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Straight Talk With Wine Spectator: Rob McMillan Of Silicon Valley Bank’s Wine Group

August 3, 2021

Wine Spectator news editor Mitch Frank recently spoke with Rob McMillan, founder of Silicon Valley Bank’s (SVB) wine group, as part of the magazine’s Instagram Live interview series Straight Talk. McMillan has been with SVB for more than two decades and writes its annual State of the Wine Industry report along with regular posts on the SVB on Wine Blogspot. Speaking with Frank, he covered how the industry adapted to pandemic-era conditions, private equity’s growing investments in wine, and encroachment from hard seltzer.

Beginning with how wineries fared during lockdown, McMillan noted that about one-third of them had higher sales in 2020 than 2019, but that figure tells us little about underlying financial conditions since those sales entailed a major shift from on-premise to off-premise. “I thought that businesses with big sales in grocery, which are generally larger wineries, would do better,” said McMillan. “And they did, but not like you would expect because they also have to sell to restaurants too and they lost that component. The dominant characteristic of those that were successful was management—who was going to quickly adapt?”

That adaptation largely took the form of finding new ways to connect with consumers and buyers. Wineries that had maintained comprehensive mailing lists had a distinct advantage, McMillan said, because, as time passed, those messages were able to shift from just keeping a line of contact open to making sales pitches. Similarly, video-call tastings and similar programs were demonstrable sales drivers—a survey McMillan conducted found that about 20% of new wine club sign-ups for the average winery came from Zoom calls.

Citing Sycamore Partners’ recent $1.2 billion purchase of Ste. Michelle Wine Estates, Frank wondered why a segment of the investment world known for prioritizing short-term profits would bother with wine and its long-term focus. McMillan agreed that there’s a limit of about ten years private equity firms can be expected to hold wine assets before moving on. McMillan cited Duckhorn, which has been owned since 2016 by TSG Consumer Partners and recently went public, as a representative example. Duckhorn’s dominance with high-end Merlot, a “difficult category,” gave it room to grow with mid-tier products for organic return on investment, which is what has happened with Decoy by Duckhorn, which reached more than 1 million cases in 2020 as the seventh-largest wine brand in the U.S. above $15 a bottle, according to Impact Databank.

On the topic of hard seltzer, McMillan noted that contrary to his intuition, the ascendant category has taken more share from wine than from either beer or spirits. Noting that wine and seltzer contain comparable amounts of calories, carbs, and so forth, McMillan criticized the wine industry for allowing itself to be outpaced by seltzer. Older generations, he said, are familiar with the health benefits associated with moderate wine consumption and its place in the vaunted Mediterranean diet while younger consumers have gotten the impression that seltzer is better for them due to aggressive marketing. “Wine is what the young consumer is looking for, they just don’t know it,” he said.

New episodes of Straight Talk air Wednesdays at 3pm on Wine Spectator’s Instagram channel.—Danny Sullivan

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