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April 4, 2008 | Demand Generation , Wine Industry Trends | WineDirect Admin

Good News for Winery Direct Sales

The Gomberg-Fredrikson Report brought in some good news, courtesy of Wine&Vines, for us proponents of Winery Direct Sales: Direct Sales Boost California Gains (CA winery shipments to all markets are up 2% over 2006). We are pleased, but not surprised. It confirms the silent wine revolution Inertia has been working for over the past 5 years.

I wanted to review all the factors contributing to the growth of winery direct sales, lest you forget it is happening.

Regulatory Environment
Ever Since the Supreme Court Decision of Granholm v. Heald in 2005, more and more states are opening up. The regulatory noose is finally beginning to loosen and winery are increasingly realizing that they no longer need to depend on being distributed in certain states to gain customers there. For the most part, eCommerce is enabling wineries to leverage this new freedom.

Wine Marketing and Media
Wine is more fashionable than ever. It’s healthy, it’s not as intimidating as it once was. Younger imbibers want it and CA wines have long shed their inferiority complexes. Hence the plethora of wine related publications and the growth of their readers. When the media focuses its attention on a given wine, this creates consumer demand. If the consumer demand cannot be satisfied in a given market for whatever reason, demand will find supply straight from to the producer, usually via a Google search.

Consumer behavior patterns
It’s a bit of a chicken&egg thing as to what helps what. Does the media make you drink more wine or because you drink more wine, the media had better write more about wine? This is a moot point. Let’s focus on the virtuous circle. No one will deny, American drink more wine per capita than they aver did, and they also buy more expensive vino. This is good for business. Furthermore, if more consumers enjoy wine, more of them want to explore the infinite possibilities of fermented grape juice, so they research it and look for availability (see factors 1 and 2).

Market Changes
The scissor effect: more producers, fewer distributors – this freezes the grinds of the wine market: traditional supply (retail) cannot satisfy a changing demand. And as this new demand grows (see above), new channel are needed to answer it. Moreover, producers no able to reach the market because of the constriction of 3-tier distribution, take the matter in their own hands and being to market their wines themselves. As producers realize that disintermediation helps their bottom line, they sell direct. Simple economics really, but huge vested interests are at stake so don’t expect these changes to happen overnight or without a big fight from the distributors.

The last factor in this growth is not an external macro-economic one; it is very micro-economic in nature and not as evident to outside observers. It deals with the wineries themselves. Here at Inertia we are in a preferred position to observe (and drive) the last factor conditioning winery direct sales growth:

Better Direct Marketing
Yes – selling direct is more profitable and a strategically sound business decision. But it is not easy – that is why producers have long left sales to others. But wineries are learning to sell direct and they are getting much better at it, provided they use the proper tools and sound marketing practices. As wineries get better at the sales and marketing game direct sales will grow, to the great benefit of consumers and producers alike.

We know for a fact that the growth of our clients’ direct sales is not just the result of outside forces; it is also in large part the direct impact of how they implement online marketing best practices. We loo forward to more and more winery direct sales!

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