Monday, March 08, 2010

Adapt or die

Adapt or die… A harsh choice, I admit, but the reality is there for anyone with eyes that are open to see it. Times will be hard for anyone who imagines that they can get through this decade using a 20th century roadmap. Many other industries have understood this clearly; the world of wine still has to remove its head from the sand.

We all love reading traditionally printed books and newspapers, and many still enjoy listening to a whole album of music by the same musician – and handwriting Christmas cards. But these activities are beginning to look as “quaint” as smoking a pipeful of tobacco and wheeling a baby around in a pram. Last year, the US publisher Random House sold 100,000 copies of Dan Brown’s The Lost Symbol as electronic "e-books" in the seven days after its release - an impressive 5% of the total sale, considering that "e-readers" like Amazon’s Kindle were only launched in 2007, cost over $250 and have no other use.

This year, sees the arrival of Apple's and other electronic “tablets” that can be used as computers and allow users to watch movies as well as read books and newspapers. These new products and their successors will change the way we read words as much as the arrival of the mobile phone changed the way we communicate. Random House is not alone in exploiting the new technology: the giant magazine publisher, Conde Nast is busily redesigning its magazines to make them work in digital form. Meanwhile, Hallmark, the huge US greeting card manufacturer has introduced emailable greetings cards, and major record companies are scrambling to find ways of serving an audience that now prefers to buy its music online, one track at a time.

The European wine industry has historically treated change like the bubonic plague: just consider the ructions over switching from corks to screwcaps and the printing of grape variety names on French wine labels. More often than not, evolution has been imposed by circumstances and competition rather than generated from within.

Setting aside the issue of the changes that might be made to the liquid product (Justin Howard Sneyd of the dynamic UK retail chain Waitrose raised many eyebrows and hackles at the Wine Future conference when he talked about drinks that combine wine with other ingredients), the industry can and must consider other forms of evolution. Among these, packaging is the most obvious. The coffee industry has been transformed by the the Nespresso single-serve “pod” which seeks to bring instant coffee simplicity to the process of preparing an espresso or cappuccino. Makers of dark beers were similarly boosted by the “widget” that facilitates the creation of a creamy head of fine bubbles when poured from a can. The wine industry has much to learn.

Changes in distribution are, however, arguably even more important. 350 years ago, a clever Frenchman called Fran├žois-Auguste de Pontac opened an inn called the Pontac’s Head in London from which he sold his family’s Bordeaux. At a stroke, he created the first branded wine (Ho Bryan is the earliest to be referred to by name rather than region) and created a novel form of distribution for it. Today, wine producers across the globe are complaining at the power of the retailers. They should learn from de Pontac – and from Nestle who sell $2bn of Nespresso pods exclusively online, by phone – or through over 120 Nespresso Boutique shops and bars across the globe.

Torres and Antinori – two unusual innovators in the European wine world – have both opened on-trade outlets, but neither is big enough to match Nespresso. But how long will it be before Constellation or a set of like-minded firms collectively addresses the on-trade distribution of its wines?

Within the off trade, this taking-back of power is already beginning to happen… In the UK, where the supermarket stranglehold is at its strongest, Matthew Clarke, which is partly owned by Constellation, has recently begun to offer its on-trade wines directly to retail customers through an online service called The Symington Group (Dows, Grahams port etc) is similarly launching a direct-to-the-public operation alongside JE Fells, its UK wholesaler.

Seth Godin, the American thinker, recently described how the Marx Brothers began as Vaudeville stars in 1910, and shifted to silent, then sound movies and radio before finally appearing on television. They adapted themselves (and their act) to new forms of distribution as they arrived. The choice confronting many wine producers today lies in embracing change and going into the history books as enduring stars like Groucho Marx, or becoming historical footnotes like all those performers who decided that moving pictures were not for them….