2020 DTC Wine Sales Review: POWER OF THE PIVOT

January 12, 2021 – Sandra Hess, DTC Wine Workshops [20-30 minute read]

Many direct to consumer teams in wine regions across the nation have been pivoting and adjusting to life’s catastrophes for several years now. From devastating fires that repeated seasons to floods and now a pandemic. Whether iconic wine regions or evolving, consumers have also adjusted to the various offerings and operational standards. Wine brand loyalists have gone above and beyond to support those wine producers they love most. The question becomes, “how easy was it for these brand loyalists to stay engaged and continue to purchase through these uncertain times”? 

2020 will be forever known as “the year of the pivot” as direct to consumer and hospitality teams became more nimble and creative than ever before. Transitioning traditional point of sale revenue to virtual tastings, phone sales, e-commerce sales & marketing campaigns, delivery service, and curbside pick up service became essential sales channels during the pandemic. 

I can share that a common thread among our high-performing winery clients this past year was the focus on “Community Building and Relationship Management”.  Those teams who came into the pandemic with these fundamentals already in place, easily pivoted because the priorities were clear. These teams also had a wealth of information about non-members,  allowing them to sell beyond the club. TIP: every member of the Winery DTC Team needs to be trained on these two important aspects of long-term business success. But first, winery stakeholders must decide if this focus is a priority 2021 and beyond. There’s a lot of great wine on the shelves of grocery stores and supercenters across the nation. Wine.com is killing it in the online marketplace space, reporting a 217% year-over-year revenue increase for the six months ending September 30th.

What is the unique connection between a wine producer and wine consumer today? It’s the people connection. Personalizing invitations, extending deeper access points and proactively recognizing loyalists is key to move the relationship along the forward path. TIP: ensure that every member of your hospitality team knows your Past, Present & Future stories so that brand loyalists can easily begin the journey and stay on your path forward for the long-run. Every member of your DTC team should be well-versed at the art of storytelling and we have coached many teams to success in this area. TIP: think about how to leverage the WHY question into your storytelling this year as “why” was the top keyword/phrase typed in Google Searches 2020. For example: Why are some chardonnays more buttery than others? Why do some winemakers use oak VS steel barrels?

In 2020, the consulting team at DTC Wine Workshops helped a little over 500 wine brands develop new, virtual winery offerings and we provided proven methods for reengaging with a variety of new customers as well as loyalists. I moderated a virtual case study webinar for Wine Industry Network and presented webinars for regional associations across the country. Three members of the DTC Consultant Network hosted the first of its kind, “Virtual Winery Summit” on May 19th in which winery association members from 25 wine regions attended a half-day training program. The important work done this past year has become a fundamental part of our client’s 2021 DTC Strategic Plans. Most avid wine consumers now have a different set of expectations as to how, where and when they engage with wine producer teams directly.

So what do we know about Direct to Consumer Wine Sales in the US as we just wrapped up 2020?

We know that 81% of US wine producers are considered “very small or limited production” producing less than 5000 cases of wine annually. We also know that California wine brands produce 86% of all U.S. wine sold to consumers, followed by Washington at 5% then New York at 4%. When we look at key progress indicators as of November 2020 for this winery segment, according to the Wine Analytics Database, the number of all wineries with an average bottle price of more than $50 grew by 70% since 2015 and growth was led by wineries producing fewer than 500 cases. There are 625 limited-production wineries with an average bottle price of more than $50 and that is 74% more than in 2015.

In a report shared by Gomberg, Frederikson & Associates editor, Jon Moramarco in winebusiness.com on December 11th, California wine shipments declined more than 6 percent in the second quarter, according to Moramarco, then recovered in the third quarter. During the first nine months of the year, shipments within California fell 14 percent versus a year earlier while out-of-state shipments increased 2 percent. This resulted in a net decrease of 1 percent, for a total volume of 185 million 9L cases. A similar phenomenon has played out in Washington, where total shipments fell by an estimated 9 percent in the nine months ending in September 2020.  While shipments from Ste. Michelle Wine Estates drove about half of the loss, the smaller wineries that account for a third of the state’s production made up the other half of the loss.

