With travel closed, winemakers are forced to move their business online.
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2020 has not been an easy year for the wine world (or for anyone, for that matter). The year’s events—fires, a global pandemic, to name a few—have sparked seismic changes in the industry.
In this ongoing series, we’re speaking with major players in the fine wine world to understand how the year is affecting the industry.
Over the last decade, the wine world has slowly been shifting to embrace technology, particularly e-commerce. But with restaurants and tasting rooms closed and drinkers stuck at home, 2020 pushed wineries and retailers to get digital—even if they did not want to.
“E-commerce gave us a huge uptick when the pandemic began because we already had a built-in online ordering and delivery platform that our customers were comfortable with,” says Howie Rubin, of luxury wine and spirits retailer Bauer Wine & Spirits.
“E-commerce is certainly a saving grace in the wine world, says RAMONA founder and expert sommelier Jordan Salcito. “We’re in the process of launching a direct-to-consumer function to meet our consumers where they are; so many of our consumers lives and shop online and this DTC function allows us to fulfill a request we’ve been getting virtually since we launched. E-commerce is especially important during this time when retail sales are low across the board.”
At the start of the pandemic, home drinkers started buying wine in a frenzy. Nielsen data researchers noted off-premise wine sales in the U.S. are up 27.6% across the board in the week ending on March 14 relative to the same week a year ago. “The industry overall is having a month bigger than Christmas,” exclaimed Jon Deitelbaum, president and CEO of Beau Joie Champagne, back in March.
According to Liv-Ex, 79% of wine businesses surveyed expect technology will make buying fine wine easier in the next five years, with 88% agreeing that it has already made the process more efficient. It’s an exciting time for wine buyers who want to taste the world with a click of a mouse.
We’re already starting to see this shift to embrace tech in the fine wine world with the advent of platforms like Rally and Vinovest.
Vinovest is looking to woo greener drinkers by guiding users through investing in managed portfolios of investment-grade fine wines. Rally has a similar approach, but instead of guiding consumers through bottle purchases, they offer shares of some of the world’s rarest bottles, like Chateau Latour and Domaine de la Romanée Conti.
Programs like these are breaking down the obstacles fine wine collectors face—like climate-control, broker fees, and connections—to open up the fine world to greener investors. But some long-time collectors think these greener investors and expanded purchasing channels are clogging up the investment market.
Fine wine collector Heidi Pozzo notes that for fine wines with limited allocation, the e-commerce world isn’t exactly compatible. “Most stores today have their inventory available online. However, most do still reach out to long time customers to confirm their allocations and sell through their list before wines hit a website. That means that the best wines won’t ever even make it to the websites. Before e-commerce, collectors had relationships with stores across the country and would be able to find bargains. So while e-commerce hasn’t really impacted the ability to get wine today, it has leveled the price.”
“My friends in their 60’s have stopped buying,” says Pozzo. “The combination of the price escalations, lack of ability to interact with producers, lack of allocations and full cellars have caused them to stop buying.”
Outside retail, wineries are being pushed online—even brands that stayed adamantly analogue over the last decade have been forced to set up online shops with tasting rooms revenue gone. Wineries of all sizes are creating online pseudo-visiting experiences, wooing drinkers with the promise of virtual tastings and doorstep delivery.
“Wineries with strong mailing lists ramped up their online marketing efforts and strong sales followed,” describes Chris Towt as owner of Durell Vineyards and Co-founder of VineSpring. “Wineries got creative—offering curbside pickup or free delivery within a specified range, and saw their second-quarter sales beat all other quarters. Many wineries also got inventive quickly with new offers—including virtual tastings that could be attended via Zoom if the customer bought a specific pack of wines.”
The rise of e-commerce also poses the question—how do wineries replace the experience of sitting down for a glass in a vineyard and hearing the story behind the wines from the grower himself? While pandemic has seen the advent of virtual happy hours, few, if none at all, have been able to replicate the immersive experience of visiting a vineyard and connecting a consumer and a wine on an intimate level.
Fine wine in particular is a hurdle to translate to an online experience. Part of the reason collectors buy-in to a brand is for the provenance, the terroir, the story and the artisan quality—things that can’t be aptly communicated via a keyboard or Zoom screen.
One of the downfalls of buying DTC online and shopping e-commerce, plus the lack of travel that 2020 allows for, is that wine brands are not building relationships with consumers.
“Wine buyers aren’t travelling the world and chatting with vintners, so those strong relationships with brands aren’t forming,” says Pozzo. “Friends describe the decades past when winemakers would make a trip through the US into many markets to raise the visibility of their wine through visits at local wine shops and dinners. They tell stories of Roberto Conterno visiting Portland and having dinner here. They developed relationships with the winemakers.”
There’s only so far virtual tastings can go. Zoom fatigue is real, firstly. Often, brands have to navigate how to paint a picture of their wine with variables beyond their control—How are you supposed to host a luxury virtual tasting for someone sitting on their couch in sweatpants?
This would be a reasonable feat if brands had time to prepare. But when the world suddenly shifted online in March of 2020, retailers and winemakers had to scramble to move their business online. It’s the only option in an increasingly digital world.
“With the rise in desire to have experiences, producers need to rethink how they create relationships with people,” Pozzo continues. “Some have started in the Covid-19-era by having interactive Zooms, but by and large, the producers in the fine wine market aren’t doing enough to rethink how they engage their customer base. At some point, the market shifts, it always does. Those that can afford the tippy top producers and have relationships will always buy. The large swath in the middle is the area at the most risk. Those markets won’t always hold up. And there isn’t a next generation coming to buy the wines because they don’t have the knowledge and experience previous generations have had.”
That said, the fine wine world is proving to be a safe investment. Tom Gearing, CEO of Cult Wines, notes “Like all markets, the fine wine sector is navigating an unknown path, with some of the longer-term effects of the pandemic still to be bedded in. we were encouraged and buoyed by a ‘miracle vintage’ release of the Bordeaux 2019 campaign and with performance levels throughout 2020 holding steady. The CW Index posted 0,8% gains for Q2 2020 with USA and ROW leading sub index growth of 2.1 & 2.4 respectively. Price dislocations will continue to present buying opportunity and new release vintages will need to offer good value incentive to maintain market demand amongst wine buyers. Without question, wine has become a leading consideration for investors looking to diversify their portfolios and as the market continues to evolve, we are seeing wine as the most established alternative within its sector.”
In the next few weeks, I’ll be speaking with members of the fine wine industry on how 2020 is changing the landscape, from shifting tariffs to new distribution channels.