Premium wineries seek more in-house digital marketing expertise, survey says

Tasting rooms have bounced back from the monthslong closures early in the pandemic as a key source of revenue for premium wineries like those in the North Coast, and many such vintners have been backing away from virtual tastings since visitors have returned, according to a recent industry survey.

After declining for several years from nearly half of sales for producers of wines that retail for over $20 a bottle, tasting-room sales jumped to 45% last year from 33% in 2020, the first year of the pandemic, and 41% in 2019, according to Silicon Valley Bank’s Direct-to-Consumer Survey. The bank also produces a closely watched industry report and forecast at the beginning of each year.

Meanwhile, sales via winery clubs, which had been growing from one-third of revenue six years before the pandemic, continued to expand in the first year of the pandemic, reading 40%. But last year that share fell to 34%.

While the share of winery e-commerce sales has continued to expand in the pandemic, the proportion of vintners employing online-tasting sessions has ebbed, the report said. When public health orders closed tasting rooms for months at a time in California Wine Country in 2020, 44% of vintners surveyed held virtual tastings at least once a week that year.

Last year over two-thirds (67%) did fewer or stopped them, but 14% continued or expanded them, “citing success in corporate tastings and club signups,” the report said.

Several factors are contributing to bigger challenges for vintners to ship wine directly to consumers, according to Rob McMillan, report author and founder of the bank’s Premium Wine Division. Though supply-chain problems that have led to shortages and increased costs for cargo appear to be evening out, the logistics business still faces a bigger bill for fueling trucks and securing drivers for them.

“When you start adding higher fuel prices, higher shipping costs, higher labor costs, that pushes inflation higher,” McMillan said during a June roundtable discussion on the report.

But there are signs that the prospects for wine direct shipping could continue to improve, McMillan said. Retail sales overall have been brisk, the restaurant industry continues to rebound from the pandemic shutdowns and patronage declines, and consumer spending has been shifting to experiences — services — from the goods-based upswing that contributed to the snarled supply chain.

Those positive factors, McMillan said, are combined with a public eager to travel after two years of canceled trips in the pandemic and a with a clientele for fine wine who are in the upper 20% of U.S. household incomes and whose spending is statistically higher than before the virus, attributed to fewer opportunities to spend it.

The share of premium-winery sales coming from internet-based efforts ranged from 8% to 9% from 2016, when the bank started asking vintners about it, through 2019. Then the share jumped to 14% of sales in 2020 as the virtual world became a lifeline for vintners amid pandemic shutdowns, backing off to 13% last year, the survey found.

Meanwhile, vintners in the survey planned to spend to less on digital marketing this year from last year, with almost 45% increasing the budget (down from 52%) and 31% upgrading systems (down from 42%). And more planned to hire dedicated digital team members (over 26%, from nearly 25%) and use consultants less (almost 28%, from about 29%).

Paul Mabray, a veteran digital wine marketer, said during the bank’s roundtable discussion on the report that some of the decrease in share of internet sales coming from online sales may be because of “absorption costs” for premium wineries in ramping up their e-commerce teams with hiring and training.

The share contribution from digital sales should move upward again next year, said Mabray, now CEO of Pix, a Napa-based venture launched early this year with the goal of better connecting consumers with wines they might like.

Jessah Diaz, marketing manager for national brands and DTC at Rutherford Wine Company in Napa Valley, said her company’s two-person e-commerce team, with the help of an outside agency, is focusing more on social connections with consumers than driving the economics of the sales channel at the moment.

“We’re passively allowing that to happen, but what our plan is for 2023 is to really engage and make sure we have what we need” in e-commerce resources,” Diaz said in a discussion on the bank’s DTC report.

But also contributing to some of the backing off on investment in digital marketing and sales efforts, Diaz said, could be the result of a wave of lawsuits that have emerged over accessibility of winery websites to virtual visitors with vision and other challenges.

Over six-dozen complaints have been filed in federal court against North Coast vintners in the past 12 months, according to court records reviewed by the Business Journal. Many of the cases were settled shortly after the initial filing.

Jeff Quackenbush covers wine, construction and real estate. Before coming to the Business Journal in 1999, he wrote for Bay City News Service in San Francisco. Reach him at jquackenbush@busjrnl.com or 707-521-4256.