But demographic, style, and preference trends dwindle in significance to the ferment now roiling wine marketing and sales. COVID has shined a bright light on a fundamental flaw: around the world, wine producers have conceded far too many end-customer relationships to wholesalers, retailers, and powerful restaurant groups. The global pandemic has accelerated, by a decade, the need for wine producers to develop meaningful end-customer relationships across direct-to-consumer (D2C), subscription (club), hospitality, regional off-premise, and on-premise. While some changes were underway when the pandemic struck, that transformation is suddenly supercharged.
While D2C sales accounted for 10.8 percent of all retail wine sales in 2019, those numbers can be misleading. Over the last 10 years, club and tasting rooms each accounted for 35 percent of those sales, telesales added another 20 percent, winery events added 6 percent, and traditional “search-based etailing”—like we would see in other online retail sectors—accounted for only 4 percent of total D2C dollars. That’s right: 4 percent of the 10.8 percent in 2019! Outside of hospitality, clubs, and telesales, what we call “near customer relationships,” wine producers remain completely dependent on the three-tier system to find and nurture “consumer relationships at distance.”
The pandemic has proved it. Online retailer sales have skyrocketed as the pandemic has deepened. Winc, a digital wine club, added 42,000 new members in March. The online wine retailer Naked Wines recently hired 80 customer service, data technology, and marketing staffers to accommodate demand. High-end retailer sales have hit all-time highs. Wine.com posted 12-month trailing revenues of $197 million. And April saw a 208 percent year-over-year leap in buy online, pick up in store (BOPIS) wine sales. Meanwhile, precious few wine producers have experienced similar growth. Hospitality and on-premise have dropped precipitously. Wholesalers are buying “on demand.” D2C and club shipments simply cannot make up the shortfall—mostly because producers do not know a majority of the people consuming their wines.
This is the real value of digital transformation. The deeper story is hybridized strategies that allow producers to own the end-customer relationship, even if those relationships are pushed to brick and mortar. For producers particularly, it’s about creating unified, holistic customer records, connecting the B2B and B2C worlds with back-and-front-of-the-house digital enablement, and building an immersive, branded experience around each customer, using all available channels and touchpoints. Smart wine producers are leveraging data and insights, customizing and personalizing every customer experience, and elevating every consumption occasion to an optimized level.
For the immediate term, wineries need bold, innovative strategies to take full advantage of the forces now shaping the industry. Among them:
Develop meaningful relationships at a distance. Wineries have always been adroit at maintaining hospitality relationships, but they fall short in most other relationships. They need to become skilled at creating meaningful customer experiences at distance, supporting all types of transactions—D2C, club, destination travel, and off-premises partnerships. The winery thereby becomes the trusted partner and world-class concierge, and the customer is the esteemed and cosseted client whose desires are meticulously accommodated—and whenever possible, anticipated.
Digital is more than ecommerce. Digital is as much about data and personalization as ecommerce. It’s about knowing the people you’ve engaged—their unique qualities as wine consumers, their preferences in cuisine and varietals, their gifting proclivities, their activities and avocations—everything, in short, that allows the producer to provide them with bespoke and deeply engaging wine journeys. To pull this off, wineries need data—a lot of it. And they need digital channels that enable ongoing conversations, constantly enriching the customer database.
Restore power to the producer. Major wholesalers and restaurant groups have long maintained control over sales data, effectively shutting producers out. But the COVID-19 pandemic is changing this dynamic, allowing producers to re-establish themselves with end customers. They must leverage this advantage. For too long, producers have made amazing wines, only to relinquish data control to sommeliers, retailers, and salespeople. Now is the time for producers to turn things around and claim the essential information that is their proper due.
Drone strikes, not carpet bombing. Producers are often overwhelmed when trying to determine wine placement and price points. They must consider three-tier and D2C sales in unison, and then make rational and strategic decisions on the best places to expand market share, matching available bottlings with the appropriate outlets and the most advantageous price points. Wine producers cannot produce on demand (unlike spirits producers), so they must be hyper-focused on winning specific markets. Praying, wishing, then selling quickly to wholesale outlets is not a strategy—it’s a desperate response to crisis conditions that will lead to eventual collapse. Producers must become engaged in the shifting dynamic between their products and markets, adjusting on a continual basis, opting for surgical drone strikes rather than carpet bombing any and all outlets while naively hoping for profitable outcomes.
Clubs don’t translate as loyalty. Clubs are subscription based, with most of the benefits accruing to the producer. Loyalty, on the other hand, is about giving something back for participation. Wineries typically are horrible at this for “consumers at distance.” Further, winery access has diminished—and diminished in value—with the COVID-19 crisis, significantly reducing the cachet of traditional loyalty programs. Wineries need to rethink what it means to be loyal to the customer rather than the other way around, and provide some real incentives for consumer allegiance. Loyalty must be used to trump discovery, keeping consumers within the brand portfolio because they feel deeply valued by their favorite producers.