Profits rise for wineries using Direct-to-Consumer sales

Pettavel cellar door, Australia
Pettavel cellar door, Australia

Direct-to-consumer (DtC) sales, whether at a winery’s tasting room or through its wine club, are now vital – especially for wineries that produce 5,000 cases or less, according to a survey by Silicon Valley Bank.

The survey of primarily US wineries, which was discussed but not formally released on Tuesday, also included respondents from Australia, France and Canada. It found that for wineries producing less than 2,500 cases, DtC sales accounted for 74% of their revenues. Those producing 5,000 cases or less derived roughly 68% of their revenues from direct sales.

The percentage drops as the size of the winery grows, but remains significant among wineries producing between 100,000 and 250,000 cases, which derive 24% of their revenues from DtC sales.

“What that is telling you is that we have reached a point in the wine business where this is a critical source of revenue,” said Rob McMillan, head of SVB’s wine division. The bank provides financing, advice, and research to vineyards and wineries, as well as to private clients. McMillan has been conducting the DtC research for several years.

During the online presentation, McMillan – joined by Sandra Hess, head of DTC Wine Workshops, Carol Reber, chief marketing officer at Napa Valley’s Duckhorn Wine Company and Cyril Penn, editor of Wine Business Monthly – teased out some of the highlights of this year’s survey, which had 839 useable responses. There are an estimated 9,000 wineries in the US.

It found that the average tasting room purchase in the US was $102.13. An average Napa winery could count on a tasting room purchase of $246.30; the average for Sonoma was $123.54; while in Oregon it was $76.92; Washington State, $61.89 and in New York, $37.59.

When it comes to the average number of visitors on a monthly basis, international wineries reported that they received 3,106 visitors, including those that scheduled appointments; New York wineries said they had 2776 visitors: those in Sonoma had 1,483 visitors, and those in Napa hosted 1,475. Those in Washington State saw 656 visitors and Oregon hosted 595 visitors a year.

Tasting rooms also helped drive the growth in wine clubs, which had, on average, a “spectacular” year. On average, 6% of visitors to tasting rooms became wine club members, who are by their very nature, repeat customers. The total average growth rate for wine clubs was 16%. To put that in perspective, Diageo plc’s average earnings growth rate for 2015 was 2.05%.

However, wineries need to become better at getting data from tasting room visitors, in order to improve customer retention. “When you go on a date with someone, and you don’t get that person’s contact information, you don’t date that person again,” said Duckhorn’s Reber, who stressed that it was important – no matter how busy a tasting room became – to get to know customers. “Make it easy for your staff… Have email signatures on your receipts. It’s all electronic, and then you already have a good way of contacting them,” she said.

Staffing is also an issue. Both McMillan and Reber noted that “the demand for high-quality people in the tasting room and the vineyard outstrips the supply.”

The full “Secrets of a Successful Tasting Room” survey will be released to those wineries who took part in it in June.

 Leslie Gevirtz

                                                

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