Declining Visitation + Heavy Reliance on DtC
If your winery produces fewer than 50,000 cases of wine per year, you’re among the 96%¹ of wineries in the U.S. categorized as “small”, “very small” or “limited production”, who are relying heavily on the Direct-to-Consumer channel to sell their wines.
Meanwhile, visits to tasting rooms in Napa and Sonoma have been declining since 2015.
Within the DtC channel, even before the pandemic struck, E-commerce and wine clubs were already forecasted to overtake tasting room sales. And today, with the prevailing sentiment that things will never return to the way they were, wine clubs and online sales have become a significantly more relevant component of a winery’s successful channel mix.
What is the biggest challenge to DtC?
Now, consider that there are over 10,000 wineries currently in the U.S., most of which have a wine club or plan to implement one, in addition to the many wine stores such as Kermit Lynch in Berkeley, and online wine retailers such as Wine Spectrum, who also have wine clubs, adding thousands of international wineries to the competitive landscape. But wait, there’s more! We can’t leave out the growing number of wine subscription services such as Bounty Hunter in Napa, SomnSelect, Dry Farm Wines, Naked Wines, Winc, The Martha Stewart Wine Club, The Atlantic Wine Club, The NPR Wine Club, The New York Times Wine Club, The L.A. Times Wine Club, and doesn’t Snoop have one now too?
But before you head down to the tasting room to give the daily pep talk to increase wine club sign ups, heed the words of Rob McMillan, the man behind Silicon Valley Bank’s annual State of the Wine Industry Report, who points out that wine club members should be measured in their lifetime value. “It’s not how many tasting room sign ups that matter. It’s not the conversion rate of visitors to club members in the tasting room that matters. It’s not the first sale that matters. What matters the most is the second sale and all subsequent sales in their club life.”
“It’s not the first sale that matters. What matters the most is the second sale and all subsequent sales in their club life. That makes the most important metric to track the length of time customers remain in the wine club. That metric is a true reflection of all the activities and initiatives you take on to improve the consumer’s utility (pleasure) and increase their Lifetime Value.“
— Rob McMillan, SVB on Wine: The Most Important Factor In Wine Club Success
Increasing the Perceived Value of Your Wine Club
The lifetime value of your club members to your winery is exactly proportional to your winery’s lifetime value to your members. Or, to put that another way, your wine club members will value you, in the same way that you value them.
So, what are you doing to make your wine club more valued in the minds of your club members? Is your onboarding process for new members geared around creating a unique experience? Are you offering training to your team so they have tools for looking after the members they’ve signed up? Do your club members get recognized when they visit your winery? Have you identified a long-range loyalty strategy that helps you strengthen your relationships with your members over the years? Are your email blasts to club members focused on pushing wine — or building relationships? And are your members deeply invested in your story so they can share it with others?
What are the 4 ways to increase wine club revenue?
- Enroll more members
- Raise the price per bottle
- Sell more bottles to each member
- Keep your members longer
You are probably already familiar with the difficulty of increasing enrollment during a time of decreased tasting room traffic, and likewise, there is little room for price increases as the industry is seeing a flattening of premiumization. Selling more bottles to each of your members is a good strategy, but it generally reduces how long they will stay as members. That leaves us with the goal of minimizing attrition.
Hey, guess what? Running a winery profitably is not a slam-dunk. Marketing is tough, and carrying the marketing talent to cover all the bases can be insurmountable. Our team has the breadth of experience, and the depth of talent to provide you with the expertise you need. We step in at the drop of a hat and ramp up quickly to get your message out to your audience effectively.
¹ Wines Vines Analytics https://winesvinesanalytics.com/statistics/winery/