A WineVision Call to Action: Challenge -- Create a Great Awakening Experience for the U.S. Wine Industry.

Lifestyle Editors/Business Editors/Wine Writers

NAPA, Calif.--(BUSINESS WIRE)--April 13, 2004

WineVision

                     "Tell me, and I will forget;
                   Show me, and I may not remember;
                  Involve me, and I will understand."
                            Mark The Date:
                              July 20-21
                          Santa Rosa, Calif.

    The Detroit saga of how U.S. automakers ignored the competitive
    threat of Japan and Germany may hold lessons for U.S. vintners.

Global competitors have landed on the shores of American wine stores, restaurants and in the supermarket wine aisles.

These "invaders" are taking over much of our marketplace with products that have been designer-made by overseas marketers working in tandem with their winemaker counterparts to closely match the palate of the wine drinkers who are not connoisseurs. By contrast, we American vintners tend to make what the wine industry would like to drink.

Led by the Australians, this "New World Wine Order" has figured out what the more casual wine consuming public is willing to pay to add wine as part of their lifestyle, and these companies have matched those prices with salient quality standards.

"We've been marketing to hobbyists," said Bill Turrentine of Turrentine Wine Brokerage and co-founder of WineVision: American Wine in the 21st Century. "But, something that our foreign competitors have learned, there are a whole heck of a lot more average consumers out there than hobbyists. To reach them it's become clear that we have to learn to use a language that is more welcoming to the average consumers language that stresses the experience rather than the product. That is what has been successful for most consumer packaged goods that have survived the '90s. If you focus on product, you lose people really fast."

For lack of a better description, what in the wine industry has become known as the "Australian model" is a paradigm that was used by foreign car manufacturers, especially Japan, to first target and then overwhelm the U.S. automobile industry. Detroit, perhaps much like U.S. vintners today, underestimated the resolve, strategy and consumer-directed approach of these foreign competitors who eventually became the major suppliers of cars and trucks in the U.S. starting with economy models and eventually coming to dominate even the highest-priced luxury-car segment of the market.

"It seems to me that our winemaking culture is rooted in the old world model, perhaps you might say the French model, even though we're obviously part of the new world," said David Freed, a grower with Silverado Premium Partners and a co-founder of WineVision. "And it seems to me and much of the rest of the wine industry that our educational system for winemakers currently has the most affinity with the French educational system rather than the Australian, where among other things their winemakers are required to take wine marketing courses and their wine marketers take winemaking courses. It's a model that is perhaps, as a result, more holistic in its approach to creating both wine and wine brands."

Some members of WineVision's steering committee, which has operated in large part as a sort of think tank for strategic challenges facing the U.S. wine business, have begun to examine how the U.S. automobile industry failed to heed the warning inherent in the expanding marketshare of Japanese carmakers in the early '80s and the near devastating effect that hubris then had on Detroit.

One key lesson for U.S. vintners is offered by Jacqueline M. Romo, external relations specialist, for the Graduate School of Management at the University of California, Davis, who has looked at the history of the U.S. auto industry and how it fared in the face of global competition.

"The US auto industry became introspective and ignored the trends that were happening globally (following the emergence of Japan's auto industry and the re-invention of Germany's car and truck manufacturers)," said Romo. "They also were arrogant about their position in the market and felt they could ignore consumer demand. Basically, the Big Three were out maneuvered by foreign companies that were better at responding to consumer demand. Eventually, as in the case of Japanese auto makers, those companies were in a position to not only respond to consumer demand, but they could also create it."

Jerry Lohr of J. Lohr Winery and a WineVision steering committee member, recalls the U.S. auto industry struggles: "I remember when foreign cars were poorly built and nobody wanted them," said Lohr. "Then, they came back much better built and solid, beginning at the economy level, and now they are best sellers up to the luxury level. Detroit is a good analogy to the wine business. We have a situation where some foreign wines, which in some cases are basically are not as good as ours, but the public expects that their Japanese car to be better built than American cars and so they actually are willing to pay more. But the truth is that many of those cars are built right here in America and sometimes at the same plant used by American manufacturers, who were able to make cars in some cases more cheaply but with more recalls. In other words, what these American car manufacturers failed to see was that it was the quality guarantee that the car consumer was demanding, not just better prices.

