Tuesday, September 1, 2015

The Wine Festival Quandry

In my last post, I wrote about some of the disappointing (from a wine standpoint) issues that presented themselves at the Jerusalem Wine Festival.

From the lack of quality of wine's being offered to the small turnout of wineries - from a Kosher or Israeli standpoint.

In fact, the number of wineries was down to 30, which in and of itself doesn't make for  a bad show, but given that in the past years there had been 45+, it is still disappointing. From among those 30, 20 were under Kashrut certification of some sort. 11 (consisting of both kosher and non-kosher)  were from outside Israel, this last point also is not necessarily a problem. As for the lack of premium wines - even this was augmented somewhat for the second through fourth days of the show from wineries such as Har Odem, Golan Heights, Bat Shlomo, Har Bracha and Barkan - each of whom did open wines from their higher level lables.

So the question remains: WHAT HAPPENED?

After speaking to some of the smaller wineries that had shown in previous years, the following answers are what I was given.

1) Structure
Each Wine Festival has an organizer (in this case, two retailers), who put on the event in order to: a) gain name recognition for themselves, b) promote their own sales and c) promote the wineries they work with. The sponsors will therefore 'invite' wineries that they work with and want to promote to participate. If the sponsoring retailers stop working with a given winery, that winery will no longer present at the event.

2) Cost of the Event
The Sponsoring retailers (in this case) have various expenses for location and advertising / marketing the event.
This expense is covered by various streams of cash flow:
- Cost to each winery to participate (usually between NIS 6,000 and NIS 10,000 depending on the sponsor and the size of the display)
- Entrance fees for the participating public (NIS 85 / person, also dramatically up over the past 4-5 years)
- Sales of wine at the event.

Many of the wineries that I spoke with mentioned that they poured on average of 150 bottles each at the festival. Combine that with the cost of the stand, and it gets to be too costly for many of the smaller wineries that produce less product.

The difference between this Festival and the February Kosher Festival is basically a commitment from the sponsor to purchase a large amount of wine from each label that the wineries open. Let's assume that there is a commitment made to buy one pallet of wine (600 - 750 bottles), for each label opened at the show. It now pays for a winery to open a lower-end wine as well as a medium wine and a high-end premium wine. They would pour samples from 50 bottles of a wine and guaranteed to sell 600-750 bottles, meaning they pour 1 bottle for every 12 sold.
If they don't get this guarantee form the sponsor, then it doesn't pay for them to open the bottles that cost more money.

But what about the marketing aspect? Don't the wineries want to put their best foot forward?

Of course, the answer is yes, which is why when it makes no economic sense, they don't show. What we are left with is wineries that a) have enough stock to pour the wine anyway (some can even be overstocked, meaning if 'we don't pour it and try to move it, we are gonna be stuck'), or b) smaller wineries who are not yet known to the general public or, c) foreign product who need to gain the market penetration in an already crowded environment.

Does that mean it's not worth going? Not necessarily.
It's still a great night out with friends!