October 2017 Issue of Wines & Vines
 
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Focus on the Consumer for Better DtC Wine Sales

 
by Andrew Adams
 
 

Napa, Calif.—A couple of decades ago, the best path to success for a winery was to build a reputation for quality and then leverage that into expanding wholesale sales supported by increased production. If the tasting room and wine club did well, that was icing on the cake.
 

Today the situation has almost completely reversed, and most new wine companies are focused on building direct-to-consumer (DtC) programs rather than trying to capture the interest of distributors that already have hundreds of brands to represent.
 

What that means is wineries need to place an even greater emphasis on all aspects of DtC—from the tasting room and events to website and tele-sales. How to do that successfully was the topic of a panel discussion at the 10th annual Impact Napa Conference organized by the North Bay Business Journal on Aug. 30 in Napa.
 

While still a small slice of total U.S. wines ($41 billion in the past 12 months), DtC has been the fastest growing segment of the overall market. According to the latest data by Wines Vines Analytics, the total value of DtC shipments (not including tasting room sales) during the most recent 12 months is $2.5 billion, and that’s 18% more than the previous year. Since July 2012, total DtC shipments have increased in value by $1.1 billion. 
 

Judd Wallenbrock, president and CEO of C. Mondavi & Family in St. Helena, Calif., said the Charles Krug tasting room brings in 10% of total sales volume. Those tasting room sales, however, account for nearly 30% of total net revenue because of margins that typically surpass 40%. Wallenbrock said the tasting room also offers the perfect opportunity for winery staff to tell the Charles Krug story directly to consumers and build vital database information.
 

Pat Roney, president and founding partner of Santa Rosa, Calif.-based Vintage Wine Estates, said that after the company acquired a Sonoma County winery with a wine club comprised of thousands of members, they pared that down to less than 1,000 to focus on the quality of relationships and not just the quantity. “It’s that one-on-one that people want. They want to feel special,” he said.
 

As a club grows, he said club managers need to be mindful of how to preserve those quality relationships and provide unique experiences to continue to provide club members a feeling of being part of something exclusive.
 

Roney also said he views DtC and the wholesale market as complementary. Consumers are buying more wine than ever, and the growth of DtC doesn’t appear to have “taken a single dollar” from the wholesale market.
 

To help fuel e-commerce sales, Vintage raised its average price by a few dollars so it could offer 1-cent shipping for full cases. He said low-cost shipping is just one “lever” to use to manage DtC sales while pricing and brand story are two others. 

 

 
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