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A to Z Wineworks

by Cole Danehower

Dear readers- This article, first published here in 2002, is a little old, but fascinating. Here is the interview where Bill Hatcher laid out his view of the Oregon wine industry, and in it, you see the seeds that will develop into A to Z Wineworks. Bill has an excellent grasp of the wine industry, and this interview continues to offer valuable insights. - 4/04

Vinous Veteran Bill Hatcher

by Cole Danehower

Managing Director of Domaine Drouhin Oregon for the past 13 years, Bill Hatcher has seen from the inside how the state's wine industry has grown-up. Now, as he moves on to new opportunities, Bill shares his unique-or as he says, heretical-opinions on wine as art, craft, business, and passion.

Domaine Drouhin and Bill Hatcher

The story has been told many times about how the French came to Oregon, and how their presence helped bring global credibility to Oregon's winemaking status. But merely being here did not ensure a lasting impact. For that, Domaine Drouhin had to accomplish two others things consistently well: make great wines, and manage an Oregon wine business.

The two things went hand-in-hand. Domaine Drouhin Oregon (DDO in the local parlance) established an enviable reputation as a highly visible and involved member of Oregon's wine community, and the quality of their wines continuously added to the reputations of both Maison Joseph Drouhin and Oregon.

Key to DDO's success was Robert Drouhin's early decision to hire Bill Hatcher as the business's Managing Director. A poet as well as a businessman, Bill brought to DDO both the artistic sensibility that respected the craft of winemaking, and the day-to-day pragmatism of running a business. Now, after a long and successful tenure, Bill has decided to leave DDO. Recently, he sat down with the Oregon Wine Report to talk about what he's learned.

This has been a great experience for me," says Bill Hatcher as he leans back in his chair and with a swooping gesture toward the window, takes in a swath of Domaine Drouhin vines. "I've spent thirteen years in this magnificent setting . . . I've learned so much . . . I've worked with such wonderful people and made enduring friendships. . . many warm memories reside . . ."

He stops speaking for a moment, and then continues. "But there comes a time for everyone in any situation to move on."

And Bill has moved on. This April was his last month at DDO; at press time he was not yet in a position to discuss what he was moving on to. But, he said with a smile, "I'm looking forward to being able to take my own stupid ideas and see if they work!"

Branded a Heretic

"Stupid" is not an adjective that leaps to mind (no matter how facetiously used) when listening to Bill present his views of the state of the wine industry.

"Heretical," by his own admission, is nearer the mark. "I have deeply held beliefs about this business," he says, "that sometimes are thought of as sacrilegious because they challenge the mythology."

Bill states his "heresy" in its simplest form: "Wine is becoming a branded business. The world of entitlement has passed. The rules that applied twenty years ago, and the niceties of the business are being aggressively challenged."

For Bill Hatcher, the world of wine-and the Oregon wine industry in particular-is at a critical juncture. "The challenge today for Western European producers, and for Oregon as well, is to recognize the importance of brand, marketing, and competition in what has become a global wine business."

He explains further: "Twenty years ago winemaking was still an art form. It was passed down almost ritualistically within families. But today that knowledge has been codified and disseminated to allow someone now to go out and hire a winemaker, not unlike one can a software engineer. This may sound blasphemous to the artistic sensibilities of winemaking, but in their own right, those who design software would equally consider themselves craftsmen, if not artists."

What this has resulted in, Bill believes, is that quality wine is now simply the price of admission to compete.

"Because there is wide understanding of successful viticultural methods and winemaking technology, it is now possible to cope enologically and viticulturally with more difficult conditions-whether warm, cold, dry, or wet-in global regions thought heretofore to be marginal for wine production," he says.

"In short, there is no longer an excuse not to produce good wine."

This dispersion of wine expertise is forcing dramatic changes in how the wine business is managed, says Bill. Most notably, increasingly large companies are competing in a global marketplace with a wider range of wines. Given the leveled playing field of quality, winning in the market, for these global companies, is a matter of marketing. And as product quality becomes less differentiated, the differentiation of value to the customer-real or perceived-becomes more dependant upon brand identity.

"For Western Europe, and regions like Oregon," says Bill, "the challenge is not to abdicate one's patrimony and aesthetic, but rather to translate these attributes into perceivable value to the customer." In other words, help the customer understand the value in the wine they are buying.

To illustrate his point, Bill cites how the market perception of Australian wines has changed over the years. "Fifteen years ago Australia was thought of as capable of only producing a $6 Lindeman's Chardonnay. Now you see Penfolds rated a 95 by the Wine Spectator and selling for $120 a bottle."

A New Competitive Wine World

"So, how do you compete against a region, or even companies within a region, with millions or even hundreds of millions of dollars to spend to condition market perceptions-and the ability to deliver the real wines that back up their marketing claims?"

Too often, Bill claims, the approach is to deny that the rules have changed. "Some wineries believe that as long as they continue to make fine wine, it will sell itself."

That has only been true in the past, says Bill, because competition was sparse. And it may continue to work for awhile as old reputations cling. But it won't work in the long run, thinks Bill, because producers who don't "communicate their values in the marketplace" will be squeezed out by larger or more nimble competitors.

"Nothing drives me crazier," says Bill, "than to hear a winemaker complain that 'they just don't understand my wine'. The simple reality is that few people are willing to invest themselves in appreciating what the market-right or wrong-defines as idiosyncrasy. It's wine, not James Joyce," he concludes.

