February 19, 2025 • 41 mins
Rob McMillan, EVP & Founder, Silicon Valley Bank Wine Division, is a leading wine-business analyst in the U.S.A. and author of Silicon Valley Bank’s highly regarded annual State of the Wine Industry Report. His views are sought after and trusted by winery owners, journalists, entrepreneurs and investors. He has been named several times as one of the Top 50 Most Influential People in the U.S. wine industry. McMillian discusses highlights from SVP's 2025 State of the Wine Industry Report.
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Speaker 1 (00:00):
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(00:20):
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Speaker 2 (00:39):
Welcome to the Connected Table Live. We're your hosts, Melanie
Young and David Ransom. You're insatiably curious culinary couple. We
enjoy bringing you the dynamic thought leaders around the world
in wine, food, spirits, and hospitality through engaging conversation. We
like to make those people come alive to you, and
we hope that you follow and find us and all
(01:01):
of our sixty five plus podcast channels and at the
Connected Table because we think we have some really great
content for you, and today is going to be a doozy.
We're with Rob McMillan, the EVP and founder of the
Silicone Bank Wine Division, which issues every year the State
of the Wine Report, which the twenty twenty five win
(01:24):
which is what we're in, came out in January, and
there's a lot to talk about because the wine industry
has really been in a state of what everybody's been
calling doom and gloom. We remain very positive though, I
hope so because it helps pay our bills and we
want to see everyone succeeds. We're going to have a
conversation about this. Rob has been traveling around talking to
(01:45):
many groups and we're really happy to have him take
some time to join us on the Connected table. So
Rob McMillan, welcome, Thanks, nice to be here. We have
a lot of overseas listeners as well. Just so you knew, Rob,
So just briefly, you have a long career over almost
forty years in banking, and you were the founder of
(02:05):
this wine division. Give us a little sense of brief
history on how this report came to be and how
it is pulled together every year.
Speaker 3 (02:14):
Well, the brief history is that I was asked to
create business plans for what we called underbanked niches or
business verticals back in the early nineties, and my first
one was mortuaries, and I thought that made sense. Nobody
wanted to bank that, and it turned out my boss said,
go do something more fun. So that's what I did.
(02:35):
That's how I picked wine and we hired somebody to
run it. I was just going to do business plans
more business plans, but after a year they decided that
they needed me to run it, and so I did that,
and you know, it turned out the plan was right
and lived happily ever after. What was the second part
the question.
Speaker 4 (02:57):
Just how the report came to be and how it
also how it's evolved over the years and the methodology
to that you used to create it.
Speaker 3 (03:04):
Yeah, so I believe in continuous improvement. You know, a
lot of times you just start and you know, take
take a step in the right direction. The way this
report evolved was when I did take over the division
running it needed to give board reports, but the industry
was woefully uh deficient in information. So I started by
(03:27):
using the technology at the time, which was a fax
machine and uh facted a bunch of you guys are
remember the modems make make all sorts of noise, and
I facts that to a bunch of our customers at
the time and got the survey results back and made
my border report, and then I just sent the information
(03:48):
back to the back to the participants and they were amazed.
They were they were really grateful, and I was shocked,
and so I said, maybe we have something here. So
from there we started to do more servey. Is now
we do two one on direct consumer, one on the
state of the industry, two reports. Sing to release another
two on top of that. It'll be financial based. So
(04:13):
it's you know, we're still doing, still kicking and still
continuous improving.
Speaker 2 (04:19):
Well takes a kick in and keeps on ticking as
they say, how long has the report been? When did
you start it?
Speaker 3 (04:25):
Two thousand and one, so this is my math, is right?
I think that would be twenty four years.
Speaker 2 (04:30):
Well, wow, that's a kind of an interesting year. A
lot happened in the world in two thousand and one.
It's a highly anticipated report and it's very detailed. We've
been following it for a number of years. Let's do
as in your pro at this the top line and
an interesting comparison of where we were in the twenty
(04:52):
twenty four and where we're on the twenty twenty five.
Because it has been a gloom and doom, but one
of the big overall messages that things will continue because
there's a big reset ahead. So let's talk about the
key takeaways.
Speaker 3 (05:05):
So the major takeaway is well, and I'm actually grateful
for the What actually has happened was go back to
the first thing was the difference between last year and
this year when you look at the analyst reports beyond
beyond just mine there. Last year, there was a lot
of analysts that said everything is fine. Uh, And that's
(05:27):
more or less pandering to the to the industry because
because nobody wants to hear bad news. To your point
about dooming glue, you know, normally that was proceeded with
just it's just doom and gloom, which means I had
a bad day and start, you know, started writing, and
that's that's just not the case. So I'm trying to
(05:47):
outlaw that term from from vocabulary this year that you know,
with the the rest of the community coming up with
coming out of speed, really, I've kind of switched off
to go. I always want to stay ahead, So I
switched off the next thing, which is, you know, how
long is this going to last?
Speaker 2 (06:06):
Well, how long is it going to last? I mean
what in your in your.
Speaker 3 (06:12):
Yeah, I guess that was a setup question, wasn't it.
So yeah, and so what we're dealing with is a
consumer reset, and we're not the only industry going through that.
Luxury industry is kind of going through the same thing.
You have an older population that was large and homogeneous.
It was Madison Avenue's, you know, the best possible outcome
(06:37):
to have this generation, and you know it's it's driven
a lot in the in the years since. But you know,
the minute the youngest boomer I think that's right, the
youngest boomers sixty one now, so you know, everybody's starting
to move off towards retirement. They're rotating out of this
older consumer base that liked wine better than everybody else.
(07:01):
And everybody following likes wine fine, but they like beer
and they like spirits and like RTDs, and they don't
have quite the same financial capacity as the older generations.
So that's that's the situation that everybodybody is finding themselves
in today. You just have to do the math when
you look at you look at it. That's the reason
(07:24):
why we're actually starting to sag a little bit. Then
you have to just do the math and you say, okay,
what's the expiration rate of the older consumer and who's following.
And so when I look at that, it's different parts
of it are going to heal at different rates. But
when I look at that, it's probably twenty thirty. That's
(07:47):
a good easy number to sit on.
Speaker 2 (07:49):
Well, the good news is older people are drinking well.
I just interviewed the executive director of a retirement living
center and they're boozing it up because they are living
up their lives before they die, so viable. That's good news.
The thirty to thirty fives, according to the report, continue
to be strong. It's the younger folks who have They're
like kids in the candy shop right now. Because since
(08:11):
I was that age and I'm a boomer, but when
I was under thirty, there were not as many options
to enjoy drinking. There was either you know, the vodka
drinks and the herd spirits, beer or wine. Now you
have alternative beverages. You have hard saucers, you have can cocktails,
(08:32):
you have THHC infus, You've got a lot of ways
to get your buzz if that's really what you want
to do. So the selections are more and then coupled
with that, the reports is there's also overproduction of grapes.
There's too much product. So is that all go to
reset or just everybody find their place in the big
puzzle of drinking.
Speaker 3 (08:50):
Well, this is the amazing thing about capital markets, is
the endpoint about excess supply that ends up being out
in the market at lower costs. If you have, you know,
two grape growers, and you know one is getting four
thousand a ton and the other can't sell it. That
one they can't sell it is going to probably sell
(09:12):
it less than four thousand, I mean, but you know,
whoever's buying it has to demand it. What we end
up with overall is a large stream of basically better
products that starts to get produced in the industry. It
really across the board, because the part of the industry
(09:32):
that starts to go away is the least expensive, the
least value appellations, if you will, And so that lowers
the cost. And when that lowers the cost and you
have better product on top of it, now you have
an opportunity to bring in the younger consumers.
Speaker 4 (09:51):
I'm wondering if that goes counterintuitive to the concept of
people are drinking less but drinking better, and that a
lot of wine producers are are starting to raise the
prices on their wine because they know they're not going
to capture that low end market because people are doing
exactly what I just said. They're buying better bottles of
wine but drinking less frequently.
Speaker 3 (10:12):
So in twenty twenty four, we're going to have as
an industry will have definitely a drop in volume total
volume sold, which is somewhere around three percent two and
a half three percent, and then on the dollar part
of it, it should be zero to minus a half
a percent something like that. That's my current forecast. And
so you know that the industry is just evolving and
(10:36):
we have the older consumers that we're drinking better and more.
