Tasting room sales 'falling off a cliff', and why wineries shouldn't rely on tasting room sales too significantly

WINE TALK
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I don’t envy the producers that have to straddle multiple competing interests.

On the one hand, you don’t want to be too cheap/free … will just encourage non wine people to come get hammered and likely buy nothing. But if you genuinely want people to taste your wines - and you’re willing to let tastings be a loss leader - you don’t want to set up a huge barrier to entry.

Maybe one answer is some kind of “collective” that allows club members at one winery to have free or discounted tastings at other collective members’ properties?

You’ve gotta have some way to “qualify” prospects. Other ways I can think of would be paid/active users to WB, CT, a critic’s website, etc … just something that shows you’re “serious” about collecting wine and not just getting drunk and posting pics on Instagram.

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the collective isn’t a bad idea, but doesnt the buy $X amount or X Bottles and get the tasting fee credited kind of keep away those just looking to get smashed for free?

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Maybe … but what about people that just don’t care for the wine? If you’re willing to let “serious wine people” taste your wine, the implication would be that they’d either buy it and/or recommend it to others if they like it. But what if they don’t?

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if you are “into” wine, go to taste and don’t care for it, you should realize the financial burdens of the winery and not mind a modest tasting fee. What is modest for what you get, well that is subjective I suppose. I personally do not expect free hand outs from businesses.

There were tasting rooms I went too where I didn’t necessarily love the wine, it wasn’t flawed per se, but I picked up a few bottles to serve when people come over (cellar defender types), to gift, etc. Again these aren’t bad bottles, just not my style maybe but still well made wines.

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This is one of the stranger parts of the economics to me. I know the wine itself is a part of the cost of the tasting room to the winery, but 1.5 ounces of Paso wine versus 0.5 or 1 ounce (considering the cost to the winery) would seem like pretty small potatoes.

If it’s $300+ Napa trophy wine, and if the winery would in fact sell through it all (such that bottles poured are bottles not sold at those prices), I guess it’s more of an issue. But then the buyers of those are probably not people who would be happy being poured a half ounce when they visit to taste either.

To those of you who operate tasting rooms, how big a portion of the tasting room operating cost is the wine itself? How much do relative pour sizes affect the bottom line?

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If the $100 fee, how much is profit?

They used to be just considered marketing costs, being free or a modest charge for the premium wines only.

IIt would seem for many wineries that don’t sell out on a mailing list, that this might have implications in sales. But maybe folks who visit the tasting room don’t account for much sales (not just in the tasting room, but as a long term customer).

In which case, they could just close the room.

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I work in the staffing industry - nothing to do with placing people to work in tasting rooms (or hospitality in general) but I would have to think in Napa/Sonoma they probably need to pay someone ~$25-$30/hr as a baseline to work in a tasting room as I am assuming they work on tips too. Fast food workers are pushing $20/hr in those markets, I think $25/hr for a tasting room is a very low floor.

So if you are doing more appointments/1 on 1 tastings, and someone is there for an hour, you have at least $25/hr sunk into labor (is it 1 on 1, are they hosting separate groups, that varies by tasting room). Then whatever bottles you open, unless you are super busy there is likely some waste involved, so there is that cost, then overall marketing/advertising, utilities, insurance, etc.

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I think my point is that it used to be marketing and not a profit center. (Showing my age here but lived up there in the 80s and 90s)- only Opus One charged (and a couple of places charged for premium wines).

If not marketing, then the rooms will start closing if not profitable.

The value of a $100 for $20 retail of wine- I was shocked that folks ever paid it.

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Having been in the travel industry pre, during, and post pandemic, I’ve had a front seat to a lot of data, and I think it explains what’s really going on here…

The first thing to note is that travel was at all time highs directly preceding the pandemic in late 2019. We still haven’t fully recovered to that point, even now.

As soon as March 2020 rolled around, people stopped moving. Travel fell 95% in those early months of the pandemic, and we sort of forget that. Which means that 2021 figures as things started to recover would show exceptional year on year growth. And what’s particularly important here is that all that travel was domestic, whereas a good chunk of it historically would have been international, especially for Americans who are the biggest travel spenders globally. This surge of domestic travel spend pushed up domestic hotel prices, airline prices, and flooded tasting rooms in warm climate travel destinations in the US (where a lot of that business would, in other years, have gone internationally, and these were also some of the biggest spenders).

