Creating a new wine: En Gobelet

Our model at Tablas Creek is pretty consistent from year to year.  We make our Esprit de Beaucastel (red and white) and Cotes de Tablas (red and white).  We make our Rosé.  We make somewhere between six and nine single varietal wines depending on what's compelling when we're doing our blending.  Some years we make a dessert wine or three.

Okay, maybe that doesn't sound very simple.  But practically speaking, it doesn't change much from year to year, or at least hasn't changed much since we introduced a relatively extensive lineup of single varietals in the 2002 vintage.  The specifics of which varietals to produce have been more or less dictated by the production levels of the vintage and what we taste when we're putting together our core blends.

One thing that we have not done is subdivide our vineyard and do vineyard block designates.  It's not that we don't believe that this might make for interesting wines; we would love to celebrate any block-level differences we learn about.  We do expect eventually to make a block-designate wine from the dry-farmed, head-pruned, west-facing eleven-acre block on the south side of Tablas Creek.  But we have not yet seen a distinctive character from a specific block that we can track from year to year.  Ask us again in a decade.

One experiment that has shown some promise has been our decision to plant small head-pruned blocks of vines in several of the flatter, lower-lying areas such as the Mourvedre block between the winery and Adelaida Road (visible at right).  We created several other head-pruned blocks in vineyard that we reclaimed from rootstock when we outsourced our nursery operation to NovaVine in 2004.  That effort accelerated when we planted Scruffy Hill (the vineyard block on the other side of Tablas Creek I mention above) in the winters of '05-'06 and '06-'07.  At this point, we have about eighteen acres of head-pruned vines, scattered here and there around the vineyard.

Head-pruning is appealing both for its simplicity and because it is traditional.  The Chateauneuf du Pape regulations which specify the rules for the appellation controllée dictate that all grape varieties except Syrah be head-pruned (taillé en gobelet; literally translated as "pruned in goblet form").  And in Paso Robles, too, the old vineyards are all head-pruned, largely Zinfandel but also Petite Sirah, Carignan and other California "heritage" varieties.  It's much less expensive to plant a vineyard this way, as you plant with less density and no posts, wires, irrigation lines, etc.  And the yields are controlled naturally, as dry-farmed, head-pruned vines rarely produce more than 2 or 3 tons per acre.  This natural yield control is why head-pruning is legislated in Chateauneuf du Pape. 

As we've had a chance to get some of these blocks into production, we're noticing they seem to share  an elegance and a complexity which is different from what we see in the rest of the vineyard.  Perhaps it's the areas where they are planted (generally lower-lying, deeper-soil areas).  Perhaps it's the age of the vines and a comparative lack of brute power.  But, whatever the reason, we believe that these lots show our terroir in a unique and powerful way.

We got the idea of putting several of these lots into one wine for our VINsider wine club last summer, as we remarked again and again on the character that they shared.  We chose to base the wine on Mourvedre and Grenache (which comprise most of our head-pruned blocks) but also added a splash of head-pruned Tannat which gives the resulting wine a little more smokiness and a little firmer finish.  We are calling it En Gobelet, after the French term for head-pruning.  We expect it to act like many Mourvedre-based wines, drinking well when young, then tightening up after 3-4 years in bottle before reopening for another 10 years or more as a mature wine.  A bottle of the wine will go out in the fall 2009 shipment.  The label for the wine is below.

Tablas Creek is a "Best Winery Blog" Finalist!

I'm proud to announce that Tablas Creek has again been named a finalist for "Best Winery Blog" at the 2009 American Wine Blog Awards.  These awards, created and administered by the tireless Tom Wark (whose blog Fermentation is a daily must-read for anyone in the wine community) are in their third year, and recognize the growing importance of the blogging community on the world wine.

As in previous years, your votes determine the winners; in the final tally, 70% of the weighting comes from voting by the public, and 30% from the votes of the panel of experts who culled all the nominations into the four finalists in each category.  So please vote!