We call that premiumization. Somebody once said, I actually joined
that word, but it's such a bastardization of the English language.
I don't think I did. That will leave that end
of the day. Yeah, the premiumization side of this is
(10:57):
kind of running to an end. Now we move toward
younger consumers. They're looking for values and uh and they
can find them elsewhere. Convenience is another thing they look for.
It was something that actually runs parallel with their own thinking.
You know, sustainability and locally sourced and plant based and
(11:19):
those kind of things. And I keep pointing out that,
you know, for God's sakes, we're plant based, and but
that's those are the kind of messages that we've that
we've got to change because you know, there's this miss
misapplication of abuse. For instance, many because we really don't
put calories on very often on wine, they think that
(11:42):
there's added sugars. They think that the you know, goork
intake is particularly high, and they don't realize there's you know,
most wines are these good wines are let down to
they're fermented down to zero percent alcohol or half a
percent something like that. So, you know, and that's the
message that we have to get across as we have
our own our own values that actually are aligned pretty
(12:07):
closely with theirs.
Speaker 2 (12:08):
Well, two things, while they're consuming that wine carefully because
they're worried about all that added sugar, they're gnauching on
potato chips and nutrition bars, which, according to a really
great new evaluation website, truefood dot tech, analyzes the lower
and higher least processed foods that these people are all
(12:28):
eating while they're saying, oh, wines not you know, I
can't have wine. So it's kind of a weird juxtaposition,
but a big takeaway.
Speaker 3 (12:37):
You go back to if you go back to the
older generation, you know, we had our own uh you know,
gallon jugs of earth beer, and you know, we had
to supersize in our generation. So every everybody's got to
go through their period of time of you know, adjusting
and finding their own path. And I think the younger
consumers largely, you know, they're trying to think about help.
(12:58):
Nobody's perfect, but you know, you know, in my generation
it was twinkies and Hostess ding dongs and you know,
a gallon jug. There's I think probably today people are
at least more aware. And I think if they were
they under stood wine actually you know, was a lower
calorie thing, I think they would be they would they
(13:18):
would appeal to them.
Speaker 2 (13:20):
Well, let's talk about the elephant in the sounding room
here that is driving a lot of issues, which is
the massive money backing wine is bad for your health,
because that is a factor, isn't it.
Speaker 3 (13:34):
Yeah, And it has been. To go back to the
late eighties eighty six to ninety three, we had a
similar consumer reset and it was pretty much for the
same reasons as the oldest generation the world, ones that
served in the World War two and got through the
Great Depression. They were rotating out as consumers, and then
(13:56):
the boomers are rotating in, so that changed. They were
more beer and spirits consumers and the bloomers are trying
to find their way. And on top of that, the
anti ALC movement was active and they were trying to
link alcohol with with you know, drugs. As a matter
(14:20):
of fact, there's some there's a drug Act. I can't
remember what the act was on top of my mind,
but there was a drug Act that one of the
outcomes was that we lowered the drinking age from in
California it was point one four. They lowered it to
point oh eight blood alcohol level for drunk driving. And
(14:42):
they also raised the drinking age from eighteen across the
United States to twenty one. It was already twenty one
in California, but that became, you know, across the board.
I don't have a large problem with the anti ALP
movement during that phase, you know, buthers against trunk driving
because they were actually looking to curb the unhealthy aspects
(15:05):
of alcohol, and I'm all for that. It's not. It's
not about just getting you know, smashed and you know
hitting a tree or something. It's with your car. You know.
To me, it's modern consumption. There's there's a healthy component
of this. And you know today we have the same thing.
(15:25):
After after we had the nineties where the French Paradox
came out, which talked about the benefits of wine consumption.
How the French the short, short part of it is
how the French could eat you know, a recipe that
was a heavy cup of whipping cream and a cube
of butter. That's the start of it. And they actually
(15:48):
smoked and they drank a lot, and yet they had
their co ordinary instance cornery heart disease was much lower
than the United States, and so that was attributed to
to wink in some it is verified in several other studies.
So you know, that's that's where it started to really change.
(16:10):
Now once once we got to that path, I think
the alcohol industry said, hey, let's settle science. You know,
we're all done. And but the anti HEALP movement that's
not going to go. It never has said we had prohibition,
and so now we're now we're moving to a point
where the Antioch movement is saying there is no healthy amount,
and that's just cherry picking information. It's not it's in
(16:32):
my estimation, it's not true. Give me example. One of
the things they say is that it produces. They're trying
to tie it to cancer, just like cigarettes. And so
one of the things they say, well, you know it's
in your cancer of the voice box is enhanced because
of drinking alcohol. Well, if you think about it, with smoking,
you end up getting you know, smoked through the voice box. Okay,
(16:55):
that that makes sense, but alcohol never touches your voice box.
And yet they say that that's one of the alcohol
and the reason is because of confounding variables. They're sticking
together people that smoke with people at drink and they're
not making that adjustment. So that's just one of the
many ways that they're cherry baking data to come to
a point of view that is already predetermined. It's not
(17:16):
science anymore. It's marketing instead of science.
Speaker 2 (17:18):
It's a hotbed topic for a variety of reasons, and
we support I am a cancer breast cancer survivor, so
I had to go through my own come to you know,
with wine, and I consume it in moderation and drink
better because I'm a big believer in drinking a healthy
amount for your body and in moderation and drinking better.
I think, you know, drinking to get drunk or a
(17:39):
buzz is not cool. Never drink, you know, and get
and drive. So I'm a big supporter. And some of
the people I personally most admire in the food and
beverage industry are those people who've lived very long and
healthy lives consuming moderate amounts of alcohol with food. But
you know, I think that COVID had a lot to
do with that as well, because a lot of people
over indulge when they were at home and then they
(18:00):
got out of their cocoons and realized they were probably
not the greatest health. Also they were overeating. But it
has been an impact and it does take Another big
takeaway is wineries need to reset their marketing approach and
also be very careful with their conversation and how they
approach these hotbed topics and also have a genuine conversation
(18:21):
with the people they want to reach. You really underscore
the importance of the digital aspect of this and or
called digital prowess to reach the younger audience. Effectively marketing
and conversation that the conversation with that group has to
engage them and want them to be a part of
the wine community. Somebody said recently, Dave mcnaar, don't call
(18:43):
it the industry called a community when you're really trying
to talk to people industry as numbers. And I got
a sense from the port that the industry has to
be more proactive and how they reach out effectively to
their target audiences. And one way is going to have
to be digitally because that's how they get their information.
Speaker 3 (19:00):
And now sure everything is digital now there's no print
media for all the tant purposes, and so that outreach
has to has to come and UH, the wine industry
as a whole is UH is woefully be under invested
in marketing. If you look at all of the alcohol
producing UH segments, you know, beer spirits, UH and other
(19:25):
they all they all spent outspend you know, ten to
one over what what what wine does? UH? And so
it's the outreach has to be there. And I think
one of the major issues is as we switch to
a younger consumer is to we have to have those
younger consumers picture themselves in those settings it's it's it's
(19:47):
the occasions. So uh, you know, as an example in
Mexican tradition, maybe it's Spanish, but it's Mexican, is is Kingtonia,
and uh, it's the coming of age of the young woman.
And I've been to a few and every single one
I've been to, it's been beer and in tequila. That's
(20:08):
that's what you have at the end. And and and
two of those were in Napa and there was no
there was no wine at all. And so that's an
example of an opportunity and the way you communicate and
you show people that you know that can that wine
can be a celebratory drink as well. Just one of
the many things that have to be done in terms
of occasions and UH and marketing and outreach to that
(20:30):
new consumer.
Speaker 2 (20:31):
Well marketing people have put their their job cut out
for them. There were a couple of things that surprised you.
Speaker 3 (20:37):
So if I go back a few years, you know,
during during COVID, we started to see uh, post COVID
once the once it was pretty much the only thing
to do that was fun that you could actually still
do without a mask. And you know, you still couldn't
do sports. You still in any case, you couldn't go
to the beach play golf. It was difficult, but you
(21:00):
could you could go to wineries. And so twenty twenty
one was a fantastic year. Not surprisingly, twenty twenty two
it wasn't as good because the world started to open
up and we had something that was termed revenge travel.
Everybody you know, left America and went somewhere else, largely
in many cases to Europe. And so, you know, revenge
(21:25):
travel was kind of coined as the term. And so
that happened one year, and then it happened the next year,
and I thought, okay, well, that's two in a row.
