Expectations were high for 2020. It was a new decade, a fresh start, and a hopeful year of prosperity. Instead, 2020 has become synonymous with “dumpster fires,” “unprecedented times,” and “the worst year ever.” We received unfortunate answers to questions like “what else could possibly go wrong?” Apparently, a lot can go wrong in one year.

2020 also became a year that revealed what some people, businesses, and entire industries are made of. The 2020 Silicon Valley Bank (SBV) report foreshadowed, “The winners of tomorrow will be intrepid and willing to try new approaches that change the status quo.” That statement certainly rang true as 2020 rolled out.

The wine industry, known for dragging its feet when it comes to technology, surprised us all by taking the challenges of the pandemic head-on, adapting quickly and creatively. Even with tasting rooms closing down, travel restrictions, protests, and smoke-filled skies, one-third of wineries had better sales in 2020 than the prior year.

This year, as we dug into industry reports and resources, like the SVB State of the US Wine Industry Report, Sovos ShipCompliant Direct to Consumer Wine Shipping Report, and Paul Mabray’s 2021 DTC Vendor Flywheel, we expected to see a focus on acceleration of technology—we were not disappointed. Bringing your winery to customers through digital means is now more urgent than ever. A likely permanent shift in the way consumers buy products gives wineries an ultimatum; embrace the digital way of buying and selling wine or forfeit growth.

Looking Back on 2020 Themes

Let’s look back at our assessment last year. You’ll remember the most prominent themes were the oversupply leading to discounting, the industry’s struggle connecting with millennials, and lack of innovation in DTC strategies beyond the tasting room.

Today, the oversupply is more balanced with a lower 2020 yield, and innovation has exploded and accelerated out of necessity in 2020. Yet, the wine industry still has some work to do on connecting with millennials. What can we expect in 2021?

Themes from 2021 Reports

Wineries with DTC models and existing online sales strategies will have an advantage as new digital buying habits become permanent.
It’s more necessary than ever to capture the Millennial demographic, and the wine industry is still missing the mark.
The drop in average bottle price and focus on value is expected to stay steady throughout the year.

Embrace the Digital Experience Forevermore

Online has become the most significant opportunity for producers in 2021. Those who already had digital strategies in place in 2020 outperformed the competition. The same is bound to be true in 2021.

During the weeks that followed the shelter-in-place orders, the average family winery saw their eCommerce sales rise from less than 1 percent to over 10 percent of their total sales.

You can see the drop in point of sale (POS) activity in March 2020 and the rise in eCommerce in the chart above. As time went on and wineries began to experiment and discover new ways to sell from closed tasting rooms, POS activity began to rise while eCommerce stayed strong.

Online sales are expected to see a permanent positive gain post-COVID. Large numbers of consumers will continue to shop online now that they have experienced the convenience, not only in wine but also in other consumer goods.

We’ve reached the limit of winery growth through in-person tactics. Waiting for the vaccine to take hold and expecting existing channels to go back to normal isn’t going to work. If wineries want to grow over the next few years, they’ll need to:

Expand beyond their local region to consumers who don’t already know who they are.
Discover ways to sell to those consumers digitally, where they live, and encourage wine club memberships.
Establish a strong virtual winery experience that doesn’t rely on being in a physical location so consumers can experience your winery anywhere.

“Online selling is, without question, the change agent that will deliver the greatest transformation to wine sales over the next decade. Online sales might represent 20 percent of alcohol sales in the next decade or sooner and at the expense of three-tier sales.” - SVB State of the US Wine Industry Report

Capturing Millennials is More Important Than Ever

The wine industry has been harping about the importance of connecting with millennials for years. But now, there are even more reasons why this demographic is critical to the wine industry’s growth.

Let’s back up and explore the millennial dilemma. Millennials got hit hard with the financial crisis. While this generation tends to be well educated, many of them had delayed career and family starts because of the economy’s state. As a more budget-conscious group, many millennials prefer premium spirits and craft beer, which offer better value per serving.

Now, millennials are entering their peak earning years and many of them are professionals working from home. 2020 has shown that remote workers are more likely to buy online. Reports predict that millennials will dominate the DTC shipping channel, yet their interest in wine is lacking. This indifference to wine is a problem since millennials’ buying power will only grow. Over the next five years, we’ll see 27.9 million American’s cross over into retirement age while 30.3 million millennial American’s will turn 40. As boomers retire, they will become more frugal and adapt their consumption and spending similar to budget-conscious millennials.

The millennial generation is the largest growth opportunity for the wine industry, yet their consumption of wine tends to be within a lower bottle price range than Gen Xers or boomers. As aforementioned, many experienced a delayed career start and developed an early preference for craft beers and spirits, plus they have questions surrounding the heath of alcohol consumption—all factors that did not significantly affect other generations.

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According to the SVB report, it was made clear in 2020 after the murder of George Floyd and the following protests, that millennials expect more from brands they support. They are less interested in bragging about wealth and more interested in whether the products they buy contribute to a better world.

The future success in marketing to millennials depends on acknowledging and aligning with their values and what they hold dear. Wineries need to evolve and leverage consumers’ values when communicating their brand. This shouldn’t be rocket science since many producers use sustainable farming practices, recycled water, look to LEED Certification standards, etc. Much of these techniques are hidden from the consumer, and little shows up in current wine marketing.

If wineries can meet millennials where they are (online) and appeal to their values, we just may be able to win them over.

Bottle Prices Drop

2021 Direct to Consumer Wine Shipping Report

While the volume of wine shipped increased by a shocking 27 percent, 2020 saw the most drastic decrease in average bottle price in a decade.

Consumers were moving to online channels and were on the lookout for value. Wines shipped under $30 increased in volume by 41.6 percent last year, while wines over $100 decreased by 2 percent in volume. This pattern is a complete reversal from what we saw in 2019 when we saw an increase in high-priced wines while value-wines dropped.

These numbers make sense with more people working from home, the working-from-home population more likely to buy online, and the likelihood of those working from home and buying online being budget-conscious millennials. Plus, people of all ages had fears about the economy and were sheltering from home.

2021 will likely bring improvements to the economy but don’t expect bottle price averages to shoot up. The reports predict that these lower prices will remain steady for the foreseeable future as the DTC channel attracts newer and younger buyers.

Looking at 2021

2020 was an awful year in many ways, but it did accelerate innovation in the wine industry and shine a light on the importance of DTC wine shipping in our future. We entered 2021 with new ways of engaging with customers, a more significant reliance on technology, and a better understanding of how we can catch millennials’ attention.

The events of 2020 shined a light on some of the already present issues and made them more urgent. Savvy wineries will learn from the past to prepare for the future with a stronger digital presence and millennial-forward marketing.

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