Ten Years Back (and Forward?)


About this time in 1999, I took an unknowing, impassioned first step into what has now turned into a ten-year love affair with wine.  Today I find myself back in my old stomping grounds of New York City pouring wines at a trade tasting.  Not as a volunteer, but as a vintner.  From a career in magazine publishing to wine production, it is amazing how quickly one's life can change.

While I was living and pursuing my passion in Italy, fresh out of Business School, I wrote these thoughts about the wine industry.  I will admit the statistics (culled back in 2005) are somewhat dated, but from recent reports I have read, the wine industry has seen a continued trend in the direction I report.  Although, just as fast as one's like can change, so can the world around us - we are all living with a (global) economic recession of galactic proportions that has already impacted some sectors of the industry.  Knowing what I wrote then, and what is happening now, I am reluctant to make any predictions on the future of the wine industry, because as I have learned with winemaking, it is good to be patient and make decisions when the sediment has settled.
On a lighter note, I was prepared to cringe while reading my youthful idealism for wine.  Expecting my words to sound like a post-Sideways Hallmark card; I actually found that my initial feelings have only been strengthened over the recent years.  So, please indulge me, read on and let me know if anyone has any thoughts about the future of wine.


[Ten] years ago, a friend from Hollywood, who traveled regularly to the sets and soundstages of New York, introduced me to fine wine.  When his day was done, over dinner at haute restaurants in midtown Manhattan, he would wax poetic about the Californian wines on leather bound lists that were larger than the scripts he would read.  He talked about buying a piece of land in wine soaked Napa Valley and retiring.  We drank Pahlmeyer, Caymus and Thackery.  Names I knew only by the corks I saved from his dissertations.

I left each dinner with self-imposed homework.  I began reading more about wine, then drinking it.  I felt I was gaining an intelligence that allowed me to appreciate the wine we would drink on his next visit.  Inevitably our friendship waned, but I continued my studies and began to refine my taste.  Through the years since, I was considered an expert amongst my friends.  However, in my mind I was far from an expert; I was an amateur connoisseur.  Like most amateurs, I can confess to having hit or miss moments while drinking.  Some nights, I will open a bottle of wine and capture the orchestration in the glass; I am able to identify with the wine's origins and create a memory the moment the grape juice touches my tongue.  Other times, I fail in achieving such oenological delight and proceed to swill the wine, while throwing sobriety to the wind.

In September 2004, I took wings to an easterly wind and visited Sicily and the family of one of my fellow business school class mates.  During the weeklong journey, we spent a day visiting vineyards on the southeast side of the island.  When I returned to the States, it was not the Sicilian wine's fruitful finish that stuck with me, but the culture of the wine making process.  I pondered the essence of this culture.

The Business of Grape Growing

Wine, in all its forms, is a packaged good.  Wine is an industry that is ultra-competitive.   Worldwide it tallies $225 Billion in sales, but the top 10 producers control just 15% of the market, in comparison, the top 10 brewers and spirit distillers account for 54% of all sales. Wine prices range from $2 a bottle to north of $2,000 for a taste of first-growth Bordeaux.  Ask the MBA educated Brand Managers at Procter and Gamble if they would be interested in overcoming the barriers to entry in this market and they would certainly dazzle you with a “five forces” analysis of the question's stupidity.

But what I learned on the vineyard is how these winemakers produce a product of quality. The philosophy of wine is delicate.  Wine is human.  On the farm, the grapes are given a heart.  During the growing season, the vines are like a mother during pregnancy.  At harvest, the grapes are reared to produce the best quality juice.  Then aged until they are uncorked. When uncorked, the wine will blossom in the glass throughout the drinking process.

Far from any classroom or boardroom, the values put into every vintage are textbook classic.  The vines are cultivated by generations of family members with consistency of purpose.  1) The grapes are the product of your self.  2) Guide them down a path, but allow them to flourish on their own - with autonomy the product will ripen.  3) Polish the product and prepare it for market. 4) While in market, the product will reflect the company's care. However you translate this philosophy, it remains a poetic, although, a process that struggles with the speed of the developing consumption patterns in the beverage alcohol market.

