A Reboot for the Future of DTC
Back in January, we published our thoughts on both Silicon Valley Banks’ and Sovos’ industry reports in our article 2020 Wine Report: DTC for the Next Generation. In this article, we review themes we saw last year and how they have evolved in the crazy realities of 2020.
Stating the obvious—things have changed between 2019 and 2020
At the beginning of the year, we addressed the three big themes we saw; the lack of creative strategies to grow the DTC channel beyond the tasting room, possible future discounting from oversupply in California and Washington, and the gap in effective marketing to millennials.
A lot has changed in the months between the launch of the industry reports and now. Priorities have been turned upside-down both within the industry and in our daily lives. The COVID-19 pandemic shut the doors of craft producers worldwide and diverted buying channels drastically away from traditional retail and on-premise shopping—towards eCommerce.
In addition to the pandemic, wildfires are destroying vineyards and communities on the west coast and many vineyards are in danger of smoke contamination. And, a spotlight has been shown on the lack of diversity in the industry.
These issues will surely have a noticeable impact on this year’s industry reports.
Lack of DTC innovation
While the DTC channel was still growing, it’s slowing growth was blatantly obvious last year. 2019 saw a 7.4 percent increase, while the average of the previous five years was 14 percent. Part of that slow down is due to the fact that most states have already opened their borders to DTC shipping. Historically we’ve seen huge leaps in DTC sales when a new state allows wine to be shipped to consumers. Now that there are only a few states left, that boost has dwindled.
The slowdown in DTC purchases is also due to the slow migration from in-person purchases to online—not all people were comfortable with online ordering or found it necessary to make the switch to digital.
Fast-forward to March 2020, and everything changed. eCommerce became the only option in many areas as mandated shutdowns halted businesses in their tracks across the nation. Consumers who were previously reluctant to purchase online weren’t left with many alternative options, and many were surprised at how easy and convenient eCommerce was.
Cory Rellas, CEO of Drizly, an online service that delivers alcohol from stores to consumers, has access to a huge amount of data around people’s online buying habits. “We know that during a time when many businesses are struggling, delivery has provided an opportunity for these businesses to continue to provide a valuable service at a local level,” said Rellas, "Consumer awareness of the alcohol eCommerce category has exploded.”
This shift to eCommerce challenged craft producers and created a noticeable gap between those who had embraced technology and those who hadn’t. Those who were ready to sell online were several steps ahead of those who weren’t.
Evolution happens in adversity and we were blown away by the creativity that we saw—so much so that we wrote an article about the innovative tactics wineries and breweries were implementing (see our article Crafty Producers Boost Sales.) Virtual live tastings, beer trucks, and creative partnerships were just a few strategies pushing new boundaries for craft producers.
It’s a fact that online purchases of wine and other alcoholic beverages have increased, and innovation has surged, but will it last? Only time will tell if these behaviors will become habits in both consumer shopping behavior and craft beverage DTC channels for the long-term.
Oversupply issues
Oversupply issues were a top concern in 2019, even before harvest. Many believed that California and Washington’s oversupply originated from failing to provide what customers want, not overplanting. The quality was good, but wineries have been missing the mark on consumers’ expectations.
More than halfway through the year, it seems there have been noticeable changes in both California and Washington wine prices—some expected and some the opposite of predictions. Washington’s bottle prices are up +4%, and California has seen some downward trends (Sonoma -$2, Napa -$7.90, the rest of CA -$2.80).
Do these changes in bottle price stem from oversupply or the pandemic? It can be difficult to tell. The way people buy wine has fundamentally changed. We’re still learning what new adopters of purchasing wine online are looking for and whether those preferences will become habits.
Connecting with millennials
The third prominent theme we covered from the industry reports was the ongoing topic of millennials. The generation has emerged as an enormous untapped opportunity that the wine industry hadn’t quite figured out.
Millennials, who are much more ingrained in the digital age than their predecessors, were quick to pick up the online shopping trend for wine and other craft beverages. 66 percent of all products that millennials buy are online—this lends itself well to the swing towards online purchasing of alcoholic beverages.
That’s not to say that there’s not still work to be done in the wine industry to attract Millennials and entice them to sip a Malbec over spiked seltzer or craft beer. But, with the upturn in DTC creativity, it wouldn’t be surprising if we saw some momentum build in this tumultuous year.
Beyond the pandemic: inclusivity and wildfires
This past May, the uprise in Black Lives Matter and protests against police brutality and systemic racism exploded across the nation. This forced us all to look within and recognize our own short-comings when it came to diversity and inclusion. One thing became apparent; the wine industry and craft producers as a whole are overwhelmingly white.
This realization is the push that we needed to open things up and ensure that opportunities and support are provided to all people. Organizations, like Diversity In Wine and Spirits, gained momentum and spotlights of black and minority-owned businesses filled newsfeeds.
Consumers took notice and support for these businesses grew. The hope is that this is not a fad and we’ll see a more diverse industry going forward. All producers, large and small, can lead the way and make a conscious effort to instill inclusivity.
If the pandemic and police brutality aren’t enough, 2020 has already seen its fair share of wildfires and smoke taint danger. The west coast is no stranger to these events, but this year seems especially brutal with all we’ve had to endure. It’s hard to imagine surviving the pandemic just to see your vineyards burn.
Thankfully, one attribute that makes the wine industry stand out to many of us, is its ability to come together, look out for each other, and help one another. The sense of community within the industry has never felt stronger and increasingly inclusive.
Looking forward
While crises are never welcome, there are opportunities that arise out of troubling times. Growing diversity within our industry will fuel innovation and make our industry more resilient.
Fires may cause destruction, but if we stay strong and support each other, there will always be a helping hand to rebuild. The pandemic has altered the way we interact with our customers but we are finding new ways to connect.
The events of 2020 won’t kill our industry, and for some, it’s making them stronger. Those that can embrace the new digital way of doing business while continuing to innovate to combat oversupply and appeal to younger generations will not only survive but thrive.
What trends and innovations have you seen rise out of 2020? We’d love to hear from you. Contact us to share or to learn more about how you can use VineSpring to grow your DTC business.
