Right now is the best time for small wineries to get a foothold.
Craft Wine is becoming increasingly important to wine sales, not just in the United States but around the world. The trend is being driven first by people who are passionate about wine retiring, leaving their day jobs or creating a space in their lives in some way to produce wines they believe in. Secondly, it is being driven by a consumer base who prefers to know that the products they are purchasing are made in a sustainable, healthy way both for themselves and the environment. Lastly, wine is becoming an experiential phenomenon where consumers don’t want to just pull a wine off of a grocery store shelf and go home and drink it. They are looking for a unique experience that isn’t available from a large, corporate, multi-brand wine entity.
It is being driven by a consumer base who prefers to know that the products they are purchasing are made in a sustainable, healthy way both for themselves and the environment.
Large producer’s like Gallo, Jackson Family Wines, Korbel and more by far make up the vast majority of wine manufactured in the U.S. today but in spite of that large producers are showing very slow growth in the first half of 2018, according to a recent article by Wines & Vines. They reported that IRI, a market research firm’s number for value growth was 1.4% but only measures off-premise wine sales at mostly major companies’ stores, the same has been true of Neilsen reporting as they do not include direct-to-consumer sales, on-premise sales and many independent wine retailers. A different study done by Gomberg Fredrikson & Associates (GFA) was 3 points higher than Neilsen’s study mainly because they use multiple data sources like TTB Treasury reports, customs reports and private company reports to compile their numbers, which captures more on-site and direct sales than the IRI and Neilsen measurements.
While large wine corporations are showing slowed growth or no growth at all despite large marketing budgets, focus groups on everything from packaging to varietal trends, small producers are in growing demand especially in the onsite and DTC markets.
So what does this mean? In a nutshell it means that while large wine corporations are showing slowed growth or no growth at all despite large marketing budgets, focus groups on everything from packaging to varietal trends, small producers are in growing demand especially in the onsite and DTC markets. Another indicator is the ever growing number of new craft wineries, in August of 2018 alone the US Winery Database added 59 new wineries all of which are under 5,000 cases per year. The reasons for this shift are in large part due to consumer preference but also can credit the loosening of some of the more archaic post prohibition restrictions that created huge barriers to the on-site sales and direct to consumer models that are helping Craft Wineries gain a foothold in the market. Additionally technology companies have jumped in to provide resources for distribution, marketing and CRM that allow a winery with a small staff to be able to run their businesses efficiently.
Craft Wineries still have an uphill battle and it will take time before the rise of small production vs. large production makes a real difference to the folks running these small businesses. In the meantime, it seems a focus on creating experiences and getting consumers into the tasting room, rather than getting wine on the shelf somewhere is a solid strategy.