Old vs. New World

Today, the wine industry continues to outpace its competitors. Some will argue that wine's growing popularity amongst consumers was bolstered by a medical report released in the 1980's that stated a glass of wine a day is actually better than the old “apple” adage.  Twenty-odd years later, in 2001, wine sales in Germany overtook beer consumption and has a penetration rate of 70% of all households. In Australia, a new winery opens every three days.  In the United States, the Yellow Tail brand (from Australia) is the #1 sold import – a couple of years prior, it did not exist.  By 2010, the United States will be the largest consumer of wine in the world.

France and Italy are considered “old world” producers.  There are 230,000 producers in France alone; many cultivating the ‘wine is human' process where “wine is consumed, not sold.” There is no marketing strategy.  The best grapes from the best “terroir” are the best value no matter what the price.  Terroir, or soil, is of utmost importance.  Without it, you can't identify with the wine.  You can't feel the wine.  Consumers in the old world appreciate wine like a work of art - they will stand in front of a painting and make an emotional connection, without such a connection a memory will not exist.  In the “new world,” such opinions about wine are still developing.  Wine appreciation is still inaccessible to the masses. In America, 15% of drinking age adults consume 85% of the wine sold, and new world producers (American, Australia, Chilean) are taking advantage of this trend, and wine production is becoming industrial.

The new world is consuming the P&G model, the product approach, where the value proposition is different - low price points for high volume sales. An international marketing machine has been created that produces “standardized” wines.  This model caters to consumers where wine is made through mass media.  Dominate holding companies, like Diageo and Pernod are returning 15-20% of sales revenue into their marketing expenses for budget wines that command a price point in the $7 range. These producers are exploiting opportunities where there are obstacles for appreciation - inexperienced consumers, language barriers and limited imports.  Retail outlets are recognizing these obstacles and consolidating shelf space to support sales that produce optimal returns. Wines with simple packaging categorized by red or white and grape name, i.e. Cabernet, Chardonnay, Syrah and Sauvignon Blanc, are delivering volume sales and the right balance of profit.

To Sell or Not to Sell

The new world is no longer new, it is established.  Consumer attitudes and consumption habits are gaining traction, and the Darwinian philosophy of pushing sales will only continue the precipitous demise of the fragmented, old world producers. For example, in the United Kingdom, over last 15 years, wine consumption per person has doubled to 23 liters (or 2.5 cases) per year per person; however, old world - French, German, Italian and Spanish - wine sales have plummeted from 87% market share to 42%, while new world (American, Australian and Chilean) share has soared from 4% to 47%. Larger producers are succeeding in turning farms into factories and limiting the distribution opportunities of artisan (old world) wine makers.  A global philosophy is dominating, a philosophy that takes cue from Coca-Cola brand management, where regional not central decision-making is helping profit margins. Brands of scale are being produced to identify with the market and not the product source.

If wine continues to be sold in this fashion, the low volume-high quality producers of the old world will have a few questions to answer.  Is there a healthy balance between artisan wine making and commercialism?  Is it possible to subsist on appreciation alone?  How can you increase brand awareness, therefore sales, without the marketing expertise or dollars to do so? For many of these producers it is impossible.  The investment for innovation, distribution and education through marketing looms large.


I have extracted my thoughts about the future, which were written in 2005, based on the notion that I am not in the game of predictions; even if, as I re-read them, some of them have come true.  But when I look at the way I have predicted the outcome(s) of this year's NCAA March Madness, I don't want to put the cart before the horse.  That being said - feel free to predict away.  Would love to hear your thoughts on the future of wine drinking and selling.

Dan Petroski is Assistant Winemaker at Larkmead Vineyards in Napa Valley. Dan has an MBA from New York University and worked as an Ad Exec in New York for several years, before switching it up and trading his suit for a move out west.