And then we got to this year and it was
three in a row, and I said, okay, well, and
I was going down the wrong path on that. It's
you know, maybe revenge travel had something to do with it,
but you know, once again, it ends up being shifted
(21:46):
to consumers. So it's it's younger consumers that are ending
up in the wine country and purchasing wine. The average
age is dropped in wine country when you look at
some of the metrics, and the older consumers post COVID
are generally going more often to see family domestically, while
the younger consumers are actually looking for new experiences. You know,
(22:08):
they they don't want to waste their life, they want
to have fun, they want to do their thing after COVID,
you know, they understand the frailty of it. So the
reaction has been to go do anything that's new, and
so that creates an issue if you're if you're just
alignation room, you've got to change up your pattern. You've
(22:31):
got to be able to attract those consumers more than once.
And that first visit is nice, but you know, you
don't get a customer until you actually get a second
visit and then they determined that they like it and
they come back. But in this case, we're going to
have to reinvent ourselves and start to have, you know,
a different opportunity to come to wine country. Maybe maybe
(22:51):
part of us collaborate with with your neighbor so that
you do create a new experience with a different a
different winery.
Speaker 4 (23:01):
Well, you know, one of the big trends that we've
been hearing within the wine industry is that they want
to create more of an experience for people that do come.
So that's probably a good way to go to go
about it as to try to attract that younger audience.
It seems to me though, that the younger people probably
aren't buying as much wine as the as the boomers
(23:21):
would or the older older visitors would. Is that something
that you came across.
Speaker 3 (23:25):
Yeah, that's the core. That's the core of the problem
is that the older consumers buy more and the younger
consumers buy less. You know, again, it's not that they
it's not that they don't like wine. It's that they
like other stuff as you know, as much as wine.
So that means that there's a decline. We have to
reset those that consumer base before we can turn and
(23:49):
go the other direction again.
Speaker 2 (23:51):
You know, it's interesting, Rob two points to that. We
live in New Orleans and when we dine out or
go out, we see everyone holding white claw or another
heart seltzer or cocktails. I mean, really, it's kind of
upsetting for us because we are such wine people and
this is really a cocktail hard class seltzer community. A
lot of it's because of the heat, a lot of
it's because it's accessible and everybody's moving around a lot,
(24:14):
and it's a cultural thing. We hope to change that,
but we have observed that quite a bit. Also, I
read in a lot of the reports because I'm reading
about everybody's trying a new new campaigns to talk to
these people and create community, blah blah blah. That financial
stress is a big one. A lot of these young
people are worried about their finances because they don't want
to run out of money, and it's expensive. I mean
(24:35):
housing is expensive now, and that must be you know,
if you're making choices between what am I going to
spend money on, you know you're going to go for
the less expensive canned cocktail or canned seltzer or whatever
than the forty or fifty dollars bottle of wine.
Speaker 3 (24:52):
Yeah, well, there's barriers to entry, there's no question for
younger consumers in particular that aren't as well off. Typically,
wine has feed more toward college educated people in careers
with a certain level of wealth, generally starting their families.
You know, in that twenty to twenty nine year age band,
when you're still going through college and just getting your
(25:15):
career started. You know, your discretionary income will go to
you know, in my case, I drank you know, twelve
dollars a case beer and that was for twenty four,
so fifty cents a bottle, you know, and you know
that's part of the experimentation that all consumers go through.
If you're going to be an alcohol consuming you got
(25:36):
to figure out what you like. And you know, those
those consumers, they're younger, have you know, found other things.
And you know, to your point about about the change
in drinking patterns, just look at a restaurant. Look at
what's happened to wineless. We used to get a book
of wineless, but post COVID, you know, the restaurants don't
(25:58):
want to carry that much wine. So now we get
aligned page a part of me, a beverage page that's
got you know that best, a third third wine, a
third craft cocktails, and a third other. And that's just
one more, one more example of the changes that we're seeing.
I never thought I would see cocktails replace wine at
(26:18):
an eating establishment. You know, wine has always gone with food,
that's my mindset. And it turns out that, you know,
new consumers are finding new occasions to drink different different categories.
Speaker 2 (26:31):
Spirits also have much bigger marketing budgets. Let's be real,
we go to tails of the cocktail, and the money
spent is incredible. It is also a big profit center
for the restaurant. So if a restaurant, which all restaurants
are pinched, they're going to go, where's the easiest way
to upsell A cocktail? Is an easy one. A cocktail
er beer versus a cocktails are now like twenty dollars
(26:51):
a cocktail now, which so you know, we still go
for the fourteen dollar glass of wine because wine by
the glass is still selling very well in many restaurants.
That is a bright spot. Robert, what other takeaways and
outcomes from this report kind of sparked you and to say, well, wow,
that's different or not.
Speaker 3 (27:16):
I think I'm pretty convinced. With my years, you know,
forty plus years in this business now and the amount
of research I put in over that period of time,
I'm pretty sure I'm on the right path of the change.
So it's rare that I'm actually surprised. I was surprised
by the visitation patterns, but you know, otherwise, there's nothing
(27:37):
that surprises me. And what I see it all makes
it all makes perfect sense. You know, what the consumer
patterns are, what their lifestyles are, they what their likes
and dislikes are, and all of that plays into the
current wine wine category, you know, including drinking spirits instead
(27:58):
of wine in a restaurant. So I don't think that's
going to go back, but we have to be more competitive.
And value is just isn't just dollars. Value is quality
over price, and so we have to make that equation
better the lower price or improve quality to the point
where one or the other, where that consumer looks at
(28:22):
that product and says, okay, now this finds that fills
my value at this price and fills my values at
this price, and so therefore this is my preferred beverage.
So that's what we're looking for.
Speaker 4 (28:37):
And thankfully, to that end, to some extent, wine has
never been better than it has been now. The quality
of wine being produced across the world is far better
than it ever was.
Speaker 2 (28:49):
I you know, I think that the wineries need to
stay the course, be more aggressive in their marketing. But always,
you know, as I say, go aim high, don't go low,
Aim high, and keep the narrative and the quality of
how you're presenting your wine the way you want it
to be perceived and connect because you want to lift
people up. You want to take that audience who is
going to be potentially if they're drinking the under twelve now,
(29:12):
they could be drinking the over thirty later. You know,
they just you got to develop that loyalty. But speaking
of brand loyalty, because we work with we have travel
a lot to Europe, so you know, we deal with
gener multi generational families who you know, are respected. People
love those wines and they've been around for you know, centuries.
A comment by a distributor here in New Orleans when
(29:36):
I did a market visit with an Italian producer last week,
he just shrugged his shoulders, rolled his eyes and said, well,
you know, those California lines are all being bought up
by benure capitalists and banks and have no identity. Now,
what are your thoughts with that opinion?
Speaker 3 (29:49):
Well, it's it's still a family business, even Gallows family,
and so the buyers really are institutional. There's there's very
few cases of of the venture capitalists that buy wineries,
you know, less than a half dozen. And uh, there's
there are some that are some corporations you know that
(30:11):
are larger, you know Gallo, the Agio Treasury, you know,
the larger companies they are buying into the premium market
by getting you know, larger established brands, and that's that's
been an ongoing thing. But but it's you know, it's
the vast majority of wineries are family owned and it's
(30:32):
craft produced, it's it's everything is by hand. That's what
you're seeing a premium side, and that's I think one
of the differentiating components of inexpensive wine and you know,
more expensive wine or wine and all the other categories.
Speaker 2 (30:51):
I think that's an interesting observation but also an opportunity
to clear a misconception that may be germinating in in
different areas of the industry and trade. Because I was
taken it back by the comment, but I also kind
of had heard it from other people as well. And
we haven't been out to California in a while, but
everybody says, oh, you go out there, it's so expensive,
(31:11):
Why go there when you go to Europe. You know,
California is trying to do something about that. They have
I think a website called California Wine Tourism or something
because we were pitched on it. But those preconceptions have
to be addressed to change interests in patterns.
