Monday, April 27, 2020

What is Normal in a Post COVID-19 World?



The Coronavirus Pandemic for the wine and restaurant industries has been like getting picked up in a tornado and dropped into the Wizzard of Oz movie but without the welcoming committees. It's been dizzying to see overall demand for wine improve, at the same time premium wineries are fighting for survival. 

Wineries with a presence in grocery and drug have been beneficiaries in this massive channel shift with some showing good sales increases year over year, even spurring some renewed interest and movement of bulk wine according to Ciatti Brokerage. As an industry during the period March 1st through April 11th, total off-premise wine sales are up a massive 32%! But as most readers know all too well, that doesn't imply total sales growth is as high given that restaurant sales and tasting room sales are almost zero today.




Danny Brager from Nielsen believes that Beverage Alcohol's total Off-Premise volume growth needs to be upwards of +22% to get back to flat industry levels. At 32%, we can see today there is actually stronger demand for wine versus last year, but why?

Alcohol was treated as toilet paper for a few weeks, but let me clarify before you wander too far off the point. Consumers sheltering in place started panic buying for things like toilet paper, dried beans, canned goods, cereal, and eggs. Alcohol fit that bill as part of the "have-to-have" products so was part of the pantry stuffing trend just like toilet paper.

With a few more weeks of results, we can see that pantry stuffing doesn't explain all of the increase. Part of this increase is explained through early survey work that is revealing wine is being consumed on more occasions today. Whether because consumers don't have a commute so have more time to savor dinner at home, or a trade-off resulting from fewer restaurant wine occasions, or maybe just the fact that driving isn't involved in at-home drinking, there is no question consumers are drinking more wine and that's great news for this oversupplied industry.


    Reopening: Recognizing Opportunity


While larger wineries with distribution have done well in the past six weeks, the typical small family boutique winery has been slammed with the loss of tasting room and restaurant sales. Winery revenues have dropped typically between 40% - 60% of normal in the same period. Everyone has been scrambling to conserve cash while searching for the yellow brick road leading to new sustainable business practices. 

What has now become clear to every small winery owner is the overfocus on the tasting room model at the expense of other paths to the consumer such as investments in online, data mining, and remote sales, has cost dearly. 

But change creates opportunity and consumers and wineries have each recognized in this pandemic that there are digital ways to conveniently move wine. In fact, online sales of wine and alcohol are up over 300% compared to the same period last year. That's mostly from online retailers, but without tasting rooms being open to deliver sales, smaller wineries are now being pushed to discover new approaches to tap the online channel too.


Whether you are a small winery or an independent restaurateur, these have been the worst business conditions arguably since Prohibition and the Great Depression. Naturally with the preceding as the backdrop, its no surprise that today everyone is focused on survival. Rightfully so, but I think it's critically important to shift gears now and begin to prepare to reopen tasting rooms and normalize business conditions. 


      Reopening: It's Coming Faster Than You Think


Dorothy wasn't given a timeline for getting home and we don't have one to get us to a normal state either, but we still have to scenario plan because we can't start with just opening doors like the olden days in February. There is far more effort that needs to go into planning now well in advance of government orders allowing us to restart.

I previously suggested that June 1st would be a good date to plan for reopening in a prior blog, and that still looks reasonable. To be clinical for a moment, death rates are dropping and current modeling used by the CDC show deaths dropping to zero on July 2nd. 

So the question everyone wants to answer is: when should we begin to resume life? Do we wait until July when there is one death in the country from this virus, or is there a better approach?



We are already seeing some states and locales loosening restrictions and allowing a few businesses to reopen - of course with backlash from people who correctly point out we aren't through this disaster yet. But we are making progress in the debate. 

The fact that we are having this debate and not shouting down people with the restart point of view is part of the process that will move us from the fear of leaving our homes, to trust that it's safe to leave. But the first phases of normalizing are already taking place.

In Seattle, near one of the earliest epicenters of the virus, the city decided to reopen the Ballard Farmers Market. (below video) Montana, Oklahoma, Mississippi, Georgia, South Carolina, and Alaska have started to reopen or announced relaxation guidance and timing. Georgia has reopened bars and restaurants with capacity limits, sanitation requirements, and dozens of other precautionary measures which is something we have to look forward to and perhaps use for modeling our own response.



ColoradoMississippi, and Tennessee are relaxing some orders and are part of a number of states promoting the phrase “safer at home.” The phrase isn't fully defined in the same way by everyone but in this context, it is an in-between step where more vulnerable populations are asked to remain at home while others begin a gradual return a more normal life.

