It’s interesting, in the light of this new report on the status of direct-to-consumer wine shipments in the U.S., to project the trend into the future and imagine what the American distribution system might look like in 15 or 20 years.
The report’s most startling discovery is that DTC’s dollar value last year “was greater than the total value of U.S. wine exports.” Almost as noteworthy is the fact that “The direct shipping channel continues to grow at a faster rate than the overall wine market.” DTC is said to be more important to “small and medium sized wineries” than it is to large wine companies that dominate supermarket and big box sales, presumably because the Big Boys have a lock on a distribution system that’s been consolidating in their favor for decades.
Which brings me to the crystal ball part of this tale.
Let’s imagine that it’s 2030 and, all other things being equal (the U.S. still exists, there’s no internal civil unrest to discombobulate markets), consumers are still healthy and buying wine. At the present rate of expansion of DTC, one can easily see the day coming when small and mid-sized wineries sell pretty much everything they produce direct, either through tasting rooms or through some sort of postage.
The result would be a schizoid market: Giant companies (Constellation, The Wine Group, Diageo, etc.), with their scores of individual brands, still dominate the supermarket aisles where most Americans continue to shop. At the same time, more and more consumers are getting their wine direct from the winery.
The situation is roughly analogous to what happened to traditional bookstores with respect to Amazon.com and other online sources of books. The trad bookstores found themselves confronted with a huge challenge: how to stay relevant. It was much easier for busy shoppers to buy something online and wait a few days to get their hands on it, than it was for them to actually get into their cars and drive to a mall or downtown, find parking, wait in line at the register, etc.
As similar-sounding as the situations are, though, there are important differences. Consumers don’t have to go to bookstores, but they do still have to go to the supermarket to buy their groceries, so as long as they’re there, it’s no hassle at all to swing by the wine aisle. This is good news for the big wine companies, who should continue to enjoy robust sales for decades to come.
Still, there are lessons for everyone. The big wine companies are going to have to “act small.” This means creating new brands that seem eco-friendly and appeal to individual niches in the market: young people, urbans, ethnic and racial groupings, housewives, singles, older retirees, liberals, conservatives, hipsters, etc. Although these brands may be mass-produced in the tens, if not hundreds, of thousands of cases, the consumers don’t know that. All they can see is a bottle they can relate to, and that seems to relate to them. To a great extent, the big wine companies are already doing this. They’re going to have to keep doing it, and do it better, if they want long-term dominance.
The small and medium-sized wineries have this lesson: They have to “think big.” They have to put on their businessman’s hat and come up with real marketing plans. After all, direct-to-consumer doesn’t happen all by itself, like Athena springing fully-born from Zeus’s brow. DTC has to be planned, created, executed and followed through; and once you have a loyal customer base, you have to keep it and make sure the competition doesn’t poach it away.
This is where communicating with the customer comes in. If a small winery has a tasting room on, say, Highway 49, in Gold Country, and is selling 90% of their wines “through the screen door,” they’re very lucky. But most wineries aren’t in that position. They may sell 30% in the tasting room, but the rest has to be cultivated, through clubs and the like. This is where social media comes in. Consumers like to feel connected to the producers of goods and services they buy, especially when the product is something as mental as wine. (“Mental”? Yes. There’s nothing emotional about buying a screwdriver. But there is something emotional about buying clothes, a car, wine. Think about it.) I’ve long said that wineries can’t put all their eggs in the social media basket, but they should put at least one or two and, depending how it goes, maybe even three or four.