Welcome to the new "LA"!

At the end of July, I found myself in the Greater Mobile Bay area, aka “LA” or “Lower Alabama,” to help our new distributor, Stephen Clark, introduce locally our Silkbush Mountain Vineyard brand wines. We called on 10 accounts over two days, had a great reception to the Silkbush wines, and look forward to having sustained sales of South African wine in the new “LA”. But that’s not the reason for this Blog posting. The greater Mobile Bay really is just great; I was highly impressed!

Contrary to the stereotype of the deep Old South, the Mobile Alabama area has significantly gentrified and become a very desirable place to visit and/or live. Downtown Mobile has fascinating restaurants, upscale wine bars, clean streets, and a vibrant economy. While Mobile’s population is about 200,000, a 60 mile radius picks up over 1 million more people. While the residents are spread out, small towns such as Spanish Fort, Daphne, Fairhope, and Foley on the Eastern Shore are very impressive and are akin to the nicer suburbs of any major US city.

Mobile residents are quite excited that in 2015, Airbus, the European jet aircraft manufacturer, will start production of the A320 series right in Mobile, and will produce at least 50 jets per year. Airbus is investing $600 million and will employ at least 1,000 workers. And, when their supporting cast of companies, (those providing engines, avionics, wiring systems, windows, seats, etc.), open their doors, the Mobile economy will receive a substantial and continuing boost. Also, ever since WWII, there has been a significant local ship-building industry due to a 75’ dredged shipping channel. This also permitted the retired battleship USS Alabama to make Mobile its permanent home and it has become a major tourist attraction. The LA economy is doing well and this should translate into ever-greater wine purchase and enjoyment among other things.

Interesting Wikipedia factoids: Mobile began as the original capital of colonial French Louisiana in 1702. During its first 100 years, Mobile was a colony of France, then Britain, and lastly Spain. Mobile first became a part of the United States of America in 1813, with the annexation of West Florida under President James Madison. As one of the Gulf Coast’s cultural centers, Mobile now has several art museums, a symphony orchestra, a professional opera, a professional ballet company, and a large concentration of historic architecture.

Today, year-round waterfront recreation is a big regional draw. There are many major hotel resorts along the Alabama Riviera and more are underway. Jimmy Buffet’s sister’s restaurant/entertainment complex “Lucy B. Goode” is drawing well; and a 500-acre effort to develop a Country Western entertainment competitor (think “Branson of the South”) is underway in Foley, to be named “Blue Collar Country”. “BCC” Phase I, including two hotels, a restaurant and convention center, and a sports tourism complex, should be open in the Spring of 2015. Because Mobile Bay is quite shallow, perhaps an average of 10 feet, much of the recreational boating is shallow draft power boats rather than deep keeled sail boats. Clearly the Bay has many nifty attractions with more coming every day.

Further, some aspects of traditional Southern recreation were quite evident, and most notably the pictured Bass Pro Shops facility highly visible from westbound I-10. The building was at least four times larger than the Marriott Courtyard where I stayed so it took little encouragement from my local friends to make an initial visit. Every kind of sporting good and apparel was available; the cast of Duck Dynasty would have thought they had died and gone to Redneck Heaven. Additionally, on a few warm summer nights, the residents living around Mobile Bay sometimes enjoy the fruits of a mysterious natural phenomenon called a “Jubilee”, when fish and crabs swarm toward shore and are easily harvested by people wading in the shallows.

Be that as it may, there are already many higher-end wine drinkers around Mobile and more moving to LA every week. They will soon be greeted with SILKBUSH wines at many turns, and I definitely plan on returning annually for Winegrower dinners and a little LA boating….

Namibia Adventure

In May of 2014, Catherine and I took our 32nd combined trip to South Africa and Silkbush Mountain Vineyards, and then our very first trip to Namibia. Planning our Namibian adventure was actually an adventure in itself; Catherine spent the better part of January 2014 researching and preparing the varied intricacies of the trip. (Her research was supplanted by our favorite African travel consultant, Denise Best, www.thebesttours.net (www.thebesttours.net)  who lives in GA and has assisted several friends in planning African “trips of a lifetime”).There was so much to see and experience we decided to stay three weeks driving across Namibia in addition to our two weeks in the Western Cape, on SILKBUSH and then in Stellenbosch.