Mentioned in this article


  • Snooth User: dmcker
    Hand of Snooth
    125836 4,989

    Not too high-flyin/overblown at all, DP. Very interesting and thought provoking. How would you describe Larkmead's marketing, and winemaking philosophy, now? Unfortunately, haven't had the pleasure of tasting your product yet.

    Oh, and how much do Diageo's practices contribute to the fact that I don't like Chalone as much as I used to? ;-)

    Mar 26, 2009 at 8:05 AM

  • Snooth User: h2w4
    Hand of Snooth Voice of Snooth
    80553 156

    Interesting points, and coming from a family owned “medium-sized” winery I frequently deal with both sides of the “quantity vs quality” issue. From my perspective making a good quality wine that encompasses a lot of the artisanal properties you describe is the goal. That being said every winery wants to make money. It can be very easy to succumb to the “quantity” side of the arguement soley based on money. But any winemaker worth his salt wants to make a great wine, and making a great wine in the quantities desired by large outlets such as grocery store chains, hotel chains, and restaurant chains can be very difficult…but not impossible. You only have to be selective. For example, rather than try to fill the 20,000 case order that Applebee's wants, you focus on the smaller chains. You work with Four Seasons, PF Chang's, Ruth's Chris, Mortons, etc… You can fill chain orders while still keeping production at a level that is both managable and maintains quality. So, in a world where profit is king and it is so easy to sacrifice your morals to the ever important dollar. I want to point out that it is possible to make a good wine at a good price point that can be semi-widely distributed without losing the quality you're known for.

    Mar 27, 2009 at 4:00 AM

  • Courtney Cochran


    As a fellow MBA grad (Anderson ‘05) now enmeshed in the wonderful world of wine, I have to say “right on!” I totally agree that the cookie-cutter brand management model for the most part doesn't work with wine - at least not with the kinds of wine I want to drink. Besides the MBA I'm a certified sommelier, and when I spoke to a major wine company during MBA recruiting they told me they would prefer to hire a non-wine expert who had CPG experience at the likes of Clorox or General Mills and then teach that person “what they need to know” about wine (translation: marketing muscle trumps a true comprehension of the product).

    What I want to know, though, is can you teach just anyone how to see the soul in a wine? I'm pretty sure you can't get that kind of intuition for the real essence of the stuff during a stint selling soap.


    Mar 27, 2009 at 5:11 AM

  • Snooth User: Philip James
    Founding Member Hand of Snooth Voice of Snooth
    1 12,575

    Dan - thats great, thanks. Some of your stats and predictions were pretty accurate:

    - The US it neck and neck to being the largest consumer of wine
    - 230,000 French producers - glad to hear you say that. I've argued with many a Napa ‘expert' over the number of producers worldwide. I claim somewhere between 500,000 and 1M, while they claim 30,000 [sorry, but Napa needs to drop its parochiality]

    So, no more predictions from you?

    Here's a few from me:

    - Sweeping consolidation in the US, as many first generation winemakers retire and find their children dont want to continue the family business. However, there will be some pockets of ‘family owned' to keep the variety alive

    - More and more ‘virtual' wineries - brands basically. Relying on custom crush and places like crushpad to make their wine

    - Deregulation in the US to really level the playing field by 2015 (although we'll ebb and flow, while making incremental progress in the interim)

    Mar 27, 2009 at 5:15 AM

  • Snooth User: dmcker
    Hand of Snooth
    125836 4,989

    Philip, what specifics of dereg are you pointing at/wishing for?

    And how might you see consolidation helping the consumer other than at the lower end?

    Mar 27, 2009 at 7:19 AM

  • Randy Watson

    Great story and insight! I really enjoyed this read.

    Mar 27, 2009 at 9:04 AM

  • Snooth User: Philip James
    Founding Member Hand of Snooth Voice of Snooth
    1 12,575

    Consolidation - I can certainly foresee some high quality niche wineries that, under the umbrella of a larger organization, are able to get their products into the hands of more eager consumers - the operational skill, financial backing and distribution muscle could actually be a huge benefit to some operations.

    Deregulation - My 2015 prediction involves pretty complete disintermediation, at least in wine producing states, so that wineries and importers can ship direct to stores, and producers can ship direct to consumers.

    Mar 28, 2009 at 6:40 AM

  • Snooth User: John Andrews
    Hand of Snooth Voice of Snooth
    36106 3,448

    Dan … as always, great blog … I can relate to this very much as I would put myself in the position you were 10 years ago. I find myself drawn to the wine industry more and more but not quite ready to take the next step. We definitely need to get together and chat.

    Mar 29, 2009 at 1:38 AM

  • Snooth User: Daniel Petroski
    Hand of Snooth
    30091 715

    Sorry all for not responding sooner, I have been on the road shilling for the brand. And not necessarily as a result, I am happy to relate that with all the bleak news in the market place, Larkmead is up 20% YOY in the 1Q. @DMCKER: In the three years since the marketing and sales team was started, we have spent no money in direct marketing, but we have amassed some travel expenses participating in trade tastings on both coasts. Our success has come with a heavy reliance on references, word of mouth and third party reviews to propel the brand. (I would appreciate HondaJohn's perspective on this as well.) However, I will say that our aura resides in the loyal followers who visit the winery. I have always said walking into our tasting room is like walking into a Pottery Barn catalog - we all want to live in those pages, don't we ? Couple that with a modest attention to what is in the bottle and not about marble statues, antique cars or tours; thus, we have succeeded in creating that ever elusive ‘experience'.

    @ Courtney, I really can't say if one can see the soul in wine like one experiences a bar of soap. But if one can experience that smell of ‘Irish Spring' and it transports them to a different time and place; I hope they have enough diversity in their experiences to put them in the state of mind to have a ‘Ratatouille' moment with a wine. But the real rub is to be able to articulate that moment - which I think more and more consumers are getting a grasp of (or at least seeking out in tasting classes, websites, et al). The one thing I would have never imagined is that wine has gathered such a new media following - with sites like Snooth, Cellar Tracker, Gary V's video blogs, Twitter, et al. I remember back in 2005 I read an article in Decanter that reported how the Japanese nouveau wine drinkers were texting each other when they tasted a wine. The wines had abbreviations, like BDX (Bordeaux), NV (Napa Valley) or the trump card of abbreviations, Y (d'Yquem). They followed with ascii faces to show their support or distaste for wine. I thought that was kinda neat back then, but now it appears almost Twitter trite. That being said, I have struggled with how a winery would promote itself in such a new media economy. I google alert Larkmead. And I get daily reviews of our wines from daily drinkers like ourselves. And I notice that 100, 200, 1000 people view those reviews. These numbers are staggering if you consider that P&G probably doesn't see 100 or 1000 click thru's on their online advertising over the duration of the ad's rotation. Wine is a packaged good, but wine comes in more shapes and sizes (not literally) and means more things to more people than a spectacular cannister of Pringles. So, I am offended to hear that a Wine Co. actually wants to recruit Brand Managers. Yes, a lot of wine is sold next to the Toothpaste and across from the kitchen cleaning products, but that debased thinking is only going to commoditize the industry (if it hasn't already).

    I wrote a short business plan (of sorts) when I was in Italy. My goal was to come back to the States and teach the wine drinking populace about the appreciation of wine. The plan was for a wine bar and store. I made simple ‘experiential' assumptions about teaching appreciation to the consumer wine drinking sects. I never followed through with that plan, but maybe I should post it here next week as a follow up to this post - offering it as a ‘modest proposal' to continue the momentum that the wine drinking public has been quick to attach itself to. Or, since I haven't re-read it in three+ years, I might realize that we are already there, moving fast and hopefully drinking slow, with attention and appreciation.

    @ Philip: I will leave you with one prediction. From an Italian proverb:

    Chi si beve
    La scolatura
    L'ultima goccia
    E bello di Natura

    Who drinks the last drop has a beautiful nature.

    Sep 17, 2009 at 4:22 PM

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