Two key reports on direct-to-consumer (DTC) wines sales have been released, and their findings make for fascinating — if, at times, alarming — reading.
By Kathleen Willcox
Sales growth “slowed noticeably” in the second quarter of this year compared with the first quarter, according to the Q2 2022 DTC Report from Enolytics and Wine Direct, which crunched wine sales and shipping data from 2,000+ wineries in three countries. This was especially true for sales online and in tasting rooms year-over-year.
Compared with this time last year, website sales are down -20%, telemarketing sales are down -17% and winery sales are down -8%. Interestingly, when folks are opting to buy wine online or in tasting rooms, they’re snagging rosé. About 16.6% of all rosé sales were conducted online, compared with 7.8% for all wines; an additional 41.1% of rosé sales were made in tasting rooms, compared with 33.7% of all sales.
In better news, DTC sales are actually up 1%, thanks in large part to surging club sales (up 17%) and an incredible increase in event-related sales (up 85%) as more and more people return to wine country.
Time To Tweak Wine Sales Strategies
Cathy Huyghe, co-founder of Enolytics, notes that because the report is so timely, winemakers will be able to quickly adjust their sales strategies to leverage strong growth areas, and adjust tactics in weaker arenas. “The net growth of DTC sales is still very strong, but tasting room sales and website sales are declining compared to the previous years,” Huyghe notes. “That seems to reflect the general economic slowdown.”
But, she adds, there are still plenty of reasons to celebrate the DTC channel. Club sales showed healthy double-digit growth year-over-year, and the average order value is up 30% over 2018.
Certain sectors of wine are growing with gusto, although value-priced brands are struggling, underlining the broader pattern across the economy. Luxury wines are outperforming lower-placed wines this year, with a 32% growth in bottles priced $90 and above, and a 15% growth in wines priced between $50-$59. Sales of bottles that are $20 and less, meanwhile, are down -1%.
Winemakers like Martin Bernal-Hafner at Alta Orsa in Mendocino, which produces about 1,000 cases annually, says that, while his sales are down slightly online, they’re booming in-person.
“When we have visitors, the return is immediate and long-term,” says Bernal-Hafner. “They often not only leave with a case of wine, they sign up for our wine club and become long-term revenue generators. I have found that focusing on hospitality and giving visitors personal tours myself creates connections that last and are personally rewarding, but also essential to our bottom line.”
Premium Wine Grows as Value Brands Struggle
The Direct-to-Consumer Wine Shipping Report, which combines information from SOVOS ShipCompliant‘s DtC transactions and data from Wines Vines Analytics (WVA), meanwhile, has found that while the overall volume of wine shipped across the country so far is down 9% to 3.7 million cases year-over-year, the total value of that wine is up 3% to $1.95 billion, in line with the premiumization pattern found in the Enolytics report.
“The decline in volume is not that unexpected, considering the record highs of the previous two years, seasonal patterns and the recovery of the on-premise sector. Consumers are back to buying wines they may have been purchasing via DTC,” said WVA’s Andrew Adams in a public statement. “And while it’s very encouraging to see shipment value remain positive, there is growing concern among wineries that challenges in the wider U.S. economy may hinder value growth through the second half of the year.”
Indeed, average bottle prices have climbed to $43.78, a 14% increase. Napa is particularly hot, with an average boost of 20% to $79.74 per bottle, and Sonoma, the Central Coast, Oregon overall and Washington state also showing particular strength compared to the rest of the United States, which was down 3% year-over-year, to an average price of $21.78.
All of these numbers reflect what’s happening on the ground at Napa’s Domaine Carneros, which produces about 75,000 cases of primarily sparkling, but also still wines, annually.
“We’ve been fortunate to take advantage of several trends in recent years, some of which were amplified after the restrictions in the early stages of the pandemic were lifted,” says CEO Remi Cohen. “Sparkling wine consumption has grown significantly and sales of our rosé, particularly our Brut Rosé, have gained momentum at the winery and in distribution.”
Last year, guest spending was up 50% over 2019, and while visitation and direct sales are still strong, Cohen says they have seen a slight drop in sales per guest, and says that sales online are down about 20% year-over-year.
“But premiumization continues to grow, with growth in revenue exceeding our volume growth,” Cohen says, particularly with the launch of new “food pairing programs and elevated experiences.”
Anticipating the Next Economic Phase
It’s impossible to say how premium and value brands will perform tomorrow, but it is possible to begin to anticipate potential pitfalls and opportunities.
Wholesale is also seeing an impact, says Lorenzo Pacini, who represents brands like Shannon Ridge and the entire MMD Portfolio (from Healdsburg, Calif., to the Oregon border) for his family’s wine distribution company Pacini Wines, although it’s unclear how deep and wide it will be.
“We have hundreds of brands in our portfolio across every price point,” Pacini says. “People seem to be spending the same amount of money, it’s just in different areas. The prices of fuel, food and fun are way up overall and the market isn’t falling on its face, but it is clearly softening.”
A softening in some areas doesn’t have to be fatal, or even extremely impactful, if hedged well.
“Today, to drive sales, wineries should be optimizing their websites, investing in SEO and providing discounts and promotions,” says Huyghe, crediting Andrea Smalling, CMO and head of e-commerce at Wine Direct for those strategies. “Price points will also dictate certain pricing strategies. Less expensive wines are very sensitive to price increases, for example. Offering wine bundles, flat shipping rates, volume deals and rewarding loyalty are all ways that Andrea lays out in Wine Direct’s E-Commerce Guide.”
What else should wineries be looking at now to optimize sales in Q3?
“Believe it or not, wineries should start thinking about maximizing holiday sales now,” Huyghe says. “Our data shows that, contrary to assumption, September is actually the most robust month for holiday sales.”
Kathleen Willcox writes about wine, food and culture from her home in Saratoga Springs, N.Y. She is keenly interested in sustainability issues, and the business of making ethical drinks and food. Her work appears regularly in Wine Searcher, Wine Enthusiast, Liquor.com and many other publications. Kathleen also co-authored a book called Hudson Valley Wine: A History of Taste & Terroir, which was published in 2017. Follow her wine explorations on Instagram at @kathleenwillcox