To control for social distancing rules, and to maintain profitability with limited capacity we saw a ton of wineries raise tasting fees dramatically. People paid them, because, where else could they go with international travel largely inaccessible?

Now, what’s happened is that over the course of 2022 travel restrictions loosened considerably internationally, and long closed routes reopened, and we’re seeing a resurgence of international travel (doesn’t it seem like everyone you know is doing an Italy trip! Yeah, it’s real).

With less travel demand domestically and all time sky high tasting fees, we’re seeing market forces play out. Hotel prices are still significantly elevated, as are restaurants. A big part of that is these businesses weren’t just hit by inflation (like everyone, of course), but in many ways they’re still recovering from the hit they all experienced in 2020.

I suspect that as businesses realize we’re returning to previous (pre-pandemic) global travel patterns and that they’re competing on a global playing field again, that’ll have some deflationary effects on prices, or at least a slowdown in the growth rate of the increases we’ve seen in recent years.

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Excellent explanation.

I do guess there will be some modest course correction in tasting fees, and more generally in tasting rooms adjusting to modestly more consumer-friendly positions overall. Basic supply and demand stuff.

But I’m sure the “good old days” aren’t coming back, either, not by a longshot.

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I looked at spending 3 to 4 days in Napa last fall. It was cheaper to spend a week in Spain.

I’m not so sure. The folks that are paying the top-end tasting fees – perhaps their jobs are recession proof. Maybe they aren’t even into wine per se, but rather the lifestyle that Napa represents.

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Assuming those official numbers tell the whole story and assuming 3% inflation is good, we still have a problem with YOY figures. Only a small increase this year doesn’t negate the cumulative effect of inflation over the past 2 years that still hasn’t been fully digested. That’s how the consumer can be pessimistic about the state of the economy in the face of “good” numbers.

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Yep. I’ve never been one to scrutinize prices at the grocery store, but even I have been shocked at how much things have gone up. I can’t imagine how I’d feel if I were living paycheck to paycheck and knowing that those prices (likely) here to stay.

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Living within the driving distance, I used to go to Napa at least a few times a year. I also loved to go to Paso for an overnight trip.

Stopped doing both - Napa has become a circus with their ridiculously priced “experiences” and, as mentioned above, snotty corporate attitude. There is simply no joy going to Napa for a wine lover since you are basically milked there for cash without much to show for it QPR-wise. It feels like an amusement park.

Unfortunately, Paso has moved in the same direction. One night in Paso costs more than 3 nights in Burgundy for similar arrangements. So yeah, I’d rather go to Burgundy for a week than to Paso for a couple of days (I know, not a great comparison).

There are a couple of bright spots remaining - Santa Barbara county is one of them. Nice wine, nice people, good overall QPR. Sierra Foothills is another one (even though I do prefer the wines from SB).

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Perhaps it’s been mentioned before but the mechanics of how CPI is formulated, and what / whether that’s relevant to a household are important too.

A fully paid off homeowner who consumes discretionary electronics might find that CPI overstates their expenses, while a tenant whose consumption basket is healthcare and education might find it understates it.

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Hotel prices in the Napa region are so high that it makes it hard for the casual visitor to consider. Day tripping from Santa Rosa or American Canyon is sort of doable, but it just doesn’t have the same fun factor with all the driving. We have gone to jazz shows in Napa as day trips from Sacramento but that only seems to work because the return trip (late night) is when roads are empty.

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Assuming that both households need to eat (at home or out) they will hardly find these costs not inflating. Healthcare also keeps growing at a higher pace than inflation; been doing it for many years.

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This is such an important point - tasting fees used to be somewhat ‘loss leaders’ to get folks to try your wine before buying. Now it’s become a profit center for many - period. Extreme change in the way things are being done compared to even 5 years ago . . .

Cheers

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I think you’re absolutely right to an extent, but there’s also going to be a lot more trips for Spain for some of these folks :wink: not just because of the cost, but just the sheer variety people crave in travel and having regained access to the world.

I also really love Spain, and now you have me thinking about it! One of my favorite places in the world for food. So underrated.

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The only way a tasting room makes money (profit center) is if it moves boxes.

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My son is studying abroad in Valencia this fall. I’m visiting him in November. (Planning to start a separate thread for reccos.)

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