"We need to wake up and understand that other countries have a comprehensive plan and strategy to reach consumers that is better than what we have. We need to understand that when we are competing now, that we are competing in a global market, and competition in a global market is entirely different than competing solely in our domestic market. We also need to be a little more approachable by much of the rest of the country. We have 50 percent of Americans who are not opposed to wine, who even drink it occasionally, but who don't buy it on anything resembling a regular basis. We need to encourage those kind of social opportunities where people can be more comfortable with what we make."

Paul Dolan, an officer of the Wine Institute and WineVision co-founder, calls the Detroit analogy "so accurate and so reflective of what the U.S. industry is now experiencing that it is scary. What used to be our California playing field for wine and wine drinking, our backyard so to speak, has now become a global playfield. This analogy has got to be our call for action that we're losing the fight in our own backyard; that a continued weakened dollar (which makes imports into the U.S. more expensive while making U.S. exports less costly to consumers) is only going to provide a little relief; and that we need to control our fate so it doesn't go the way of the dinosaurs in Michigan."

Freed believes that the implications of the Detroit analogy is "we in the wine industry need to take the time and make the effort to really understand American consumers and their real, as opposed to presumed, taste profiles."

WineVision sees the current challenges now faced by domestic U.S. producers, growers, retailers and distributors as, at least, two-fold:

1. How do we bring our per-gallon costs down to compete in this New World Order?

2. How do we create wine experiences for the consumer that both enrich one's quality of life and match the pocketbooks of the masses as opposed to the connoisseurs?

Clearly, many of the very largest wine companies who have access to considerable consumer research and market trends data already are heading down this road. WineVision sees its challenge as creating a journey that the rest of the industry can take to establish what it sees as a new era for a consumer-focused wine portfolio.

The first step in this WineVision journey will be The Great Awakening Summit, an experience for invited "change leaders" selected from the wine community and set for July 21 in Sonoma County. Much of the "experience" will be facilitated by noted business consultant Sue Cook, co-author of Turned On: Eight Vital Insights to Energize Your People, Customers, and Profits.

"This is nothing less than a U.S. wine summit, a call to action to address the market's mounting challenges," said Cook. "The objectives are simple: to network with some industry leaders; renew and expand efforts to increase consumption and reduce costs; and create experiences for consumers that wine is an integral part of enriching the quality of life."

The summit, designed as far more than an annual conference or seminar, will be based on the point of view of a Native American proverb: "Tell me, and I will forget; Show me, and I may not remember; Involve me, and I will understand."

WineVision's goal is to enhance the acceptance and enjoyment of wine in the United States. To achieve this, the steering committee has determined that there is a need to accelerate the transformation of the U.S. wine community from supply driven to consumer focused.

WineVision's objective with the "Wine Summit" is to change the assumptions / behaviors of decision-makers within the wine industry, from the grower to the retailer, so that a new, awakened trade begins as a group and individually as brand managers to address the needs of the consumer. In so doing, this will lead to consciousness that embraces a "think consumer-first" perspective in the development of business.

Takeaways from this unique "experience" should be:

-- Understanding of the principles of becoming consumer-driven

and learning to engage others in the conversation.

-- Conversations with those experienced with "consumer-first"

thinking.

-- Specific ideas that can implemented to empower individuals

throughout the management chain at your business to re-orient

your existing brands and newly developed brands toward the

consumer rather than toward production-oriented demands.

-- Thoughts on matching wine with consumer wants, needs, desires

and life experiences.

-- Embracing of innovative product positioning and development to

match the needs and desires of consumer segments for growth

and greater market share.