketed Tablas Creek.  We opened our tasting room.  We launched our VINsider wine club.  And we started supporting the wines in the marketplace, visiting and working with dozens of distributors each year and participating in many more wine festivals around the country. 

And, little by little, we pulled ourselves out of the hole we'd dug.  Our total sales (wholesale and direct) rose to 5500 cases in 2003, 8000 in 2004, 11,000 in 2005, 15,000 in 2006 and 18,000 last year.  The growth was divided among the different outlets we had: tasting room, wine club, domestic wholesale and export.  Since we'd had the dubious luxury of having extra inventory of our wines from library vintages, we had lots of options for special features in our tasting room and could make selections for our wine club without having to worry that we were shorting our wholesalers of what they wanted.

Our production from 2004-2006 was a fairly consistent 16,000 cases per year, with 2004 a little below that and 2005 and 2006 a little above due to ample winter rainfall and favorable growing seasons.

Enter 2007.  The 2007 harvest was very light, and fooled us.  It followed a cold, dry winter and two years of higher-than-normal yields, and the result was a perfect formula for low production.   Our yields were less than 2.5 tons/acre, and we produced less than 13,500 cases of wine.  The wine is really good, very intense and focused (a little like 2002 was for us) but there's just not much of it.  And, the fact that we've worked through most of our back inventory in the past few years means that we're at the point that we're not going to have the wine to satisfy everyone who wants it.  With the natural growth of our wine club (we're netting about 500 new club members each year), the fact that our tasting room is up compared to last year, and the growth in demand for exports with the weak dollar, I don't see how we sell much less than 20,000 cases this year even with our moderate expectations for the domestic wholesale market in a challenging economy.  That's a lot more cases than we produced last year.

We're going to do what we can to stretch the 2006 vintage as long as we can, and release the 2008's (please, let yields be good!) a little earlier.  But, the simple fact is that we're having to make some difficult choices, particularly in whites (which were down more than reds, and which are released sooner).  Our fall 2008 wine club shipment will have 4 reds and only 2 whites for the first time ever.  We're going to hope that we can complete the fermentation of the 2008 Rosé in time to include it in our Spring '09 shipment with 2 whites and 3 reds.

I guess I should be happy about this.  Doesn't every business want to sell out of their product?  The simple solution of raising prices calls (and we will be doing that, slightly, with the next releases of our Cotes de Tablas and Cotes de Tablas Blanc).  But I have always felt that we make wines for people to drink and enjoy, not to be intimidated by because of their price or their scarcity.  And, I'm convinced that part of the reason for our success is that overall, the wines that we make provide excellent value for the people who buy them.  I'm not going to disrupt that.

But, I originally moved out here to be Director of Marketing.  How do you market when you don't have wine to sell?  What do I tell our National Sales Manager to do when any sales that he creates cause new headaches?  Or say to key restaurants or retailers who call and ask for a wine that we've sold out of except for what we've allocated to our wine club?  It will be a challenging year as we navigate this new situation of having to limit our sales to our current production and balance the demands from our different markets.

I don't yet know how this will play out.  We're going to be pulling back some of our wholesale market work, cutting down on wine festivals and letting some of our underperforming distributors slide in ways we wouldn't have tolerated in past years.  We'll protect our wine club for sure.  We aren't going to disappear from the wine scene; even wineries who are perpetually out of stock continue to show their faces and their wines periodically to maintain their fan base. 

But, I'm guessing I'll have many more opportunities to get better at telling people "sorry, we're out".  I guess that's what happens when a business grows up.