Incidentally, the distances in Namibia are substantial; we covered by car at most 60% of the country, one week driving ourselves and two with our very enjoyable guide, Richard “Zubee” zu Bentheim zubentheimr@gmail.com. If visitors have less time, flights in light aircraft can be arranged at greater cost and you really miss out on much of the flavor of the country. Like much of Africa, much of Namibia deserves to be seen more slowly and digested deliberately with the locals.

BTW, Namibia is the first country in the world to incorporate environmental protection into its Constitution. From this, many tourism options spring, providing real monetary and social benefits for the local communities who provide them and, in return, a very enjoyable and gratifying Namibian experience for tourists. We visited the highest sand dunes in the world and the largest game reserves in Africa. We visited local communities, tribal lands and developed an appreciation for Namibia, it land, its wildlife, and its tourist-friendly peoples and amazingly diverse cultures. The country has earned its nickname, the Arid Eden!

This trek also became a geological safari because of the varied and ubiquitous rock formations throughout the country. Geologically, the Namib area is composed of a wide range of rock types, ranging from 1,265 million year old granite to the present day formations making up the Namib Sand Sea. The area is just west of the Great Namibian Escarpment, a feature formed by the uplift of the entire southern African continent about 120 million years ago. In the north and southeast, we saw many lavas or “volcanics” which are exposed rock outcroppings. Namibia’s highest point is the south at 6,500 ft. above sea level. The lowest naturally is the long Atlantic coast line or sea level.

We were totally awed by the local habitats, wildlife, and traditional cultures and rituals here, and we knew our tourism dollars had a beneficial impact on the environment and wildlife conservation. We’ve chosen just over two hundred pictures from the several thousand we actually took throughout our Namibian journey. We hope they and the accompanying text will give you multiple impressions into our most wondrous adventure. Take a look at Gallery 11 (http://silkbush.com/gallery/namibia) on Namibia and enjoy the ride. Botswana, Tanzania, and Kenya are all great game camp safari areas we have also enjoyed, but Namibia is a different sort of adventure in Southern Africa; please give it due consideration.

WHY IS THERE SO LITTLE SOUTH AFRICAN WINE AVAILABLE IN THE US?

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For those interested in trying Republic of South African (RSA) wine in the US, it is often a challenge to even find a few local bottles to buy and  try. Why is this, you may wonder, given the enormous array of wines available on the grocery store aisles or in major wine shops? Well, first, while the entire US wine market is about 370 million cases sold per year, bottled RSA wine is just under 1 million cases, so less than 1/3rd of 1%! (There is enough bulk RSA wine imported for another 2+ million cases yet it may well be blended to upgrade other wines. If so, in the process, its origin is lost and its heritage becomes invisible to the consumer.)

Next, the average retail price of a bottle of wine sold in the US is about $6.25 and perhaps 80% of all wine sold is $10/bottle or less. Since it costs about $1/bottle to bring wine from South Africa to the US, most importers have given up on selling any decent RSA wine for retail prices under $10. Since distributors and retailers receive at least 50% the retail cost of the wine, the transportation cost comes right out of the winery’s pocket. (More typically, an RSA winery will gross only $5/bottle that sells for $15 in the US, and their costs may easily be $3-$4/for the bottle.) Given all the other expenses, few foreign wineries can afford to compete in the US with Gallo and Bronco (“Two Buck Chuck”) unless they are working through great oversupplies of grapes. (And even that usually is a temporary condition, even for Australia’s [Yellow Tail].)

The other side of the coin is the simple fact few wine buyers “experiment” with wines costing more than $20 retail. (This applies equally to US domestic wines as well.) There are some wonderful RSA wines in the $20-$40 range but they will only be purchased by the very knowledgeable and loyal RSA wine consumers.

That then places most South African wine within the $10-$20 price range where most of the good yet affordable wines in the US are being sold today. The SILKBUSH wines we are importing (Pinotage and Viognier) are usually sold in the $14-$18 range, where there is lots of competition with many very good domestic wines. So clearly RSA wines cannot differentiate on price alone.

Very simply, a consumer must be interested in buying a South African wine before they enter a wine shop, a tall order. Further, there is so little experience with RSA wines in the US (essentially just the past 20 years) there is seldom a “South African section” in most wine departments, or if there is, it is just a few facings on a bottom shelf. With so little attention  paid by retailers and consumers alike, there has been little RSA sales growth in most regions.