That is all an important preamble to begin the discussion of what the wine business will look like next. We have to guess what reopening will look like because we want to find the right paths to the consumer and at the same time, want to avoid hitting some brick walls.

      Reopening: Different Than What You Left


You will remember from the story, that when Dorothy and her colleagues arrived at the Emerald City, all wasn't exactly as they had imagined it. The same will exist for the wine business. But reopening is certainly an exciting vision off in the distance!

When we do open the doors again, the consumer will be different than the one we left in March, and their purchase patterns will have evolved as well.

What are some of the changes to expect? Many believe that the present consumer trend of buying higher-production brands in grocery has to do with the consumer now shifting for comfort in a time of crisis but I'm not a believer that will continue through the forthcoming recession. 

I think behaviors behind purchasing in grocery stores are largely panic influenced and not a reflection of real consumer demand. I think consumers are buying larger production brands because that's what's being sold in the grocery stores, not because of comfort, so I can't predict that will continue. What about price increases in the grocery channel? Is that a trend that will continue?


Price discounting in the family-run winery when tasting rooms are closed, and price increases in grocery stores when distributors are fighting to keep store shelves stocked isn't a true reflection of normalized demand either. 

There is too much emotional noise to suggest these trends will continue out. Simply said, with the growth rates in off-premise, distributors don't need to use promotions and discounts for the present and that raises the price. Neither case - what we see in boutique wineries or what we see in off-premise is indicative of what I expect when we reopen tasting rooms.

Interestingly to me though is the $20-$25 price tier. That continues to perform ahead of all other price tiers in off-premise in every weekly period since the beginning of March according to Nielsen. That's an interesting trend by itself, but how can it be that in a period when we have an implied unemployment rate of 17%  - the worst in our lifetimes, that we also see higher-priced wine moving so well? 

Part of it is due to channel shifting and panic as discussed, but I've been suggesting for some time that the retiring boomer would be moving down in pricing appetite while the younger consumer will be trading up as they find their financial footing. That perspective might give us a hint into the consumer we will discover when we reopen.


      Reopening: The June 1st Consumer


At the end of the Wizzard of Oz, Professor Marvel came clean and acknowledged he was a fraud but he did have a way to get Dorothy home. Then the dumb dog jumped out of the balloon basket chasing a cat and Dorothy ran after him, leaving the professor sailing away and seemingly with it, Dorothy's only opportunity to find her way back to her home and normal life.

Life, when we get back to reopening, won't be the same as it was when we left in mid-March. The consumer will have evolved and found new ways to satisfy their wine demand away from the tasting room, and among other things - they will be a younger crowd. That's an opportunity we don't want to let sail off into the blue!

That's one point I want to underscore: With this restarting of business, please don't try and attract younger people to wine country by talking about your wine quality, soils, or how bespoke an experience you will create. PLEASE INCLUDE THE CONCEPT OF FUN WHEN YOU REOPEN! Everyone, old and young, wants some fun after this experience so that has to be what you sell first.

I have quite a few thoughts that you can think through that may be of help next. So why don't you click your heels together three times and  ... well ... ok nevermind. That's a little too sappy. How about you just read my views of what June 1st will present below and we'll leave Dorothy and Toto out of it.

Returning To Normal:

  • We will be in a recession of unknown length and depth and like prior recessions, we will find that consumers are more frugal on the whole.
  • Different from past recessions, this one hurt lower-paid hourly workers more but will leave typical wine consumers less impacted and still employed. That has the potential to make for a shallower recession in premium and luxury goods.
  • With a still sizeable oversupply of wine and competitive wineries offering discounts to increase sales, we will see price drops and shoppers expecting deals. Segmenting consumers will be key to driving successful luxury strategies.
  • The state reopenings taking place now are phasing in relaxed orders, and we should expect the same precautions for wineries. A lower level of traffic in the tasting room is to be expected as people work through fear and move to trust. Those wineries that don't have a by-appointment approach to the tasting room will have to adopt that to ensure customer flow doesn't overtake mandated lower capacity limits. 
  • Reduced capacity for tasting rooms means reduced revenue - unless you find a way to enhance the other off-site sales channels.
  • Rethink your tasting fee approach to a variable pricing model, perhaps cutting the fees in half or even waiving them for slow periods during the week or day, with higher fees at prime times. Use segmentation strategies and attract younger consumers with different music, messaging, ambiance, a greater use of outdoors and lower fees during slow points.
  • A repeat of a point from other videocasts, find an "on-ramp" for new consumers. If you expect to have a novice younger consumer showing up and buying $45 wine, you may be disappointed. In this time of excess supply, you can produce a wine that is value-priced for online sale or to sell away from the tasting room. Two caveats: 1) please do not sell a materially lower priced wine in your tasting room. It will cannibalize sales. 2) This strategy won't materially improve profits. If it's break-even that's fine, as long as you use it as marketing and don't try and grow it every year. It's marketing.
  • With slower startup sales compared to the past, wineries are advised to pay close attention to staffing levels and manage staff size tightly to revenue growth and activity measures.
  • One creative use I've seen in oversupply in the past is to create a bottle of wine called "gratitude," or "thankfulness" ... something along those lines, and surprise a customer with a gift of the wine when they buy a case or half case. Just be careful about the packaging costs and to keep it special, don't offer it for sale. That ruins the impact.
  • Tasting rooms will need to be prepared and enhanced to reduce community spread. Local and state orders will create some policies, but something as simple as handing a glass to a customer has to be considered as a hard surface that can be a transmission point. Do customers pick up their own glasses from a washing rack? Should tasting room employees wear masks and gloves? Should bars have a plexiglass sneeze guard installed? Will social distancing require six-foot separation between people coming in the same car? What signage and messaging should you prepare and how will you position and use it? What cleaning approaches will you insist on? Will you provide free-standing hand sanitizers to use at the door? Many wineries will need to hire a receptionist to keep people from overfilling the tasting room.
  • With mandated limitations likely on capacity, wineries should be thinking about creative ways to use the space outdoors to get closer to normal capacity, even if its a popup shade covering two barrels and a plank.
  • With the closure of restaurants and shelter in place orders, Americans have been forced to rediscover the joys of the family home-cooked meal. CGA reports that the frequency of consumption has improved with well over half of wine-drinkers either maintaining or increasing the number of times they drink wine during the week. So in this case, wine is catching a break, and wine is being linked to home meals. Some consumers will want to continue the dining-at-home trend and it's up to the wineries to exploit it, making sure those consumers aren't only shopping for wine in grocery stores.
  • "Safer at home" orders will still have older consumers staying put when we reopen. That means wineries will have marginally younger consumers visiting if you properly market. How will you adapt your marketing and sales approach to reach that consumer, making sure they come to your winery?
  • The digital practices you developed and discovered during this lockdown will need to be reinforced and enhanced to attract the older "safer at-home consumers."
  • In another spot of good news, consumers will want to get out for the summer but won't be going to Europe or even New York. They will be looking for great experiences and staycations. Consumers staying home for the summer are an opportunity if you plan ahead, collaborate, and market your region. Consider partnering with a local restaurant, balloon concession, regional attraction, and local guided tours to create adventures and share customer lists.
  • Many reports suggest 10% to 20% of restaurants will fail before June 1st and more after with constrained seating. The restaurants that do open will have capacity constraints which will lead to a lower sales volume of wine. That puts even more pressure on other sales modes. Phone sales should be part of everyone's playbook.
  • The slow consumer shift to online shopping was rocketed forward with shelter in place orders, and can't be undone. The genie won't go back in that bottle. That spells opportunity for wine producers and online wine retailers, the latter of whom will be looking for more supply.

The Great Recession was materially different from this one. That was an asset driven recession that hurt consumers who owned homes, particularly consumers that had over-leveraged themselves. While job prospects were made worse for younger consumers, they didn't get hurt as much as older consumers because they didn't have homes or other assets. 

This recession is different in that the majority of the 17% of unemployed consumers are in the hourly workers class. They are consumers who worked retail cash registers in malls, waiters, people in hourly sales roles, cooks, cleaning crews, hospitality workers, etc. So part of the explanation of higher wine demand today lies in who is still employed. The higher-paid college graduates, the very people who we've depended on for years as wine customers will be in relatively good economic conditions when we reopen testing rooms, and that gives us hope for tomorrow.

I'll say it again: Demand for wine is up and wineries have an opportunity to recover and improve sales. We only have to figure out how to give wine consumers what they desire, delivered to them at the right price, and through the right channels. When we do that, we will see success again!




