08.30.2017  
 

Focus on the 'C' for Better DtC Wine Sales

Key to a good direct-to-consumer wine program is continual customer engagement

 
by Andrew Adams
 
scandanavia u.s. wine sales
 
A panel including (from left) Pat Roney, founding partner of Vintage Wine Estates, Paul Leary, president of Blackbird Vineyards and Judd Wallenbrock, president and CEO of C. Mondavi & Family, discussed how to find direct-to-consumer success at the Napa Impact Conference.

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, then that was just the 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 a distributor that already has 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 & CEO of C. Mondavi & Family in St. Helena, said DtC is not anything new in the wine business and he said he’s seen many iterations of it in his nearly 40 years of experience in the wine industry. What has changed is the importance of a strong DtC program because of distributor and retailer consolidation and new technology that makes connecting with consumers easier.

Wallenbrock was joined by Pat Roney, president and founding partner of Santa Rosa, Calif.-based Vintage Wine Estates, and Paul Leary the president of Blackbird Vineyards in Napa Valley for a panel discussion on DtC sales success.

While Charles Krug winery has operated in Napa Valley since 1861, Wallenbrock said it was only relatively recently that the company made a major investment in its hospitality space. Since that overhaul, the Charles Krug tasting room — that now features a salumeria and pizza kitchen — bring 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.

‘Customers love to hear from us’
He added that unlike other consumer goods industries, wine consumers don’t mind outreach from wineries. “We’ve learned that our customers love to hear from us,” he said.

He said most wineries “are scared to death” of the idea of telemarketers dialing up customers, but before joining C. Mondavi he worked for a smaller company that averaged about $7 million in total sales per year. Bringing on a tele-sales team for just incremental sales resulted in $1.5 million in new business over the course of a year.

Vintage Wine Estates has acquired several wineries and brands in the North Coast and Oregon. Roney said that after acquiring a Sonoma County winery with a wine club comprised of thousands of members they pared that down to less than a thousand 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.

He attributes that to consumers taking advantage of new opportunities to buy wine through the web and get it delivered but they are still finding new brands in restaurants and retail outlets. When they do find a brand they enjoy, Roney said they’re now more likely to buy with their phone or tablet as nearly half of all Vintage’s e-commerce sales are through mobile devices.

‘Levers’ of DtC sales
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 and pricing and one’s story are two others. “Social media may not drive immediate sales but it does drive the relationship,” he said. “It helps drive the overall experience.”

The company manages what it calls the Wine Sisterhood. This group has brought together more than 4,000 female consumers and provides marketing insights for new brands, fosters brand loyalty and generates sales.

Pricing is a quick way to drive DtC sales, but Leary with Blackbird Vineyards described it as a “slippery slope” and said one is better served building consumer engagement for a 10 to 20-year brand building strategy rather than just hitting sales goals for that quarter or year.

As a relatively young and smaller winery, Leary said from day one they were in the cloud with Sales Force to track leads and sales and then determine how best to generate new sales. He said they can track back on every sales lead to see how they obtained that person’s info: whether it was from a tasting room visit, event, website inquiry or direct sale. Understanding how consumers engage with the winery enables Leary and his team to best allocate resources to generate new sales. “What are you doing to invest in that experience and understand your customer in the right way?” he asked.

Winery staff also need to understand how they are doing in terms of closing the sale. Metrics such as wine sales compared to tasting room reservations can provide data to see where to improve or spend resources.

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