April 23, 2020

Wash Down: The 2020 State of the Wine Industry Report

By Angela Oemcke

Even prior to the devastating COVID-19 pandemic rolling out globally, the wine industry was moving into a low growth period for 2020 as we continued to see an excess of supply and drop in demand in the market. Typically, at this point of the business cycle some producers will win big while others lose out completely. It’s not down to luck, but down to a brands efficiency as highlighted in the Silicon Valley Bank’s 2020 State of the Wine Industry.

So, how do you get your winery coming out on top in trying times? Let’s start by understanding this: good wine alone doesn’t sell itself anymore, and neither does relying fully on that noble steed of a sales channel that has served you well over the past decade (yes, we are looking at you Cellar Doors and Wine Clubs). It’s time to find other ways to connect with consumers.

The Report pushes the idea that wineries can stay afloat by pivoting their focus on competitive issues to their business management structures. It is true that cutting unnecessary costs to improve margins is essential, but when it comes to being a winner in any business the focus must always be on sales coming in. You don’t need to be an accountant to know that you’ll have better luck finding a Domaine de la Romanée-Conti than you will improving margins without any sales. 

New dog… old tricks? 

The main takeaway from The Report is that the industry is doing a poor job in recognizing and reacting to changing consumer values, as well as in accepting the factors contributing to this. As a result, the industry players aren’t developing effective strategies to discover new avenues for growth

Now presenting, Millennials!

So why is there a drop in demand for wine? As we have alluded to, many wineries have focused on marketing means that worked for the Boomers and stuck with them to the hilt. But the Boomers have retired and eventually their market share will too. Simply, producers need to adapt the way they sell to connect with the beliefs and needs of the new generation of consumers. 

The key player is the millennial now, and though The Report indicates they are not getting around wine, this year’s Wine Intelligence Industry Report suggests otherwise, stating they are the biggest consumers of off-premise and premium wines. This presents a massive opportunity for wineries, imagine what could happen if we actually started to give these guys attention? 

Error: marketing message not sent!

The Report outlines the opportunity for the industry to tap into the millennial market to an extent.  However, The Report’s point on millennials lacking an interest in wine seems dismissive of the fact that the industry has done nothing to gauge it in the first place. Although it does incite that  industry analysts overestimated the impact of the millennial on the US wine business, assuming they were already consuming wine, and as a result didn’t give this market segment the attention it needed.

“Believing that millennials were consuming wine already might have created a false sense that nothing needed to be done… The millennial’s retail silence, particularly for discretionary spending in premium wine, is deafening.”

This has led to a chunk of Wine’s market share going to Craft Beer and Spirit sales by the new generation. I mean, why buy a product that doesn’t speak to you when there are plenty out there that will. 

Millennials, the new Lizard People? 

Marketing what is important to millennials is the right move, as The Report suggests, but this isn’t because they are significantly different to previous generations. They just absorb information by modern means. The Report goes on to say,

“Millennials don’t trust the rich, are skeptical about inauthentic and opaque marketing and don’t care about your family’s name on the bottle. They are more interested in what’s in the bottle — the ingredients and additives — and how you make the world better.”

Sure, they have a stronger focus on sustainability and maybe the same salesman-esque approach doesn’t tickle their fancy. Does this mean they don’t care about the people behind the wine or the story? Not at all. This cynical brush The Report paints millennials with highlights that while millennials may not be embracing wine, wine is not embracing millennials either. 

The real issue isn’t the messaging, but the way it is delivered. Just because a generation that grew up beyond the days of chain mail doesn’t resonate with a monthly “what’s happening at the winery” e-blast doesn’t mean they will reject the underlying story. 

Direct to Consumer (DTC) channels, i.e. the elephant in the room

So how do producers get in touch with the neglected millennial? Email lists and web pages alone will not make the cut with the smartphone generation. The Report highlights that wine business developing both strategies and tactics around DTC channels continues to show sales growth. Taking from that, when you consider that the new era of wine drinkers grew up in the digital age it makes sense to engage with them in this space.

Repeat after me: DTC is not eCommerce

The report focuses on the DTC channel as a replacement for Wholesales, but take note: a DTC channel is not an online store. Direct to Consumer means creating a direct connection between the producer and consumer, which can be through any online or offline avenue whether it is an app, event or social media to name a few. Even the Cellr packaging solution provides a unique DTC marketing tool that connects consumers directly to producers.

DTC facilitates consumer engagement with the result increasing sales across the board, and the fact that most consumers have smartphones makes them infinitely accessible. Whether it’s a livestream, your social media profile, or even ads on google, these all occupy the digital space and are all examples of DTC channels that engage consumers and can eventually lead them to your online store (or even to your Cellar Door, it’s all about discovery)!

DTC beyond the cellar door

The report outlines DTC sales make up 60 percent of the average family winery’s revenue today, and almost all of that growth is dependent on a consumer first visiting the winery’s tasting room. After many years of focusing on the club, wineries are running into instances where owners are unable to grow their active club. 

This could be two reasons: the club doesn’t add value to the consumer AND that the method of establishing DTC via visitation is outdated. 

On top of that, until humans reach their final form and can teleport Cellar Doors aren’t easily accessible for a majority of wine consumers.

It is about streamlining your efforts with current technology and existing platforms to speak to consumers. Without diversifying their DTC channels wineries are isolating themselves from a chunk of consumers in the market. In turn neglecting sales channels such as online, off and on premise trade, which have more consumer traffic than any cellar door has capacity. 

“The reality is that nobody has the formula for selling wine to a consumer who has never tasted or heard of your brand. New customer acquisition away from the tasting room is still largely untested and an unknown, so the solutions will evolve with new and reformed service providers and consultants and with wineries that experiment and fail quickly, using different techniques (print, digital, phone, etc.) to connect with remote consumers.”

Don’t write the new landscape off as being incohesive with the wine industry, similarly don’t project this fear of change upon the new age consumer. True DTC is about trying new things, having fun along the way until you find a connection that works. Luckily for wineries there are endless ways to achieve this. To facilitate True DTC Cellr employs NFC technology into it’s capsules allowing wineries to send messaging, such as videos or competitions, direct to consumers when they tap their wine bottle lids.

Last words

There is room to win and grow as a winery in these uncertain times, but it means finding ways to connect beyond the tasting room. A decrease in demand would be an issue if there weren’t a market, but there is one and it is under explored and ripe for the picking. It’s time to focus on how you can properly use digital DTC channels to connect with the new age of wine consumers. 

Photo by Paweł Czerwiński on Unsplash

Connect you brand

Do you want to strengthen the connection with your consumer? Submit your details below.


Connect with us on social media.

Sign Up

Subscribe to Cellr’s Newsletter and get our latest, delivered straight to your inbox.