The most interesting thing to me is always discovering blogs I wasn't aware of.  You can read the complete list of finalists, with links to the finalists' blogs, or if you know who you like, you can vote here.  Voting ends Wednesday, March 4th.

Fog in the Vineyard

It's not foggy out at Tablas Creek very often.  Our elevation (1500 feet) and the barrier of the Santa Lucia Mountains mean that neither the Salinas Valley fog that settles in areas close to town on summer mornings nor the Pacific fog that comes through the Templeton Gap in the afternoons when we have onshore flow tends to make it out to Tablas Creek.  [For a cool photo of what summer fog patterns look like in Paso Robles, check out this animated satellite image of fog retreating up the Salinas Valley.]

What we do occasionally get is ground fog in the winter, nearly always shortly after it has rained.  This morning, it was clear in town but when I arrived at the vineyard, the winery was shrouded in fog (though the blue sky was visible through the fog).  The effect was cool, so I grabbed the camera and drove up to the top of our highest hill expecting to come out the top of the fog, but it was actually thicker up there than down lower.  So I took a handful of shots of the vineyard, several of which I'm pleased with.  I've posted the best here; you can look at the complete Fog in the Vineyard album on Facebook.

The first three photos are all in our Grenache blocks up near the top of the tallest hill in the vineyard.  First, a photo looking up and west through our oldest section of Grenache.  The vines are starting to look mature as they approach 20 years old.

The second photo looks east through a slightly younger Grenache section on the back of what we call Mount Mourvedre.

The third photo shows how variable the fog cover was.  It was taken less than a minute after the previous photo, but looks north through the Grenache block rather than east.  It also show how much the cover crop has grown even in the last two weeks as we've gotten our first consistently rainy weather of the winter.

Speaking of cover crops, I got a nice shot of a sweet pea, one of the most useful of our cover crop components.

As is often the case, most of the best shots of the fog were taken into the sun.  This photo below looks south-east, down the old Grenache block.  To orient you, the first three photos were taken from more or less where the road exits the left-hand edge of the frame.

As I was standing at the top of the hill, the fog was rising up to meet me.  This photo looks east toward Halter Ranch, and you can see the fog approaching from the south.

The next photo looks north, down through our Viognier block, and shows how thin the veil of fog was, with the hillsides no more obscured than vines twenty yards down the hill.  It also shows the two long "kicker" canes that we leave when we prune early-sprouting varietals.  These kicker canes sprout first, and delay the sprouting of the buds closer to the cordon by a week or so.  It doesn't sound like much, but getting an extra week of frost protection can mean a lot.  (We later come through and prune off the kicker canes so they don't sap too much of the vine's vigor.)

Finally, with the fog fully rolled in, the Grenache blocks disappeared, giving a terrific ghostly feel.

Wine markups at the wholesale, restaurant and retail level

I try not to rant about the wholesale market for wine in the United States.  Really I do.  I know that distributors and retailers play an important role both in marketing and in delivering wine to the millions of American wine consumers, and I am grateful for the work of the dedicated wholesalers, restaurateurs and retailers who support Tablas Creek wines every year.

But there are times when the entire wholesale channel can be discouraging, when I eye jealously the producers around here who sell most or all their production direct.

The economic challenges of a recession hit both ends of the distribution chain.  Restaurants have so far taken the largest hit, with several notable top spots already closed and others, particularly those who rely on businesspeople with expense accounts or tourists, down as much as 30%.  Retailers as well have seen the effects of consumers tightening their belts, and though they continue to sell plenty of wine, most of what is selling now is on the less-expensive (and less profitable) end of the price spectrum.  Similarly, smaller, higher-end wineries are impacted by having to convince several people along the distribution path that they should have enough confidence to sell their wines.  As I wrote a few weeks back in my post Succeeding in a poor economy:

"for a wine to sell in the wholesale market, the distributor manager has to believe in the product enough to maintain a healthy inventory, the distributor rep has to believe he or she can sell the wine enough to pull a sample and show it to his or her accounts, and the buyers at the accounts have to have enough confidence to buy the wine in a crowded marketplace full of people offering them hitherto-unimaginable deals.  That's a lot of people whose confidence you have to win or keep before the consumer even gets the opportunity to buy your wine."

