REthink Wine Blog

The rumors are flying - there is growing concern that we are entering a recession.  All indicators seem to point in that direction.  What does that mean for the wine industry?  Well, in general wine sales have slowed during recessions but people tend to enjoy wine when they are in good or bad times, they just tend to be more frugal.

But the ramifications and challenges are less related to consumption than they are to how the market deals with the plethora of brands.  What you have is that wholesalers are less likely to take chances and buy low velocity or unproven brands.  As a businessman I completely agree with their thought process.  Why tie my dollars up in inventory that I may not sell, takes extra effort to sell, or sells slower than other possible products.  Moreover, when they do take a position in a brand, they tend to take a far less aggressive purchasing approach.  Why buy two pallets instead of just one?

On the demand side of the equation the trade also is experiencing a similar approach.  Retailers are less likely to veer off the standard path of what sells and what sells fast and easy.  Restaurants on the other hand are in the situation of not wanting to purchase deeper inventory due to the slowdown in on-premise sales.  But remember, restaurants continue to proliferate in direct support of population growth and I know people don’t stop making babies during recessions.

Consumers are still buying wine, just trying to manage their pocket books better and buying less expensive wine on the frequency basis yet still saving a bit of money for that favorite winery or exploratory purchase.  Unfortunately also they are not traveling as much to wine country diminishing the tasting room as your core direct sales machine.  That doesn’t mean they don’t want your wine, they are just not traveling across states lines as frequently to get it (one side note, tasting room sales do not often decline during recessions because LOCAL residents not traveling out of state tend to visit local wine regions more frequently to get their fix - it doesn’t denote health of hospitality, just a shift in attendance).

It sound scary.  It sounds ominous.  But look deeper.

As a result of the “slow down” the amount of access to brands in any particular market becomes limited.  That does not change the fact that that there are still buyers - both trade and consumer - looking to buy their desired brands.  It just means that those brands may no longer have the same access to the markets.  Do you really think that just because the brand is not in the market and someone loves the wine that they are going to abandon purchasing it? Heck no! They will simply need to find another way to gain access to that brand!

Also, just because on-premise has slowed it does not mean that restaurants do not want a diverse wine list that matches their food, atmosphere, and personality.  But unfortunately the slow down means their access to these brands is now limited by the economics of the market.

So where is the good news?  It is very pure and simple.  Demand for your products still exists, but the strategy for getting them effectively into your desired markets does need to change – think DIRECT.   With a direct sales strategy, the consumer who can’t find your wine in the local market will search the internet and find themselves at your website or find a phone number to call you on the phone.

How do you ensure you’re available for that DIRECT contact? Consider the following: Are you staffing appropriately for your DIRECT program?  Do you have a good fulfillment strategy (like leveraging Wine Tasting Network’s bi-coastal operations) to help lower costs and incent people to buy direct?  Have you made sure to get maximum, cost-effective penetration through your direct shipping permits?  On the trade side, specifically for restaurants, selling direct to trade is new. However, in an economic slowdown, with a limited selection likely being offered by traditional means, they are more likely to go the extra effort to buy direct. Why? Because it allows them to continue in their efforts to create a unique Point of Difference through their selection, from the restaurant next door.

And for you, the winery, this is ALL good news.  It means that your direct channel gets more fuel from sales.  It means that you can possibly recapture margin.  It means that your customers now go into your database for creating long term relationships, thus stabilizing your brand.  Are your direct programs ready for the recession?

This entry was posted by Paul Mabray on Wednesday, June 4th, 2008 at 1:52 pm and is filed under Wine Industry Trends. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.