REthink Wine Blog

No one doubts that when it comes to electronic commerce and e-marketing in the wine industry, wineries with a tasting room have a significant advantage. The visitors that walk into the tasting room immediately become customers or well-qualified prospects that can be added to a winery’s “contact list” for future outreach. But if you don’t have a tasting room, building a contact/customer list is a much more daunting task. But if e-mail marketing and online sales is part of your direct sales strategy, then it’s a task you must take up and address.

Here are some creative strategies for building customer and contact lists that have been successful for other wineries without tasting rooms. 

1. Business Teaser Cards: A few wineries, when printing business cards for all their employees, have used the back of the card to offer the holder a 10% or even 20% discount on their first purchase. Often each card has a code on it that buyers can use to assure their online discount and to track who’s business card led to the sale. It’s a creative way to invite new acquaintances to the website when without the discount/invite you’d only be handing out a business card with no call-to-action.

2. Event Giveaways: One Sonoma winery with no tasting room but with a guest house on their property always brought a sign to the tastings they attended announcing that following the tasting a drawing would take place for a weekend getaway at the winery’s guest house. The sign carried beautiful pictures of the guest house and the property. All the attendees had to do was drop their business card in a fishbowl or fill out a simple slip of paper with name, state and email. Within a day of the tasting the winery did their drawing, contacted the winner and set up when they would visit. But more importantly, the winery would also contact via email every single person who entered the drawing with a “thank you” message and an offer of 15% on their first purchase. Their list continues to grow.

3. Contests: A number of wineries without tasting rooms have found that contests are a fantastic way to draw prospective customers to their website. The best contests should be easy to enter, but also give the entrants a feeling of participation or connect with the winery, winemaker or brand. One winery has used its back label as a canvas for the contest by inviting entrants to design their own 100-word back label on a specific subject. The winner had their entry published on the label when the wine was bottled! The contest was announced with a press release and an ad, and the winner was announced on the website and in a press release. They received hundreds of people visiting their site to participate, all providing their entry of back label copy along with their e-mail address. The winery grew their mailing list and customers were able to engage with the brand. Win-Win.

Prospecting and building your email contact list must be an ongoing project if increasing online sales is part of your marketing strategy. If you don’t have a tasting room, you’ll need to think creatively. The time and effort that goes into a very creative customer prospecting program will pay off in an enhanced email list, and ultimately increased sales.

With hundreds of wine blogs, websites and social networking sites now concentrating on wine, one could spend an infinite amount of time trying to soak up all the wine information and intelligence needed to give you a head start and a foot up on the competition. It’s important to have a manageable collection of websites that can keep you informed and keep you learning about wine the industry without getting buried in information.

Here are a few of the resources we recommend to stay in touch with what’s happening in wine, while not getting buried:

Wine Business Monthly

This is a great site that is updated daily with articles, links to important news items, and links to blogs that focus on the wine industry. You just might want to make it your first stop on the Net on a daily basis. You can also sign up for their daily email of top news items here

Wines and Vines

Wines & Vines is America’s old trade publication for the wine industry, but nothing about it is old fashioned. The site is constantly updated with new articles and resources.

Wine and Spirits Daily

Daily Reporting on the wine and spirits market is this organization’s forte and they do it well - often breaking stories, offering analysis of important stories, conducting interviews with key industry figures and alerting readers to new research. You can go to their site daily or sign up for their daily email and have the info sent right to your inbox.

Wine News at Topix

This is an interesting aggregation site for both consumer and trade-oriented wine news. You are likely to find constantly changing articles culled from wine blogs, major wine websites, recently issued press releases and articles in major newspapers and magazines.

Inertia News

Of course, you can always keep up with the latest Inertia news by heading to our press page. There you’ll find links to recent announcements and press coverage of Inertia.

