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Wine marketers turn to 'big data' to uncork more sales

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On the internet

Customer Vineyard

customervineyard.com

Wine Concepts & Design

wineconceptsintl.com

For an industry steeped in tradition over hundreds of years, the business of making fine wine has been undergoing a technological renaissance in the vineyard, cellar and C-suite. The big deal the outside business world has been making about “big data” is starting to reach wine marketers, who increasingly are able to dive into the lake of data on who their best consumers are and how to reach them.

What big data analytics means for wine producers and sellers is the ability to leverage the science of pulling together and quickly analyzing information from traditional and online sources to sell more wine directly to consumers and the places they buy it most often.

Two ventures connected to the North Coast are looking to bring the big data savvy of e-commerce powerhouses such as Amazon to the wine business. One is CustomerVineyard, launched by a consortium of industry suppliers, educators and financiers, and another is Wine Concepts & Design from the Lodi winegrowing region.

CustomerVineyard launched at the beginning of this year. It’s a venture by Vinvention’s Wine Marketing Solutions division, Sonoma State University’s School of Business and Economics, the school’s Wine Business Institute and outside investors. At the forefront of getting the venture out the gate were M.J. Dale, head of marketing for Vinventions; Joel Miller, a veteran marketer of consumer products who has taught in Sonoma State’s executive MBA program; and Rob McMillan, founder of Silicon Valley Bank’s Premium Wine Division and a closely followed industry trends watcher.

FISH WHERE THE FISH ARE

Behind Wine Concepts is Nicholas Karavidas, who started it four years ago after building the OZV zinfandel brand as winemaker and general manager for Lodi’s Oak Ridge Winery. Over a decade before that, he was trying to figure out how to better translate paper files with graphics and market research into brands that connect with specific consumer types.

“I wasn’t trained in demography, but I was creative as a brand designer, winemaker and marketer,” Karavidas said.

That led him to big data wrangler Geo Strategies, which over the past two decades has been building what’s now called cloud-based software to help clients transform their sales and customer data into maps that identify where key consumers are clustered.

“It’s about fishing where the fish are, but smart fishers use sonar,” Karavidas said. “If they see a fish jump in the distance, they don’t move their whole commercial fishing operation to where they saw it jumped. You burn fuel, time and energy to realize there are no fish there.”

The amount spent on acquiring the wine consumer data, having them analyzed and creating sales action plans from them worth it? Case studies leading up to the launch of CustomerVineyard suggests the return on the investment could be over 10 times the marketing and sales dollars put into the effort, Dale said.

“That’s because of the focus on finding your untapped potential in your existing customer lists,” Dale said. “These are people who are not already your top club members but have interacted with the brand. Helping to identify those with extraordinary potential really helps wineries get laser-focused in who to interact with then how to turn that into additional relationships and direct wine sales.”

Five companies, a mix of vintners and retailers, participated in the first phase of CustomerVineyard, which wrapped early this year. Another 10 are involved in the second phase, with how long it takes to complete varying with the company. Another 50 wine producers and retailers have requested more information.

On the internet

Customer Vineyard

customervineyard.com

Wine Concepts & Design

wineconceptsintl.com

Dale came to the wine business from high technology, where big data is more commonly used, she said.

“I was surprised at how agrarian we are in our marketing,” Dale said. “At the end of the day, the wine business is a farming business, so it makes sense, but leading-edge marketing techniques would not be first and foremost.”

The key is to turn big data into prioritized marketing action that results in higher profit from sales, she said.

Some of the slow adoption of higher-tech marketing was the result of outside constraints on the industry, Dale said. After all, it didn’t make sense getting too granular in building a profile on end wine consumers, because for many years it was illegal to ship wine directly to them. That all changed with the U.S. Supreme Court’s 2005 Granholm decision, which forced states to revisit their prohibitions on direct shipments of wine by outside producers and retailers.

The technology industry historically has understood the power of data, and the wine business has historically been focused on deeply understanding the soil-vine-wine connection. But vintners have been evolving in their marketing savvy, Dale said. Packaging design has been taking on a greater role in moving bottles from the store shelf. And wine clubs have helped producers identify high-value customers.

