The 2019 Wine Report—Refocus Your DTC Strategy
Rob McMillan of Silicon Valley Bank recently released the 2019 State of the Industry report. I read the report and think there are some helpful insights that you, dear audience, might be interested to hear.
THE OVERALL FOCUS OF THE REPORT WAS ON A COUPLE OF PRIMARY TOPICS.
The generational differences in buying behaviors and wine interests, specifically millennials’ disappointing wine drinking habits.
The expected plateau of growth in volume and price. McMillan suggests that 2019 growth in volume and price will be flat, based on historically low sales growth and a modest surplus of grapes which will put pressure on prices. Additionally, growth in DTC has historically been buoyed by the new opportunities that new DTC states create. With all but a few states open for DTC shipments, the energy that new states provide to the industry will slow down.
The report covers a lot of ground. I recommend that you take a read. I looked for highlights to share that relate to the topics I know—marketing and DTC sales. Here’s what I found.
Direct-to-Consumer Strategies Need to Evolve
This finding is no surprise, but it’s a good reminder. Many wineries have built their DTC business on tasting rooms. While the tasting room strategy was successful, consumer behaviors and changes in tourism are decreasing the impact of the tasting room. According to the report, tourists are less likely to visit tasting rooms at wineries that they aren’t already familiar with and they are visiting fewer tasting rooms on their visits.
Distributor consolidation and a lag in innovating alternative direct-to-consumer strategies beyond the tasting room and club models are limiting DTC growth for family wineries.
If tasting rooms are less likely to support discoverability of wineries, how do you reach potential new customers? All of us need to start thinking of new approaches to connect with wine lovers.
Despite the positive year in 2018 and 25 years of great growth for the US wine business, I believe sales growth forecasts for the next five years should be tempered. The fundamental underpinnings that created the industry growth are changing, which means the tactics that were relied upon to ride this wave of success to this point will slowly prove flawed without business adaptation. To continue its growth in the years ahead, the US wine industry needs new direction and a changed focus.
The “changed focus” that Rob suggests is to move outside the tasting room. Here are some of the recommendations, taken directly from the report:
We have to take the experience on the road, and we need ideas. One idea might be to start by picking a region — not all 50 states — in which to build your brand. Narrow the focus. Personally invest your time in that remote market. Perhaps a charity wine auction to raise money for something important regionally. Consider entertainment and educational events that build your database of people who’ve tasted your wine and already have an opinion. Take the winery to the customer:
Consider how a live online video stream at the winery might bring interest and wine country beauty to a remote consumer, even allowing them to attend a winery event from their home.
Engage the distant consumer with links to a Spotify favorites list of music played at the winery.
Stream virtual winemaker tastings.
Consider cross-marketing with other luxury companies in regions remote from the winery.
In my opinion, a “changed focus” should also be an online focus. The existence of digital is ubiquitous. It’s no longer reserved for a specific time when I’m at home at my computer. Instead, I’m online, everywhere I am, at all times.
As a consumer, I’m researching wineries when I’m at the wine store on my phone. I’m following wine experts on Instagram and reading their recommendations. When I’m visiting wine country, I’m searching blogs, Yelp, Google Reviews, and TripAdvisor for recommendations. The internet creates a huge opportunity for consumers to discover your wine. It also creates a lot of competition.
For more tips on how to delight customers online read Boost eCommerce Sales with Personalization and Automation.
A great first step to increase the likelihood that someone will discover your winery online is to leverage your most valuable asset—your customers. Encourage your existing customers to review your winery on Yelp, Google, and TripAdvisor. Provide incentives and special offers for referrals. Which leads me to the next topic that I found interesting in the report—premiumization.
Premiumization Is in Its Final Phases as a Trend
As defined by the report, premiumization is wine that sells for above $10 per bottle. This segment is responsible for 54 percent of the dollar sales today but only 29.9 percent of the volume. The segment of wine sold above $9 is expanding, up 4.1 percent in dollars and 3 percent in case volume through November 2018. But one of many clues that suggest premiumization is beginning to break down is shown in the figure below, where declining sales growth in most price segments has become a clear trend.
Keep in mind, this data is specific to retail sales.
If premium wine is predicted to decline in sales in a retail environment, wineries might want to get strategic about how they leverage their DTC channel to sell those high-priced bottles.
When it comes to the DTC channel, access to great wine at premium prices is an important part of creating a special experience for club members and allocations customers. The question is, how do you scale a premium experience for your customers?
Leslie Osborne, Head of Product at VineSpring, suggests a solution in her recent post.
In summary, the SVB report shares useful insight. It seems that the DTC channel has possibly experienced its period of easy growth and now we need to get creative.
What are your thoughts? I’d love to hear your takeaways from the report and if you’re testing new strategies for attracting customers. Email me at andrea.steffes-tuttle [at] vinespring.com.
