Every year, we here at Copper Peak like to take a look back over the events of the past year and try to anticipate some trends for the year to come. 2019 was full of changes for the industry; understanding, weathering, and even embracing those changes will take much thought and effort.
At the same time, we’ve personally seen the wine industry in this nation persevere through anything and everything. It is full of smart, caring people, and we can’t help but feel that they will find ways to make 2020 a banner year when it comes to the creation and enjoyment of wine.
So what changes did we see in 2019, and how have they affected the industry?
The Slowing DTC Channel
At the start of the year, we heard reports claiming that the DTC channel was facing slowed growth. Perhaps this was inevitable: The DTC channel had some explosive growth in years past as wineries tried out new tools and the economy grew as a whole. But such double-digit growth is not possible in the long run, especially when more and more wineries are trying DTC and thus creating competition.
There is also the issue of changing demographics. Millennials do not appear to be taking up wine at the rates that some had hoped for, and boomers seem to be cutting their wine consumption as they age. Health concerns, too, seem to be driving more and more people to abstain from drink. Given all these factors, it’s actually good news that DTC is growing like it is!
What can we expect going into 2020? It will be interesting to see if this slowdown will continue across different categories and geographic areas. Many wineries are drawn to the DTC channel because they get to keep more of the profits from sales. But they will also need to work hard to generate demand.
Tasting Rooms Are Evolving Rapidly
The tasting room is not dead…but it has started to undergo a rapid evolution. Consider:
- There is increasing competition amongst wineries that, together with a healthy economy, is fueling expansion.
- A new generation of wine consumers is looking for a different experience in a tasting room. Guests are making fewer stops in favor of a better experience.
- To entice guests to come to the tasting room, and to keep them there, winery owners are using food, events, and attractions more and more.
- Regulations on tasting rooms are still a patchwork of laws, and many wineries are still working out the model when it comes to codes, permits, sanitation, training, and so on.
Not all tasting rooms are undergoing this transformation, of course. But consumer behavior is definitely changing, and those tasting rooms that have changed with it have gotten a considerable amount of press in 2019.
What can we expect going into 2020? The tasting rooms of yesterday will need to find ways to adapt, or they will continue to struggle. There is no one sure-fire way to do this, of course. But tasting room managers do need to find ways to make their location (and their brand) relevant to a new generation of wine tourists. We expect to see more clever ideas emerge in 2020. We also expect to see more and more wineries wrestle with this challenge; as we stated in our article on food in tasting rooms, there’s always more to consider than first meets the eye.
More Wildfires
We’ve been through years with wildfires before, and the wine industry has always bounced back. But we can’t help but feel that these kinds of fires are the new normal. And while the industry as a whole is finding ways to adapt and survive, it’s clear that these events are taking a toll on tourism.
Of course, the fires themselves bring up the issue of climate change. Politics aside, it is clear that the wine industry must continue to be good stewards of the environment, even as it prepares itself for increasingly frequent weather events.
What can we expect going into 2020? Here at Copper Peak, we’ve had an Environmental Promise for some time already. We expect more companies to adopt something similar, which will mean more recycled packaging, more responsible uses of energy, and more steps taken to eliminate waste. We also expect wineries to start thinking in terms of more ongoing efforts to be resilient in the face of potential wildfires and other weather events.
A Labor Market That’s Still Tight
Toward the end of 2018, we noted that there was a national labor shortage, and that the shortage would get worse before it got better. Today, at the end of 2019, we can say with confidence that it has, in fact, gotten worse—or, at least, that there is no clear end in site.
It’s still hard to find good people for open positions, and the smaller labor pool has meant both a rising cost of wages and increased turnover as workers hit the job market in search of better and better positions. For the wine industry in California, this is doubly problematic, as a tight housing market and high cost of living are making it harder to justify relocation here.
What can we expect going into 2020? For now, more of the same: Rising cost of wages, understaffed teams, and lots of turnover. Outsourcing certain functions might help alleviate this problem somewhat, but wineries will need to seriously consider what can be outsourced effectively.
Note: Our eBook from last year, Where is Wine Shipping and Fulfillment Going? is just as relevant now as it was at the start of 2019. We highly recommend following the link to get your free copy and start planning for 2020!
Cannabis is Everywhere
In 2019, cannabis was everywhere. Many states have legalized it for both medicinal and recreational use, and we’re now seeing it in more and more products, from hand lotion to dog treats. (Yes, there are now cannabis treats for your doggo.) It was only a matter of time before we began seeing cannabis-infused wines, too.
Wine and cannabis have had an uneasy relationship. Some industry experts thought that the expanding cannabis market was hurting wine. Others are trying to find ways to piggyback on the popularity of cannabis. At this stage, it is still not clear if and how wine and cannabis will coexist.
What can we expect going into 2020? More wineries will try more ideas as the list of cannabis-based products grows long. We doubt that cannabis will replace wine in any significant way, but we might see a budding market (sorry) for consumers of both. After all, wine and cannabis might have more in common than we think.
Regulations and Compliance: Always a Challenge
As we covered in our expert series interview with Steve Gross in September, the laws around shipping and compliance are changing as cases are being decided in court (such as the U.S. Supreme Court decision on the Tennessee Wine and Spirits Retailers Ass’n v. Thomas case). But it naturally takes some time for the effects to be felt industry-wide.
It’s much more worthwhile for wineries to pay attention to laws that are already on the books. States are leaning more and more on carriers for enforcement, for example, meaning that monitoring and ensuring compliance will be critically important going into 2020.
What’s more, there are many laws that might well apply to the sale of wine but that are routinely missed by wineries. For example, if you sell digitally, you might need to revisit The California Consumer Privacy Act and the Americans with Disabilities Act. Bringing food to your tasting room? FDA/FSMA regulations will apply. And so on.
What can we expect going into 2020? As enforcement tightens, wineries will find themselves having a harder and harder time shipping wine DTC if they do not have their house in order. We also expect some challenging times ahead as wineries figure out the legal complexities around the above trends: Food in tasting rooms, cannabis products, disaster preparedness, etc. This will be a natural cost to progress, however: Wineries that do not invest in the future will find themselves struggling in an increasingly competitive landscape.
If you’re eager to discuss what that might look like, especially for your DTC channel, we’re more than happy to have that conversation with you. Just reach out.
And as always, thank you for reading this past year. Here’s to a prosperous new one!
The Team at Copper Peak Logistics