While both restaurant/retailers and wineries struggle, the system is set up such that wholesalers are guaranteed to make healthy money off of wine.  For example: a typical wine that retails for $25/bottle ($300/case) a retailer would expect to buy for $200/case.  The distributor who sells it for $200/case would expect to buy it for $150/case.  An agent who sells to distributors for $150/case would expect to buy it for somewhere around $120/case.  So, a winery starts off with $10 of the eventual price of $25, and bears most the real costs of the wine (including, but not limited to, land, winery building, farming, harvest labor, winery labor, barrels, bottles, corks, and marketing).  Nearly every wholesaler and many retailers pay their sales force on commission, so if they sell less, they're paid less.  It's a great way to make sure that whatever sales are, the business ends up in the black.

The world of restaurants has even more dramatic markups on wine (which go to subsidize food and labor costs).  That same wine which the retailer sold for $25/bottle would normally sell on a restaurant list for triple the restaurant's cost, or $50.  If the restaurant were to pour it by the glass, the typical markup is to charge bottle cost for each glass of wine.  So, a glass of the wine would be $16.  I wonder if most people realize what a small percentage of the price that they are paying for wine at the retail shop or restaurant goes back to the producer. 

It's worth mentioning that I am not particularly complaining about restaurant markups, at least not wine list markups.  Restaurants typically use the margins they make on wine to help subsidize the rest of the astronomical costs of building out and running their operations, and given that 60% of restaurants close or change ownership in the first three years, most restaurateurs are not in the business getting rich.  I do think, though, that the standard 400% by-the-glass markup and the resulting $12 bottle cost limit for by-the-glass wines, is often self-defeating for restaurants, as most restaurants therefore can't offer great wines for their by-the-glass selections.

Why did this system evolve in a way that protects the profitability of wholesalers at the expense of restaurants and producers?  In my opinion, it's a combination of legislation that protects the distribution tier (the famous three-tier system) and natural economies of scale.  For a distributor to be effective, they must be relatively large, and sell many dozens (probably many hundreds) of wineries' wines.  This means that the success of any individual small winery or any individual restaurant or retailer means relatively little to them financially.

In addition to these natural economies of scale, wholesalers are protected by the laws that license them to make deliveries of alcohol to restaurant and retail customers. (A few states do permit wineries to do this, but it's usually only practical in the winery's own home region.)  Many states give even more explicit protection from competition to the wholesalers, including roughly 20 states with franchise laws that expressly prohibit wineries who are dissatisfied from choosing to move their custom elsewhere.  This has always seemed to me a clear violation of antitrust laws, and on a more pragmatic level allows distributors in franchise states to routinely work on higher markups.  With distributors' large size comes political clout and efforts to protect their privileges through favorable state legislation, as advocacy groups like the Specialty Wine Retailers Association point out.

It's worth noting that there are exceptions to every generalization.  We have several wholesalers in key states around the country who are terrific, who share the costs of offering better deals to our customers, and who are out on the streets regularly advocating for our wines.  But those distributors who provide advocacy and education in addition to their warehousing and delivery tend to be our smaller, wine-focused distributors rather than larger we-sell-everything-from-Jack Daniels-to-boutique-wine wholesalers, and mostly (though not entirely) come from states without franchise laws.  It doesn't take a rocket scientist to guess in which sort of wholesaler Tablas Creek does best.