What's Your Opinion?
  • Do you have a different perspective?
  • What do you see changing and how will you prosecute the change?
  • Have you learned anything from this abnormal change in business conditions?
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37 comments:

  1. Well done Rob. I admire your restraint in not saying I told you so. For the past three years you have been telling us to be conscious of what the new consumers want and be prepared digitally to take our wines to all channels appropriate for their brand. You’ve given some excellent tips into what the new consumer will look like and where the silver lining may lie. Thank you.

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    1. Thanks CP - If I said "I told you so," then to be fair I'd have to acknowledge all the times I've been wrong. So I think like the Wizard of Oz, I'll just stay safely behind the curtain.

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  2. Rob - love the analogy, 'cept we don't have Glenda around when we need her. I think your key points are spot-on! I'd re-emphasize that shifting gears now will be critical to future success - the comfortable and same-old stuff that "seemed" to be working pre-crisis ain't going to cut it. Two prime thoughts:
    1) Restructure - ever the eternal optimist, I think some companies will leverage this crisis/recovery to revamp their whole DTC approach - and they should! It is a unique opportunity to remap the whole deployment strategy - people and dollar allocations should look dramatically different than before. It may be the only time to do this without severe pain (like we haven't had enough) - smart leaders will take this chance to restructure their businesses.
    2) Lifetime Customers - you touched on this well in the article - that the younger set has different needs/values, and new approaches are required to secure them as long-lived and delighted clients. $75 tasting fees and $100+ bottles are not the answer. Resist the urge to create a better buggywhip - and get those engines revving.
    Again, loved the article and insight
    Joel

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    1. Thanks Joel. There is no question that this pause give us time to turn over our present thinking and use it as a point in time to pivot into new approaches and away from old. Management teams that embrace change and look for the new opportunities will find it. That's my belief.

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    1. Thanks Unk 1:01. Any thoughts to add or disagreement about the landscape when we reopen?

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  4. Seems like it will be a long, long time (2022?) before people hop on an airplane, check into a hotel, visit tasting rooms and go to restaurants in wine country. Especially unattractive for Gen X and Boomers who drive the tourism economy. So you reliant on mostly local, younger visitors with less money and more at-home options than they had before.

    Overlay a recession, oversupply, an ongoing up and down infection battle (we lack the leadership and collectivist society to beat this), and assumedly at some point the fed stops printing money and stocks head down to where they belong... I really am frightened for small, tasting room-dependent wineries that think things will go back to more or less normal in a few months.

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    1. Unk 1:05 - Thanks for the gloomy comment - but your point is well taken. We have to adjust to a different reality. In a world where people shelter more, travel in planes less, and we have mandated reductions in visitation - yes, sales volumes will be lower that we'd like.

      A major point I've tried to make in the past 4+ years is the tasting room model was showing age and there was a significant need for investment in online sales, data mining, and taking the experience away from the tasting room to gather club members.

      In a reduced visitation world and one where it will be some time before we find a vaccination, we absolutely have to hit the ball square - attract younger consumers and work through other channels.

      Tasting room sales will come back, but it will be slow so we have to factor that into our plans. Better to plan now than wait until June 1st and wake up and discover, we aren't in Kansas anymore.

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    2. I prefer to think of myself as alarmist vs. gloomy. ;-). In any case, I believe we'll clamp down enough to stop the economy, but not the virus.

      You've have been quite prolific in your guidance to wineries to diversify from the tasting room. Hopefully enough of them are sufficiently motivated to make use of that advice now.

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    3. Thanks again for the comments Michael. I prefer to view myself as a realist instead of a pessimist, but when things are un-real, optimism is an ally.

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  5. Great analysis Rob. And think you are pretty accuarate. Thus , it Will be fun to track how accurate you are on all the predictions to prove your skill. See you on the street one of these days.

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    1. Thanks Dick for weighing in. We'll see in June how close I got to the reopening, but either way - I sure hope people are moving their efforts away from tasting room and over to other paths to the consumer since we won't have as many consumers in the tasting room arguably for a year.

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  6. Lots of good points and analysis. I’m interested in seeing how wineries leverage their experience with virtual tastings and develop creative ways to engage consumers. With respect to the recession, I think it is too early to categorize this recession as affecting mainly hourly workers only. We need to get through a couple of earnings seasons before we really know the impact across economic sectors (downsizing, global economy, bear market, real estate values). I hope you are correct but there is still a lot of uncertainty unfortunately.

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    1. Thanks for the post UNK 9:49.

