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‘The most difficult business conditions since Prohibition’

National Wine Day GL0610-natl-wine-day-pandemic.jpg
“Internet sales were kind of a turning point for the industry” amid the COVID-19 pandemic, an industry leader says.
COVID-19 closures forced wineries to innovate, experts said.

Rob McMillan, author of the highly acclaimed “Annual State of the Wine Industry Report,” spent National Wine Day on May 25 leading a virtual Direct-to-Consumer Wine Report webinar.

The founder of Silicon Valley Bank’s Wine Division in Napa Valley shared the podium with three other speakers (Aileen Sevier of Early Mountain Vineyards; Janiene Ullrich from The Family Coppola, and Paul Mabray, CEO of Pix) in bringing an updated industry view to more than 1,500 electronic attendees.

With a focus on selling wine both during a pandemic and post-pandemic rather than the art of growing wine grapes, how the end product was being marketed and received by the consuming public was the hot topic.

“Last year represented the most difficult business conditions since Prohibition,” McMillan said.  “I kept thinking we were going to get by things like the pandemic and wildfires and then something else would come up.  It was just a never-ending stream of difficulties that closed down restaurants and tasting rooms which, at that time, represented about 44% of sales for the average family winery.”

So, as wildfires were extinguished and control measures began to take effect on the pandemic, “Small wineries presented Zoom tastings which really didn’t exist before and online sales took off,” he said. “Direct sales via the Internet jumped from 9% in 2019 to 16% in 2020.”

“A big surge in on-line sales started in late March 2020 and continued through the rest of the year,” reported Janiene Ullrich.  “In response, we revamped our online shopping experience.”

“Internet sales was kind of a turning point for the industry,” added McMillan, who called it ‘passive growth via digital shopping carts’ and suggested the phenomenon would drop back.

Paul Mabray disagreed.  “The genie is out of the bottle now and with some improvements to the system, I expect sales on-line will continue to improve.”  Aileen Sevier was of like mind.  “These were not passive sales, but a very broad consumer group.  We reached 85,000 consumers in 2020 through these efforts.”

Positive changes

Undeterred, McMillan proceeded to say that recent months and creative efforts had shown that positive changes could be implemented.  “We’ve needed to break away from the standard tasting room model for some time,” he said. “That model isn’t completely broken, it’s still a totally viable source of revenue, but we were overly dependent on it, just stuck on the same rail.  We’ve needed to take this experience on the road, and this is one path on which we need to go as an industry, addressing our consumers through all channels.  There’s every reason to believe the 16% e-commerce sales figure will probably drop.  I think we’ll go through a certain hiatus as we all kind of reject Zoom for a while, but I think those kinds of tastings are here to stay.”

One of the webinar discussion points relevant to all aspects of the wine industry, from initial growing to bottling and selling, involved the need for appropriate personnel.

With wineries gearing up for consumers to begin revisiting their properties, McMillan acknowledged, “The thing we’re all struggling with right now in the hospitality industry is hiring.  We’re all having a hard time trying to fill frontline positions because you can’t just pick up the phone and have former employees return.  They’ve moved on and it will be a herky-jerky re-start, a welcome reopening — but one where qualified labor will definitely be an issue.”

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