A quick reminder that Wisconsin drops reciprocity effective October 1, 2008.  In doing so, it joins the growing list of states allowing consumer direct shipment of wine with a direct shipper permit.  This opens direct shipments to permitted wineries in every state instead of just those in the shrinking number of reciprocal states, which is now down to just New Mexico and Iowa.  Details will be available in the State Shipping Laws section of REthink Compliance effective October 1st.  The permit application is available at the state website:  www.dor.state.wi.us/.  Below is an excerpt from the bill’s legislative analysis outlining the basics.

This bill repeals the reciprocal agreement system for authorizing interstate wine shipments directly to consumers and replaces it with a new permit system available for both interstate and intrastate shipments of wine directly to consumers.  The bill requires DOR (Department of Revenue) to issue a new permit called a direct wine shipper’s permit that authorizes the permittee to ship wine directly to an individual in this state who is of the legal drinking age, who acknowledges receipt of the wine shipped, and who is not intoxicated at the time of delivery.  A direct wine shipper’s permit may be issued to any person that manufactures and bottles wine on premises covered by a winery, manufacturer’s, or rectifier’s permit issued by DOR, a winery permit issued by another state, or a federal winery permit.  Containers of wine shipped to an individual in this state must be clearly labeled to indicate that the package may not be delivered to an underage person or to an intoxicated person.  No individual may resell, or use for a commercial purpose, wine that the individual receives by direct shipment under the permit.  No individual in this state may receive more than 108 liters of wine annually that is shipped under authority of the permit.  Holders of direct wine shippers’ permits must report quarterly to DOR specified information related to wine shipments made under authority of the permit and must include the amount of the occupational tax in the sales price of the wine and pay the sales or use tax on the sale of the wine shipped under authority of the permit.

I was speaking with an acquaintance not long ago and he was bemoaning the fact that as a holder of a type 17/20 license he was being discriminated against as a “virtual winery” by California Alcoholic Beverage Control (ABC) because he couldn’t allow consumers to taste samples of his product while the holder of a type 02 Winegrower license was allowed to do so.  He believed that since 02’s and 17/20’s were both wine producers they should both hold the same rights and privileges.  He chalked this “discrimination” up to a bias based on economics.  That it was merely money politics trying to maintain an uneven playing field.

As he spoke it sunk in to me how little he understood the licenses he held and the rights and responsibilities the licenses conveyed.  I realized at that point how unfortunate the monicker “virtual winery” was as a way to describe the activities permitted by holders of 17/20 licenses because it caused many misperceptions among both the public and the licensees.

The last decade has seen an explosion of what have become to be known as “virtual wineries”.  This jazzy, romantic name is generally applied to wine makers who hold a Type 17 Beer/Wine Wholesaler license and a Type 20 Off-Premise Beer/Wine retailer license.  It is a relatively inexpensive way to enter the industry because it does not require the holder to purchase equipment or have a bonded wine production facility, a huge capital outlay.  Many fine wines have been made by “virtual wineries” and it has been a tremendous boon to the growth of the industry. 

In many ways I like the name…it has cachet.  The problem is that it is not an accurate description of the rights granted to Type 17 and 20 licensees.  It is misleading because, simply put, neither the 17 or the 20 license grants the right to produce wine.  The license in California that grants wine production rights is the Type 02 Winegrower license.  Neither the 17 or 20 license types were created for the purpose of winemaking.  They have been co-opted by small wine makers who did not qualify for a type 02 Winegrower license.  The 02 requires the holder to have a federal Basic Permit, which in turn requires access to a bonded space (read “winery”).  It doesn’t have to be your own space.  You can lease space in a bonded wine production facility and obtain an alternating proprietorship.  This allows a winery to get an 02 license without actually owning their own facility.  But with that bond comes responsibility.  Excise taxes, monthly reporting, maintenance of a secure facility are just a few of the myriad responsibilities required of an 02 licensee.

