Wine/Beer/Spirits

Q&A With Diageo On 2020 Sustainability Goals, Commitment to Diversity

Lara L. Sowinski · September 2020 ·

Sustainability takes on a broader meaning for organizations that interpret its meaning to encompass more than environmental stewardship. True sustainability also includes such areas as human resources, customer relations, and product lifecycle, among others.

Likewise, for food and beverage companies whose products are largely tied to water and agriculture, sustainability ultimately determines their ability to function as a viable business––as leading companies are well aware.

Recently, Diageo concluded its 2020 Sustainability and Responsibility Goals and reported on its achievements over the past five years. Perry Jones, president, North America supply, reflected on the company’s progress and how it continues to attain new milestones with regards to reducing greenhouse gas emissions, creating a more diverse workforce, and elevating its role and responsibility with regards to sustainability.

SCSparrow: While diversity is discussed in terms of internal leadership positions being held by more women, is Diageo looking to expand diversity with its suppliers, vendors, partners, potential acquisitions? In other words, looking at diversity externally as well?

Jones: Championing inclusion and diversity is a strategic priority at Diageo, both within our business and with the partners and suppliers with whom we work. We recognize that diverse suppliers can often deliver greater agility, as well as access to fresh ideas and experiences that can result in accelerated product and process innovations.

Since 2015, we have grown our Diageo Supplier Diversity Program through a dynamic and multifaceted approach, focusing on growing the number of suppliers in our portfolio and strategic relationships with them, and building internal visibility and education. In this past five years, we have tripled the amount we spend with woman-owned suppliers and doubled our spend with minority-owned businesses. We’ve also seen an enormous increase in our spend with LGBTQ-owned businesses and businesses owned by veterans.

We’re increasingly asking our existing suppliers to demonstrate their commitment to diversity. For the last two years we have asked our advertising agencies to share data on the gender balance within their organizations as well as their plans to drive inclusion and diversity. We are also taking a stand on issues through our involvement in collaborative groups such as the World Federation of Advertisers’ Diversity & Inclusion Taskforce and the United Nations Unstereotype Alliance.

SCSparrow: Diageo’s “moderation messaging” is another indication of how the consumer profile and demographic has changed, and in turn how that is affecting the wine/beer/spirits industries with regards to new packaging and products, improved visibility with regards to ingredients and suppliers, and so on. Therefore, how is today’s consumer influencing and driving Diageo’s sustainability targets and goals for the future?

Jones: Sustainability and responsibility have been a priority at Diageo for many years—our global 2020 goals were originally set in 2008 and refreshed in 2015. The 2020 targets were selected to align with the United Nation’s Sustainable Development Goals and designed to cover Diageo’s three main focus areas: reducing environmental impact, building thriving communities and promoting positive drinking. Key highlights delivered include:

Cutting greenhouse gas (GHG) emissions from direct operations by 509,000 metric tons, delivering on its commitment to reduce absolute emissions by 50%.
Reducing emissions by over a third (33.7%) across its total value chain, going beyond the original 30% target.
In water stressed areas, replenished 100% of the water used in our final product.
Ensured that over 99.5% of its packaging is recyclable and achieved 45% recycled content in its packaging.
Achieved zero waste to landfill in all operational sites and offices.
Supported more than 250,000 people through its projects focused on clean water, sanitation and hygiene (WASH) in 2020.
Empowered 435,000 women to date through its community programs.
Championed diversity such that 39% of leadership positions are now held by women, going beyond its original target of 35%.
Reached 2 million people with moderation messages from our brands.

Diageo aims to contribute to the delivery of the United Nation’s Sustainable Development Goals in the critical decade of action leading up to 2030.

The COVID-19 pandemic has emphasized how important it is that we address issues that matter to our stakeholders and strengthen our business, deepening our connections with communities. Building inclusive, thriving communities that work for everyone is key to this. It requires us to be global champions for water stewardship and vocal advocates for a low-carbon world. It also means going further in exploring circular economy approaches, so we can make more drinks with fewer materials. We also know we must be leaders in promoting positive drinking.

SCSparrow: Can you provide more detail on how COVID-19 has impacted Diageo’s view of sustainability currently and looking forward? Are there different areas of focus? Adjustments to future targets? Any positive/negative impacts that are worth noting?

Jones: As mentioned previously, the COVID-19 pandemic has emphasized how important it is that we address issues that matter to our stakeholders and strengthen our business, deepening our connections with communities. It is within that context that Diageo announced in June the creation of the Diageo Community Fund to support social justice in America, helping Black communities and businesses recover. With a commitment of $20 million, the Fund will help address the urgent needs of Black communities and businesses who have been disproportionately harmed by COVID-19. The Fund will also support businesses, consumers and partners integral to the hospitality industry in Black communities across the U.S. This will include a combination of targeted donations supporting advocacy efforts as part of the economic recovery from COVID-19, training for business owners and employees, relief aid and more.