Speaker 3 (31:28):
Yeah, and you know, the tourism component has to work
with in the marketing side of it too. In the
Napa Valley during just after COVID, when you know it
was we were overrun really with tourist because it was
the only thing to do. Hotel prices, even modest hotels
were up to a thousand a night, which is absurd,
and so you know, those those prices have to and
(31:50):
they have they have to come down, but you know
they will come down to meet the consumer because they
don't want empty, empty rooms. And so that's just what
we're going through right now, which is part of the
normal movement and capital change. But you know, I hope
people give, you know, a second look at places like
the North Coast of California, central Coast Oregon in those
(32:12):
places because they make awesome wine and you know, the
experiences are there for the having with very small family
farms and custom crafted wine that you're not going to
find elsewhere. But you know, it's a little bit more
of an effort to go find it, but that's part
of the fun of wine.
Speaker 2 (32:32):
What's the same with New York State David Sanyo Too
Winery for many years award winning winery in the Hudson Valley,
they're no longer in it, but they were and you know,
this is the same with New York State wines. You've
got to travel far to get to the best wines,
but the journey is so worth it.
Speaker 3 (32:47):
Yeah, part of the fun.
Speaker 2 (32:49):
Yeah, same with Virginia wines. And we love We've traveled
a lot domestically when actually during COVID we were nomad's
and we enabled us to go into wine countries because
it was in the middle of nowhere and you meet
people and it was it was great. And we encourage
everybody listening to explore and go beyond the boundaries. And besides,
right now in Europe they're dealing with over tourism that
(33:11):
a lot of them don't want to stare right now anyway,
because we're taking over. So maybe it's time to take
the domestic route.
Speaker 3 (33:18):
And you know, the over tourism is coming and uh way,
people that are looking for those new experiences. And it's
just it's not just the US, It's it's a worldwide phenomenon.
You know, it's all all adjusted from this change in
consumer patterns that came after World War Two. It was
this large influx of baitings and uh and it just
(33:40):
didn't happen just in the United States, and so as
we go through this consumer change, uh, and it's not
we're struggling to just wine.
Speaker 2 (33:48):
Yeah, it's not confined. I mean, you know, Europe is
facing the same thing. Younger people aren't drinking and they're
all talking about it, and everybody's going through the same thing.
So it is a it's an adjustment, as I say,
and it like all adjustments, they all work their way
out of them at some point.
Speaker 3 (34:05):
If you're patient. And I think this one that we're
going through will sort itself out. For the fineline industry,
I think it'll be quicker. It's you know, maybe as
early as twenty six, twenty seven. For the cheaper wine,
I think they're going to go through a longer reset
and maybe go past twenty thirties. We have to probably
(34:26):
get rid of some of the lower quality grapes that
we're using worldwide, and that's where we're seeing that happen
right now.
Speaker 2 (34:33):
It's true, they're they're destroying you know, do use do
you do something? Repurpose them going to the skincare business,
That's all I have to say. They're all repurposable. So
we're moving toward the last parts of this more about you, Rob.
You know, so you're immersed in wine, but what do
you drink when you're not chilling with all this?
Speaker 3 (34:56):
Well, I you know, during COVID, I have to say
I drink about a bottle and that and uh, yeah
we did too probably after Yeah that was just me
and uh, that's too much. But that's that's what I
was coping with. And when I make mistakes, that was
too much. And and then since then, you know, I'm
(35:17):
down to a couple classes a night, and I just
rotate through and and I have plenty of wine given
to me from domestic sources h in an at Valley, Sonoma,
or in Washington, Central Coast, California, and so you know
those are in my cellar, of course. But but you know,
(35:38):
I like European wines too. Wine is you know, it's
just such a remarkable product. If you get a cabernet
from from you know, around Perth and Australia, it's not
the same as a cabernet from that, But it's not
the same as a cabinet from from Bordeaux. It's not
the same as a cabernet in Chile. They all make
their expressions of it and uh, you know, in my mind,
(36:00):
if you want to travel to those areas, you know,
try their wine, and you know that'll start to lead
your dream.
Speaker 2 (36:09):
Well, I think that's how what leads many people to
becoming dedicated consumers. They went abroad, they had the wine,
they want to find it in their local shop and
they ask for it. So we're big proponents of wine
is a tourism and a great way to sell more wine.
It's very interesting. We also would you like to play
the drums? So are you like in a band?
Speaker 3 (36:30):
Well, yeah, I have been. I started playing when I
was five, and then I was trained. I was trained
to professional levels. I went an international title in Professor
of Arts in nineteen seventy six in Philadelphia, and that
allowed me to actually teach kids in school to put myself.
(36:53):
I put myself through college by teaching kids at USC
Colclate Northridge, at UCLA NOS. I taught them drumming. But
I had to leave the music industry just because I
figured out at that age it was a real crapshoot
to try to try to make money at it, and
(37:13):
so that's why I'm a banker today. Yeah.
Speaker 2 (37:16):
We always say should have gone into banking in area.
And so who's your favorite drummer?
Speaker 3 (37:20):
Uh Neil Perth is one of my one of my favorites,
I guess you know, great set drummer, studio drummer. And
Billy Cobbraam is another one.
Speaker 2 (37:33):
Oh yeah, David's the Deadhead. He's been to sixty five concerts.
Speaker 3 (37:38):
You know, I can't remember a single Grateful Dead concert
I went to.
Speaker 2 (37:44):
He's encyclopedic. Well, you'll have to come.
Speaker 4 (37:46):
I like milkur as the drummer as well.
Speaker 2 (37:48):
Well, you know, New Orleans is very tied to his music,
and it really warms our heart when we see the
kids on the marching bands right now because Marty Grass
is happening and we hear the bands playing in the
park's where they all practice, and we just think music
education is really important. So you'll have to come over
to our neck of the woods, New Orleans and come
to one of the music festivals. You would really enjoy
it since you really are into music and a percussionist.
(38:11):
It's an evely place, Yeah, it really is, and it's
a great way. Music is a great way. You know,
banking is great, but it's nice to be well rounded
and have that creative outlet as well.
Speaker 3 (38:21):
Yeah, I'm ill suited as a banker, as I say
often because I am a creative person. I'm not structured,
and most people in the banking industry they get you know,
if you're not structured, you just don't make it past
the beginning stages, which is, you know, been the secret
of my success. I'm I'm a very persistent person. I'm
just maybe stubborn, but I think rational and I just
(38:47):
don't give up. And so I got myself through those
early parts of banking. And once I got through that,
and you start to have decision making in a bank,
and people are, you know, toward world and be done.
You know, people will say, well, how'd you come up
with that idea? And you know, my mind works in
the spaghetti bull and comes out with something and I
(39:09):
can't tell you how I came up with it, but
it just happens, like you breathe.
Speaker 2 (39:14):
Oh the spaghetti bull.
Speaker 3 (39:15):
I like that.
Speaker 2 (39:16):
Sometimes I'm a big believer in fake it till you
make it. Personally, sometimes you just got to make it
happen and just take that leap right. Well, we want
to thank you for your time. We know Rob you've
been on the road. You've been very busy. We want
to take really thank you for taking the time to
talk with us about This has been an interesting year
(39:38):
and we hope that twenty twenty five goes smoothly for everybody.
And I think at the end of the day, we
all got to just hang in there, be patient, be persistent,
be productive, and think creatively about how we're going to
get through this and be on to keep the industry
very healthy.
Speaker 3 (39:58):
Right well, at the end of the day, if we
all just have a glass of wine, then we'll be
I'll be fine. And that's individually.
Speaker 2 (40:06):
That's a great or two. A glass of wine or
two at the end of the day. This is how
we end our day. We take a long walk and
then we come back and have a nice glass of wine.
Speaker 3 (40:15):
That's moderate living. That's that's what your mother taught you.
Don't do anything in excess to moderation. And I think
that that's that's probably the secret that most people need
to live by, that's for sure.
Speaker 4 (40:27):
And my mother's ninety about to turn ninety three and
still has a glass.
Speaker 3 (40:30):
Of wine every day.
Speaker 2 (40:31):
Yeah, she's so just remember you can have a very
healthy long life and enjoy your wine.
Speaker 3 (40:42):
That's right, and that's that's what my mom says.
Speaker 2 (40:45):
Yeah, that's what I say too. So we want to
thank you again for anyone listening who wants to access
the State of the Wine Industry report. We'll put a
link on our site, but it's also www dot s
VP dot com, slash Trends slash Insights from Silicon Valley
(41:06):
Bank Robecmillan, thank you so much for joining us on
the Connected Table.
Speaker 3 (41:11):
Yeah, I enjoying myself. Nice to see you guys, and
look forward to our next talk.