“In the wine industry, we are so thoughtful about our inventory and vineyards, but the customer list and their performance (are) as every bit as important to your economic welfare,” Dale said. “Other industries get that, but we haven’t historically.”

Understanding the importance of customer data was behind the success of several wineries that have recently sold at prices that reflect large multiples of earnings, Dale said.

“In some cases, there weren’t vineyards involved,” she said. “It was just inventory and a customer list, which was the value.”

But the need for more marketing moxie comes as growth in wine consumption in the U.S. slowed 2013 through last year, after two decades of strong growth, according to the Wine Institute. And winery tasting room appears to be trending down during that same period in Napa and Sonoma counties and in Washington state, yet rising in the newer production markets of Oregon, Virginia and New York, according to surveys McMillan conducted in connection with his closely followed annual State of the Industry report.

“We have added so many more tasting rooms, and a lot of the experiences are similar,” Dale said. She was quick to add that DTC sales growth continues to be brisk, partly because of a channel shift by smaller vintners from going mostly wholesale and from growing consumer interest in buying directly from producers. “We’re still in a growth mode, but it’s a warning sign that the smarter businesses will figure out how to innovate and move forward to be successful, to figure out if there is a contracting market ahead, how your business will be a winner.”

CULTIVATING THE DATA

The CustomerVineyard process involves a number of steps, grouped into consolidating the data, cleansing and augmenting it, analyzing the data, then taking action on a strategy to boost direct-to-consumer sales profitability.

The five participants in the first phase of the project came with different technologies for sales and customer data, different regions, different case production and different bottle price points — luxury to mass market. The idea is to develop a system that works for a number of different winery operations, Dale said.

Those five producers contributed data on 132,000 consumers, three years of DTC sales and 486,000 transactions. When big data was appended to that information, it produced 48 million data points. Phase 2 of the project, already in progress, is expected to double that database.

Common methods in the industry for tracking trends involves data for what left the winery (shipments), wholesaler (depletions) and retailer (product scans) as well as from consumer surveys.

“This isn’t just what consumers are telling us,” Dale said. “It’s how they are behaving outside of wine as well as inside that helps us get smarter.”

It’s helping producer marketing teams hear the “voice of the customer,” like a number of the retailers they supply increasingly do, she said. Some of this knowledge already exists at the wholesaler and retailer levels but has been closely guarded.

But with customer profiles of their own, vintners can enhance both direct sale and wholesale efforts, such as approaching a distributor with data about brand loyalists in a given block of a market near a given store, Dale said. After all, a given consumer may buy wine from a store, at a restaurant and vintner direct via a club.

“We have … different times and ways we want to buy wines, but this is a great opportunity to bring that loop together,” Dale said. “It could be a persuasive tool to help your wine get carried.”

BIG DATA AND CUSTOMER PRIVACY

An incentive in the CustomerVineyard project is participation would benefit the whole industry, but it is said to have careful protocols built in so that proprietary data would not be shared or allow for cross-selling to each other’s customers, Dale said. That caution may prove fruitful in the current climate of concern over data-sharing.

For months, social media giant Facebook has been at the center of a growing conversation, inside and outside government, on how much consumer information companies are collecting, what they’re doing with it and how safe it is. Wall Street Journal on Thursday reported that the U.S. Securities & Exchange Commission has opened an investigation into how much Facebook knew about what research firm CambridgeAnalytica was doing with data on users of the platform.

And European Union rules took effect May 25 that require websites accessible to users in countries part of the bloc to disclose what information they collect and allow users to get copies of and delete that data. The General Data Protection Regulation, or GDPR, can carry penalties into the millions of dollars for noncompliance.

For looking to bring the wine business into 21st century technology, keeping data proprietary to each winery or retailer must be as important as keeping consumer data secure, Dale said. So CustomerVineyard has concentrated on acqusition and analysis of business and financial information that’s publicly available, versus the “questionable realm” that has put some companies under the regulatory magnifying glass recently, she said.

“We’re not looking at people’s social interactions or medical conditions — anything like that,” Dale said. “We haven’t changed, but we started with a ‘conservative’ approach, and that’s on purpose.”

Contact Jeff Quackenbush at jquackenbush@busjrnl.com or 707-521-4256.

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