I hope you appreciate the below roundup of 2020 DTC Wine Winners as this is meant to be a training tool filled with examples, best practices and guidance for building long-term, repeatable models.

DTC WINE WINNERS 2020: 

1. Who are they? = Direct to Consumer Community Builders and Relationship Managers. 

2. What characteristics do these winning teams share? = 

• Built effective re-engagement strategies pre-pandemic.
• Taught their DTC and Hospitality teams to prioritize relationship-building at every customer touch-point.
• Quickly pivoted from Tasting Room to Virtual, eComm, and Phone Sales during the pandemic.
• Are “eCommerce Enabled” with stream-lined tools and competitive shipping offers.
• Extended personalized invitations and offers by customer type based on lifetime value. 
• Leveraged Virtual Meet & Greets to welcome new members and form communities. 
• Cross-trained hospitality teams in the areas of outbound phone sales, private client services, and virtual/e-commerce sales techniques. 
• Partnered with long-term vendors and complimentary lifestyle businesses to reach new audiences through social media live events and virtual experiences. 
• Updated winery profiles in Wine Apps that include Vivino and Drync to reach new consumers and better engage with those in this evolving channel. 

How did a variety of winery teams successfully pivot DTC Sales in 2020? Below is a list of wine brands and examples of how each team enabled “Omni-Channel” direct wine sales and consumer engagement opportunities. While this is a short sampling of wine brands and their success stories, I encourage you to conduct some research of your own for regional examples of how complementary and competitive winery teams successfully pivoted during the pandemic. 

In a report released by the Press Democrat on May 31st, we learned that boutique wine brand, Smith Story Wine Cellars of Philo in Mendocino County lost an estimated $1 million in sales between mid-March and May 21, 2020.  Co-owner Ali Smith Story said, “In this trying time, there is hustle and determination. “We are very much in startup mode right now,” For example, she was out May 15 making 24 home delivery drop-offs to customers as far away as San Francisco. Driving a rental car, Story expressed appreciation to loyal wine club customers at each delivery stop. She and her husband, Eric Story, now produce 3,000 to 5,000 wine cases a year with bottle prices from $20 to $80. With unemployment plunging to Great Depression-era levels, the winery has dropped the prices of sauvignon blanc and rosé to be price sensitive for consumers. And there is a renewed sense of purpose for the entrepreneurial couple. “We started this with a base of knowledge on the wine business, not with a silver spoon or a bunch of money that we made in Silicon Valley. We are doing this because we want to do,” she said. “It’s to stay relevant.”

In an article published by Napa Valley Registry on August 20, 2020, ONX Winery of Paso Robles figured out early on that they needed to do something to reach out to members and potential customers who could not make it to the winery to taste new releases. For about $20, the winery sends two-ounce samples of five wines and then the recipients can organize a Zoom call among friends or relatives with a rep from the winery. In this successful effort, not only did ONX sell hundreds of kits (one of my friends in Studio City has quite a name at the winery for organizing about 20 tastings and selling 120 kits just by word of mouth) but the winery sold many bottles and will surely be a stop when any of these tasters heads to Paso Robles. In fact, the sampling program has been so successful, ONX is not stopping once tasting rooms are back to normal; they are expanding the program to sample library wines, barrel samples and food and wine pairings.

When California relaxed its restrictions on selling wine through restaurants, Jasmine Hirsch of Hirsch Vineyards created a concept with a popular Los Angeles restaurant, Marino, to deliver three course meals and two bottles of their prized Pinot Noir for less than $200. A Zoom call with the chef and Jasmine for 20 minutes before the meal was just the right amount of time to balance and education and wine.

At Jordan Winery in the Alexander Valley, the hospitality team increased their popular vineyard hikes from 3-4 times a year to 2-3 times a week and added a twist to the experience there. “Paris on the Terrace” is a seated five-course meal paired with Jordan wines and Champagne. Using produce from the winery’s gardens, winery chef Todd Knoll creates French-inspired food for an escape from everyday life, transported to a Parisian café, French music and all … while safely distancing.