Speaker 2 (41:15):
We raise a glass and for everyone listening, I hope
all of our friends around the world are inspired to
learn more about this report, and as always, we like
to remind you to stay insatiably curious. Thank you,
The topics and opinions express in the following show are
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(00:20):
W FOURCY Radio.
Speaker 2 (00:39):
Welcome to the Connected Table Live. We're your hosts, Melanie
Young and David Ransom. You're insatiably curious culinary couple. We
enjoy bringing you the dynamic thought leaders around the world
in wine, food, spirits, and hospitality through engaging conversation. We
like to make those people come alive to you, and
we hope that you follow and find us and all
(01:01):
of our sixty five plus podcast channels and at the
Connected Table because we think we have some really great
content for you, and today is going to be a doozy.
We're with Rob McMillan, the EVP and founder of the
Silicone Bank Wine Division, which issues every year the State
of the Wine Report, which the twenty twenty five win
(01:24):
which is what we're in, came out in January, and
there's a lot to talk about because the wine industry
has really been in a state of what everybody's been
calling doom and gloom. We remain very positive though, I
hope so because it helps pay our bills and we
want to see everyone succeeds. We're going to have a
conversation about this. Rob has been traveling around talking to
(01:45):
many groups and we're really happy to have him take
some time to join us on the Connected table. So
Rob McMillan, welcome, Thanks, nice to be here. We have
a lot of overseas listeners as well. Just so you knew, Rob,
So just briefly, you have a long career over almost
forty years in banking, and you were the founder of
(02:05):
this wine division. Give us a little sense of brief
history on how this report came to be and how
it is pulled together every year.
Speaker 3 (02:14):
Well, the brief history is that I was asked to
create business plans for what we called underbanked niches or
business verticals back in the early nineties, and my first
one was mortuaries, and I thought that made sense. Nobody
wanted to bank that, and it turned out my boss said,
go do something more fun. So that's what I did.
(02:35):
That's how I picked wine and we hired somebody to
run it. I was just going to do business plans
more business plans, but after a year they decided that
they needed me to run it, and so I did that,
and you know, it turned out the plan was right
and lived happily ever after. What was the second part
the question.
Speaker 4 (02:57):
Just how the report came to be and how it
also how it's evolved over the years and the methodology
to that you used to create it.
Speaker 3 (03:04):
Yeah, so I believe in continuous improvement. You know, a
lot of times you just start and you know, take
take a step in the right direction. The way this
report evolved was when I did take over the division
running it needed to give board reports, but the industry
was woefully uh deficient in information. So I started by
(03:27):
using the technology at the time, which was a fax
machine and uh facted a bunch of you guys are
remember the modems make make all sorts of noise, and
I facts that to a bunch of our customers at
the time and got the survey results back and made
my border report, and then I just sent the information
(03:48):
back to the back to the participants and they were amazed.
They were they were really grateful, and I was shocked,
and so I said, maybe we have something here. So
from there we started to do more servey. Is now
we do two one on direct consumer, one on the
state of the industry, two reports. Sing to release another
two on top of that. It'll be financial based. So
(04:13):
it's you know, we're still doing, still kicking and still
continuous improving.
Speaker 2 (04:19):
Well takes a kick in and keeps on ticking as
they say, how long has the report been? When did
you start it?
Speaker 3 (04:25):
Two thousand and one, so this is my math, is right?
I think that would be twenty four years.
Speaker 2 (04:30):
Well, wow, that's a kind of an interesting year. A
lot happened in the world in two thousand and one.
It's a highly anticipated report and it's very detailed. We've
been following it for a number of years. Let's do
as in your pro at this the top line and
an interesting comparison of where we were in the twenty
(04:52):
twenty four and where we're on the twenty twenty five.
Because it has been a gloom and doom, but one
of the big overall messages that things will continue because
there's a big reset ahead. So let's talk about the
key takeaways.
Speaker 3 (05:05):
So the major takeaway is well, and I'm actually grateful
for the What actually has happened was go back to
the first thing was the difference between last year and
this year when you look at the analyst reports beyond
beyond just mine there. Last year, there was a lot
of analysts that said everything is fine. Uh, And that's
(05:27):
more or less pandering to the to the industry because
because nobody wants to hear bad news. To your point
about dooming glue, you know, normally that was proceeded with
just it's just doom and gloom, which means I had
a bad day and start, you know, started writing, and
that's that's just not the case. So I'm trying to
(05:47):
outlaw that term from from vocabulary this year that you know,
with the the rest of the community coming up with
coming out of speed, really, I've kind of switched off
to go. I always want to stay ahead, So I
switched off the next thing, which is, you know, how
long is this going to last?
Speaker 2 (06:06):
Well, how long is it going to last? I mean
what in your in your.
Speaker 3 (06:12):
Yeah, I guess that was a setup question, wasn't it.
So yeah, and so what we're dealing with is a
consumer reset, and we're not the only industry going through that.
Luxury industry is kind of going through the same thing.
You have an older population that was large and homogeneous.
It was Madison Avenue's, you know, the best possible outcome
(06:37):
to have this generation, and you know it's it's driven
a lot in the in the years since. But you know,
the minute the youngest boomer I think that's right, the
youngest boomers sixty one now, so you know, everybody's starting
to move off towards retirement. They're rotating out of this
older consumer base that liked wine better than everybody else.
(07:01):
And everybody following likes wine fine, but they like beer
and they like spirits and like RTDs, and they don't
have quite the same financial capacity as the older generations.
So that's that's the situation that everybodybody is finding themselves
in today. You just have to do the math when
you look at you look at it. That's the reason
(07:24):
why we're actually starting to sag a little bit. Then
you have to just do the math and you say, okay,
what's the expiration rate of the older consumer and who's following.
And so when I look at that, it's different parts
of it are going to heal at different rates. But
when I look at that, it's probably twenty thirty. That's
(07:47):
a good easy number to sit on.
Speaker 2 (07:49):
Well, the good news is older people are drinking well.
I just interviewed the executive director of a retirement living
center and they're boozing it up because they are living
up their lives before they die, so viable. That's good news.
The thirty to thirty fives, according to the report, continue
to be strong. It's the younger folks who have They're
like kids in the candy shop right now. Because since
(08:11):
I was that age and I'm a boomer, but when
I was under thirty, there were not as many options
to enjoy drinking. There was either you know, the vodka
drinks and the herd spirits, beer or wine. Now you
have alternative beverages. You have hard saucers, you have can cocktails,
(08:32):
you have THHC infus, You've got a lot of ways
to get your buzz if that's really what you want
to do. So the selections are more and then coupled
with that, the reports is there's also overproduction of grapes.
There's too much product. So is that all go to
reset or just everybody find their place in the big
puzzle of drinking.
Speaker 3 (08:50):
Well, this is the amazing thing about capital markets, is
the endpoint about excess supply that ends up being out
in the market at lower costs. If you have, you know,
two grape growers, and you know one is getting four
thousand a ton and the other can't sell it. That
one they can't sell it is going to probably sell
(09:12):
it less than four thousand, I mean, but you know,
whoever's buying it has to demand it. What we end
up with overall is a large stream of basically better
products that starts to get produced in the industry. It
really across the board, because the part of the industry
(09:32):
that starts to go away is the least expensive, the
least value appellations, if you will, And so that lowers
the cost. And when that lowers the cost and you
have better product on top of it, now you have
an opportunity to bring in the younger consumers.
Speaker 4 (09:51):
I'm wondering if that goes counterintuitive to the concept of
people are drinking less but drinking better, and that a
lot of wine producers are are starting to raise the
prices on their wine because they know they're not going
to capture that low end market because people are doing
exactly what I just said. They're buying better bottles of
wine but drinking less frequently.
Speaker 3 (10:12):
So in twenty twenty four, we're going to have as
an industry will have definitely a drop in volume total
volume sold, which is somewhere around three percent two and
a half three percent, and then on the dollar part
of it, it should be zero to minus a half
a percent something like that. That's my current forecast. And
so you know that the industry is just evolving and
(10:36):
we have the older consumers that we're drinking better and more.
We call that premiumization. Somebody once said, I actually joined
that word, but it's such a bastardization of the English language.
I don't think I did. That will leave that end
of the day. Yeah, the premiumization side of this is
(10:57):
kind of running to an end. Now we move toward
younger consumers. They're looking for values and uh and they
can find them elsewhere. Convenience is another thing they look for.