Type 17/20 licensees do not have wine production rights.  They produce their wine at a licensed winery’s bonded wine facility, frequently referred to as custom crush facilities.  They pay a fee for use of the equipment, facility and to operate under the license so they can produce their wine.  Their 17 and 20 licenses then provide the rights necessary to market their wines to wholesalers, retailers and consumers.  Still, they do not have the same level of responsibility as licensed wineries operating under a federal permit.  They are only on the hook for maintaining the responsibilities of their licenses as wholesaler/retailers.  They do not take title to the wine until excise taxes are paid and the wine is removed from the bonded facility by the 02 licensee.  They are not the responsible party if the tax doesn’t get paid or the report doesn’t get filed.

Common Misperceptions about “Virtual Wineries”

MISPERCEPTION:  By combining the type 17 and type 20 licenses together a new hybrid type of license is created that grants rights beyond those of the individual licenses.  That combining these two licenses permits wine production in much the same manner as a type 02 Winegrower license permits wine production.  That it was created by the legislature for wine producers who don’t have their own equipment or facility.

REALITY:  A 17/20 is a combination of two license-types that, put together, allow the licensee to market wine they produce in the bonded facility of a licensed winery at the wholesale and retail level.  There is an unfortunate tendency to group the two license types together, as if there is such a thing as a “Type 17/20″, but they are two separate licenses.  A check of the ABC regulations will show that no such creature as a “17/20″ exists.  They are tied together because they are advantageous for small producers and that’s fine, but they are separate licenses. 

MISPERCEPTION:  17/20’s are discriminated against based upon economics.  That because they do not have the resources for equipment and a facility they are treated differently than licensed wineries.  That rather than being a “loophole” in laws created to govern wholesalers and retailers, the 17/20 license “type” was created by the Legislature as the result of wineries, trade associations, lobbyists working to protect their sales against lower overhead 17/20 producers.

One suggested form of discrimination is that type 17/20 licensees unfairly cannot taste wine to consumers.  That since both 17/20’s and 02’s produce a wine product designed for sale to the wine consumer, they should both be able to sell their product on a level playing field.  That such discrimination clearly consists of unfair business practices and restraint of trade by one market segment over another.

REALITY:  Actually, the wine consumer has equal access to buy a “virtual wineries’” wine, they just can’t taste it first because the license types 17 and 20 don’t permit it.  The reality is 17/20’s are not truly producers from a legal standpoint.  They do not bear the same responsibilities and also do not have the same rights.  One of those rights is direct wine sampling to consumers.  The Legislature deemed it inappropriate for retail licensees to hold such rights because they didn’t want the corner liquor store to be able to sample wines.

Changing the Reality for “Virtual Wineries”

Many argue some change should be made to the type 17 and type 20 licenses to accommodate the needs of wineries operating under the combined licenses to allow them to compete more fairly with the type 02’s.  I believe the law should change as society and commerce changes.  While I can support a change in the law to allow type 17/20 producer to taste their wares to their customers, I believe the change in the law should be to the type 02 license, not the type 17 or the type 20.  To make changes to the 17 or 20 would be to permit wholesalers and retailers to taste wine to consumers directly.  This is not a desirable situation.

The fact of the matter is neither a type 17 or 20 license was written for the purpose it is now being used.  Certainly consumer tasting is unavailable to a type 17 wholesale licensee.  And it is not permitted for type 20 retail licensees either.  When was the last time you went to a 7-11 and did a wine tasting?  The license was simply not created with the idea that making wine would be the result.  It is as it is because legislators didn’t envision it being used in such a fashion when written.  What needs to happen is the type 02 license either needs to be amended to accommodate “virtual wineries” or a new law needs to be written.  The better solution is to review, and possibly revise, the qualifications for acquisition of a type 02 license to include wineries operating under 17/20’s.

“Virtual wineries” are good for the industry, even if the name is somewhat misleading.  Changes in the law to accommodate the changes they have brought to the industry are probably warranted.

It has often been argued that the true value of social networking, whether in blogging, Facebook, consumer generated content, Twitter, or otherwise, lies in the transparency it brings between you and your audience.  That is especially true if your ultimate goal is in building long term relationships with your customers, partners, vendors, or employees.

