This tale is being told to demonstrate a point. As it is an ongoing saga to this day, there may well be additional chapters moving forward. It isn’t exactly like Game of Thrones, though the recurring theme of the ‘Big Box Bullies’ could be likened to dragons in that they have changed the landscape in the wine industry forever.
The story of Eli Callaway is an intriguing one. Before he created the golf business that still bears his name, he pioneered the Temecula area, for better or worse, as a wine designation. Eli was a great promoter who knew how to use the media opportunities. Somehow, he got the wines from his maverick north winery into a situation where one was served at an east coast function involving the English Royals.
From Callaway winery’s own website,”On July 9, 1976, Her Majesty, Queen Elizabeth II, and his Royal Highness, The Prince Duke of Edinburgh, toasted the President of the United States at a luncheon at the Waldorf-Astoria Hotel in New York City. The only wine served at this bicentennial event honoring the Royal couple’s visit to this country, was Callaway’s estate bottled 1974 White Riesling. Her Majesty, not known to be a wine drinker, requested a second glass! This was the first time in U.S. viticultural history that a dry table wine from Southern California was chosen to be served on the east coast at an international diplomatic event.”
You can bet Eli made sure the word got out and, given the slower, perhaps ‘longer shelf life’ way that news worked back then, it turned out to be kind of a big deal for Callaway from a market awareness perspective. Eli also had his own team of sales people, most of whom, probably ‘coincidentally’, were attractive younger woman. While that is not something one can point at today (or even mention), at the time it was a pretty clear marketing tool. From our small store in Glendale back around 1980, Callaway was a very successful brand. Then something else happened that we think changed Callaway’s (the winery) fortunes forever.
A ‘big box bully’, noting the success of that particular brand, came calling. If memory serves the company was called ‘Price Club’ at the time (they merged with Costco in 1993). Suddenly we began hearing from customers that they were seeing the wine at substantially lower prices at these outlets, and our sales (and we are sure the sales of a number of other stores and restaurants as well) pretty much dried up. Eli got paid (this is Amercia, by gum) by selling the now higher volume Callaway winery to a liquor company. But the brand, nor the wine itself, was never quite the same.
From there Eli moved off to golf club world dominance (it should be mentioned that famous golfer Bobby Jones was Eli’s mother’s cousin). As to the Callaway wines, they went from a hot commodity to little more than a footnote, we believe as a consequence of selling big drops to big box stores at super low prices. While the term ‘brand destroying’ was not used until later (and occasionally hurled at us), that is precisely what happened. Sure the immediate sales were great. But the groundwork and enthusiasm that built the brand in the first place went by the wayside.
Our message is “How much do you hear about Callaway any more?” Their wines are virtually unseen out in the marketplace. Why? Because the small retailers and restaurants that helped build the brand felt betrayed when they were undercut and blindsided. The die was cast and the same thing has been happening repeatedly ever since. Wineries/wholesalers sell their souls for that big volume moment, but can suffer in the long run because they upset their market ecosystem making concessions to get that ‘big deal’.
Who cares? It’s always about getting the lowest price, right? Well yes and no. It’s hard to explain. We know a number of consumers aren’t going to get past that ‘always the lowest price’ thing. That’s fine. It has worked prety well for us over the years as well. But we’re going to try to explain the sometimes delicate balance that is the wine business and how there can be long term, negative effects from that one-time blowout scenario because of the high and continued visibility at such venues.
First we’ll start with the fact that big box and chain operations do virtually no brand building. They come along well after all of the hard work has been done and a brand is established and entice purveyors or wineries with eye popping volume in exchange for substantial price concessions. The ‘BBBs’, as we will call them, then turn around offer the now popular brands at substantial discounts, enhancing their image but possibly doing harm to the wine’s perception in the marketplace. It can be a big sale, but at what cost.
Because the suppliers are willing to exchange heavy price incentives for essentially unheard of volume from the ‘BBBs’, it becomes an untenable competitive situation for virtually everyone else. The ‘BBBS’ will then ride the brand for as long as it suits them and then say ‘see ya later’ when it doesn’t. At that point the high volume goes away for the purveyors, and the brand itself will have a hard time finding any new, or old friends to ‘play with’ moving forward. As with our dragons, it often becomes a ‘scorched earth’ situation
We could generate pages of specific examples of these things happening to a variety of brands through the years, but suffice it to say that it is a very regular occurrence these days. What is more important is the typical aftermath. The ‘BBBs’ make the deal, and run off all of the competition because they got such a significant price reduction from the supplier. This usually happens at the height of the brands popularity, which is why the ‘BBBs’ came around in the first place. Lots of boxes get sold and someone on the supplier’s team probably gets a big volume ‘bonus’. But the company made a substantially lower profit by offering the massive discount on the volume, and were faced with the aftermath of that decision of dealing with an ‘injured’ or possibly ‘dead’ brand.
When the next vintage vintage comes along, there are far fewer places willing to carry whatever the affected brand was. So the supplier may have had to go back, hat in hand, to the ‘BBBs’ and have to be in a position to offer them an even better deal so they could maintain some semblance of volume. Otherwise ‘numbers’ will go down, nobody gets a bonus, and the talking heads from the upper hierarchy at the supplier’s place will start to squawk. It is as predictable as sunrise in a majority of cases.
The ‘bullies’ aren’t going to do anything to promote the brand. That’s not what they do. So the supplier must sell and pray that the brand enjoys similar success with them in ‘year 2’, if indeed they get a shot at ‘year 2’ at all. If the ‘tarnished’ brand is not as successful, the ‘bullies’ will often cancel the orders they committed to with no fear of reprisal, leaving the supplier with pallets of specially cut ‘warehouse display’ cases and not a lot of options as to what to do with them except heavily discounting to others which piles on the destructive process even more.
Ultimately the brand will cease to be exciting to many of the same consumers who relished the original price markdown. The brand will be considerably less viable in the marketplace after burning so many bridges among those who were supporters before. The ‘BBBs’ will move on to another item from the ‘next victim’. The faces change, but the cycle does not. We’ll come back to this later on.