SVB Annual DtC Benchmarks

Direct to Consumer sales now represent 60% of the average winery's revenue, but the real growth in direct sales has only taken place over the past decade, dramatically accelerating in the past 5 years. While it might seem like wineries have been doing this for a long time, it's difficult for me to say direct sales have been a professional discipline.

In 2013 I published one of my more popular posts addressing the problem the industry faced in finding good Direct to Consumer Managers. Since it was a new discipline, it wasn't possible to find experienced managers. That is starting to evolve with time, but we are still scratching and clawing our way to direct sales success, learning from each other as we go and playing a little bit of follow the leader. Some of that is good and some not so good which underscores the importance of data.

The Tough Questions Wine Clubs Face

 

After many years of flailing away looking for the right strategy, we are seeing DtC sales homogenize around a common theme. Wineries build a tasting room with a design statement. That's 'the experience.' Customers come to the winery, pay a fee and receive a curated tasting of wine. At the end of the tasting, the customer is invited to join the wine club and somewhere around 7% accept. It's working, and if you believe the stats that came out yesterday, DtC sales in February 2017 were 37% higher than February 2016.

Annual DtC Survey is Open!

Today, the eleven largest wineries are moving 80% of the wine sold in America, while distributors continue to march toward complete consolidation. The other 9,000 wineries in the U.S. are left to compete with each other for the remaining 20% of case sales.

Not their Fault

I don't blame wholesalers. They have no financial incentive to take on that mass of small customers. Add to that the decline in restaurant sales, which historically have been a large part of family wine sales, and it's hardly an exaggeration to say that Direct to Consumer sales are required for the survival of small family wineries now. It's really their only viable path to market, and yet the industry itself is still barely novices in selling wine direct.

Will Boomers Keep Buying Wine?

The title of this piece is the question all wine companies should be asking today, because boomers are the dominant cohort across all price points above $14. Can they continue to buy your wine? 

I've been saying for nearly a decade the anticipated ascendance of millennials as the top cohort was greatly exaggerated as to both timing and impact, but their coronation is coming and the day when boomers no longer dominate consumption is also fast approaching.

2017 State of the Industry Report

Most of the wine business has already developed their strategic plans for 2017 and is starting to execute. The plans had to be put together using history as a guide, laced with a hint of a best guess. That's just the way this family owned industry has to roll.

Louis Vuitton: A Story in Brand Destruction

 

Rome: The Eternal City

My fiance Jackie and I just got back from a spectacular 2 week wine cruise with Darioush Winery that started in Lisbon and ended in Rome. 

I've never been to Rome so we tagged on an extra 5 days at the end of the cruise to see the sights. 

There is a problem in going that extra week though. I don't care how big your suitcase is. By the time you've lived out of it for 2 weeks you are flat out of clean clothes so selecting something to wear becomes a challenge.

What I underestimated is just how that challenge could impact our shopping experience at one of the world's top luxury retailers. Ask yourself as you read though, 'could this happen at my winery?'

The Election Perspective from Europe

Who do Europeans Want for President?

I've been hiding in Europe while the most recent election debate has been taking place. I've been in Lisbon, Cadiz, Barcelona .... pretty much having sangria and tapas across the Iberian Peninsula. 

It's been more than civil over here, and I've really been interested to see the business growth in the region, at least with respect to tourism. My last visit here was in 2010 and things were miserable. But the usual tourist areas seem packed now which is good to see, because Spain for example still has more than a 22% unemployment rate and nearly 50% among youth. They really need tourism. In another change, after the terrorism in Nice I have noticed a larger police presence throughout the tourism areas and even some on La Rambla carrying weapons.

I fled over to Europe in part because thought I could get away from all the acrimony and derisive talk about the presidential race... and I wanted a vacation too. But guess what? People in Europe care about who the next "Leader of the Free World" will be too. It's the very first thing they want to talk about. And guess who they favor in a non-scientific poll? Answer: Neither.

You might be surprised to find the Europeans I've spoken with here seem more concerned with why these are the best two candidates we can find? I find myself explaining how our process works, and am getting a civics lesson in how other countries elect their leaders at the same time.

I've yet to find a single person tell me they would vote for either candidate but in an equally enlightening discovery unlike Americans, Europeans aren't glued to watching Sean Hannity or Rachel Madow so they aren't overly focused on the press revelations and network spin. Instead they are focused on what positives the candidates bring to the party while they go about their lives. 

I envy the Europeans because they aren't force fed the hype but I am glad we in America will soon be put out of our collective misery and we'll have a new leader. We'll have an election, I'll vote my conscience and I'm just glad it will be over for American's and Europeans alike!

But this Vote isn't Yet Over

Unlike the firm ending date for Presidential Election, the Silicon Valley Bank Annual Wine Conditions Survey which had been scheduled to close Friday, has been extended out and will now close Wednesday, October 19 at 5:00 PM Pacific time. This is a much easier decision than the Presidential Election.

For 12 minutes time, you will get the complete survey results, and dozens of relevant graphs and analysis that will help you benchmark your winery. This will be distributed only to those who complete the survey.

You can take the 2017 SVB Wine Conditions Survey here ------> [LINK]

Annual SVB Wine Conditions Survey Ends Friday

 

Face it. Getting actionable information in the wine business is challenging. You can pay more than $2,000 for an annual report on the wine business and in return, get regurgitated information. I once did that myself.

Thinking I would check on the offering of a group putting out a comprehensive report on the wine business, I was disappointed to find it was closer to a college level report that consolidated information from primary research. In fact several places cited the Silicon Valley Bank Annual Wine Report to support their findings.

There are a few places where you can get good primary research on the trends facing the business. For the past decade we've led a survey and conducted research with more than 600 wineries and the major AVA's participating from across the country each year. Why are we so lucky to get such strong participation? 