How does a small to medium-sized winery who makes their livelihood in the wholesale market survive?  I have no idea (thank goodness for our tasting room and our mailing list, through which channels we can offer customers good discounts on wines and still make a much better margin than on what we sell wholesale).  My dad and I have come to the conclusion that for a winery to be successful focusing solely on the wholesale market they need to make somewhere above 50,000 cases.  I wouldn't know about that.  But I do know that at Tablas Creek, we've been forced to think of our money-losing efforts in the wholesale market as a portion of our marketing budget.  It's about the only way that we can avoid throwing the mouse at the computer when we get a request from a wholesaler that we lower our price on a bottle of wine that we sell for $9 (out of which come all the concrete costs of making the wine) so that the distributor can make their $4 for delivering a bottle of wine from their warehouse to a restaurant and the restaurant can make $58 on that bottle when pouring it by the glass.

So, where does this leave us?  Get involved in your state legislatures' discussions on wine-related matters.  Oppose franchise laws, exclusivity for wholesalers and other laws that protect the middle tier from competition.  Support direct shipping legislation.  Free market capitalism stops working when the markets aren't free, and the wholesale wine market, at least outside California, isn't very free.  And both producers and consumers suffer the consequences.

Snow in the Vineyard

We're (finally, thankfully) in a cold, wet winter weather pattern.  Over the past four days we've received about 3.5 inches of rain, and it appears that we have Pacific storms dropping down out of Alaska every other day for the next ten days or so.  That's great.  We're up to 8.85 inches of rain for the year, and hope to pick up another 3 or 4 inches this week.

Still, I was not expecting, when I left town in the steady rain that we'd been receiving all night, to see snow out at the vineyard.  It does snow in Paso Robles every now and then (the link at the left is to a blog post from our last snowfall, almost exactly three years ago) and when it does it's always beautiful.  When I got out to the vineyard, it was still snowing hard, and we got an inch or two of accumulation.  The photos below are a few of the best; you're invited to view the whole "Tablas Creek snow" photo album on Facebook (you can look at the photos even if you're not a Facebook member).  First, the main road heading out into the vineyard, lined by snow-covered olive trees:

A look down toward our grapevine nursery through our tiny Chardonnay block:

I love the geometry of the vineyard, made more dramatic by the snow.  Below, a newly-pruned Roussanne block to the west of the winery:

We've been pruning for the past few weeks; below is a single, newly-pruned Roussanne vine, with a closeup below:

We collect the prunings off the vineyard for our grapevine nursery.  The pruned Roussanne canes are in the foreground of the photo below, covered with snow:

It was cold enough (32 degrees exactly) that the snow was sticking wherever it landed.  Add to that the fact that the air was absolutely calm and the snow built up even on the unpruned canes like those in the Syrah block south of the winery:

Finally, one shot of the snowy Beaucastel sign in front of our tasting room:

Succeeding in a poor economy: it's all about the fundamentals

I get questions every day from people asking how our sales are holding up overall and what we're doing to help survive the current struggling economy.  Most people look surprised, and then relieved, to hear we're doing pretty well, all things considered.  Our wholesale sales were down 11% last year because of a decline in the fourth quarter, but our tasting room sales were up 15% for the year and down just 3% in the fourth quarter.  Our traffic was up 5% for the year.  Our sales to our wine club were up 21% for the year, and we ended the year with about 3400 VINsider wine club members: more than 500 more than we had at the beginning of the year.

So far this year, we're holding steady in the tasting room.  Our January sales were up 4.5%, and our traffic up 9.5%.  We signed up 16% more new VINsiders this January than last.  A part of this improvement can be attributed to the day of the week on which New Year's fell (it was a Thursday this year, creating a four-day holiday weekend to begin the year) but we're seeing consistently good traffic out in our tasting room and our average sale per customer and the percentage of our customers who we're converting into wine club members are both at our averages from the past few years. 

So, given all this, I thought it might be helpful if I tried to enumerate what I think that essentials are for a winery who wants to be successful in this economic climate.  I've tried to give some context for my suggestions, as not all of these will apply to everyone's situation.  Most of it is not rocket science.  It's about focusing on the fundamentals and doing them well.