At Larry Stone’s Lingua Franca in the Eola-Amity Hills area of Oregon’s Willamette Valley, their COVID-19 marketing plan was one of education. For an hour every week, wine educator Sam Schmitt, held Zoom webinars that didn’t sell or taste but simply educated viewers on subjects from the terroir of the Willamette Valley to the three B’s of Italy: Barolo, Barbaresco and Brunello to Emerging Chardonnays of Oregon. At the end of each class, there was a soft sell of some kind of special.

Gary Farrell Winery in the Russian River Valley of Sonoma County joined with Plum Markets in Michigan to sell a three-pack at special pricing that came along with a Zoom call with winemaker Theresa Heredia. This pivots the in-winery tasting experience to a remote one but allows wine fans that opportunity to meet the winemaker, virtually, but with the impact one would hope for in a tasting room but is rarely possible with a winemaker’s schedules and other responsibilities. Via Plum Markets, Heredia and Gary Farrell Winery created hundreds of new fans who felt they “knew” the winemaker. This out-of-the-box outreach is how wines are sold.

Christine O’Sullivan and husband Jim Bean are former Apple executives who bought Brand Winery in 2019, a high-end winery and vineyard on a 110-acre estate in St. Helena, California that typically turns out about 2,000 cases of wine per year. The couple was featured in a December 29th interview in CNBC about the lessons they learned from Steve Jobs to pivot their small business during pandemic. “We started in year one with incredible momentum…then Covid hit,” says O’Sullivan, who with her husband, Bean, is the co-owner of Brand. One pivot the winery team made during the 2020 pandemic was the creation of a program called #FromBrandWithLove, where customers pay $150 for a 2016 bottle of Brand’s Napa Valley BRIO, “an estate-produced Bordeaux-style red blend of Cabernet Sauvignon, Cabernet Franc and Petit Verdot,” according to the winery’s website, and Brand sends a free bottle to a teacher or first-responder of the customer’s choice. The $150 package has a $300 value, the business says. The program has had “tremendous support and feedback from the community”. The program has shipped Brand wine to 37 states and 70 different zip codes. In March, this winery team started offering “professional” virtual tastings, specifically targeting CEOs and executives, especially from the nearby tech industry in Silicon Valley. Because the virtual events are curated and tailored to each customer, Bean and O’Sullivan say that pricing varies, but a virtual tasting for executives can start at $785 per attendee and that includes an “in-depth guided tasting” and four bottles of wine for each attendee.

Kim Kramer, owner of Kramer Vineyards in the Willamette Valley’s Yamhill-Carlton region in Oregon, shared this in the WineDirect 2020 Report released October 21st: “Ecommerce previously made up a small sliver of sales at 5%, and is now up to 30%” she said. “I decided to lower the threshold for shipping costs and train people who were accustomed to buying face-to-face to begin purchasing online. This has resulted in a 603% increase in online sales processed through WineDirect compared to last year.” WineDirect clients (2000 unique wine brands) saw higher revenue and substantially more orders in 2020 VS 2019. Wineries partnering with the company for eCommerce sold $1.7 billion worth of wine direct-to-consumer between October 1, 2019 to September 30, 2020, a 13% increase over the same period the previous year. What’s more, the average order value during the six-month period of April – September 2020 was up 29% over the previous year. In addition, 11 million orders were processed and 350,000 new wine club sign-ups were completed.

Also, learn about the approaches winery stakeholders at  Round Pond Estate, Newsome Harlow Wines and Wente Vineyards took in this Wine Industry Network Virtual Programs Case Study Webinar Recording. You will discover that our friends at Newsome Harlow Wines not only pivoted 100% of all tasting room revenue to virtual programs but also grew revenue in 2020 through their ability to successfully pivot. The final revenue numbers will be released at our DTC Wine Symposium session on January 22nd.

