Despite wineries being shuttered and millions of people sheltering in place due to the COVID-19 pandemic, consumers have not stopped buying wine, but have increasingly turned to other channels for their wine purchases. Especially retailers offering online purchase and delivery have seen a spike in sales; Drizly’s growth rate doubled, Vivino had their highest sale day ever on March 13 (greater than Black Friday 2019), and Wine.com too has seen demand nearly triple compared to a normal March day during the shutdown.
The latest weekly U.S. off-premise data from Nielsen reveals that alcoholic beverage sales increased in the first full week of the pandemic ending March 21, 2020 by +28% compared to the week prior and +55% versus a year ago. The magnitude of the year-over-year increase was largest for spirits at +75%, followed by wine at +66%, and the beer category at +42%.
“Not surprisingly, online growth rates for alcohol are ahead of in-store sales growth, but the online measured increases were out of the park – up 243% versus the same period of a year ago,” says Danny Brager, Senior Vice President of Beverage Alcohol at Nielsen. “And wine continues to dominate in terms of online share, 71% of total Beverage Alcohol sales.”
However, it is unclear that this surge will lead to a new normal or breakthrough for alcoholic beverage eCommerce beyond the pandemic or even beyond its beginning.
Vivino founder Heini Zachariassen recognizes that eCommerce has previously been slow to take off, but is hopeful that more of the 42 million Vivino app users will take advantage of the app’s winebuying feature while they shelter in place, in addition to repeat customers taking the opportunity to stock-up. ”There is definitely a combination as we are seeing strong sales come through from both new users and repeat customers. On March 25, we had more new customers purchase from Vivino than we have since Black Friday 2019 – which has been our biggest day in terms of sales and new customers ever!” says Zachariassen.
Wine.com founder Michael J Osborn also says, “The demand is coming from both existing and brand new Wine.com customers.” And the operational changes they’ve made at Wine.com in response to the pandemic and resulting demand indicates they are prepared for continued demand during the pandemic. “Our warehouses are fully operational, practicing social distancing, and extra cleaning procedures. We’re happy to support the community by hiring 100 additional people to help pick pack & ship orders.”
However, while the overall sales are booming, the composition of orders raises some flags. “People are buying more bottles per order, and spending slightly less per bottle, $23 versus our normal $32,” says Osborn.
The drop in average bottle price is purchasing behavior associated with recession wine buying, and the larger number of bottles is consistent with stocking-up behavior and could well mean a longer time before these customers are in the market for wine again.
Direct to Consumer Sales
Though winery tasting rooms are closed and events cancelled or postponed, wineries have amped up their efforts to sell wine through their website or over the phone; many in combination with offering virtual wine tastings, and it has paid off.
WineDirect reports that the volume of non-club shipments increased the week of March 16-20 by 62% week over week and 176% year over year. That includes shipments from all five of their fulfillment centers in Napa, Paso Robles, Santa Maria, Willamette Valley, and Ohio.
The data from the fulfillment centers doesn’t reveal anything about the purchase composition or the share of new customers, but it is likely a result of the wineries’ aggressive campaigning to their existing customers, many including discounts to incentivize purchases to shore up the shortfall in tasting room sales, which normally provides over a third of direct to consumer sales.
“While it’s too soon to tell how this will develop in the coming weeks, it’s clear wineries are aggressively moving to sell wine online and their customers are responding positively, at least for now,” says Adrienne Stillman, Marketing Director at WineDirect.
This week, WinePulse released their first DTC Industry Report, and it shows that despite the last two weeks’ shutdown, winery direct to consumer sales are up 3.26% year to date compared to last year. The 48% drop in tasting room sales in March is made up for by a 207% spike in eCommerce sales. But, Remy Sabiani, Owner of WinePulse is seeing several reasons for concern.
“Average order value is actually flat, if not slightly down for eCommerce,” says Sabiani. “Keep in mind that a lot of wineries had their club shipment in February or early March, so for the customers that are club members, they had just received their shipment.”
This fits with the stock-up buying pattern experienced by online retailers, and Sabiani is already seeing signs that the eCommerce spike is coming down, and he’s concerned for the near future direct to consumer sales indicated by that spike coming down and a 2.3% drop in active wine club members.
“The drop in active membership had started earlier this year,” says Sabiani.”What is happening over the last two weeks is a sharp increase in members asking to be put in hold, which automatically reduces the number of active members, even though they don’t necessarily cancel their membership.”
The drop in active wine club members is concerning, because it puts in jeopardy the next shipment, and going back to existing customers to buy more wine is a strategy that can only be effective for so long before that market is saturated.
The real test is seeing what happens next, if wineries can sustain a higher level of eCommerce sales, but it likely means that they will have to find a replacement for the true value of the tasting room – customer acquisition. Likewise, online retailers will have to show that they can capitalize on this crisis and bring new customers to their platform.
If those two things succeed, it may change wine sales and marketing beyond the pandemic, but until then, the question remains: Where will wine sales come from next month?
By Kim Badenfort