It was something that actually runs parallel with their own thinking.
You know, sustainability and locally sourced and plant based and
(11:19):
those kind of things. And I keep pointing out that,
you know, for God's sakes, we're plant based, and but
that's those are the kind of messages that we've that
we've got to change because you know, there's this miss
misapplication of abuse. For instance, many because we really don't
put calories on very often on wine, they think that
(11:42):
there's added sugars. They think that the you know, goork
intake is particularly high, and they don't realize there's you know,
most wines are these good wines are let down to
they're fermented down to zero percent alcohol or half a
percent something like that. So, you know, and that's the
message that we have to get across as we have
our own our own values that actually are aligned pretty
(12:07):
closely with theirs.
Speaker 2 (12:08):
Well, two things, while they're consuming that wine carefully because
they're worried about all that added sugar, they're gnauching on
potato chips and nutrition bars, which, according to a really
great new evaluation website, truefood dot tech, analyzes the lower
and higher least processed foods that these people are all
(12:28):
eating while they're saying, oh, wines not you know, I
can't have wine. So it's kind of a weird juxtaposition,
but a big takeaway.
Speaker 3 (12:37):
You go back to if you go back to the
older generation, you know, we had our own uh you know,
gallon jugs of earth beer, and you know, we had
to supersize in our generation. So every everybody's got to
go through their period of time of you know, adjusting
and finding their own path. And I think the younger
consumers largely, you know, they're trying to think about help.
(12:58):
Nobody's perfect, but you know, you know, in my generation
it was twinkies and Hostess ding dongs and you know,
a gallon jug. There's I think probably today people are
at least more aware. And I think if they were
they under stood wine actually you know, was a lower
calorie thing, I think they would be they would they
(13:18):
would appeal to them.
Speaker 2 (13:20):
Well, let's talk about the elephant in the sounding room
here that is driving a lot of issues, which is
the massive money backing wine is bad for your health,
because that is a factor, isn't it.
Speaker 3 (13:34):
Yeah, And it has been. To go back to the
late eighties eighty six to ninety three, we had a
similar consumer reset and it was pretty much for the
same reasons as the oldest generation the world, ones that
served in the World War two and got through the
Great Depression. They were rotating out as consumers, and then
(13:56):
the boomers are rotating in, so that changed. They were
more beer and spirits consumers and the bloomers are trying
to find their way. And on top of that, the
anti ALC movement was active and they were trying to
link alcohol with with you know, drugs. As a matter
(14:20):
of fact, there's some there's a drug Act. I can't
remember what the act was on top of my mind,
but there was a drug Act that one of the
outcomes was that we lowered the drinking age from in
California it was point one four. They lowered it to
point oh eight blood alcohol level for drunk driving. And
(14:42):
they also raised the drinking age from eighteen across the
United States to twenty one. It was already twenty one
in California, but that became, you know, across the board.
I don't have a large problem with the anti ALP
movement during that phase, you know, buthers against trunk driving
because they were actually looking to curb the unhealthy aspects
(15:05):
of alcohol, and I'm all for that. It's not. It's
not about just getting you know, smashed and you know
hitting a tree or something. It's with your car. You know.
To me, it's modern consumption. There's there's a healthy component
of this. And you know today we have the same thing.
(15:25):
After after we had the nineties where the French Paradox
came out, which talked about the benefits of wine consumption.
How the French the short, short part of it is
how the French could eat you know, a recipe that
was a heavy cup of whipping cream and a cube
of butter. That's the start of it. And they actually
(15:48):
smoked and they drank a lot, and yet they had
their co ordinary instance cornery heart disease was much lower
than the United States, and so that was attributed to
to wink in some it is verified in several other studies.
So you know, that's that's where it started to really change.
(16:10):
Now once once we got to that path, I think
the alcohol industry said, hey, let's settle science. You know,
we're all done. And but the anti HEALP movement that's
not going to go. It never has said we had prohibition,
and so now we're now we're moving to a point
where the Antioch movement is saying there is no healthy amount,
and that's just cherry picking information. It's not it's in
(16:32):
my estimation, it's not true. Give me example. One of
the things they say is that it produces. They're trying
to tie it to cancer, just like cigarettes. And so
one of the things they say, well, you know it's
in your cancer of the voice box is enhanced because
of drinking alcohol. Well, if you think about it, with smoking,
you end up getting you know, smoked through the voice box. Okay,
(16:55):
that that makes sense, but alcohol never touches your voice box.
And yet they say that that's one of the alcohol
and the reason is because of confounding variables. They're sticking
together people that smoke with people at drink and they're
not making that adjustment. So that's just one of the
many ways that they're cherry baking data to come to
a point of view that is already predetermined. It's not
(17:16):
science anymore. It's marketing instead of science.
Speaker 2 (17:18):
It's a hotbed topic for a variety of reasons, and
we support I am a cancer breast cancer survivor, so
I had to go through my own come to you know,
with wine, and I consume it in moderation and drink
better because I'm a big believer in drinking a healthy
amount for your body and in moderation and drinking better.
I think, you know, drinking to get drunk or a
(17:39):
buzz is not cool. Never drink, you know, and get
and drive. So I'm a big supporter. And some of
the people I personally most admire in the food and
beverage industry are those people who've lived very long and
healthy lives consuming moderate amounts of alcohol with food. But
you know, I think that COVID had a lot to
do with that as well, because a lot of people
over indulge when they were at home and then they
(18:00):
got out of their cocoons and realized they were probably
not the greatest health. Also they were overeating. But it
has been an impact and it does take Another big
takeaway is wineries need to reset their marketing approach and
also be very careful with their conversation and how they
approach these hotbed topics and also have a genuine conversation
(18:21):
with the people they want to reach. You really underscore
the importance of the digital aspect of this and or
called digital prowess to reach the younger audience. Effectively marketing
and conversation that the conversation with that group has to
engage them and want them to be a part of
the wine community. Somebody said recently, Dave mcnaar, don't call
(18:43):
it the industry called a community when you're really trying
to talk to people industry as numbers. And I got
a sense from the port that the industry has to
be more proactive and how they reach out effectively to
their target audiences. And one way is going to have
to be digitally because that's how they get their information.
Speaker 3 (19:00):
And now sure everything is digital now there's no print
media for all the tant purposes, and so that outreach
has to has to come and UH, the wine industry
as a whole is UH is woefully be under invested
in marketing. If you look at all of the alcohol
producing UH segments, you know, beer spirits, UH and other
(19:25):
they all they all spent outspend you know, ten to
one over what what what wine does? UH? And so
it's the outreach has to be there. And I think
one of the major issues is as we switch to
a younger consumer is to we have to have those
younger consumers picture themselves in those settings it's it's it's
(19:47):
the occasions. So uh, you know, as an example in
Mexican tradition, maybe it's Spanish, but it's Mexican, is is Kingtonia,
and uh, it's the coming of age of the young woman.
And I've been to a few and every single one
I've been to, it's been beer and in tequila. That's
(20:08):
that's what you have at the end. And and and
two of those were in Napa and there was no
there was no wine at all. And so that's an
example of an opportunity and the way you communicate and
you show people that you know that can that wine
can be a celebratory drink as well. Just one of
the many things that have to be done in terms
of occasions and UH and marketing and outreach to that
(20:30):
new consumer.
Speaker 2 (20:31):
Well marketing people have put their their job cut out
for them. There were a couple of things that surprised you.
Speaker 3 (20:37):
So if I go back a few years, you know,
during during COVID, we started to see uh, post COVID
once the once it was pretty much the only thing
to do that was fun that you could actually still
do without a mask. And you know, you still couldn't
do sports. You still in any case, you couldn't go
to the beach play golf. It was difficult, but you
(21:00):
could you could go to wineries. And so twenty twenty
one was a fantastic year. Not surprisingly, twenty twenty two
it wasn't as good because the world started to open
up and we had something that was termed revenge travel.
Everybody you know, left America and went somewhere else, largely
in many cases to Europe. And so, you know, revenge
(21:25):
travel was kind of coined as the term. And so
that happened one year, and then it happened the next year,
and I thought, okay, well, that's two in a row.
