The future for the wine industry can be summed up in two words: Direct-To-Consumer Sales.
The curve ball for the industry in 2020 was the COVID pandemic which had a sizable impact on wine sales. Wineries had to quickly change tactics in response as tasting rooms and restaurants went dormant. In a nutshell, sales shifted dramatically to online and direct-to-consumer purchases.
What to Expect for 2021-22:
Improved demand from consumers as hospitality, cruise lines, travel, concerts, sports and the like reopen, in addition to deferred events such as weddings.
How Wineries Can Make the Most of the Changed Sales Landscape:
Opportunities for marginal growth will be found by investing in ecommerce and digital strategies.
How Vineyards Factor In:
What’s critical is a balanced harvest supply in the West. Supply is the West is largely balanced going into 2021 but with low growth rates, a large harvest will put supply back out of balance. However, as California appears poised for a drought in the summer of 2021, over-supply appears unlikely.
In conclusion, the wine industry will need to continue to adapt in sales channels, strategies, tactics, and messaging to be successful in meeting the post-vaccine demand.
DIRECT TO CONSUMER CHANNEL MOVEMENT: Channel shifting was the byword for 2020 in grocery, smaller producer and direct-to-consumer channels. With tasting rooms’ closure in March, the consumer adapted and went online to purchase. The shift replaced lost tasting room sales. Online is now the greatest opportunity for producers in 2021.
OFF PREMISE VOLUME AND VALUE CHANGES: 2020 began with declining volume measures and discounting due to an acute oversupply of wine and overall flattening consumer demand. March lockdowns moved consumers to a panic-buying phase for wine, spiking wine sales growth above 60 percent. By the end of the year, total wine sales were about even with the prior year.
AVERAGE WINERY SALES CHANNELS PRE-COVID AND DURING COVID: Restaurants and tasting room sales made up about 43 percent of the average winery’s sales in April 2020, when the government issued shelter-in-place orders, closing both channels. Resilient producers immediately evolved to phone sales, ecommerce, Zoom tastings and curbside pickup, among other tactics. By November, the magnitude of the shift was apparent, with online sales showing the greatest total change.
ECOMMERCE TRENDS IN ALCOHOL: With consumers sheltering and working from home, online sales became important for all alcohol producers. Growth in delivery company accounts for companies like Drizly and Instacart exploded. We believe there is a permanent consumer shift to more online purchases of wine, which will expand with the coming of age of millennial consumers.
Information sourced from Silicon Valley Bank State of the Wine Industry Report for 2021: https://www.svb.com/trends-insights/reports/wine-report