I think there are a few reasons:

1. We deliver good and needed information to the business for free.
2. We keep the information anonymous and noone can back into responses to determine who responded.
3. We've earned the owner's trust that we aren't using your information to add you to a sales calling list.
4. We give back more than we take. Only survey participants receive the complete data set back and that helps everyone in planning for the year ahead.

So I hope you will consider taking the survey this year. It takes about 12 minutes and in exchange, we will send without cost, the complete survey results, dozens of relevant graphs, and our early analysis on wine industry conditions. [Last year's survey results].

The survey is scheduled to close next Friday so please don't wait. Your participation will pay itself back many times over.

Take the survey now [LINK]

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The Scourge of Tourism Circa 1972

Is tourism a problem? It depends who you ask, but it's impact has been feared and debated for a very long time as an issue. Even way back in 1972 when many of us were still living life in black and white, and cable was part of your corduroys instead of your TV, tourism's impact in the Napa Valley was being reviewed and questioned. 

Some things have have remained the same today but the narrator in the above news piece offered an interesting view into tasting rooms of the day when he said tourism was "important to PR, and to a lesser extent, sales." 

You see, tasting rooms back in the day weren't put in place to sell wine. That's what distributors did. Tasting rooms were nice-to-haves. My how those days have changed!

Today tasting rooms and tourism are linked to the survival of family wineries. Direct sales represent 60% of an average winery's sales, and tourism is the lifeblood of the family winery. Without tourism and direct sales, I'd make an educated guess that 60% of the wine business as we know it would fail.

Selling Millennials Through Myths & Lies (Final Part 3)

Millennials Are Normal People?

This is the third of a three part series: Part 1, Part 2

If millennials are narcissistic, lazy, and entitled as described in our last post, you will need to quickly come up with some new marketing tactics. So instead of giving them a toaster for joining the wine club (a boomer era tactic), maybe you could give away a free mirror with every new account? Oh I know! What about giving away a tiara for the self-absorbed, and some Red Bull for the lazy ones?

Selling Millennials Through Myths & Lies (Part 2 of 3)

Desperate to find the secret of the millennial code, media and researchers have taken creative license over the past fifteen years which in the final analysis, hasn't provided the hoped for guideposts that would convert marketing strategy into new consumers - at least as it relates to the wine business. But it has created a dialogue overblowing the impact of our youngest cohort (eg, above video.)

Selling Millennials Through Myths & Lies (Part 1)

Authenticity. Only for millennials?

Just the Facts

Millennials are the most engaged and socially connected generation of all cohorts. They demand sustainability and authenticity in their products. Socially responsible and transparent companies rank high in importance when it comes to their purchase decisions. They demand customization and wide selection. They consume more wine per occasion than all the other cohorts combined.

Thirty-three percent of Millennials say they are motivated to buy more frequently when a friend recommends a wine, but 99.8% say they like any wine better when a friend buys it for them. 

One hundred and fourteen percent agree with the statement that feeding one's animal spirits premium wine is better than hitting your toe with a hammer. The remaining percentage believe morning-after flat party beer is good for hydration, so long as there are no cigarette butts in the bottle. When there are butts in the beer, their preference to consume falls to 0.4% with a statistical error rate of +/- 0.4%

Annual DtC Videocast Tomorrow - Last Chance Signup

I'm not fond of looking at pictures of myself. It's even worse when I try and grab a screen shot like the above from last year's Tasting Room videocast. Blech. Makes me sick. That looks like I'm getting ready to spit! Actually it's the end of a sentence where I'm saying 'tasting roooommmmm.' That's what I look like when I say 'm,' and it's the best I could do - I'm sad to say. But looks aren't everything. 

Market to GenX at your own Risk

Let's talk about Millennials! How exciting is that conversation? Demographers and researchers are laser focused. It's a feeding frenzy at times because that's the growth opportunity of future retail. Boomers are old news, nothing to write home about and not hardly anywhere near as interesting as Millennials.

Oh ... there is GenX of course but why talk about them? They are a small cohort.... except they are the second largest consumer of fine wine in the U.S. today and the largest growth opportunity for most wineries, but that doesn't matter. Let's talk about Millennials!

The 2016 Wine Market Council's Findings Are Wrong

      WMC: "Millennials Consume 42% of all wine in America"

The Wine Market Council presented their annual 2016 roadshow in New York in January, and using the above slide announced with fanfare that Millennials are now the largest wine drinking population in America, consuming 42% of all wine and surpassing the boomers with 30% of total consumption. They also said Millennials were consuming 160 million cases compared to 114 million cases consumed for boomers (below right chart). 

To many of us in the business the facts appeared grossly exaggerated, but the media ran with the story because it was such a senstational headline. The long-awaited ascendance of the millennial had finally come we were told, and the articles proclaiming the fact hit the wires in waves:

• Millennials Top U.S. in Wine Consumption (CBS News)
• Millennials Come out on Top in U.S Wine Consumption (S.F. Chronicle)
• Millennials are Drinking More than Boomers (Fortune)

     WMC: "Millennials and Boomers Consume the Same Amount of Wine."

Inexplicably, six weeks later at their Yountville presentation, devoid of any supporting facts or charts, the WMC offered the following totally contradictory statement in their presentation:

"Boomers and Millennials today account for nearly the same amount of wine consumption and Millennials will soon account for decidedly more consumption."

Last Chance to Participate in the 2016 SVB DtC Survey

Every year when we start the Direct to Consumer Survey I'm always a little nervous about participation. The effort required to sell wine has become more difficult by the day, and owners have to make choices about where to invest their precious time. Survey results could be viewed as nice-to-have versus a critical need, but in this case I'd argue this is a have-to-have for wineries with Direct to Consumer sales.