Alexander Westgarth is the founder and CEO of WineCap, an investment platform that makes wine investment affordable, transparent and simple.
I’ve been in the fine wine industry for nearly two decades. At first, I thought I was becoming an expert in world-famous flavors. But the truth is I learned so much more. I discovered the art of business: What makes a product stand the test of time. How to improve every year. And where to find the most dependable clients in the world.
Sometimes the most valuable lessons come from unlikely places. Here are the five best business lessons I’ve learned from fine wine.
1. Hedge against inflation.
Last year, the U.S. inflation rate hit an eye-watering 9.1%. It’s bad news for businesses that find themselves paying more for the same materials. For example, the cost of both cement and brick manufacturing increased 15% year-on-year. Unsurprisingly, the U.S. construction sector is projected to shrink by 7% this year. What’s more, staff rightly want to be paid a fair wage that keeps up with inflation, yet a study found 57% of small businesses were forced to cut costs over the past year.
Fine wine—which is famously less sensitive to inflation—has taught me the power of storing wealth into physical assets. When times are good, it makes sense to put the cash somewhere where it can’t be harmed by quantitative easing. That could be buying back shares, investing in corporate property or something else—the best decision depends on the company.
2. Understand your customer.
Knowing your customers and their unique taste is a fundamental part of the fine wine business. Some clients want to buy a bottle when their child is born to enjoy decades later at a graduation. This usually means a champagne that ages beautifully over twenty or so years. Others may be looking to strengthen a business relationship with a meaningful gift. Mature vintages are especially popular with this group, as they’re hard to source and extremely valuable.
Each client has vastly different timeframes, occasions and motivations, which will alter the type of wine they should opt for.
Wine has taught me, without a doubt, that understanding your customer is key to future-proofing your business. And research backs it up: 74% of customers in one study report that feeling understood and valued drives their brand loyalty. What’s more, companies with satisfied customers could grow 2.5 times faster than their peers.
Today, I’ve noticed loyalty is in decline. One in three customers don’t feel connected to brands and will move to competitors easily. Now, more than ever, companies must reconnect with their clientele, which starts with understanding them.
3. Stay relevant.
Wine is certainly not new. At a museum in Germany, you can find an almost 1,700-year-old vintage. Known as the “Speyer wine bottle,” it’s more than 1,000 years older than the U.S.’s independence! Yet, somehow, throughout the passages of history, wine has always remained relevant. I think it’s thanks in no small part to the attitude of winemakers. They are always thinking one step ahead.
Look at the market today, and you’ll see wineries experimenting with non-fungible tokens (NFTs). You’ll find them exploring new regions as they try to battle the effects of the climate crisis. Producing wine in places like England and Sweden might have been unthinkable two decades ago, but now it is a growing industry due to the effects of global warming. Moreover, becoming carbon-negative is increasingly important for vineyards. The art of winemaking is a constantly evolving process that requires passion, imagination and ambition.
If producers fail to capture new trends, they risk becoming irrelevant. Mead (a honey-based ale), for example, fell into decline centuries ago, despite being one of the oldest beverages in the world. The same is true for businesses. Staying relevant means pushing forward with new ideas and listening to younger generations. Think of Blockbuster or Myspace. Brands can fall into near-extinction because they don’t move with the times.
4. Improve every year.
We know fine wine improves with age. Looking at my company’s data as of June 2023, I can see at least 36 wines have delivered returns of more than 1,000% over the past ten years. But it didn’t happen overnight. Becoming exceptional takes planning, time, and care.
Just like fine wine, some of the most successful companies take decades to develop. Luxury fashion house, Chanel, has been steadily improving its brand since 1910. Gabriele Chanel began as a hat maker. It would take another 11 years before the first perfume launched. And a further 34 before the iconic tweed suit was created in 1956. In 2022, the brand was valued at $15.3 billion. But it was a step-by-step process.
Improving each year means different things to different businesses. For one company, it could be digital transformation. For another, it could mean reaching out to a younger market segment. I’d encourage businesses owners to make meaningful long-, medium- and short-term goals. Researchers found that writing down your objectives is more likely to lead to success.
5. Focus on quality, not quantity.
Growing up, I heard “quality, not quantity” a million times. Whether I was shooting a basketball, rushing through homework or swinging a golf club, the phrase came up. But I only truly understood it when I entered the wine market. You can walk through corridors, aisles and warehouses of wine that will still be worth less than one bottle of fine wine.
Quality matters. Much more than quantity. That means the quality of your customer service, the reliability of your products and the passion in your employees. I’ve noticed the companies that have grown over a century—from Chanel to Colgate—all have this in common. By contrast, 80% of customers who have left a brand did so because of a poor quality experience. Businesses that do not offer high-quality interactions and services will miss out.
Quality weathers any storm. And it keeps your most important asset—your reputation—in good standing. True value always wins in the end.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
Read the full article here