While the above winery teams leveraged the right tools and approaches to pivot sales holistically during the 2020 pandemic, we can also learn a lot about wine consumer buying behaviors from our friends at wine.com. The largest online wine retailer in the US shared a press release on November 23rd indicating that the company closed the first half of its fiscal year (April 1 through September 30) with $176 million in revenue, representing 217% YOY growth. This brought trailing 12-month revenue to $285 million, a 102% increase over the comparable year period. Highlights over the last 12 months demonstrate acceleration in the company’s growth as consumers go online for wine in record numbers:

• Revenue from StewardShip members (Wine.com’s $49/year unlimited shipping program – think Amazon Prime annual membership), increased 123% to $157 million for the trailing 12 months as the company grows wallet share among these loyal customers.
• Customers increasingly prefer to shop from their phones and Wine.com’s 4.8 star mobile app (51,900 reviews). Revenue from mobile devices increased 105% to $100 million.
• The company introduced Picked by Wine.com, a personalized wine subscription which combines the expertise of real sommeliers with a proprietary algorithm to select recurring shipments of six wines for each customer based on their tastes and feedback, and at the frequency and price point of their choosing.  
• Wine.com expanded its series of virtual wine tastings featuring the “who’s who” of the wine world. Since the launch in April 2020, the company hosted 45 events that have been viewed by over 63,000 households.

DTC WINE “MISSES” 2020: 

Now, you know I’m not going to call out wine brands and individuals by name but I will share the common characteristics and themes that we observed while serving over 700 winery teams in 2020. Unfortunately, these DTC Winery Teams didn’t have the tools, training or talent in place to effectively pivot during the pandemic. Who are they and what does this look like? 

• Winery sizes: mainly small, very small, and limited production brands. 
• Exhausted their membership list and sent weekly promotions via email and no other communication channels. Membership cancellations are already stacking up in Q1 2021. 
• Didn’t pivot to other direct sales channels and kept waiting for things to return to normal in the tasting room. 
• Deeply discounted wines to encourage curbside pickup and order deliveries. In many cases, the discounts were the same or greater than club discounts – risking long-term member relationships. 
• Didn’t offer Social Media Live Events or Virtual Tastings to connect with current and new customers. 
• Some in this category thought it would be best to go rogue and ignore state mandates – risking business and ABC licenses. This action confused consumers and tarnished relationships. 

How can these “misses” be corrected?

I encourage wine brands who fall into this category to begin leveraging solid data-points, as well as proven direct sales and engagement methods from 2019 and 2020 to build long-term and sustainable business models. Now is the time to rethink the DTC Sales Channel with so much knowledge and powerful information including the resources below. Also, be sure to tune into the “Virtual Winery Offerings Case Study Presentation” at the Virtual DTC Wine Symposium on January 22nd at 11:00 as I will be moderating an enlightening discussion with three winery stakeholders representing small, mid and large size producers across California. Drop me a line HERE with any questions about this blog post or to share your successes. Our consulting team is ready to help guide and coach to ensure your DTC Division has the ideal balance of tools, talent and tech to thrive in 2021 and beyond.

1. The Commerce7 Data Book: “The Data That’s Changing Winery DTC,” released on December 10th, 2020. This resource reveals insightful findings focused on the shift in consumer preferences that defined 2020 and will shape the winery DTC industry for years to come. The data that was collected and analyzed comes from Commerce7’s 420+ winery clients utilizing the platform for their DTC business needs. One key finding to report is that “in 2020, club members who were able to edit their club release package increased their average order value by 20.7% and proved less likely to churn – a decrease of 50% when members were provided more flexibility”. 
2. The WineDirect 2020 Highlights Report released on October 21, 2020. Key data points and insights are shared from this tech provider supporting 2000 unique wine brands across the globe. One key data point from the report: “wineries partnering with WineDirect for eCommerce sold $1.7 billion worth of wine direct-to-consumer (DTC) between October 1, 2019 to September 30, 2020, a 13% increase over the same period the previous year. What’s more, average order value during the six-month period of April – September 2020 was up 29% over the previous year”.
3. Sovos/ShipCompliant Direct Shipping Reports including the December 4th article on “High Transactions on Black Friday and Cyber Monday”. Some important indicators and key take-aways include this: “on Cyber Monday, our tax determination engine experienced  its highest volume ever, with about 46 million line items calculated, a 169% increase over 2019. In addition, 13 million transactions were counted, a 202% increase over 2019. On Black Friday, the number of line items calculated increased 211% compared to 2019, and the volume of transactions increased by 197% when compared to 2019”.