• Make sure that the customer experience when someone is coming to visit you is a good one.  I think that this point, for small- to medium-sized wineries, is as important as all the others combined.  I am amazed by how many people we get in our tasting room who tell us stories of disinterested servers, overcrowded tasting bars, or salespeople whose only interest is a club sign-up.  A hugely successful tasting room may convert 5%-7% of its customers into club members.  That means that the vast majority of the people coming through your tasting room are not going to sign up on the spot.  Focus on giving everyone a memorable experience, and the wine (and wine club) will sell itself.  This does not mean that wineries should approach sales as though the idea is somehow dirty: sell through education and enthusiasm, and make sure that the customers know the options in front of them.  Every person who leaves your tasting room happy is a source of repeat business and referrals.  An enormous piece of being able to ensure a good customer experience and the sales that result is having sufficient staff on hand to handle your busiest times.  This necessarily means that in slower times you'll be overstaffed, but if you calculate the value over time to your business of a single club sign-up or a single dissatisfied customer who would otherwise have bought a case of wine and told their friends, the cost of labor seems pretty minor.
• Build and use your lists.  At Tablas Creek, we saw 22,000 people come through our tasting room last year.  Adding just a small percentage to your email lists (let alone your wine club lists) can give you a powerful tool to communicate special offers, share information about events, and generally build an ongoing connection to your base.  Once you have added these people to your lists, it's important to contact them regularly.  An email every few months, with perhaps a print newsletter a couple of times a year, is generally seen as welcome rather than intrusive.  And, for your core customers (read: wine club members) a little extra outreach in times of economic difficulty may well prove rewarding.  We've found that while our wholesale sales have suffered, the responses to our wine club emails are providing a consistent, growing return even over the past four months in this struggling economy.  One final word: there are wineries who fear to contact their club members out of worries that this will remind them that they want to cancel.  I think that this approach is self-defeating in the long run.  You may squeeze an extra shipment out of a few people, but the numbers of dissatisfied members of your base who you create, and the churn of returned or refused shipments, challenged credit card charges, and lost opportunities for between-shipment sales seem to me to far outweigh the gains.
• Cultivate partnerships.  You are not the only one in your area with an interest in bringing people into town and giving them a good experience.  Reach out to local hotels and bed&breakfasts and create co-marketing opportunities and specials that will give them a reason to be emailing their customers about you.  Work with local restaurants to put together dinners that both you and they will market.  This expands your base, supports your partners in your community, and ensures you stay visible.
• Stay visible.  This is not the time to cut your marketing budgets and hope to save your way through the economic downturn.  Sure, be selective about what expenses you choose (was that half-page ad in the glossy wine magazine really worth the $10,000 it cost?) but don't disappear.  When overall business is contracting or staying stagnant, you can be assured that your competitors are out there pounding the pavement.  Keep going to festivals.  Keep working in the market with your wholesalers.  Keep supporting the local organizations that are promoting your area and keep supporting the advocacy groups that focus the wines you make.  This will help ensure that you maintain your share of whatever business is out there, and will position you for fast growth when the economy does turn around.
• Do your part to ensure that you get editorial coverage.  Writers in lifestyle and wine publications are struggling, too.  Newspapers and magazines are both being hit hard by a decline in ad revenues, and many are letting writers go or converting paid positions to contract labor.  This means that everyone in the media is being asked to do more work for less or the same money.  Help them out.  Come up with creative ideas that will make good stories (and relate somehow to your business).  Then pitch the writers who you know on these ideas.  Don't expect every idea, or even most ideas, to pan out, but you'll be surprised what does.  And not contributing ideas is a great way to ensure that they don't get used.  Plus, be sure that you're covering the basics.  Are you sending samples of all your new releases to the 20 or 30 key writers around the country a few times each year?  Figure that the total cost of doing so is somewhere around $2500 plus a few cases of wine.  Calculate what a full-page advertisement is in any of the key wine or lifestyle publications.  Do the math. 