From the consumer's point of view, Bill says by way of illustration, it is difficult to decide how to risk their money on an unfamiliar wine. "A consumer looking at a row of Chardonnays in the $15 to $30 range has no idea how to choose-except that they know they liked that Jacob's Creek over there, so that's what he or she ends up buying."

In buying the wine they know, says Bill, they may have passed up a more finely crafted wine that cost more, and which might also deliver more flavor and experience. But this hypothetical consumer may never know that because the power of, say, the Jacob's Creek brand was too effective, and the risk/reward ratio of the unknown wine is just too high.

"I believe that in the long run, unless they adapt, it will become more and more difficult for smaller regions like Oregon-and even Burgundy and non-mainstream parts of California-to compete because branded products are going to grow. Economics is the perfected form of Darwinism."

If he is right, then what hope does Bill see for the craft producer of fine wines-which includes mostof Oregon's wineries?

"Don't misunderstand," protests Bill, "I don't believe our best wineries have to compromise their craft to compete. The underlying qualities that create grace, nuance, and finesse are what makes wine so wonderful. In fact, these are the very things that we have to become better at marketing in order to thrive, if not survive, in this new world of mass branded, increasingly homogenized wines."

"The partisan response," he continues, "would declare it unthinkable that 'me-too' refinery offerings could ever displace finely shaded wines on the consumer's palate. Then again, forty years ago no one would have predicted the demise of roadside diners with their myriad regional nuances at the hands of monolithic fast food chains."

"Unfortunately," Bill laments, "a lot of wineries would still prefer to believe that all you have to do is plant your vines and make a few basic commercial decisions in order to have a successful wine business."

Summing up the new business challenge Bill believes faces wineries, he asks this question: "When you can walk into Trader Joe's and buy a $4 bottle of Chilean Merlot that is absolutely drinkable, how do you make the argument to a consumer to spend $20 or $30?"

Market the Uniqueness for Success

The answer, Bill believes, is for quality producers to embrace brand marketing in the same way that the big commodity wine producers are doing-but to focus their messages to consumers on what is special about their wines: brand the nuance that makes them unique.

"Wine professionals can talk about how the subtleties of a $75 bottle of wine make it better than a $20 bottle, but to a consumer, those differences are often marginal," says Bill. "They don't necessarily translate into value to the consumer."

So, he says, the craft winemakers must develop a strong marketing appeal. An appeal that is commensurate and reflective of the wines they produce, in order to induce consumers to buy their offerings rather than the heavily branded produce of the global wineries. "Better winemakers," he claims, "will sell a certain amount of wine just on the pull of their name, but at some point inertia is insufficient to keep the product in orbit."

The trick is to persuade the next consumer to the marginal values that differentiate the craft producer's wine in quality and cost. What gets confused in Oregon, Bill thinks, is that "what passes for marketing is merely advertising." And advertising alone, says Bill, does not constitute a marketing plan. "You can buy the finest steelhead gear, but if you fish in the park frog pond, you won't catch anything."

"What Oregon does have, is an image from afar that it is one of the last pristine places." This, combined with its reputation for wineries that are small family businesses focusing on quality artisan wines, provides, in Bill's view, a unique platform for differentiated marketing.

"I'm not denying the importance of the art and craft of winemaking," cautions Bill. "It is the sine qua non. However, I steadfastly believe that you have to find a balance between preserving the art form and making it commercially viable."

Preserving the Art; Marketing the Value

Bill sums up his marketing vision this way: "It is to preserve the art in winemaking while at the same time communicating its value as perceived worth to the consumer. For example, most bottled water is purchased for intangible reasons, convenience, image, etc., whereas twenty years ago the idea of a two dollar bottle of water in a gas station convenience store was ludicrous. Similarly, who would have thought twenty years ago that you could sell a cup of coffee for three bucks, let alone create a worldwide chain of stores to do so?"

Bill believes that craft winemakers-in Oregon and throughout the specialty wine regions of the world-must bring new sophistication, resources, belief, and will to their business and craft. "Not to be submerged by these market forces," he points out, "but rather to ride the crest of the wave."

"Our thinking must become more sophisticated about how to market our products," Bill explains. "We must cultivate the resources and the mindset to think in terms of the marketplace. That means knowing who our customers are, or could be, and why they (would) buy our wines. How much is attributable to the intrinsic qualities of the wine itself, how much to the image the winery projects, how much to the public personality of the winemaker and so on. It also entails an understanding of market trends with their associate risks and opportunities. And, it involves strategic partnerships such as those fostered by special bottlings, preferred customer premiums or key retailer/restaurant alliances that project the brand."

The risk, as Bill sees it, is that if such principles aren't applied, "then we allow the wine business to become a commodity business, and treasures like Burgundy and Oregon risk being compromised into something that will become that much more 'white bread.'"

"If," he continues, "in twenty years people have forgotten the wonderful nuances of these wines, we will all find ourselves drinking pretty much the same McWine, differentiated only by extra oak or extract, like double cheese. Nuance will be a mere redolence, like the memory of the best piece of apple pie in the world at that little café in Bakersfield."

Concluding his convictions, Bill cautions "I'm not claiming to be an oracle; I'm simply defining a problem that's wholly apparent. I'm not saying 'here is the way we need to market this industry;' rather, I'm saying, 'we need to identify what makes us different-both as a region and as individual producers-and craft that message just as we craft our wines'. The answer is neither singular nor is it static; we need to continually remind an increasingly distracted marketplace of ourvalue."

And lest anyone think that Bill is giving up on wine in his life after DDO, he has a heretic's final thought: "You'll probably have to burn me at the stake to get rid of me."

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