Reading the latest reports on DTC wine shipping, one is reminded of the old story of the vending machine salesman who wanted to see if there was an opportunity to lease his machines to the local hospital. So he sends his two sons, who are also in the business, to scope out the waiting room and cafeteria.
The next day, his youngest son calls and says “Don’t bother trying to get a contract at this hospital. I walked around the entire place and not a single person was drinking a soda.” Soon after, his older, sharper son calls. He says, “Get down here with a contract as fast as you can! I walked around the entire place and not a single person was drinking a soda!”
Both sons saw the same situation, but each interpreted what they saw differently. Where one saw a lost cause, the other saw an immediate opportunity.
When we look at the Silicon Valley Bank 2023 Direct-to-Consumer Wine Survey (SVB) and the Sovos/ShipCompliant Direct-to-Consumer Wine Shipping Report (Sovos), we can’t help but be like the older son here: We see a lot of opportunity.
Data Isn’t Just the Key to Growth, It’s a Competitive Advantage
The SVB made the point very clearly that wineries’ own data was going to hold the key to future growth:
The abundance of owned-data available from wineries, coupled with specialized industry vendors, represents a tremendous opportunity for businesses to improve decision-making and more effectively target their customer bases to drive sales and club success…Marketing data management will become the next must-have discipline for successful wineries.
While 80% of those surveyed use email to grow their DTC channel, and 74% used social media, only 33% were looking at platform analytics (such as Google Analytics), and only 13% were using the services of a data analyst. This tells us that using sophisticated data analysis is still relatively new in the industry—meaning an advantage for those who get started now.
The Growth in ABP (Average Price Per Bottle)
The Sovos report notes upfront that the ABP jumped for the second consecutive year, climbing by 9.7%. Part of this has to do with the resilience of higher-priced wines ($100 or above), which, despite worries about inflation and the economy, are still selling and shipping at an equal pace to the previous year.
However, those brands account for only about 8% of the DTC sales channel. Lower-priced wines faced a challenge; from the report:
… wine consumers, particularly those purchasing wines under $50 per bottle, pulled back on their DtC purchases, which helped push up the average price per bottle shipped. And finally, it may be the case that many of those who came into the DtC shipping channel during the 2020 pandemic year have exited.
OK, but is this just speculation? We think it might be. Yes, the number of purchases has pulled back this year. But that has happened at a time when prices have increased across the industry—as the SVB notes, the economy has cooled, inflation rose, and prices have increased across the supply chain. Most wineries have raised prices somewhat as a response, and that is going to affect what consumers buy.
Rising Enthusiasm for Wine
When considering the future, the thing we need to think about isn’t dollars spent yesterday, but enthusiasm that is apparent today. Do consumers still want to buy wine, and buy it direct from wineries? And are they open to the kinds of digital outreach that these reports are calling for?
We think so. Look at the SVB report, which has statistics on email open and click rates by bottle price and volume of cases (p. 8). There, we can see that consumers are only slightly less likely to open or click an email advertising wine in the $20-to-$50 range—and certainly not a sign that these consumers are “pulling back” in any sort of ongoing way.
In fact, while internet sales were down slightly, wine club sales picked up slightly. So yes, internet sales probably spiked during the pandemic and have now returned to normal. But club sales continue to be a lucrative way to grow the channel.
Putting it All Together
What we see in these reports is a consumer base that is used to using digital tools in every other aspect of their lives. So, when it comes to wine, they will respond to an email, interact on social media, and buy from a website (if that site is well-designed and relatively frictionless). They will also sign up for a club or subscription service. These are not the behaviors of a flighty consumer base that just wants a convenient deal. These are the behaviors of consumers curious about brands, and willing to explore.
Now, finding those customers, getting their attention, and providing them excellent service will be the tricky part. And it will require the one-two punch of having good data analysis and great DTC kitting and shipping services. (That goes double for smaller wineries.)
If you’d like to learn more about either of these, Copper Peak can help. We see what you see: Opportunities to sell to a new generation of eager customers. Let us help you get your brand and your bottles into their hands.
In the meantime, these older articles might be helpful: