However, when I was reading the latest Silicon Valley annual report on the wine industry, I was surprised to the find that DTC sales stagnated in 2019 following years of rapid growth. Annual growth rate has gradually fallen from a peak of 30% in 2016 to low-single digits in 2019:
Given the emphasis placed on this channel, I was expecting continued growth. Yet, it appears wineries have exhausted most of the low hanging fruit regarding DTC sales. Historically, wineries had used their wine tasting room to drive direct sales and wine club memberships to their customers. As visits to the tasting rooms have also slowed, particularly in Napa, wineries have not evolved to develop more sophisticated customer acquisition channels.
Furthermore, wineries rode the boom of more and more states legalizing direct-to-consumer wine shipments. Today, there are only seven states that have not legalized this activity. The predictable trend of new states opening up has now become far less reliable.
Going forward, in order to drive greater DTC sales, wineries need to become more sophisticated in their analytics and customer acquisition capabilities. This includes implementing greater technology and data capture and subsequent analytics along with the employees to oversee this. However, given the limited resources available, wineries have been reluctant to invest in these capabilities and systems. Nevertheless, it may start becoming necessary in order to grow their business and take advantage of the new DTC sales opportunity.
Source:
“State of the US Wine Industry 2020”. Rob McMillan, Silicon Valley Bank
I also liked the report's commentary about the changing nature of wine tourism.
ReplyDelete"Today, the consumer is redefining what a visit to wine country is all about. Twenty years ago, the purpose of a wine country trip was to taste and purchase wine. A consumer might make four to five winery stops and at each visit purchase a case. That’s not what’s taking place today. The wine tourist today is going to wine country and staying in hotels or Airbnb lodging, then making one or two stops per day at a winery. The wineries are treating their guests to seated presentations that last much longer than they did 20 years ago, so there’s not as much time to visit as many wineries. Increased tasting fees are also dissuading casual consumers. It’s understandable why the average tasting room sale is up in all regions. Tourists know exactly where they want to visit before they leave home, and they are predisposed to buy when they walk in the tasting room."
As a millennial consumer, I am put off by the high tasting fees in the US, where I have to pay a minimum of $20-30 to get what I would have gotten for free in most wine regions in Europe. Wine Country Getaways created a Napa Valley Wine Tasting Index in 2014 and the price of a tasting has risen from $18.50 to $30.50 today. No wonder wine is not considered accessible! Given the stagnant sales, I'd highly recommend that these wineries lower the barrier to entry by reducing tasting prices or at least consider a tiered pricing for demographics that they are trying to attract (i.e. younger consumers).
https://winecountrygetaways.com/what-it-will-cost-to-taste-wine-in-the-napa-valley-in-2019/