Despite these inherent adversities, South Africa’s exotic image, wild animal TV series on Discovery Channel and National Geographic, and  increasing tourism (some of which is “wine tourism”), are all leading to increased awareness of the Beloved Country. The 2010 World Cup soccer championship, the recent passing of former President Nelson Mandela, and the attendance of most world leaders at his memorial services: all these exposures increase international awareness. If the Western Cape can become a sufficiently attractive international tourism destination, its beautiful Winelands are only 30 minutes from Cape Town and are usually visited. This is a long, slow way to promote RSA wine in the US but one that should work and develop permanent fans. Only time will tell.

 

Dave Jefferson

Reverse Wine Snobbery and Wine Supply Chain Economics

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Today we wish to feature an interesting and valuable wine blog, The Reverse Wine Snob, (www.reversewinesnob.com) updated quite frequently by Jon Thorsen, located in our former home state of Minnesota.  (Yes, they do have very long winters and chilly springs up north, but those former Nordics purchase and drink a lot of wine, partly as a result of being indoors much of the year.)  Jon’s subscribers are largely wine drinkers who want the greatest wine quality for the lowest prices, starting with the cost of subscription to his service, which is ZERO. For those of us who years ago had a smattering of economics/price theory, we understand it is impossible to solve this equation (as quality and price are both variables), but Jon does a decent balancing job: he rates wines he reviews for both quality and price, comes up with a final score, and then makes consumer suggestions to purchase, purchase in quantity, or “Saturday Night Splurge” for the highest quality, and forget the price once a week.  (We like this approach!)

We think his wine blog is quite valuable for many, especially for those considering purchase of imported wine in the $12-$22 range with which they have no prior experience.  Many in the wine business are regular readers as it is a very interesting approach, especially as most wine buyers are far more price sensitive than the wine business likes to discuss publicly.  The average retail price of a bottle of wine in the US is around $6.25, and perhaps 80% of the wine is sold for less than $10/bottle.  As growers of premium grapes in Napa, Sonoma, and South Africa, we are not very interested in the sub $10 market, but even the occasional sub $10 reviewed by Jon can be rated quite highly for low prices, hence his “Reverse Wine Snob” blog name, and his Bulk Buy category.  But if the wine quality is only so-so, his overall rating is usually under about 7.3, perhaps his median score for wines reviewed on his site.  (Lower quality wines are usually not reviewed.)

Because the wine business ultimately is a business, and at a minimum each participant must recover their costs (or permanently subsidize a very expensive hobby, which clearly a number do), we thought a thorough discussion of wine economics may prove interesting to some.  We will leave that exercise for a later day, however, and just supply some conclusions based on our own experience.

Supply chain economics/observations:

  1. Your retail $15/bottle of imported wine contains at most wine costing $1-$1.50 (10% at most) at the winery level, and frequently less than $1 (6% of the retail price per bottle). We hope the consumers do not begrudge the growers/wine makers this pittance of total wine bottle cost. Packaging at least triples the winery cost to somewhere between $3 and $5, FOB some major port.
  2. The wine sold by the foreign winery for $5 then sees the cost at least tripled again to $15 if not $17 or more at the US retail store. (As there are thousands of wineries competing to get into the US wine market, and only about 300 significant distributors, and perhaps 30 major ones, the distributors and retailers are able to compete imported supply prices to the lowest possible levels.)
  3. Most imported wine sold for $10/bottle or less is pretty much a “semi-industrial grade” product; and when you get down to $4.99 to $6.99 wine, wine reviews are irrelevant! (It may be red, 14% alcohol, and in a 750ml bottle, but that’s about it.) Admittedly, it is far better wine than available 20-30 years ago at these prices, but usually not very remarkable.
  4. We see little high quality imported wine selling for much below $12-$15/bottle for these reasons; and since there is real consumer resistance to experimenting much above $20/bottle, it appears that most of the imported retail game will likely be played in this range for the next several years.
  5. As more Internet-hip Millenials on limited budgets take up wine drinking, blogs such as Jon Thorsen’s will become increasingly popular. And while imported wine today in the US is about 33% of total wine sales, many have projected imported wines taking at least 50% of the US wine market within another 15 years. If so, blog-informed consumers will become increasingly happier with having taken the time in advance to sort the wheat from the chaff.

Chart describing the reverse wine snob rating system

Silkbush Viognier Wins Another Fan

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Viognier is a wine lover’s wine. Silkbush’s version from our high elevation vineyards is creating quite a stir among people who are searching for the best of the best.

I was blown away by this bottle of Viognier from South Africa.  There is a lot of great things going on with this wine. Without oak barrel aging, the layers of all the flavors and aromas are front and center! My mouth is watering for more! Lisa Mays, Wine with Lisa  Read her review and pairing suggestions.