      A forecast is just that. I can tell you much more after a couple of quarters of information on this virus and earnings. But there is no question that the recession is only beginning today. The implied unemployment rate is 17% right now; the highest since the Great Depression and will get worse and likely become the worst job market of all time. So I can make the other argument and say "in a consumer economy when consumers have no work, how can we not expect a disastrous outcome?" Economists smarter than me are debating that right now, and coming to a multitude of varied answers.

      My degree in economics ... well it was only a minor ... but those several classes in economics allow me to postulate the correct answer which is: Because the Fed is throwing the kitchen sink at the problem and so is Congress. We'll all be long dead before that's paid back but that's another discussion.

      To me, if we get to normalizing in June and restart the economy without wholesale business destruction, then we will have the reopening after a 4 month break, and a start of rehiring. We have a chance to enter a new period of economic growth off a lower base and the stock market as a leading economic indicator seems to be voting that way too. So put me in the L shaped recession camp. You can tell me "I told you so" later but this is a time where everyone hopes my optimistic view is closer to accurate.

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  7. Hi Rob. Thoughtful work as usual. Wine Intelligence data is still coming in on the US (and other markets) but what we have seen so far largely supports your points about consumer behavior. At a general level, there is clear support for the idea that wine drinking frequency has actually risen as a result of the crisis, though closer analysis shows a more uneven picture - more affluent wine connected consumers drinking more, less affluent marginal wine drinkers drinking less or abandoning the category altogether. Regarding the "June 1st Consumer" question, it's an intriguing puzzle at this point. The majority of respondents in our study are expressing profound caution about going out, attending events or visiting restaurants post lockdown (given the uncertainty over virus transmission, who could blame them?). They also seem determined to rein in spending generally, consistent with recessionary behavior (or perhaps I should say "behavior that causes recessions"). On the plus side, there is more support for the idea of smaller scale treats and experiences, 'necessary indulgences'. Our next task is to unpack the data at a segmental level and look at who is more or less likely to commit a share of scarcer dollars to higher value wine product and experiences. More soon!

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    1. FYI it's Richard at Wine Intelligence - for some reason post anonymized me!

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    2. Thanks for posting Richard. I'm glad you are digging in with consumer research to support syndicated information. I'm an observer at this stage, piecing together observations of larger data sets. But there are unusual things that stand out with this channel shift and demand increase:
      * Pricing firm in grocery but weak in boutique/premium producers.
      * Price tier in grocery that is most active $20 - $25 which is a move up and unexpected from my chair.
      * Purchase via scan, and now consumption as well via survey are both higher in the sheltering in place period.

      One of the most interesting (to me) contributing observations I've come up with is for the first time in probably 60 years, we have reverted back to the family dinner in America. That's forcing shopping in grocery for everyone, which contributes to purchase patterns. But behaviors are also shifting from a cocktail culture with on-premise, to a wine culture with the family meal.

      Is the family meal something that will stick post-lock down? Will wine continue as the go-to solution for consumers who have meals together? They say habits are formed in 6 weeks and we just slipped by that period, so maybe. That is a question for some consumer research company ... like Wine Intelligence??

      Thanks again for the post Richard.

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  8. Hi Rob,
    Can you unpack the advantages of giving away a bottle with case purchase? All I see is shipping and compliance issues with the 13th bottle?
    "One creative use I've seen in oversupply in the past is to create a bottle of wine called "gratitude," or "thankfulness" ... something along those lines, and surprise a customer with a gift of the wine when they buy a case or half case. "

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    1. UNK 9:39: Thanks for posting and the question.

      Taken literally, it would be illegal to give away a bottle of wine for free, but obviously there are ways around that by selling the case with the bottle included, lowering the average price per bottle, or offering it for a dollar.

      I had that experience in the last recession when I had an offer to take a case of wine at the full price, or 11 bottles and one 'special bottle that is not sold anywhere.' I took the case with the bottle nobody else can get because that is something every wine consumer loves to show off.

      I can't tell you how the pick and pack went. Today getting mixed cases is pretty routine so there must be a way to do it, but that's above my pay grade.

      Perhaps some other readers have a better explanation on the mechanics and compliance issues with shipping a mixed case of wine?

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  9. The elephant in the room to me is what happens to wine clubs, the ATM machine for most wineries. If your prophesy comes to pass, with reduced traffic made up of younger audiences, wine club enrollment will not offset attrition leading to further cash flow problems for wineries. The wine club model needs to evolve with the times and go digital as much as possible. Otherwise more wineries will fall by the wayside.