As technologies that are now considered cutting-edge become main stream, and as Millennials, with their reputation for being fully connected and passionate, begin to overtake Baby Boomers and Gen X’ers in numbers, a tremendous opportunity presents itself in the form of Social Media.  Exactly how are Millennials staying connected?  Are they reading newspapers or are they reading blogs and other forms of Social Media?

For employees, partners, and customers alike, transparency provides clarity behind the direction of your company and your brand.  For employees, it’s a constant reminder of why they come to work each day.  For customers, it answers the all important question “Why should I stay”?

Web 2.0 has provided a fundamental shift in the way we communicate.  It allows for real people to connect with others – in vibrant and open discussions about what interests them most.  Gone are the days of hiding behind the corporate brand.  With transparency comes trust.  It is your opportunity to display your company’s human side and begin building a direct dialog with customers.

Developing a Social Media strategy means adapting to change and understanding that your brand is now in the hands of forces outside of your control, meaning it’s in the hands of your consumers.

As you begin to develop a Social Media strategy, there are several important principals to keep in mind:

• Know your audience:  Are they customers, employees, industry veterans, or colleagues?
• Give more than you receive:  Blogging is about the sharing of information.
• Always place the needs of your customers first.
• Admit when you’ve a mistake:  Your customers will respect you for it.
• Work with customers to improve your product and your brand.
• Don’t be afraid to show your weaknesses as well as your strengths.
• Reveal your true corporate identity: in the form of your product, your services, and your employees.

Social Media is a whole new ballgame.  If the goal is to display authenticity, you can’t address your audience through a corporate filter.  They want to know the real you.  This is your chance to talk openly and honestly with them.  It is the perfect opportunity to expose the people and the vision behind your name.

So, whether you’re just getting your feet wet by posting comments on blogs or on Facebook, or are diving right in and starting a blog of your own, the easiest places to start are in answering some of the following questions:

• What makes you proud to be sitting where you are today? 
• What is your story? 
• How about your winery’s story?
• Who are your customers and what motivates them?

Social media presents a tremendous opportunity to learn, both from the good news and the bad. 

From Jonathan Schwartz’s (CEO of Sun Microsystems) blog:   “Sunlight’s not just a great disinfectant, it’s a wonderful safety net, too - you can’t fix the problems you don’t know about. But once you know about a problem, even small attempts to help, multiplied over the long tail of the internet, can make an extraordinary difference.”

The recent news that Amazon is looking to get into the wine retailing game broke like a wave a few days ago. What the impact of the multi-billion dollar company coming into the online wine selling market will be can’t be said at this point. And there is also great deal of speculation of exactly how they are going about doing business online with wine.

But this isn’t what was truly interesting about all the press on Amazon’s wine program. Down deep in these stories was an estimate by Barbara Insel of Stonebridge Research on the size of the e-commerce market for wine. Insel, one of the top analysts and business consultants in the wine industry, estimated for the reporter that $2.8 billion of America’s $30 Billion retail wine market comes in the form of direct sales. Although the article didn’t mention this fact, that $2.8 Billion is only winery-direct sales and does not include online wine merchants.

Also interesting was Insel’s estimate that seven percent, or roughly $200,000,000, of that $2.8 billion in direct sales occurs exclusively online. It’s not winery club sales. It’s not tasting room sales. It’s pure online transactions from winery to consumers. We think this is significant because it demonstrates just how large the upside is for savvy wineries looking to increase their sales. There is clearly a lot of room to increase the 7% to something more. It’s likely that this percentage will increase over time in an organic fashion. But for individual wineries that are hovering around that 7% figure with their own sales, they can find a way to increase it substantially through strategic online marketing and prospecting for qualified customers in every venue they offer their wines.

The fastest way, however, to increase your pure online sales is to talk more frequently to the customers in your data base. Consider your email marketing program, for instance. Are you leveraging your communications as best as you should be? Consider a few of Angela Sanchez’s Tips for Increased Email Conversion.