And then we got to this year and it was
three in a row, and I said, okay, well, and
I was going down the wrong path on that. It's
you know, maybe revenge travel had something to do with it,
but you know, once again, it ends up being shifted
(21:46):
to consumers. So it's it's younger consumers that are ending
up in the wine country and purchasing wine. The average
age is dropped in wine country when you look at
some of the metrics, and the older consumers post COVID
are generally going more often to see family domestically, while
the younger consumers are actually looking for new experiences. You know,
(22:08):
they they don't want to waste their life, they want
to have fun, they want to do their thing after COVID,
you know, they understand the frailty of it. So the
reaction has been to go do anything that's new, and
so that creates an issue if you're if you're just
alignation room, you've got to change up your pattern. You've
(22:31):
got to be able to attract those consumers more than once.
And that first visit is nice, but you know, you
don't get a customer until you actually get a second
visit and then they determined that they like it and
they come back. But in this case, we're going to
have to reinvent ourselves and start to have, you know,
a different opportunity to come to wine country. Maybe maybe
(22:51):
part of us collaborate with with your neighbor so that
you do create a new experience with a different a
different winery.
Speaker 4 (23:01):
Well, you know, one of the big trends that we've
been hearing within the wine industry is that they want
to create more of an experience for people that do come.
So that's probably a good way to go to go
about it as to try to attract that younger audience.
It seems to me though, that the younger people probably
aren't buying as much wine as the as the boomers
(23:21):
would or the older older visitors would. Is that something
that you came across.
Speaker 3 (23:25):
Yeah, that's the core. That's the core of the problem
is that the older consumers buy more and the younger
consumers buy less. You know, again, it's not that they
it's not that they don't like wine. It's that they
like other stuff as you know, as much as wine.
So that means that there's a decline. We have to
reset those that consumer base before we can turn and
(23:49):
go the other direction again.
Speaker 2 (23:51):
You know, it's interesting, Rob two points to that. We
live in New Orleans and when we dine out or
go out, we see everyone holding white claw or another
heart seltzer or cocktails. I mean, really, it's kind of
upsetting for us because we are such wine people and
this is really a cocktail hard class seltzer community. A
lot of it's because of the heat, a lot of
it's because it's accessible and everybody's moving around a lot,
(24:14):
and it's a cultural thing. We hope to change that,
but we have observed that quite a bit. Also, I
read in a lot of the reports because I'm reading
about everybody's trying a new new campaigns to talk to
these people and create community, blah blah blah. That financial
stress is a big one. A lot of these young
people are worried about their finances because they don't want
to run out of money, and it's expensive. I mean
(24:35):
housing is expensive now, and that must be you know,
if you're making choices between what am I going to
spend money on, you know you're going to go for
the less expensive canned cocktail or canned seltzer or whatever
than the forty or fifty dollars bottle of wine.
Speaker 3 (24:52):
Yeah, well, there's barriers to entry, there's no question for
younger consumers in particular that aren't as well off. Typically,
wine has feed more toward college educated people in careers
with a certain level of wealth, generally starting their families.
You know, in that twenty to twenty nine year age band,
when you're still going through college and just getting your
(25:15):
career started. You know, your discretionary income will go to
you know, in my case, I drank you know, twelve
dollars a case beer and that was for twenty four,
so fifty cents a bottle, you know, and you know
that's part of the experimentation that all consumers go through.
If you're going to be an alcohol consuming you got
(25:36):
to figure out what you like. And you know, those
those consumers, they're younger, have you know, found other things.
And you know, to your point about about the change
in drinking patterns, just look at a restaurant. Look at
what's happened to wineless. We used to get a book
of wineless, but post COVID, you know, the restaurants don't
(25:58):
want to carry that much wine. So now we get
aligned page a part of me, a beverage page that's
got you know that best, a third third wine, a
third craft cocktails, and a third other. And that's just
one more, one more example of the changes that we're seeing.
I never thought I would see cocktails replace wine at
(26:18):
an eating establishment. You know, wine has always gone with food,
that's my mindset. And it turns out that, you know,
new consumers are finding new occasions to drink different different categories.
Speaker 2 (26:31):
Spirits also have much bigger marketing budgets. Let's be real,
we go to tails of the cocktail, and the money
spent is incredible. It is also a big profit center
for the restaurant. So if a restaurant, which all restaurants
are pinched, they're going to go, where's the easiest way
to upsell A cocktail? Is an easy one. A cocktail
er beer versus a cocktails are now like twenty dollars
(26:51):
a cocktail now, which so you know, we still go
for the fourteen dollar glass of wine because wine by
the glass is still selling very well in many restaurants.
That is a bright spot. Robert, what other takeaways and
outcomes from this report kind of sparked you and to say, well, wow,
that's different or not.
Speaker 3 (27:16):
I think I'm pretty convinced. With my years, you know,
forty plus years in this business now and the amount
of research I put in over that period of time,
I'm pretty sure I'm on the right path of the change.
So it's rare that I'm actually surprised. I was surprised
by the visitation patterns, but you know, otherwise, there's nothing
(27:37):
that surprises me. And what I see it all makes
it all makes perfect sense. You know, what the consumer
patterns are, what their lifestyles are, they what their likes
and dislikes are, and all of that plays into the
current wine wine category, you know, including drinking spirits instead
(27:58):
of wine in a restaurant. So I don't think that's
going to go back, but we have to be more competitive.
And value is just isn't just dollars. Value is quality
over price, and so we have to make that equation
better the lower price or improve quality to the point
where one or the other, where that consumer looks at
(28:22):
that product and says, okay, now this finds that fills
my value at this price and fills my values at
this price, and so therefore this is my preferred beverage.
So that's what we're looking for.
Speaker 4 (28:37):
And thankfully, to that end, to some extent, wine has
never been better than it has been now. The quality
of wine being produced across the world is far better
than it ever was.
Speaker 2 (28:49):
I you know, I think that the wineries need to
stay the course, be more aggressive in their marketing. But always,
you know, as I say, go aim high, don't go low,
Aim high, and keep the narrative and the quality of
how you're presenting your wine the way you want it
to be perceived and connect because you want to lift
people up. You want to take that audience who is
going to be potentially if they're drinking the under twelve now,
(29:12):
they could be drinking the over thirty later. You know,
they just you got to develop that loyalty. But speaking
of brand loyalty, because we work with we have travel
a lot to Europe, so you know, we deal with
gener multi generational families who you know, are respected. People
love those wines and they've been around for you know, centuries.
A comment by a distributor here in New Orleans when
(29:36):
I did a market visit with an Italian producer last week,
he just shrugged his shoulders, rolled his eyes and said, well,
you know, those California lines are all being bought up
by benure capitalists and banks and have no identity. Now,
what are your thoughts with that opinion?
Speaker 3 (29:49):
Well, it's it's still a family business, even Gallows family,
and so the buyers really are institutional. There's there's very
few cases of of the venture capitalists that buy wineries,
you know, less than a half dozen. And uh, there's
there are some that are some corporations you know that
(30:11):
are larger, you know Gallo, the Agio Treasury, you know,
the larger companies they are buying into the premium market
by getting you know, larger established brands, and that's that's
been an ongoing thing. But but it's you know, it's
the vast majority of wineries are family owned and it's
(30:32):
craft produced, it's it's everything is by hand. That's what
you're seeing a premium side, and that's I think one
of the differentiating components of inexpensive wine and you know,
more expensive wine or wine and all the other categories.
Speaker 2 (30:51):
I think that's an interesting observation but also an opportunity
to clear a misconception that may be germinating in in
different areas of the industry and trade. Because I was
taken it back by the comment, but I also kind
of had heard it from other people as well. And
we haven't been out to California in a while, but
everybody says, oh, you go out there, it's so expensive,
(31:11):
Why go there when you go to Europe. You know,
California is trying to do something about that. They have
I think a website called California Wine Tourism or something
because we were pitched on it. But those preconceptions have
to be addressed to change interests in patterns.
Speaker 3 (31:28):
Yeah, and you know, the tourism component has to work
with in the marketing side of it too. In the
Napa Valley during just after COVID, when you know it
was we were overrun really with tourist because it was
the only thing to do. Hotel prices, even modest hotels
were up to a thousand a night, which is absurd,
and so you know, those those prices have to and
(31:50):
they have they have to come down, but you know
they will come down to meet the consumer because they
don't want empty, empty rooms. And so that's just what
we're going through right now, which is part of the
normal movement and capital change. But you know, I hope
people give, you know, a second look at places like
the North Coast of California, central Coast Oregon in those
(32:12):
places because they make awesome wine and you know, the
experiences are there for the having with very small family
farms and custom crafted wine that you're not going to
find elsewhere. But you know, it's a little bit more
of an effort to go find it, but that's part
of the fun of wine.