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    1. Ron - Thanks for the thoughts.

      The wine club model has had cracks in it for a long time, and is a point I've been making in reports and videocasts for at least 4 years if not longer. Club shipments from talking to a lot of wineries in the past 6 weeks, are actually up. There is attrition of members between 10-20%, but the remaining members are making up for lost sales at this strange time. That drives at the strength of wine as a 'need to have' good, and also at the uneven impact this recession is having on hourly wage earners versus professionals. The latter are still buying wine.

      The way we acquire club members - to your hidden point, absolutely has to evolve. It doesn't have to totally ignore the tasting room as a source for club memberships, but we have to attract members in other ways ... Zoom tastings, pop up tastings or "taking the experience on the road,' which is a phrase I've been using to place hold building your brand away from the winery using a regional approach.

      From a metrics perspective, if you are limited to 50% occupancy when the tasting room opens, you should have 50% fewer signups for your club. That means to stay even in your club sales, you have to solve for club signups in new ways - digital, analog, data-driven or digging out your rotary phones.

      We have to evolve the way we sell and market wine is the point, and some wineries have already begun that transition.

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    2. I would not underestimate the power of higher conversion rates w/ more 1:1 or reservation style tastings vs. the normal walk in model. Obviously dependent on how tastings were set up previously, but for those that operated a walk in only business, this should be a conversion driver.

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  10. Pat Jeffries - wine industryApril 29, 2020 at 12:50 PM

    Rob,

    Great article to help us as we navigate the inevitable and this new landscape. As the old adage says, be the change or be forced to change. I will be using this article as a guide during my next team meeting. We will tap into our inner Scarecrow, Tin Man, and Cowardly Lion, using our brains, our hearts and our courage as we navigate down the yellow brick road. Cheers.

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    1. Pat - Thanks. That makes my day Professor. Feel free to add it other thoughts or disagreements - but yea ... we have a lot to do, little time in which to do it, and the results of our efforts are going to create winners and losers. Change is now mandatory for success in all cases, and survival in some cases.

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  11. Great article in an interesting time. I am a winery owner operator in my mid 30's, and I think my perspective on this is very different than what a lot of commenters to this article have said.

    While many people in the wine industry are probably looking at all of the negatives here, there appears to be a great opportunity for winery owners/operators who are more tuned in to the younger customer (either because they are younger themselves, or they are open to adapting), to thrive. I don't think DTC or the tasting room is dead as a whole, but it has to change to cater to younger customers. The old school tasting bars with chachkies everywhere, classic rock playing, and retirees working behind the bar is going to be at a significant disadvantage to a modern, fun, engaging tasting experience. This scenario seems reminiscent of uber entering the taxi market. Instead of adapting to the new customer, the taxi companies dug their heels in and said this is how this industry works - deal with it. 15 years later, those taxi companies who dug their heels in and refused to adapt have died. Like it or not, the younger customer is coming, and just like with taxi's, we will dictate how the industry serves / interacts with us.

    Further, with not much else to do these days of lockdown, I have polled a fairly large group of my peers (think 30-45 year olds), and overwhelmingly there is no hesitancy to travel domestically. On the contrary, our polled group can't wait to get out of lockdown and out and about. As soon as there is an approved method for them to leave their homes, condos or apartments, they will be out and looking for engaging experiences to replace large international vacations. For those of us in wine countries with large urban centers fairly close, there is a great chance we see increased tourist activity from those younger groups.

    Last from me is just something to think about - everyone references millennials like they are fresh out of college and have no money. And while the very low end of millennials is indeed in their early 20's, my side of that group is approaching our prime earning years, we have disposable income, and have been starting to go down the wine rabbit hole for a few years now. It is frustrating to hear my winery owner peers not be able to understand that "millennial" is not a blanket term for someone in their mid 20's. I think the industry would be well served to stop talking about generations, but rather focus on age groups. Attracting and engaging with the 35-45 year old demographic is always going to be a key to success in the wine industry - it doesn't matter what generation label has been applied to them.

    Rob - keep up the great articles and keep hammering on fun/engaging experiences vs soil and science nobody cares about, it is the right call!


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    1. Unk 8:31 - Thanks for the thoughtful post. I really have nothing to add. Everything you say is something I've said and agree with.