To get an indication of what it would mean to increase your online sales from 7% to 10%, imagine allocating three percent of your volume sales that had been sold to wholesalers, and selling it instead direct to the consumer. Amazon will have some sort of impact on overall online wine sales. But you can impact your own bottom line right now by shooting for an immediate 3% increase in direct sales through strategic e-commerce marketing.

Anyone in the wine industry knows full well they did not get into the business because of an unabashed love of compliance work.  Without sounding ridulous, wine is an alcoholic beverage and the production and distribution thereof is one of the most heavily regulated industries in the United States.  Unfortunately, winery compliance isn’t nearly as much fun as producing (or consuming!) a fine bottle of Cabernet Sauvignon.  Nor is it as much fun as watching the income generated when that bottle sells to an appreciative audiance.  Let’s be honest, the income side of the business equation is always more exciting than the cost side. 

Bad Idea

The problem with this equation is it results in bad business practices.  Make no mistake, producing and distributing wine is a business.  At least if you want to do it for long!  There is a natural inclination to give short shrift to the less pleasant part of the business.  Compliance - the ugly stepchild of the wine industry.  People have such a distaste for compliance that they even give it a backseat to paying the bills! 

Now I’m not here to say that compliance can be fun and we should all love it.  However, I am here to say that relegating compliance to the last seat at the dinner table only furthers the notion that compliance is some horrible task with which to deal and that’s a bad idea.

Compliance is not that hard.  It just requires organization.  As with any business task, it needs to be scheduled and maintained.  Too many times it is treated as an afterthought and not taken on until the last minute.  Attempting to gather your numbers for the previous month just before the due date is a mistake.  It’s also stressful and it often leads to calculation errors and over- or under- payment of taxes. 

You certainly wouldn’t want to approach a sales opportunity unprepared at the last minute and you shouldn’t do so with winery compliance either. 

Planning Makes Perfect

Whether you are filing your monthly TTB 702 report or your state excise tax return for North Carolina, schedule the task with enough time so that you can review your work and accommodate any unforeseen problems without pulling your hair out.  Scheduling and planning will make all of the difference. 

• Schedule a time to do the work with enough time before the deadline.
• Maintain the appropriate sales or production data over the course of the month so you don’t have to throw it all together at midnight on the last day of the month. 
• Organize your data file in such a way so that much of the work is already done for you in the data input process.

Just Another Business Cost

One last thing about compliance and taxes.  Taxes are just another part of your cost structure like any other element of your production and sales systems.  When making price determinations for your product, remember to include the likely excise taxes you will incur in your intended markets.  Florida has very high excise taxes which should be accounted for while the reverse is true for a state like California.

In the end, compliance is just another part of the wine business we all love.  Don’t let it scare you and don’t let it overwhelm you.  Just plan appropriately and the burden of compliance won’t seem so bad.  Remember, REthink Compliance is there to help.  It is the place to find the rules of the road, so to speak, for state shipping laws, perform compliance checks before you ship, and create the reports needed to stay compliant.  Now, go do the fun part…make wine!

If you haven’t already found it, Ablegrape is one of the best new Web 2.0 wine tools - it is the ONLY vertical search engine for the wine industry with a very cool methodology of searching for wine information (check it out - we at Inertia are very impressed).  Please go visit the site and fill out their survey to make it better.

I’m not a tax specialist, but I have picked up a few things in 15 years of performing all types of winery compliance tasks.  And I always tell people that winery compliance work isn’t nearly as difficult or scary as they may think.  Labor intensive…possibly.  Fun…definitely not!  Difficult…not really. 

For direct shipment of wine, you are essentially looking at three different reports at the most for any one state:  excise tax, shipments, and sales & use tax.  For a well-organized office, excise tax returns are not that difficult.  Total up the volume of wine you shipped to the state during the period covered by the return, multiply the total volume by the rate of the excise tax for each category of wine, write a check for the amount of the tax due.  Shipment reports are even easier…just detail what and to whom you shipped, no check required. 

