Small wineries recoup lost sales from tasting rooms, restaurants, says new data analysis
While larger wineries have been able to claw back through store retail some of the big hit to revenue from the coronavirus' toll on dining, lodging, entertaining and traveling, a new analysis suggests smaller-scale vintners also have been deft in creatively recouping part of the large share of sales lost to the economic shutdown.
Data from multiple sources has been showing how shelter-at-home orders has shifted consumer buying to stores and online, particularly for beverage alcohol. Those orders started rolling out nationwide from the Bay Area in mid-March, shutting down tasting rooms, restaurant dining rooms, bars and 'nonessential' travel.
Now there's more data on how the smaller wineries have done it.
Tasting rooms and restaurants made up 44% of revenue for the typical premium U.S. winery before the lockdown, according to Silicon Valley Bank's latest industry report, which surveyed hundreds of mostly West Coast producers. That all but went away overnight.
But by May 8, smaller producers had dramatically shifted marketing efforts to make up most all the lost tasting-room sales, said Rob McMillan, founder of the bank's wine group and author of the report, citing new transaction data from Napa-based winery direct sales software provider VinSuite.
Phone and e-commerce sales jumped from 3% of the sales mix before the lockdown to 10% and 16%, respectively, over two months. While winery mailing-list and subscription sales remained at 10%, club sales shot up to 35% from 23%. Off-premises wholesale business edged up to 20% from 18%, based on other industry data.
'You'll never see again in your lifetime this kind of consumer change, with this dining-at-home thing,' McMillan said during a recent webinar update on his annual industry report.
This rapid shift to direct sales accelerated a trend in behavior of visitors to Wine Country seen in falling numbers of visitors at tasting rooms, said webinar panelist Amy Hoopes, president of Wente Family Estates in California's Livermore Valley.
'If you're a small winery, there's an opportunity to continue to accelerate your engagement in DTC and really build the relationship that you've already started, whether that's by continuing through your club or moving on to referral,' Hoopes said.
Tasting-room sales had fallen to 5% of small-winery sales by early May, and sales to restaurants 2%, per McMillan's analysis.
Yet to be recovered for smaller producers is the restaurant business, making up about 15% of sales on average for such producers, and tasting fees, which for a number of vintners in Napa and Sonoma counties had become substantial in the past several years, McMillan told the Business Journal.
In-restaurant dining only started being allowed to resume in a few states in the past few weeks and in parts of California, such as Napa Valley, only as of May 20. But only 1 in 5 beverage alcohol consumers has returned to bars and restaurants so far, according to Max Heinemann, wine and spirits client manager for Nielsen CGA, which analyzes on-premises food and drink trends.
'A lot of on-premise outlets, which have been scraping together and making deals with their landlords and suppliers to defer payments until things reopen, may not survive 25% occupancy,' Heinemann said on McMillan's webinar, referring to limits some states have put on patrons in restaurants in the early stages of the reopening.
One-third of on-premises venues weren't prepared for the shift to delivery or take-out sales, Heinemann said.
And another troubling statistic is that 45% of wine consumers historically have been older than 55, but since the reopenings such patrons have only made up 4%, he said. That age group is at higher risk of life-threatening complications from COVID-19.
Sales of wine in U.S. grocery stores continues to be up significantly since early March, according to the latest Nielsen figures. Dollar volume for sales of wine were up 31.1% for the 11 weeks through May 16, compared with a year before, better than beer (up 13.8%) but trailing spirits (up 36.1%). Beverage alcohol sales would have to maintain 22% year-over-year growth to make up for lost on-premises sales during the lockdown, and total sales for such libations for off-premises consumption was 27.7% through May 16, according to Nielsen.
Store wine sales for the week of May 23 were down 3.7% from the previous week though up 30.8% from a year prior.
'There was some pantry loading and all sorts of other things, but I would actually say that the industry is growing probably better than it was by the end of 2019,' said Danny Brager, senior vice president of beverage alcohol at Nielsen, during the webinar.
Jeff Quackenbush covers wine, construction and real estate. Contact him at email@example.com or 707-521-4256.