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  12. Thank you for the post and the fuel to kindle us out of the *stunned phase* the shelter in place has wrought. It is vital that we consider what’s next, the changes, overhauls, etc.
    There will be trial and error, and error … and I agree w Joel Miller, and a few of the other comments (from Unknown, etc) that have a more cautious thought for the unknown future of recovery (the science of the virus, the 2020 election, the food chain in the US, travel…).

    So In response I offer one hope and one critical observation I think you missed:

    One Hope:

    You asked: “We can see today there is actually stronger demand for wine versus last year, but why?”

    I HOPE that we have seen a dramatic shift in mealtime habits in the US. May I call it the Franco-vinification...or euro-vinification of the American mealtime?
    People are finding more (and creative) ways to sit down together, cooking at home, sharing around the table and enjoying wine … daily, as the French and Italians do. It is a silver lining to come out of this massive disruption.


    One piece I think you missed:

    You said: “The majority of the 17% of unemployed consumers are in the hourly workers class.” AND, “Larger wineries with distribution have done well in the past six weeks…”

    The Missing part of the picture on unemployment in F&B: Layoffs, furloughs etc. are still ongoing…and it is not *just the hourly workers* … I and many of my colleagues in middle management/sales office execs that worked for wineries making between $50-90K are laid off, furloughed or permanently released from our jobs. Experienced on-premise distributor sales execs in several states with southern Glazers Wine & Spirits, Young’s Market Co, RNDC, etc, have all been furloughed (possibly permanently released) from work… and many of those seasoned sales reps made $100k+. Owners and GM’s like Danielle Hamilton of Prune in NYC has likely lost her successful restaurant business of 20 years ( NYT Article Link ). AND these wineries (large and making it through grocery store sales) and distributors in multiple states are re-casting 2020 sales projections *downward* by 10-20% from last year. Senior execs if they still have their jobs are taking 10-20% pay cuts. Those are not losses for hourly workers … those will ripple out in ways we have not yet seen.

    I appreciate trying to re-envision a future with the wine (and F & B) industry intact... recovering even. We would all desperately love to wake up from this bad dream and recover, yet I’m not sure we can see that clearly enough when our business was premised on social interaction, the close sharing of food, wine, the air we breathe ... and space where events, wine, music, celebration, In person gathering was the currency we based our business upon. How will that work wearing masks?

    We will be lucky to have 50-60% of these jobs come back by 2021. I don’t think we have enough information to envision what comes next. And more bad news comes today re: -4.8% GDP: the steepest contraction since the last recession in the U.S. (WSJ Link)

    Certainly projecting and re-programming the ways in which wineries interact with consumers is essential. Lowering prices everywhere possible is likely necessary. Ideas that meet the “safer at home” template, like offering wine subscriptions for the daily dinner wine (arriving monthly) instead of wine clubs (a minor but familiar tweak on the current SOP) And adding remote activities, food & wine pairing kits, video and live tastings and so many more creative ideas that can be shipped and experienced in peoples homes with their trusted group of friends and family seems to be the next phase of how we operate. Until a vaccine, herd immunity, new government programming that supports our industry, and/or a sense of safety settles into our modus operandi, the landscape to recovery will continue to shift in uncertain and dramatic ways.

    I’m going to go open a bottle of wine now.

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    1. Lisa- Thanks for your post. I see a lot of fear in your writing, but you are rational and you're not alone.

      I'm purposefully not reciting everything that is askew these days, because there aren't great solutions for the problems foisted upon us. We can't make a vaccine, can't fix unemployment in restaurants, and can't get everyone tested.

      What can we do? That's my focus because that's what we control. Beyond that, where are the 'green shoots' that might be less visible to many people. That's what I try and vocalize today because that's something some might miss.

      You're point about dinners at home is one I have posted in this blog in a of couple places. Overall wine demand has it's best growth rate in years, and it's not just pantry stuffing. This is the first time in 60 years we are having dinners at home. That and a few other factors have made wine a part of dinners today and it's becoming a habit. I believe that will continue past sheltering in place, so it's up to wineries to craft solutions to get their wine to the consumers who want to have wine with their family meals. That's marketing.

      And what about online sales? They are predictably blowing out the roof. That is an opportunity too, but wineries have to make an investment and focus on that channel to make it work for them.

      Then there is the whole discussion of 'the experience away from the tasting room.' Club sales are up as well but we need to find new ways to get club members into the club besides that tasting room.

      There are many things we can control to have success and that's where I'm putting most of my mental energy. But I'll tell you a secret: I have noticed all the bullets coming our way too. They are hard to miss. I worry too. But sometimes faith - though it's intangible, is powerful. No ... not the kind of faith that just blindly thinks everything will work out fine. But I do have faith that this will end, there will be better days, and that I can help offer some views on how we as an industry can make that happen.