What usually throws people is sales & use tax (S&U).  Unlike the straightforward nature of excise tax and shipment reporting, S&U taxes have several other variables that can impact the degree of difficulty (Olympics jargon here) in completing the return.  Besides that, the form is usually longer with schedules and attachments for deductions, exemptions, adjustments, credits and prepayments.  And let’s not forget local taxes. 

Having said all that, even completing S&U tax forms for most states a winery ships to is not that complex; you simply need to separate the wheat from the chaff and understand a few basics about what information the state wants.

A comment I hear often is that the forms are so complicated and the instructions so difficult that I don’t know how to complete the form.  The reality is that for every state except the home state in which your winery is located most of these schedules and attachments aren’t going to apply.  These forms are generally designed for resident businesses in the state and as such cover many exceptions that are only applicable to resident businesses.  For a winery shipping wine direct to out-of-state residents, completing that state’s S&U tax return is pretty much limited to reporting the sales activity for wine and any other products you ship into the state, deduct any non-taxable items (such as shipping costs or non-prepared foods) and multiply the net sales by the state tax rate.  The only difficult S&U tax return is going to be for your home state…and you have to do that whether you ship or not because your home state S&U tax return includes all of your sales activity in the state, not just your shipping activity.

A couple of key things to be aware of when comleting S&U tax returns:

Gross Sales v. Net Sales:  almost invariably on line 1 of the return the state wants to know the amount of sales activity you had in the state for that period.  Read the instructions for line 1 carefully because the value to put there will determine your response to other questions on the return.  Specifically, determine whether the state wants to know your Gross Sales (taxable and non-taxable) or your Net Sales (taxable only).  Most states want to know your Gross Sales and then let you deduct your non-taxable sales further down in the form.  Non-taxable items could be certain types of products (non-prepared foods like that jar of gourmet mustard) or sales to certain types of customers (sales to the U.S. government, sales for resale).  They could also include shipping charges incurred.  The important thing is to be sure to understand what sales are to be included in line 1.

Frequency:  how often you are required to file is usually a function of the volume of sales activity in the state.  For most wineries that will be relatively low resulting in only annual filing.  For others, quarterly or even monthly filing may be required.

Local Taxes:  more and more states are moving to “destination-based” systems wherein the winery is required to collect and remit not just the state S&U tax but also the local S&U tax.  Local taxes usually range from a .25% up to 2.5%, depending on the region and are determined by city, zip or even street level address.

When all is said and done, most of your compliance work is not as cumbersome as it may seem once you look past the extraneous information on the forms.  And for the information that is required, new systems are available to assist you to complete these tasks effectively and efficiently.  That is why we created REthink Compliance.  To bypass the chaff and remove the anxiety of direct shipping compliance.  The reports generated there will tabulate the sales activity according to each state’s requirements…right down to local sales & use tax rates.  So don’t despair.  Taxes are still a nuisance, but they don’t have to be scary.

Did you know that search engine spiders may only crawl your site every month or so? Sometimes it’s even longer! If you want to make your products “searchable” come holiday season, it pays to start thinking about it now. Determine when your first promotions are scheduled and count back, you’ll need to update both product descriptions and keywords way before the holiday shoppers hit your store. When updating your information, make product descriptions relevant to holiday buying. Add enticing verbiage to your teaser and descriptions. “Staff favorite”, “Great gift idea”, and “Ships in a separate box” help the buyer picture your wine as a gift. An appealing description that is optimized for search can make the difference between a sale and a missed opportunity.

Are you planning to do corporate gifting? Determining what product(s) you’ll offer, your decorative packaging, and gift pricing are all factors to start thinking about early. But, coming up with your gift presentation is only half the battle. You also need to consider your targets: companies you already have relationships with, a purchased target list, your own DTC customers that own/operate businesses, etc. How are you reaching out to them? A nice printed piece, a personal visit? Companies often look for corporate gifting options far before the holiday arrives, so have your prep done early and be ready to sell, sell, sell.