By Janet Perry
As historic funding sources dry up and impact marketing budgets, vintner associations look to new ideas to increase revenue. Business Improvement Districts (BID) for the wine industry may be the answer, but change always comes with growing pains. If BIDs are adopted by the wine industry, should individual AVAs work together to promote their region?
We spoke with Alison Laslett, Executive Director of Santa Barbara Vintners Association (SBVA). She says she favors the adoption of a Business Improvement District (BID) for the wine industry because it provides consistent, sustainable funding that does not have to come off the vintners’ bottom line. “It’s also a cost structure that the consumer is familiar with because of hotels, because of San Francisco and other tourist areas,” she added.
Laslett explained that historically, associations could hold events that were very profitable. The SBVA was founded in 1983 and the Vintners Festival was a big piece of their fundraising. “That’s when wine festivals were unique,” she said. “They were new. They were exciting and lots of people came.”
Wine events have become more familiar now. “Auctions, festivals, all these events are there,” said Laslett, “but they don’t generate the kind of profit that an association really needs to be successful.”
SBVA had considered other options like sponsorships, expanding their events and raising dues. “Vintners make wine to share,” said Laslett. “Wine is not just a product to them, it’s an art and it’s a passion. They make legacy investments in their vineyard and they invest for generations in their family businesses. When you have that kind of investment in a culture, a product, an industry, then you are willing to pay dues to market it. The issue is the level of dues required to actually move the needle on marketing is cost prohibitive. It’s just too much.”
One possible solution is the establishment of a Business Improvement District. The Business Improvement District (BID) is based on a 1994 law that states that if an industry has more than 51% support, then they can put an assessment on that industry.
“We are proposing a two percent assessment on the retail sales out of wineries, that includes California Sales tax,” said Laslett. “The reason to do that is it’s a very trackable, traceable way to confirm that the assessment is fair. You can audit the assessment then against the California tax.”
Laslett said, “What I have found is when you sit down with somebody and explain the value to them, of building the reputation and the recognition of Santa Barbara County wine, then they’re more clear on what the value of the BID is and how it works.” Laslett added that their focus right now is continuing the discussion with the local vintners about what the BID is and how it could benefit their wine region.
Some vintners thought it was coming off of their bottom line and thought they had to pay the two percent. Others fear that consumers won’t want to pay the 2% and they’ll look for their wine elsewhere. Laslett said the penny drop comes when they see the number of consumers they will gain due to the increased marketing budget.
Laslett noted that change always feels risky. “I have heard again and again, from the hotel industry and the tourism boards, that everybody has the same initial concern when a BID is proposed. It’s unfamiliar and it feels scary. But, again and again I have also heard, ‘this does not slow the consumer down.’ The tourism boards, the hotels, are able to promote themselves on a level, by working collectively, that they’re not able to do individually. That’s what we’re hoping to achieve for the vintners, is to give them some real power to succeed.”
The Winegrowers of Dry Creek Valley (WDCV) worked with consultants to explore implementing a BID as well, but have paused their efforts while their board has formed a task force to review all of their options.
The board’s decision to pause was in direct response to a coordinated request from a sizeable percentage of the WDCV’s winery members, including several representing the historic core of the Dry Creek Valley. That group raised concerns about the BID concept in terms of consumer confusion, dilution of Sonoma County brand messaging, and financial fairness, as well as whether the proposed path is the right one for the WDCV overall. According to one member of the group, “it’s not obvious to any of us that more marketing is the right answer. But we look forward to gathering as a community to figure this out.”
David Mounts, Board President of WDCV explained, “We know that we cannot continue to rely on events to drive funding and want to find a way to fund our organization that is aligned with the fabric of the businesses that comprise our community. There are pros and cons to each of the options on the table, and we are in the middle of a process to bring all these options to the table and have our community make a recommendation on how to move forward. BIDs are set up in all sorts of customer interactive businesses. Restaurants, hotels, chambers of commerce, etc. They’re not that uncommon.”
Ann Petersen, Executive Director of Winegrowers of Dry Creek Valley echoed the need for more funding. “Two factors are really impacting profitability for wineries right now. First, consolidation in wholesale channels. Fewer distribution channels means less opportunity for particularly small wineries to get on wine lists and retail shelves. Second, increased competition from both inside and outside the wine industry. There are now more than 10,000 wineries in the U.S. alone. And, every wine region in the world is competing for a share of the U.S. wine market.”
“We know that if we don’t innovate and implement strategies to attract the right kind of consumer to our AVA, we face substantial risks,” said Petersen. “Only a collective marketing effort can make the right impact while preserving what people love about Dry Creek, meeting the owner in the tasting room.”
Michael Haney, Executive Director of Sonoma County Vintners prefers a county-wide approach to promoting the region’s wines. “We have concerns regarding individual associations implementing assessments, and believe instead, that our strength is working together as one wine community to promote the wines and wineries of Sonoma County to the world. We feel that promoting Sonoma County first is a much more effective and advantageous method and program for increasing awareness, market share and visibility for our County-wide wine community. ‘Rising tides lift all ships.’”