“Imagination is more important than knowledge. For knowledge is limited to all we now know and understand, while imagination embraces the entire world, and all there ever will be to know and understand.” … Albert Einstein
All the recent economic and financial story headlines and news feeds that we all receive, read and attempt to digest have led to an industry wide case of psychological indigestion. There is often significant cognitive dissonance in what we want to achieve with in-place business models and the levels of brand performance necessary for survival in these recessionary times. We can either retreat to our cellars, heads-in-hand, or rethink our models and create new ways to improve brand success. Sitting down with key staff and analyzing sales and distribution numbers used to be a monthly routine, but this process has now become a weekly, if not a daily exercise. We collectively obsess in the analysis of our flash reports and wonder when and if in the near term there will be a turnaround. Well, soon perhaps, but it’s been my life and wine business experience that difficult times call for imaginative solutions – imaginative solutions that will position your winery to survive in the short term and to thrive in this transformative economy.
The closure of the fulfillment/compliance firm New Vine Logistics this past weekend was met with a audible gasp heard throughout wine country. Today we can hear the scramble as a significant number of wineries try to recover their wine, meet individual state and federal compliance requirements, and communicate in the midst of chaos with their customers, clients and fans. In the spate of news articles, analytic pieces and blogs on the subject it became apparent that many of the wineries, the ones that relied solely on a DTC channel model for sales may need to rethink their distribution. A good case study was discussed a few months ago when I hosted a tour of three west Sonoma County Pinot Noir producers for a group from HBS. At each stop the same question was asked by the group about the breakdown in the winery’s distribution model. All of these still successful wineries had the same answer: 50% DTC, 50% three tier sales focusing primarily on-premise, but with growth in independent retail and mid-chain sustainable grocery. All three wineries understood that a diversity within their models allowed significant flexibility to refocus priorities as market dynamics changed, and market dynamics have changed, and will change again.
Although a few cult wineries are holding even on club sales, most wineries have suffered increased resignations, or clubs shipments placed on hiatus resulting in diminished DTC sales performance. The national wine wholesale channel is no longer open to distributing unproven brands or brands that belatedly realize, with the recent pressure on DTC sales, the need for other tactics to sell and distribute wine. The time to create you own revenue enhancement opportunities is now.
The Lesson Plan
Although it’s tough out there, it’s been tough before. Something we tend to forget this after periods of meteoric growth.The US wine business is a product saturated, dynamic and evolving industry meandering through peaks and valleys on its way to maturity. But a little imagination on how to market, distribute and sell you wine brand(s) will help in overcoming even significant obstacles on the path uphill. There are so many distribution options available to wineries in DTT, DTC, or three tier models just use focus and creativity in building your base channel strategy.
If your brand has limited distribution, then you have a lot of distribution voids. Start locally. No matter what you call your wine country, you want to achieve distribution in local key reference accounts. Tourist come from all over the world to visit, to taste and to eat. If your wine is on a local must visit restaurant wine list or as a wine by the glass feature it creates not only trial but awareness. If you’re a Napa Valley winery, target the wine list at Cole’s, Tra Vigne or Bouchon. I was at Cafe La Haye in Sonoma last year when a distributor friend from Texas ordered a bottle of Radio-Coteau. He’s now Eric Sussman’s Texas wholesaler. Years ago, Schmitt-Sohne, an unknown German wine brand without US distribution, established a tasting room at Disney’s Epcot and within 1 year had distributors in 50 states growing today to be one of the most successful of German wine brands in the States.
In order to build sustainable broad market distribution start building a key lighthouse and/or multi-unit on-premise account base. Begin in your immediate local market, then as production grows expand regionally. If you’re lucky enough to produce wine in a state that allows DTT distribution, or you’re working with a firm such as Inertia Beverage, key on what is now called national accounts.
Although SW&S’s Mel Dick always advises building your brands on premise today I believe in a more diverse distribution strategy. The ascension of the local mid-chain grocery provides quality distribution alternatives for fine wine sales. If you’re in St. Louis, you want your wine in Dierbergs, or in Cleveland at Heinen’s, or at Nugget Markets in Sacramento. And on a regional or national level distribution and features at Whole Foods will result in significant sales. If you have a new brand that has garnered 90+ reviews from The Wine Spectator, The Wine Enthusiast or The Wine Advocate and your goal is regional distribution in club stores such as Costco – then it’s achievable.
If you have unsold wine, understand that the burgeoning private label business is booming. Rather than spending resources to launch a second label, consider the development of a private label wine for a regional beverage chain, a mid-chain Grocer or with an emerging sommelier. The aforementioned Heinen’s in Cleveland offers Vin Hunter, a label developed by Wine Director Ed Thompkins.
Consider distribution in control states. For example, if you’re a small winery and decide to sell wine in Pennsylvania you will be in the PLCB speciality store system opening up the special order market to a state closed to most out of state winery DTC efforts, while providing the ability to access the important on-premise markets in Pittsburgh and Philadelphia.
In order to drive more guests to your winery plan more effective promotions. Ch Ste. Michelle and Robert Mondavi do this through summer concerts. But this tactic is not just for the iconic destination properties. C.Donatiello has a great summer concert series – most of which are free. Newbies get to discover great wines, associate the wines with a memorable time like Gomez’s Ian Ball’s birthday concert and become members of a growing fan base.
Offer freemiums, such as online complimentary or twofer tasting coupons. Offer free ground shipping or additional discounts based on quantity purchases. Host a group of local or visiting wine, food or travel bloggers such as the recent Hahn vine planting forum, the St. Supery annual bloggers forum, or the Twisted Oak pre-WBC bloggers party. Establish and maintain your Facebook and Twitter accounts. Don’t treat winery social media accounts as hard sales tools, but occasionally offer specials such as the first chance to get limited production wines. Initially limit this to your contacts, but count on this offer going viral.
Focus on improving your customer service. Recognize the importance of your guests. Greet every visitor with a smile. Over deliver on their brief experience. Call your customers and thank them for their phone and internet orders. Let them know about any events, tastings or winemaker dinners in their home market. Solicit ideas and suggestions and then listen. Reward your most loyal customers at least once per year with an in-house members of the tribe event.
This list is not meant to be comprehensive. The above ideas are just suggestions meant to engage you the winery chief marketing officer and to encourage your brand building creativity. You have responsibility for your winery’s success. There is no one out there to hold you’re hand. Bury any inclination towards hubris and arrogance, and listen to what the market has to say. Pay attention to other wineries, big and small that are successful, and study just what it is that they do to create sales. Have the right staff with the right skills in place. Invest in resources, even as margins are squeezed. Spend time in your best markets and keep your eyes and ears open. Keep your pants up and your head down. And be prepared to work harder and smarter than ever to achieve the tasks at hand, but do it with a smile on your face, and the attitude that failure is not an option.
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