Retail wine sales soar but wineries still suffer revenue slump
Tri-county wine tasting rooms and restaurants likely won’t reopen to visitors soon, but consumers are still buying and drinking wine.
The Nielsen Co. reported that wine sales at grocery and drug stores soared 27 percent in the week ending March 14 when compared to both the previous and the year-ago week. Wineries are getting higher than usual support from wine club members and other direct sale customers.
But overall, wineries are missing one or more vital segments of their revenues during this period of sheltering in place to prevent the spread of the COVID-19 virus. How they are faring depends on their marketplace profile.
If they have no retail presence, the spike in grocery store sales is doing nothing for them. If their distribution is focused on selling through restaurants, they are hurting. If direct sales through the tasting room and wine club is their only channel, they are among the hardest hit.
WineAmerica, a national association of wineries, released the results of a survey of wineries on the economic impact of COVID-19. On average, respondents expected a 63 percent slump in sales in March, followed by a 75 percent decline in April. The average winery anticipated a loss of $37,376 in March alone from far lower sales and unexpected expenses. The survey, sent on March 19 with a deadline of March 23, went out to all U.S. wineries. It drew 1,085 responses from 49 states, representing about 10 percent of all American wineries.
Rob McMillan, executive vice president of Silicon Valley Bank and founder of its wine division, said he has been on the phone with clients nonstop for two weeks and everybody was looking for some kind of relief.
“So the amount of work that we have is unprecedented,” he said in a phone interview, and it’s been a problem because the bank is not staffed to respond to 100 percent of its client base at one time.
Tasting rooms typically account for 30 percent of a winery’s sales, and selling into restaurants about 20 percent, McMillan said. “So on average we’re seeing about a 40 to 60 percent loss in sales because of the coronavirus for small family-run wineries.”
McMillan said he’s not surprised by the soaring wine sales at grocery stores and online retail sites like wine.com.
“With shelter in place and closure of winery tasting rooms, consumers will still drink wine,” he said. “They’re gonna drink wine in good times and they’re gonna drink wine in stressful times too.”
Tim Snider, president of Fess Parker Winery & Vineyard, said they don’t have many wines in the grocery channel, but sales there have grown exponentially, north of 40 percent and sometimes close to 70 percent over a similar time period in the last two weeks. He wonders if that will continue or if it will settle down to something more normal.
Snider said e-commerce sales of their Fess Parker and Epiphany brands have doubled in March, and he sees a chance of that being sustained through the duration of the crisis. Overall, he’s forecasting a 30 to 35 percent drop in gross revenues with tasting rooms closed and on-premise sales taken away.
Jason Haas, partner and general manager at Tablas Creek Vineyard in Paso Robles, said wine club members and consumers from their mailing list of 37,000 have stepped up with their support.
“We’re only two weeks into this so only two data points,” he said in a phone interview, “but so far it’s been incredibly encouraging and heartwarming.” Orders are triple what they usually have been.
About half their sales are direct to consumer and half are through distribution, he said, but the majority in distribution is through restaurants and that part is down to almost zero. More than half of the remaining distribution slice is through independent retailers, not grocery chains, so a bump in sales there is helping, but won’t make up for losses elsewhere. He expects wholesale sales to be down by a third overall as long as restaurants remained closed.
“But so far in the short term, the orders have been wonderful and they’ve kept the lights on and kept everything going for us and, I think, a lot of other wineries like us,” Haas said. He has talked to a fair number of local vintners and everyone says they’ve seen an uptick in pickup and shipped orders.
Jamie Slone, owner of Jamie Slone Wines with his wife Kym, said that of the 37 tasting rooms in the Santa Barbara municipal area, he believes that theirs, located in the downtown Presidio neighborhood, is the only one without any distribution.
“And so 98 percent of my revenue is derived off people that are walking through that door,” he said in a phone interview, “and with no one coming in, the party’s over.”
A just-completed wine club shipment created some cash flow and the club membership “has been fantastic, so supportive,” he said, but the business is struggling. Slone said he’s pivoting as fast as he can to build more awareness of the brand online.
He was already active on social media, but now he has produced a 30-minute variety show, “The JSW Show,” that was set to debut online for the winery’s Instagram followers on April 3. The show aims to connect through entertainment and engagement, with short segments that will include classic rock music, humor, talk about wine and food, and a Wine Time focusing on one or two of their wines. Looking ahead, he will be offering virtual wine tastings.
The coming months will be difficult for many, but McMillan said now is the time for wineries to prepare for eventual reopening and think about who’s going to want to come to wine country.
“And the answer is a lot of consumers are going to want to come to wine country because they’re not gonna go on cruises, they’re not going to Europe, they’re not going to go to Asia. They’re going to be uncomfortable jumping on airplanes right away.”
He’s advising wineries to get their sound bites and marketing in place to welcome people back.
“That’s what we can control, and I think we’re going to end up with a pretty good summer that will help us recover from some of this pain.”
• Contact Tom Bronzini at TBronzini@verizon.net.