Speaker 2 (32:32):
What's the same with New York State David Sanyo Too
Winery for many years award winning winery in the Hudson Valley,
they're no longer in it, but they were and you know,
this is the same with New York State wines. You've
got to travel far to get to the best wines,
but the journey is so worth it.
Speaker 3 (32:47):
Yeah, part of the fun.
Speaker 2 (32:49):
Yeah, same with Virginia wines. And we love We've traveled
a lot domestically when actually during COVID we were nomad's
and we enabled us to go into wine countries because
it was in the middle of nowhere and you meet
people and it was it was great. And we encourage
everybody listening to explore and go beyond the boundaries. And besides,
right now in Europe they're dealing with over tourism that
(33:11):
a lot of them don't want to stare right now anyway,
because we're taking over. So maybe it's time to take
the domestic route.
Speaker 3 (33:18):
And you know, the over tourism is coming and uh way,
people that are looking for those new experiences. And it's
just it's not just the US, It's it's a worldwide phenomenon.
You know, it's all all adjusted from this change in
consumer patterns that came after World War Two. It was
this large influx of baitings and uh and it just
(33:40):
didn't happen just in the United States, and so as
we go through this consumer change, uh, and it's not
we're struggling to just wine.
Speaker 2 (33:48):
Yeah, it's not confined. I mean, you know, Europe is
facing the same thing. Younger people aren't drinking and they're
all talking about it, and everybody's going through the same thing.
So it is a it's an adjustment, as I say,
and it like all adjustments, they all work their way
out of them at some point.
Speaker 3 (34:05):
If you're patient. And I think this one that we're
going through will sort itself out. For the fineline industry,
I think it'll be quicker. It's you know, maybe as
early as twenty six, twenty seven. For the cheaper wine,
I think they're going to go through a longer reset
and maybe go past twenty thirties. We have to probably
(34:26):
get rid of some of the lower quality grapes that
we're using worldwide, and that's where we're seeing that happen
right now.
Speaker 2 (34:33):
It's true, they're they're destroying you know, do use do
you do something? Repurpose them going to the skincare business,
That's all I have to say. They're all repurposable. So
we're moving toward the last parts of this more about you, Rob.
You know, so you're immersed in wine, but what do
you drink when you're not chilling with all this?
Speaker 3 (34:56):
Well, I you know, during COVID, I have to say
I drink about a bottle and that and uh, yeah
we did too probably after Yeah that was just me
and uh, that's too much. But that's that's what I
was coping with. And when I make mistakes, that was
too much. And and then since then, you know, I'm
(35:17):
down to a couple classes a night, and I just
rotate through and and I have plenty of wine given
to me from domestic sources h in an at Valley, Sonoma,
or in Washington, Central Coast, California, and so you know
those are in my cellar, of course. But but you know,
(35:38):
I like European wines too. Wine is you know, it's
just such a remarkable product. If you get a cabernet
from from you know, around Perth and Australia, it's not
the same as a cabernet from that, But it's not
the same as a cabinet from from Bordeaux. It's not
the same as a cabernet in Chile. They all make
their expressions of it and uh, you know, in my mind,
(36:00):
if you want to travel to those areas, you know,
try their wine, and you know that'll start to lead
your dream.
Speaker 2 (36:09):
Well, I think that's how what leads many people to
becoming dedicated consumers. They went abroad, they had the wine,
they want to find it in their local shop and
they ask for it. So we're big proponents of wine
is a tourism and a great way to sell more wine.
It's very interesting. We also would you like to play
the drums? So are you like in a band?
Speaker 3 (36:30):
Well, yeah, I have been. I started playing when I
was five, and then I was trained. I was trained
to professional levels. I went an international title in Professor
of Arts in nineteen seventy six in Philadelphia, and that
allowed me to actually teach kids in school to put myself.
(36:53):
I put myself through college by teaching kids at USC
Colclate Northridge, at UCLA NOS. I taught them drumming. But
I had to leave the music industry just because I
figured out at that age it was a real crapshoot
to try to try to make money at it, and
(37:13):
so that's why I'm a banker today. Yeah.
Speaker 2 (37:16):
We always say should have gone into banking in area.
And so who's your favorite drummer?
Speaker 3 (37:20):
Uh Neil Perth is one of my one of my favorites,
I guess you know, great set drummer, studio drummer. And
Billy Cobbraam is another one.
Speaker 2 (37:33):
Oh yeah, David's the Deadhead. He's been to sixty five concerts.
Speaker 3 (37:38):
You know, I can't remember a single Grateful Dead concert
I went to.
Speaker 2 (37:44):
He's encyclopedic. Well, you'll have to come.
Speaker 4 (37:46):
I like milkur as the drummer as well.
Speaker 2 (37:48):
Well, you know, New Orleans is very tied to his music,
and it really warms our heart when we see the
kids on the marching bands right now because Marty Grass
is happening and we hear the bands playing in the
park's where they all practice, and we just think music
education is really important. So you'll have to come over
to our neck of the woods, New Orleans and come
to one of the music festivals. You would really enjoy
it since you really are into music and a percussionist.
(38:11):
It's an evely place, Yeah, it really is, and it's
a great way. Music is a great way. You know,
banking is great, but it's nice to be well rounded
and have that creative outlet as well.
Speaker 3 (38:21):
Yeah, I'm ill suited as a banker, as I say
often because I am a creative person. I'm not structured,
and most people in the banking industry they get you know,
if you're not structured, you just don't make it past
the beginning stages, which is, you know, been the secret
of my success. I'm I'm a very persistent person. I'm
just maybe stubborn, but I think rational and I just
(38:47):
don't give up. And so I got myself through those
early parts of banking. And once I got through that,
and you start to have decision making in a bank,
and people are, you know, toward world and be done.
You know, people will say, well, how'd you come up
with that idea? And you know, my mind works in
the spaghetti bull and comes out with something and I
(39:09):
can't tell you how I came up with it, but
it just happens, like you breathe.
Speaker 2 (39:14):
Oh the spaghetti bull.
Speaker 3 (39:15):
I like that.
Speaker 2 (39:16):
Sometimes I'm a big believer in fake it till you
make it. Personally, sometimes you just got to make it
happen and just take that leap right. Well, we want
to thank you for your time. We know Rob you've
been on the road. You've been very busy. We want
to take really thank you for taking the time to
talk with us about This has been an interesting year
(39:38):
and we hope that twenty twenty five goes smoothly for everybody.
And I think at the end of the day, we
all got to just hang in there, be patient, be persistent,
be productive, and think creatively about how we're going to
get through this and be on to keep the industry
very healthy.
Speaker 3 (39:58):
Right well, at the end of the day, if we
all just have a glass of wine, then we'll be
I'll be fine. And that's individually.
Speaker 2 (40:06):
That's a great or two. A glass of wine or
two at the end of the day. This is how
we end our day. We take a long walk and
then we come back and have a nice glass of wine.
Speaker 3 (40:15):
That's moderate living. That's that's what your mother taught you.
Don't do anything in excess to moderation. And I think
that that's that's probably the secret that most people need
to live by, that's for sure.
Speaker 4 (40:27):
And my mother's ninety about to turn ninety three and
still has a glass.
Speaker 3 (40:30):
Of wine every day.
Speaker 2 (40:31):
Yeah, she's so just remember you can have a very
healthy long life and enjoy your wine.
Speaker 3 (40:42):
That's right, and that's that's what my mom says.
Speaker 2 (40:45):
Yeah, that's what I say too. So we want to
thank you again for anyone listening who wants to access
the State of the Wine Industry report. We'll put a
link on our site, but it's also www dot s
VP dot com, slash Trends slash Insights from Silicon Valley
(41:06):
Bank Robecmillan, thank you so much for joining us on
the Connected Table.
Speaker 3 (41:11):
Yeah, I enjoying myself. Nice to see you guys, and
look forward to our next talk.
Speaker 2 (41:15):
We raise a glass and for everyone listening, I hope
all of our friends around the world are inspired to
learn more about this report, and as always, we like
to remind you to stay insatiably curious. Thank you,
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