      When I am down and out of strength there is one thing I have always remembered that my mom taught me: "The sun will come up in the morning." Some nights in my life I've stared at the ceiling unable to sleep and needing something to get me to sleep even. But when I do and wake up, something about that sleep makes the next day more tolerable.

      We'll get through this. I guarantee it.

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  13. Ah, well. Uncertainty, yes. But perhaps more accurately, what you hear is mourning.

    An essential piece of food, beverage and hospitality is sharing the same space, a bottle, a plate, and the very same air. That is gone, at least for a bit. There is a crackling energy shared between two or more people in that space over a bottle of red wine, lollipop lamb chops and the moonrise.

    Oh how I will be missing that.

    So I'll say I'm mourning.

    Yes, also fear of the uncertainty, but anyone who has jumped out of a plane, or been diving to 147 feet deep in the blue hole has enough steel in the veins to weather the viral storm too.

    I definitely appreciate the perceptive and personal reply.
    And most importantly, the note of optimism.

    Awaiting the sunrise.
    Thank you, Rob.

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    1. Lisa - This will improve much faster than people think, but it won't be even when it does. There will be winners and losers. Losers will be the ones who aren't already changing and adapting and open their tasting rooms hoping things will be the same. But there will also be new people coming into the industry taking over some marginal wineries and giving them new life. That is another part of change that is painful - but necessary for us to point the ship in the right direction. New people bring new ideas and skills.

      The business has been around for 8,000 years, so this is an unnoticeable blip in that context and a reminder that we'll all survive!

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  14. As usual--great thoughtful analysis on the macro effects of this economic wave. Also as usual--not much of note for premium winery products' biggest fans, the independent local wine shop owners as brand introducers and cheerleaders. Any thoughts for the brick and mortar people?

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    1. Anon 12:23. Thanks for posting!

      The small wine shops have the same opportunity to sell online as the wineries. Some retailers have done quite well in this pandemic, shipping wine to thirsty shuttered consumers. They already created and were selling digitally before the crisis though. Diversification of sales streams has never been so obvious a need as now.

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  15. I would encourage wineries to thoughtfully target key independents and have the retailers do some of the Zoom leg work, instead of so much DTC.

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    1. Thanks Sophia for the comment. It is a fair point to make that no retailer will sell wine without being provided with content and given the tools and encouragement to do so.

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  16. Hi Rob! Lots of great info here. Question regarding phone sales. You said everyone should have phone sales as a part of their strategy. Can you elaborate a little more on this? Does this truly mean telemarketing/telesales? Calling up members or those that have a profile with your winery and literally asking them to buy wine? I have a hard time with this one because I know I wouldn't want that phone call, but maybe I'm thinking about it in the wrong way?

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    1. And does this all still apply if you have a pretty solid email marketing strategy?

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    2. Unk 6:01 - you are a little dated in your views. It's like you still think its February or something!

      IMHO, sales come in a couple forms. One form is the guy that hovers on you when you walk on a used car lot and wants to know if you are looking at buying and when. The other form is more about helping someone. The latter approach is the only way I've been able to be an effective salesperson. I couldn't have a job that had me misrepresenting my product or service.

      To me, phone sales are a natural extension of tasting room activity where you're hosting and developing connections with your guests. In a perfect world where you make friends, wouldn't it be OK to call that person back up and engage with them; tell them what's happening at the winery? Some wineries do assign a single individual to a club member to make follow on calls, but in reality tasting room personnel are often assigned tasks in calling. Obviously, when things are slow in the tasting room, that is a good time to call.

      An additional point of guidance - it's really about establishing connection with a human. It's high touch client care. You don't have to sell wine on the phone to have value. You can let them know what's happening at the winery, ask them how they are doing, and if they are planning on coming out this year, can you help get them set up at hotels and restaurants or set up appointments at other wineries. The list of things you can do is lengthy and all accrues positively when done well.

      Wine Business Monthly has a Webinar on Wednesday you might want to attend if you get this:

      Details:
      Winery Phone Sales Management Best Practices: Lessons from the Gurus
      Date: Wednesday, May 13, 2020
      Time: 11:00 a.m. - 12:00 p.m. PST

      Register Here:
      https://www.winebusiness.com/?go=getNewsLink&dataId=230700&ref=rss

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