|From left to right, Damien Wilson, George Hamel III, Stephanie Peachey, Bill Stratton|
The party's not over, but North Coast and other wineries are going to have to work harder and in innovative ways that require acquiring new skills in order to go forward and prosper, said experts at the WinEXPO conference held Dec. 6 in Santa Rosa.
Expert panelists from California's North Coast offered sobering analysis and sage advice on how to survive the current trends buffeting wineries in the wake of the 2017 fires and generally flat sales in the overall wine industry.
Note: While the panel was not focused on organic producers in particular, wineries in the North Coast region - which includes Mendocino, Napa and Sonoma - form the largest concentration of organic vineyards in the country.
These three counties have more than 9,000 acres of certified vines, according to the most recent statistics (2015) provided by California Department of Food and Agriculture (CDFA).
In 2015, Mendocino County had 3,963 acres, Napa had 3,739 acres and Sonoma had 1,573 acres of certified organic vines for a total of 9.249 acres.
That represents 68% of the organic wine grapes grown in California, according to the CDFA statistics.
The industry has been reflecting on new strategies to survive what Rob McMillan of Silicon Valley Bank Wine Division earlier this year characterized as the tail end of the wine industry's big growth era.
Said panelist Joel Miller of Customer Vineyard, "We've been frankly milking the Boomers and the Gen Xers. Many wineries in the North Bay derive 60-75% of their revenue from these two groups."
While these buyers are core, their numbers and spending potential are not likely to fuel new growth.
Panelists weighed in on the trends that are reshaping the industry and offered advice from their diverse perspectives.
Moderated by Damien Wilson, professor at Sonoma State University's Wine Business program, the panelists included:
• George Hamel III, managing director of Hamel Family Wines (certified organic and Biodynamic)
• Stephanie Peachey, vice president of DTC & Brand Strategy for Kosta Browne Winery
• Dale Stratton, vice president of strategic insights for Constellation Wines US
• Joel Miller, founder and president of Customer Vineyard
Hamel Perspective: Customer Experience Drives Engagement
Customer campaigns - not calendar events - drive wine club sales and retention, said George Hamel III (whose family endowed the wine business professor chair that Damien Wilson was selected to fill.) As a relatively new winery, Hamel said the winery, which has both organic and Biodynamic certified estate vines, learned quickly to hone in on customer services and experiences, a big theme all the panelists mentioned.
Constellation's Insights: Three Main Themes
Stratton focused on major trends affecting the overall wine outlook, looking at the impact of intersecting sectors competing for the wine category's share of the alcohol market. In his remarks, he outlined three themes from his research:
• Occasions - new environments are emerging
• Total Beverage Alcohol (TBA) consumption - patterns are changing
• Premiumization - prices are trending up in wine, beer and spirits
"Occasion is a big driver of what you drink and what category you participate in in terms of demographics," he said, explaining this his research shows many new types of events encroaching into gatherings that used to be about wine.
"We see spirits and beer producers really trying to push into spaces that would be traditional wine experiences," he observed. He says beer and spirits producers are actively promoting beer pairing dinners and spirits pairing dinners.
"That's a traditional wine space - and always was - and they're really trying to push into that," he said.
2. Total Alcohol Beverage Consumption
Stratton says the lines between beer, wine and spirits as well as other beverage categories are very fluid, which Wilson later characterized as being "promiscuous."
Said Stratton, "Today's consumer is very much driven by participating in all three categories.
"And as you go younger, it is more prevalent that that occurs. We believe that that trend is going to continue and then it's going to expand, not contract."
"The other trend that is very, very powerful is premiumization," Stratton continued. "Premiumization isn't only a wine phenomenon. It is across the Total Beverage Alcohol landscape."
"When you look at the numbers, it's really prominent in the beer category...Six years ago 42% of what was consumed was premium. It's now up to 56%."
"Spirits are also experiencing that," he said. "This is a trend that we also believe is going to continue."
Owning the Alcohol Beverage Experience: Rising Competition from Retailers
Stratton said wine marketers need to upgrade the brand experience and customer service standards.
"You're seeing these two wineries (Hamel Family Wines and Kosta-Browne) mentioning personalization," he said. "Everything has to be personalized in today's world, and technology can enable a lot of that."
On the retail side, he said that means more competition from retailers who increasingly want to own the customer experience. "Retailers are now putting restaurants in pretty heavily into their spaces. They're putting wine bars into their space. I have even seen a microbrewery in a grocery store. So they're really trying to capitalize on that and get the experience for themselves."
Local Wine Shops: Personalization Par Excellence?
"Big retailers are going to continue to buy things," Stratton said. "We're going to continue to see them look for other places to buy. But you're also going to have new retailers."
Stratton predicts a resurgence for local wine shops. "They could come out and be able to hit the personalization, hit the experience, and really learn how to win in that space," he said.
On Premise Shifts - With Food Delivery Up, What Happens to Wine Sales?
"The rise of delivery is important. When we think about food being delivered - prepared food, restaurants that are now delivering - it's interesting to see what happens to the wine purchase," Stratton said. Consumers are going to drink something they bought at retail or whatever's on hand at home, or they may skip wine altogether."
"The industry may be moving to smaller sizes. We know people are looking to try and do something with small sizes so that they can capitalize on the food delivery trend."
Health and Wellness
"We're seeing many more on-premise establishments focus on health and wellness and driving that through their menus," Stratton said. "Health consciousness and driving toward that is a big topic."
New Types of Experiential Outings
Stratton identified a number of emerging types of gatherings that he said are influencing the marketplace.
"We're seeing some new concepts come into play...kind of like the Dave & Buster's (a restaurant chain with video arcades) - experiential outings but with high end food."
"These are places where you can bowl, you can play foosball, you can throw darts. It's very much about an experiential outing and being there as a gathering place."
Taprooms are another expanding - and competing - space, Stratton said.
"We have seen a growing number of taprooms - right? Microbreweries exploded. And most of the taprooms that I have been to - they're a pretty simple thing."
"They have more of a warehouse feel; they don't have food, but they let you bring all the food in that you want. Have a pizza in. A couple that I have been to have food trucks outside and the taprooms just sell you beer. It's a really easy solution for the taprooms to get beer trial and, by the way, people take beer home from that."
From the wine industry's perspective, Stratton said, "that's stealing occasions. That is another occasion that's coming in that is really having an impact here."
The Big (and Changing) Picture
Note: Material presented by Joel Miller of Customer Vineyards, who also spoke on the panel, are included in a separate article.