Annually, Silicon Valley Bank (SVB) releases their State of the Wine Industry Report. For a largely private industry without a lot of research groups focusing on data and analytics, this report is a wealth of topical trend information and provides a great window in trend forecasting based on surveys and analytics data to craft a high-level picture from the economics, to the viticulture to the sales aspect of the wine industry. That being said, the data is largely survey-based and directional in nature and should be taken as high-level drivers and not try to action decisions around the analysis. Typically wine articles funnel out every year on the report and try to take a hard angle with some of the data points occasionally going sideways from a point of view perspective.

My interest is the topical themes that primarily impact the small producers and family wineries. A lot of the themes are quite similar year after year. For instance, younger generations not buying wine, water resource scarcity, and premium sales growth are recurring and often mentioned items in the media. I am interested in teasing out a few of the themes that impact or heavily touch the small producers.

Digital Sales and Technology Impacts

Although you saw higher online sales spikes at the beginning of the pandemic, this has paved the road for a much more focused digital marketing effort and social media and online presence. According to the report, “While wine e-commerce sales were 12 percent lower than peak fourth-quarter sales in 2020 through the three-tier system, overall e-commerce sales in 2021 were still 146 percent higher than pre-pandemic numbers — perhaps the most important thing to note. It’s more evidence that consumers are still evolving the way they purchase wine, and e-commerce is a critical part of sales.”

From a small producer perspective, it presents an opportunity to creatively develop an online presence while trying to do it cost-effectively. Fundamentally, consumers’ purchasing habits have evolved. For many, getting several packages a day dropped off at their doorstep is becoming routine. By engaging with their customers and prospects online, small producers have the opportunity to bypass the grocery store chains and provide that one-stop click for the consumer. With regards to return on investment, the report makes a good case. “If you were the beneficiary of higher online sales over the past two years but that growth has largely come from the consumer finding you versus any change in your strategy, this is a time when you absolutely must factor e-commerce more forcefully into your winery’s sales strategy and harvest the consumer who will permanently shift a portion of their wine acquisition to online purchasing. If you don’t invest, those sales will go to another winery.”

For a smaller producer who is only direct-to-consumer, this is probably even a more significant business case. It would be interesting to survey and determine the most cost-effective ways to grow a digital footprint without expending a lot of resources and dollars, which is the challenge point. Social media comes to mind, but there are probably other avenues that offer higher engagement as well that are underutilized. Hopefully, third-party digital technology providers creatively look at ways to assist small producers in broadening their online presence either through trade groups or working directly with the wineries.

Insurance Impacts

Rising insurance premiums and denial of policy coverage keep me up at night.

The report notes that “Eight percent of the wine industry was unable to obtain insurance in 2021, and another 27 percent said they couldn’t obtain sufficient coverage.” This would be data worth deep-diving looking at historical metrics as the assumption would be obvious that overall coverage is going down, but what are some action items small producers can take to manage their businesses? Whether it is wildfire destruction or backups at the ports for critical supplies, a mechanism needs to be put in place to keep these small producers and family wineries from going under because of a cataclysmic event . Especially the wineries doing their due diligence to limit their risks like setting up defensible space around their estate properties. Might there be public/private partner opportunities that provide some layer of protection? Time will tell.

WineRAMP Project an Output of the Report

A key solution driver coming out of the report is to kick start a new project WineRAMP (the wine Research and Marketing Project). At a high level, I love the approach to fund a project to help improve the overall sales, marketing and promotion of wine. The first business case they are tackling is young consumers. “Young consumers are more frugal today and financially disadvantaged compared to boomers. They have been pushed to spirits because of the perceived price/quality relationship versus wine. And yes, wine is confusing. With spirits, how many varietals or regions do you need to know?”

I wish the project was more small producer and family winery focused on strategic items like digital sales and insurance. Also with the limited funding available, I do not see it as necessarily solving for these items, but more vision planning to look at incremental steps that can be taken and then measured against to validate progress. To be fair, the report notes trying to make a broad set of stakeholders in the wine industry happy is an impossible solution. I am sure there is some underlying data pointing them to trying to tackle the younger consumer segment.

At the initiative’s core, it offers a good system project-based approach to tackling many of these problems that impact not only the wine industry, but agriculture at large. I realize a lot of this is happening already, but from a small producer perspective, I think of it in the sense of collaborating not only with other wineries regionally, but also establishing partners in different industry segments whether it is technology vendors, marketing agencies or tourist groups for instance. The project-based approach also keeps it short term so that partners are focused on a specific goal and achieving that goal versus starting another trade group that can get bogged down in a number of competing action items. Honestly, the biggest challenge has and always will be limited funding- asking trade groups and wineries to deploy dollars against initiatives that might not immediately provide them benefit is a tough sell especially with limited budgets to work with. Overall, the State of the Wine Industry report provides a good baseline and common framework to start conceptualizing New Year’s business resolutions.