This is part of a broader global two-year program called Raising the Bar that supports pubs and bars as they begin to welcome customers back. Through Raising the Bar, Diageo will provide $100 million to support the recovery of major hospitality centers around the world, including, among others, New York, London, Dublin, Mexico City, Delhi, Sydney and includes the $20 million Community Fund for the U.S.

SCSparrow: Going forward, are there any areas of the supply chain, and/or the overall operations that will likely receive greater attention with regards to sustainability? What are the areas most ripe for improved sustainability?

Jones: In the coming months, we will be announcing a new set of targets to help further support in the delivery of the UN Sustainable Development Goals over the critical decade to 2030, with a focus on our three priorities: promoting positive drinking, championing inclusion and diversity, and grain-to-glass sustainability.

We will continue to be global champions for water stewardship, vocal advocates for a low-carbon world and explore circular economy approaches.

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Cheers to Robot Supported Happy Hours

Lara L. Sowinski · August 2020 ·

Automation is making a deeper foray into the food and beverage supply chain as companies look to implement social distancing and contactless transactions to keep workers and consumers safe in the midst of the coronavirus pandemic.

Thankfully, Rosé the Robot and Tipsy Robot are doing their part to make sure the much needed Happy Hour isn’t disrupted.

Hotel Trio in Healdsburg, California saw an expanded role for Rosé the Robot, which the property deployed several years ago to deliver a variety of items to guests’ rooms. In March, the robot went from “novelty to necessity” in order to provide guests with a touchless experience, explained Scott Satterfield, Hotel Trio’s general manager, who added that the robot is thoroughly sanitized after each delivery.

Meanwhile, Tipsy Robot in Las Vegas is also experiencing a renewed appreciation for its robotic bartenders that mix up drinks ordered by customers via an app, then delivers the drinks on a conveyor belt. The Tipsy Robot, located inside the Planet Hollywood hotel, opened in 2017. Like other dining and drink establishments in Las Vegas it closed briefly this spring, but it has since reopened.

Aside from delivering a bottle of wine to a guest’s hotel room or mixing a drink, there are other areas in the food supply chain that are seeing increased adoption of robotic automation, such as fast food environments where repetition and efficiency are key, or for tasks such as flipping a burger, slicing, or putting a pickle on a sandwich.

However, the consumer experience is an important consideration. While a burger-flipping robot may be acceptable in a fast food restaurant, human interaction is preferred in upscale dining environments.

So, it seems Sammy the Sommelier may be a few years away.

Younger Consumers Willing To Pay More For Sustainably Produced Wine

Lara L. Sowinski · June 2020 ·

The latest wine industry research shows younger consumers are leading the push for sustainably produced wine and they’re willing to pay more for it.

“Younger consumers of legal drinking age are significantly more engaged with sustainability and view it as increasingly important to protect future resources,” notes Lulie Halstead, CEO of London-based Wine Intelligence.

According to research from Wine Intelligence and Full Glass Research of Berkeley, California, nine out of 10 Millennials are willing to pay more for sustainably produced wine.

In a survey of U.S. wine consumers representing various age groups, $3 was the average additional amount they were willing to pay for sustainably produced wine. Consumers also want it to be easy to find and identify sustainable wine, both on the label as well as at the retailer, and they support the use of sustainability certifications in the wine industry.

Full Glass Research’s Christian Miller adds that “large majorities at all levels of the trade felt familiar with key concepts of sustainable wine production, and do recommend sustainably produced, organic and biodynamic wines to their customers.”

Seventy-three percent of the wine trade surveyed believe demand for sustainably produced products has increased over the past five to 10 years, and 76 percent think it will increase in the next five to 10 years.

The California Sustainable Winegrowing Alliance describes sustainable winegrowing practices as those that help reduce water and energy use, minimize pesticide use, build healthy soil, protect air and water quality, recycle natural resources, maintain surrounding wildlife habitat, provide employee education, and communicate with neighbors about vineyard and winery operations.

Wine Brand West + Wilder Finds Its Groove With Innovative Packaging and Solid Supply Chain Practices

Lara L. Sowinski · April 2020 ·

The COVID-19 pandemic is upending most industries, including the wine industry. While grocery stores and delivery services are helping to keep wine flowing to consumers, other outlets such as restaurants, wine shops, and winery tasting rooms are essentially offline, especially in major wine producing states, including California.

“Like a lot of people in the wine business, we’re trying to be as agile as possible, but we’re in new territory,” says Kenny Rochford, who together with Matt Allan are the founders of wine brand West + Wilder.

The business partners launched West + Wilder almost two years, focusing on quality wine that was more approachable for consumers, both in terms of the actual wine as well as the packaging.

Rochford and Allan share a background working with traditional fine wine brands. As Rochford explains it, the goal back then was to “make wine more expensive and more exclusive—and frankly, more scarce—which was the metric for success.”

Over time, wine became unnecessarily complicated, says Rochford. This inspired inspired the pair to launch West + Wilder, a brand that aimed to position wine as “more of a beverage” and less of a confusing enigma for consumers.

While fine wine generally comes with plenty of storytelling pertaining to the winery, the winemakers, the varietal and the appellation, today’s consumers are ultimately searching for “something dry, refreshing and bright, that’s also easy to get, and priced right,” Rochford explains.

Not surprisingly, West + Wilder tends to align well with younger consumers, who also use social media to connect and interact with the brand. However, the brand also resonates with older consumers too, remarks Allan.

Convenience, quality and price are among the selling points for the brand’s diversified consumer demographic.

Packaging is another attractive feature, which likewise offers several advantages from a logistics standpoint.

The canned wine is sold in a 3-pack, which holds roughly the same volume of wine as one 750 ml bottle. A case of West + Wilder’s canned wine is about half the size and weight of a regular 12-bottle case of wine.

This worked in the company’s favor when they were bidding against “bigger brands with bigger dollars” to have West + Wilder carried on airlines and cruise lines, explains Allan.

“We knew that the simple weight and logistical efficiency of our product was an advantage,” he said. “This was especially apparent in the cruise line industry,” where ships that are transporting thousands of people are particularly concerned about efficient use of space.

For instance, “We can get 90 cases of our wine on a standard pallet, compared to 56 cases of bottled wine,” says Allan.

Aside from the density and weight advantages of canned wine, the aluminum is more sustainable than glass, adds Rochford.

“Cans are good not only from a logistics standpoint, but also from a sustainability aspect, because it’s so much easier to recycle and reuse aluminum as opposed to glass. Aluminum is cradle-to-cradle and you can keep on reusing it if you recycle it properly. But, glass degrades and you have to use less of it each time you make a new glass container,” he says.

Most of the fruit used to produce West + Wilder wine is sourced from Sonoma County (California), with Oregon and Washington also providing some of the wine used in the winemaking process.

Tanker trucks transport the bulk wine to production facilities for the canning process. However, during peak season, finding capacity is sometimes difficult.

“It can also get very expensive moving wine around,” says Rochford, who says the goal is to find the “right sized” truck for each haul.

The perishable nature of wine adds to the logistics complexity.

For example, it’s best to avoid underutilization of the tanker truck. “If you put 3,000 gallons of wine in a 6,000 gallon tanker truck, you’re leaving 3,000 gallons of headspace and air in the tank, and that’s not good for wine” because it promotes oxidation, explains Rochford.

The wine must also remain in a temperature-controlled environment. “The requirements for canned wine are the same as bottled wine,” Rochford emphasizes. “Temperature is always the best way to go.”

Meanwhile, the impact of COVID-19 is being felt all along the wine supply chain, not just at the retail level.

“One of the unique challenges right now is getting labor for the bottling lines,” says Rochford.

“The bottling lines are available, but you can’t find 8 to 10 people to help you operate the line. There’s also the responsibility aspect: do you really want to be responsible for having people work in close proximity to one another?”

Although California’s winemakers are generally allowed to continue operating because they qualify as an essential agricultural industry, that doesn’t mean it’s easy to find labor to work the bottling lines. People are increasingly hesitant to work closely to one another, while others left to find work elsewhere.

“Because of the fires in California over the past few years, we’ve lost a lot of workers to the construction industry,” says Rochford. On a positive note, instead of relying on migrant crews that were hired seasonally, the industry has begun hiring more full-time workers and raising the pay scale, he says.

Nonetheless, bottling lines require maintenance and repair. “We haven’t seen it yet, but what if a line needs a part or something needs fixed, but the company you depend on doesn’t have the team in place? Those kinds of things can potentially slow the business down,” says Rochford.

The wine distribution side of the business also has to adapt. “The challenge is to stay agile and nimble, and refocus the sales teams to work differently,” says Rochford.

Wine reps are no longer making in-person visits to retail shops and other outlets. “They’re going to be forced to be better communicators, and to get better at matching wine to the buyers’ requirements.”

Rochford acknowledges that, “We’ve also had to think about how to maintain the same level of customer service, and introducing and presenting our wine without being in front of the customer.”

However, “The people who can rise to the current challenge are going to do very well,” he says, “and those who decide to just write off the year, may end up disappearing.”

