Specifically, the patience and long-term thinking that family owners can afford in running a winery and building a wine brand manifest themselves in a few critical ways:
- Investing through a downturn: not having to report to the stock market/investors or a powerful Board of Directors allows these winery owners to think beyond short-term P&L, and be able to make tough yet potentially smart investment decisions when the markets are tough (e.g. investing in CAPEX during the financial crisis or housing crisis).
- Brand building & maintenance: given that it's tough to accurately attribute the returns (especially in the medium to long term) to branding and marketing efforts, especially in an industry with fickle and unpredictable consumption preferences (i.e. not consumables used on a daily basis such as toothpaste) such as wine, one can imagine that wineries might have a tendency to under-invest, especially if the returns to investing in branding a varietal or region is shared with competitors as well. Similarly, given pricing is a strong signal for brand equity, family-run businesses who do not face short-term profitability pressures are less likely to discount to drive short-term sales, at the cost of long-term brand image
- Sustainable farming: Ivo mentioned that biodynamic farming reduces both the current and long term production cost at his winery, while this might be true to him, in reality, sustainable farming is perhaps more likely to see economic benefit over the longer term (e.g. 50 year + grapevines he discussed), especially given there seems to be limited short-term topline benefits (e.g. organic branded wines sold more at a higher price).
Given the fluctuations / seasonality this industry faces, some degree of passion-driven "irrationality" - reflected in families that think long-term and are willing to invest because of their passion for wine - seems to be critical.
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