• Work with new media.  I wrote a little less than a month ago about Facebook and social networking for wineries.  In the month since I wrote that article, Tablas Creek's Facebook page has gained 130 new fans.  Extrapolate this power across months and years, and you will see how potentially valuable these inroads into social networks can be.  And Facebook isn't the only outlet.  A blog is a great way to personalize your business, communicate your core ideas and principals, and drive traffic to your Web site.  Getting involved in online bulletin boards can develop enthusiasm in an important base.  And new wine 2.0 sites like Snooth are just starting to show their power.  If you aren't particularly technologically inclined and are worried about your ability to execute in these new media options, find an intern to do it, or just ask a member of your staff who is recently-graduated from college.  You'd be surprised how easy and inexpensive it is to create a broad online presence.
• Be more hands-on in managing your relationships with your wholesalers.  We're finding that a major problem in our wholesale efforts is overcoming the nervousness of our gatekeepers.  Clearly wine consumers have not stopped buying Tablas Creek; the people with whom we have direct relationships prove that.  But for a wine to sell in the wholesale market, the distributor manager has to believe in the product enough to maintain a healthy inventory, the distributor rep has to believe he or she can sell the wine enough to pull a sample and show it to his or her accounts, and the buyers at the accounts have to have enough confidence to buy the wine in a crowded marketplace full of people offering them hitherto-unimaginable deals.  That's a lot of people whose confidence you have to win or keep before the consumer even gets the opportunity to buy your wine.  You can overcome many of these hurdles by staying actively involved with your wholesalers.  Make sure you're receiving inventory reports every month, and accounts-sold reports quarterly.  A distributor can't sell wine they don't have in inventory, and won't sell a wine whose inventory is down to a few cases.  Know who you'd like to see the wine sold to, and make suggestions to the distributor.  Offer to support your wines by offering their sales reps (who usually have a limited sample budget) some samples at your expense. These ideas are good even in a strong economy (the wholesale market is a very crowded one, and distributor mergers have guaranteed that most distributors have many more wines in their books than they can realistically focus on) but become essential when times are tough.  And, be sure you're out in the market, working with your distributors.  It's important for you to hear what their customers are saying, and for the distributors to see that you care enough to support their efforts.
• Focus on giving people value.  Value is an essential concept.  It does not mean that things need to be cheap.  But, it does mean that you need to think about what will remind or convince a potential customer that what you're offering is worth what they will spend.  Offer a special on a specific wine each month.  Or offer free or discounted shipping.  Be generous with events that will bring people out to the winery where a purchase is more likely to happen.  One example: we included a $15 discount coupon in the end-of-year gift that we sent to all our wine club members at the end of last year.  Just a few days later, we started getting orders from people who had received that coupon.  Would we have received those sales had we not sent out the coupon?  Probably a few.  But most, in my opinion, were spurred by people deciding that this little nudge was enough to tip their value scale into the black. 

These are just a few ideas, and nothing here should be earth-shattering for business owners or managers.  But for us they have meant the difference between lamenting the poor economy and being able to continue to grow even as the fundamentals of the economy have deteriorated.  I hope that this has proven helpful, and would love to hear from other business or winery owners out there who have also come up with creative ways of protecting themselves from the economic downturn.

Announcing the 2009 American Wine Blog Awards

Tom Wark, on his blog Fermentation, has announced that nominations are open for the 2009 American Wine Blog Awards.  We were proud to win the 2008 Best Winery Blog, and I am hoping that we will be competitive in this category again.  But, regardless of how we do, these awards are a terrific chance to see what's new and compelling in the world of wine blogging.

So, go ahead... browse over to Fermentation.  Nominate anyone you think is doing extraordinary work.  And come back regularly over the next month to read about the finalists and vote for the winners.  The votes of the public account for 70% of the total weighting in tallying the results.