The Silicon Valley Bank (SVB) and SOVOS/ShipCompliant 2022 Wine Industry reports came out last month, and they have already generated quite a lot of discussion. Here, we want to provide wineries with our takeaways from these reports, especially focused on the DTC channel.

In a nutshell:

1. DTC sales are still strong, and
2. eCommerce sales are still strong, too
3. New sales growth will come from better digital exposure
4. Wine (and wine marketing) is definitely a “generational” thing

First Takeaway: DTC Sales Are Still Strong

Some had predicted that DTC sales would shrink as people got back to old pre-COVID buying habits. But that was not the case. From the SVB report:

“Today, DTC sales represent about 10 percent of total wine industry sales in the US and about 65 percent of the average winery’s total revenue in 2021. Through all of the channel shifting during this COVID crisis, DTC sales have continued strong, with 2021 sales exceeding every monthly benchmark from 2020.”

The shift in audience was noted in the SOVOS/ShipCompliant report as well:

“2021 looks a good deal like what we would have expected it to look like had the pandemic never happened. But this new normal is one that includes new buyers who entered the DtC channel in 2020, as well as an even greater willingness of American wine drinkers to receive wine via direct shipment than in years prior to the COVID-19 pandemic.”

Second Takeaway: eCommerce Sales Are Still Strong, Too

Again, it was predicted that overall internet sales would relax as restaurants and tasting rooms reopened, settling back to pre-pandemic levels. That has not yet happened. From the SVB report:

“…internet sales from wineries have thus far proven resilient during reopening [from COVID]. We may be looking at a much more robust shift in consumer buying preference than we expected…overall e-commerce sales in 2021 were still 146 percent higher than pre-pandemic numbers — perhaps the most important thing to note. It’s more evidence that consumers are still evolving the way they purchase wine, and e-commerce is a critical part of sales.”

Like the authors of the report, the important thing to note here are not just the sales trends, but the behavior. Consumers might have been averse to ordering wine online, or signing up for a club, prior to the pandemic. But they quickly got over their concerns with few other options during lockdowns. Now that those consumers are comfortable buying online, they are continuing to do so.

That means that wineries will need to continue reaching out to consumers via digital channels. Which brings us to…

Third Takeaway: New Sales Growth Will Come from Better Digital Exposure

The SVB report in particular gave some very pointed advice for winery growth, centered around “getting digital exposure to new consumers who live elsewhere and don’t know you.” In other words, growing beyond exposure through tasting rooms and local events.

In the report, they listed some of the needed elements as:

• Finding ways to encourage those consumers to join your wine club via digital means instead of insisting that the only method for club growth is tasting room visitation.
• Building your brand regionally by offering experiences away from the winery, including a digital component. Zoom is just one tool for that.
• Investing in understanding your existing consumer data.

One other thing we noticed is that none of this advice mentions social media…but that seems to be what wineries consider “digital.” The SVB report, in fact, comments on the growth of social media as the prime digital investment:

“When asked where they’d make digital investments in 2021, most wineries in our survey said they would be increasing their digital marketing budgets—most likely reflecting the overwhelming use of social media…But the 25 percent who said they planned to hire a dedicated employee to help with digital sales and outreach gives us hope that wineries see sales possibilities and plan on focusing someone on the opportunity.”

By contrast, the SOVOS/ShipCompliant report is clear that this is already happening:

“Equally important is the newfound emphasis wineries placed on digital marketing during 2020 and 2021. This increased investment in time, effort and personnel aimed at augmenting digital sales is likely to result in more incremental sales from both club and mailing list members, particularly as the efficiency of digital marketing increases.”

In other words, wineries are investing on social media, but that’s not the end of the story. There has to be someone responsible for staying on top of those digital outreach efforts, no matter what the medium is. Someone has to put the time and the effort in to get those incremental sales.

We would argue that this goes for wine clubs and shipping arrangements, too: There needs to be a point person to formalize the communications strategy and ensure that customers are being served. That is what will drive repeat business.

Fourth and Final Takeaway: Wine Is a Generational Thing

One of the most interesting parts of the SVB report was how it compared the trajectory of the wine industry to the history of the beer industry in the U.S.

That story is a generational one: The post WWII generation was more frugal, and the beer industry thus focused on bringing down the cost per unit ethanol with mass-produced beer. But the boomers that came after them were less concerned with cost, and more concerned with quality and health. The beer industry’s response? To try to serve this new generation, but doing what they had always done—the result being mass-produced lite beer that was heavily marketed. A similar pivot is now underway as millennials become dominant in the market.

Wine appears to be generational, too, though the pivots seem to come later and slower than they did for beer. For wine to continue growing, it will need to connect with the newer generation’s values. Wineries would do well to join forces and focus their efforts on making wine accessible and fun for a whole new generation—as they say, a rising tide lifts all ships.

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