A couple of weeks ago, I had the opportunity to spend a day in Sacramento at the Unified Wine & Grape Symposium (Jan 23-25th 2018). It was a fascinating experience. I have participated in dozens, and possibly hundreds of, conferences and industry trade shows around the world. However, this conference was different in almost every respect.
For starters, all other gatherings I had participated in related to IT — i.e., some emerging technology in telecommunications, information processing — or related applications. Historically, most of the gatherings I have attended reviewed wholly disruptive products or services that rendered prior offerings obsolete. Furthermore, the products or services at these gatherings were almost always “man-made” sans the direct, explicit participation of mother nature. In most cases, the climate at these gatherings was showy––with multiple languages often overheard in the hallways and Wall Street suits visibly present. Most products or services detailed were only a few years old, and anything beyond 5 years old was definitively a “museum piece”.
Wine, often, gets better and more expensive with age. The industry is only a few thousand years old. Furthermore, the grape and wine business is an important part of the economy, particularly here in Northern California. In the US, it is about a $60B per year industry, and here in California, represents 60 percent of the US, and several hundred billion dollars worldwide. Wine consumption worldwide is growing at a faster clip than the global economy, and the average unit bottle price is shifting to premium brands (over $15-20 dollars per bottle).
Furthermore, while the United States (US) leads in the rankings of wine consumption, other countries lead in production. The table below highlights the top 10 largest producers and consumers of wine.
The wine industry is also unique in that, while the US dominates most IT (information technology) sectors, European countries (Italy, France, Spain, etc.) not only are the leaders of wine production, but historically have brought forth and advanced the industry’s leading technologies. They have exported their know-how, mostly via emigration, to the US and to most of non-European countries, with the exception of China. Wine consumption (and production) in China is a recent phenomenon in part facilitated by globalization and the continued expansion of the country’s middle class. Other emerging countries exhibit the same trend, showcasing a high correlation between middle class enlargement and demand for wine consumption.
Nature dictates the tempo of the industry. Grapes are harvested once a year and wine production is followed by an aging process which may last from a few months to a few years. Tradition and experience dominate this process, while science and technology has played an increasing role in adding value, reducing costs, and increasing quality and efficiencies across the value chain in the last century, particularly in the last several decades, post WWII.
Incremental innovations galore was my first broad impression perusing the booths of the Unified Wine & Grape Symposium trade show. The range of products on display was mind-boggling, from disparate fertilizers and agriculture machines to advanced tools and bottling labeling equipment. Suppliers for every step of the value chain and every imaginable service was on display. My own professional formation (or deformation) was to look for those disruptive forces3 that would have an impact xN (multiples of N>1), and I really had to look much harder to find those.
Identifying these critical emerging disruptive forces, in general, was not a different task from identifying the disruptive forces of any other industries. I have highlighted these below for your review:
My observations at the Unified Wine & Grape Trade Show elicited the following disruptive insights:
- IoT is slowly penetrating different elements of the value chain making possible to start talking of a “connected” vineyard or winery:
- Precision agriculture is enabling 2, 3, 4 and 6, among others. First examples of managing water, fertilizers, growth rates, etc. are becoming available.
- Various key building blocks of the wine-making process (such as pumps, sensors, flow meters, et al) are becoming wirelessly “connected,” enabling dashboards and automation; enabling 3, 6, 8 and 11.
- Software platforms are emerging to enable end-to-end management from the vineyard through production, distribution, and logistics. This is enabling 2, 4, 6, 9 and 10.
- Direct-to-Consumer (DtC) software and Apps, enabling disintermediation (1), connecting with the consumer directly. Furthermore, this new distribution channel enables a steadfast gathering of information about consumer tastes and preferences (4) to anticipate (8) and personalize (9) the experience, enabling increases in loyalty and revenue. Tasting rooms, wine clubs, apps, et al all play a role here.
- Work-in-process efficiencies and monitoring. For example, improving the aging process as it becomes dramatically reduced by using new oxygenation technologies,
CBInsights has developed the map shown below. The map identifies a list of Wine Tech companies entering the space targeting one or more areas of disruption. While it is easy to dismiss very traditional millennia-old wine industry, it seem it cannot escape the lure of technological innovations. Examples range from wine subscription services to rating apps, startups in the space are innovating more than ever before. Connected corks and bottles are starting to emerge, as well as algorithm-based recommendation features to better match personal tastes to wine.
Comparing the Wine Tech market map constructed by CBInsights with the list of exhibitors at the 2018 Unified Wine & Grape Symposium, none of the 50+ companies could be found in the exhibitor’s list. This is intriguing… Could it be that they are on the waiting list of floor space for future Unified Wine & Grape Symposium trade-shows, as an executive at one of the incumbent companies responded? Or is it just possible that they are showing their wares at new trade-shows where the disruptors and the early market adopters attend? Provocative as it sounds, I lived through a very real experience in my professional journey, as data communications and eventually the internet created their own venues and conversations away from traditional, century old telecommunications industry trade shows, which were centered on voice communications. This is a far-fetched analogy, but could it be true?
While we are still a while away from dial-a-wine, nutraceutical wines or a complete synthetic wine home production, there is no room from complacency. I say this not because of my expertise on the wine & spirit industry, but because of my conviction that the digital transformation is creating the perfect storm for each incumbent, in each industry. Each one individually or as part of a tectonic shift in its industry, and at its own time will be unable to scape and will likely face its own deconstruction and re-construction over the next decade. Disruptive forces will pound on the incumbents, and it will be compounded due to global competitive pressures, all vying to get hold of their revenues and profits.
Until my next post – Carlos B.
 Italian, French and Spanish catholic missionaries were often the technology transfer agents bringing the know-how of growing vineyards and wine-making to new lands across all continents, beginning in the 1600s through the early 1900s.
 Incremental innovations expected improvements are about N% while disruptive innovations provide xN improvements (for example, 5% versus 5 times better performance)
 While the health benefits of wine are widely known, the nutraceutical food and beverage industry is still nascent.
 Analog to the way 3-D printing has disrupted the manufacturing, logistics and retail industries.