The direct-to-consumer wine scene has changed since the early Covid boom and that's worrying for some wineries.
By W. Blake Gray | Posted Thursday, 26-Nov-2020
More people are ordering more wines direct from wineries than last year; of course they are. October set a record with 961,000 cases of wines ordered for $527 million.
However, there is a slightly ominous trend for wineries in the average prices of bottles people are ordering.
The average price of a bottle of wine ordered direct from the winery in October 2020 was down nearly $5 from 2019, according to Nielsen and Sovos ShipCompliant. That average price of $45.67 still looks pretty hefty.
However, here's something I didn't know, and maybe you didn't either: October is the month with the highest average bottle price. (I would have bet the farm on December, but then I would have ended up like many inexperienced farmers who make bad decisions.) The average bottle price is usually almost as high in November, but it drops immensely in December.
In other words, the big season for online ordering of expensive wines in 2020 is already almost over.
Last year, the average bottle price for October was $51, and it was $48 for November. But in December 2019, the average bottle price dropped to $36, and it kept dropping until the pandemic started.
Moreover, growth in direct sales appears to have flattened. After six consecutive months of volume growth over 30 percent, volume growth dropped to 24 percent in September and 19 percent in October, according to Nielsen.
This coincides with a flattening of growth of sales of wines by retail stores. Wine sales in retail stores were dramatically higher from March through July, according to Nielsen, perhaps because of customers stocking up. Volume growth was still good in October – 10 percent higher than in 2019 – but that is the lowest number since the pandemic started.
In most of retail, November and December are the big months. Direct wine sales are different because October is traditionally when many wine clubs send shipments, after waiting out the hot summer months.
Explaining the price drop
There are several reasons that the average direct-shipped bottle price is down. One is that, with tasting rooms closed for much of the summer, more people are ordering wine than before, and newer customers might buy less expensive bottles.
Also, wineries are more likely to ship wines in the summer months than before, said Adrienne Stillman, director of marketing for WineDirect, a company that manages deliveries for wineries, and that might have pushed some expensive purchases to earlier months. WineDirect has come up with systems to make this possible, including boxes that have a place for frozen cooling packs, and refrigerated trucks to make the journey from California to fulfillment centers halfway across the country.
"Certainly wineries are looking for ways to extend the shipping windows," Stillman told Wine-Searcher. "That's in response to consumer demand. Consumers want to order their wine and they don't want to wait three months to receive it. On the winery side, if you can only ship wine a few months a year, that's difficult. In the past we had only one refrigerated truck per week leaving our Napa Valley fulfillment center in the summer. This year we had two per week."
However, Stillman also said that high-end wineries are the most reluctant to risk heat damage, so that some higher-priced bottles are still not be shipped until Big Money October.
Nielsen noted that the October drop in growth was most noticeable for Napa wines and wineries that produce fewer than 5000 cases per year. Also, growth slowed in shipments to three of the most important states: New York, Texas and Illinois. It's hard to say why this might be as the three states had very different regimens for the opening of retail stores and restaurants in October.
Wine is also losing share of the online alcohol market, according to Nielsen. There is still more wine sold online than beer and spirits, but the growth rate for spirits is higher, led by big growth for Tequila, Cognac and ready-to-drink cocktails.
Nielsen also reported that slightly fewer people (37 percent of Americans) plan to serve wine at Thanksgiving this year, and nearly 25 percent of consumers plan to spend less than $25 on alcohol for Thanksgiving. But at least they're buying something, for which wineries should be thankful.
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November 26, 2020 at 05:03AM
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Direct Wine Sales Feel the Pinch - Wine-Searcher
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