Employee Health Top of Mind for Wine Industry

SCSparrow Staff · April 2020 ·

Businesses are clearly worried about the health of their employees right now, and the wine industry is no different. Wine production is still very labor intensive, especially for smaller producers, with both temporary and permanent employees working in all aspects of the winemaking process, from the vineyard to the bottling line.

Louise Domenitz, marketing director for eProvenance, a provider of global monitoring solutions for wine and other commodities, such as fine art, that are sensitive to temperature, humidity and other environmental conditions, said clients are concerned about the health of their workers, as well as the potential impact on operations.

While wine producers are generally allowed to continue operating because they’re considered an agricultural business, they are aware of the potential for disruptions to the supply chain if there is a “surge in people falling ill, particularly if they are operations managers who may not be easy to substitute or replace,” Domentiz explained.

However, “With revisions to regulations changing almost daily, and more countries opting for ‘lockdown’ mode, the situation may be very different at any moment,” she emphasized.

Likewise, “As more is learned about the transmission of the virus, more adjustments will likely be made in logistics/handling guidelines and practices,” added Domenitz.

“For now, most of our clients continue to ship and monitor their shipments. We continue to operate and provide results and analysis to our clients. Obviously, getting results back also assures clients that their shipments have arrived as intended.”

Kenny Rochford and Matt Allan, founders of West + Wilder, said the wine industry is already seeing some impacts on labor, especially on bottling lines. Not only is it getting harder to procure temporary labor for the lines, workers are also understandably concerned about working in close proximity to one another.

Chateau Went Poof: Can Winemakers Attract the Next Generation of Consumers?

Lara L. Sowinski · April 2020 ·

Ok, Boomer. As hard as it is to believe, the younger generation of consumers doesn’t share your penchant for wine, and it’s raising concern among winemakers.

Part of the reason could be the growing sober-curious and mindful drinking trends.

According to the UK’s Totaljobs, a leading jobs board, younger consumers are more likely to identify as mindful drinkers than the Baby Boomer crowd. A recent study by Totaljobs found that 37 percent of Baby Boomers (b. 1946-64) described themselves as mindful drinkers, compared to 48 percent of Generation X (b. 1965-80) and 56 percent of Millennials (b.1981-96).

Improved weight management and physical health were cited as the top two reasons for consuming less alcohol or eliminating consumption entirely.

In the State of the US Wine Industry 2020 report, Silicon Valley Bank’s Rob McMillan, executive vice president, explained that Baby Boomers, who control 70 percent of discretionary income and half of the net work in the U.S., are heading towards retirement and dwindling in both their numbers and per capita wine consumption. At the same time, Millennials aren’t drinking as much wine as predicted.

McMillan pointed to other “headwinds” in the report, especially when it comes to younger consumers. These include the wine industry’s need to effectively promote the health benefits of moderate consumption, to recognize the growing threat from wine imports and substitutes, and better understand younger consumers’ values in order to give them a reason to buy wine over spirits.

Despite the headwinds, the report revealed some finer notes, too.

Last year’s strong economy is helping Gen Xers and Boomers alike increase wine purchases above the $9 bottle price, and led to record U.S. wine sales by value in 2019 (although the impact of COVID-19 going forward could be a spoiler).

Furthermore, “The large Millennial population hasn’t begun to embrace wine. While that’s a negative, if we look at it from the other side, it’s also the wine industry’s largest opportunity,” noted McMillan.

An oversupply of wine in the market currently will also “allow for better-quality juice in lower-priced bottles, which improves value and will provide an incentive for some Millennials to become more consistent wine buyers,” he added.

Direct to Consumer (DTC) sales remain promising in the overall wine market, and that’s good news for logistics providers that specialize in handling wine, especially for the DTC segment.

“Luxury wineries sell most of their wine through DTC channels,” stated McMillan. “Prior to 2016, there was significant channel shifting away from wholesale and over to the DTC channel, as SVB (Silicon Valley Bank) survey results showed. Since 2016, the shifting has stabilized, and DTC sales have remained right at 60 percent.”

Meanwhile, “It should be noted that with only seven states still prohibiting direct shipment of wine to consumers, the potential expansion of direct sales from the opening of new states to direct shipping is now more limited than in the past decade. Growth in this segment will come from new subscription models and from wineries growing their sphere of influence and taking their direct sales efforts and winery experience on the road,” he stated.

Nonetheless, “One of the more interesting growth opportunities comes via the U.S. Supreme Court’s ruling in Tennessee Wine & Spirits Retailers Association v. Thomas in 2019. It’s a crack in the wall that could help unwind other protectionist barriers against direct shipments of wine from retailers. That ruling may provide other sales options for luxury wineries, particularly for larger retailers with a strong existing experience shipping wine direct,” McMillan concluded.