Weathering the Economic Storm

Cellar Rats (ITB)
21

This last Christmas.

Sales WAY off, the few times I’m glad I’m not the owner!

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I know the feeling, but at my company, I AM the owner…

[cray.gif]

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We implemented a few new things and modified some old:

We’ve always offered a repeat customer discount program. These customers get a special discount based on their past purchases: 10% plus 1% more for every hundred dollars they spent with us during the previous year (up to a maximum of 20%). This year, we included an additional “blank” order form with each of these mailers. Repeat customers could refer a new customer who would get the same discount and the referring party will get a special gift later in the year if these referrals order.

Under the regular program, customers who purchased from a release but then chose to skip a year still receive a 10% discount to welcome them back.

All of the above discounts are good throughout the year.

Skipping two years usually returns a customer to retail pricing and a regular spot on the mailing list. However, with the current economic climate, we offered a limited time, prerelease 10% discount to the regular mailing list.

We pay for ground shipping on orders or 6 bottles (750’s and 375’s) or more. We pay for ground shipping on all magnums.

The above steps seem to be doing a good job at solidifying the base. Our problem has been attracting new customers. Folks seem to be buying what they know. So to attract new customers, we’ve been donating and pouring at more events. We’ve also recently joined the Napa Vintners and are trying to leverage their marketing prowess and participate in their events such as Auction Napa Valley and in March we’ll be going to the Taste Napa NY where about 100 Napa vintners will be hitting NYC and NJ.

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Mark,
We’ve been noticing some very stiff competition from the online New Jersey retailers. Your area must be getting good discounts on wine purchases. I just checked Wine Searcher and a certain wine we pay 56.67 a bottle wholesale here in Napa, is being sold online by 4 NJ retailers for 40.00 to 45.00 a bottle. We were just offered deep discounts on the vintage, 40.00 a bottle. Its not likely we will be competing with NJ on this particular wine, but will wind up sitting on them. As a retailer in tight times, we are looking at selling a portion of our slow moving wines at cost to generate cash flow. Unfortunately, we know this hurts other retailers, but survival takes precedence. [help.gif]

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And no John (Holdredge) its not any of your wines. If we can’t sell your wines we drink them, screw everybody else. [cheers.gif]

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well, truth be told, I’d rather pay your (usually very reasonable) price for that “certain” wine, and get to deal with people I like and want to support, instead of some guy doing the email version of dialing for dollars from a boiler room in Hoboken. And long term (which we all need to keep in mind)- that’s what its all about…

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Randy,
Yes online is definitely a different arena. Competing there requires an entirely separate mindset from in-store traffic and it is much more cutthroat. I know of several examples of closeouts that are offered by wholesalers only with the proviso that minimum retail price be maintained by the retailer in the online venue. Without such controls everybody would be dealing at close to cost with the exception of exclusives or private labels.

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Interesting post today on the Tablas Creek blog by general manager Jason Haas, on pricing and the 3-tier in this economy.

Wine markups at the wholesale, restaurant and retail level

My dad and I have come to the conclusion that for a winery to be successful focusing solely on the wholesale market they need to make somewhere above 50,000 cases. I wouldn’t know about that. But I do know that at Tablas Creek, we’ve been forced to think of our money-losing efforts in the wholesale market as a portion of our marketing budget. It’s about the only way that we can avoid throwing the mouse at the computer when we get a request from a wholesaler that we lower our price on a bottle of wine that we sell for $9 (out of which come all the concrete costs of making the wine) so that the distributor can make their $4 for delivering a bottle of wine from their warehouse to a restaurant and the restaurant can make $58 on that bottle when pouring it by the glass.

This kind of pressure from distributors may explain why pricing varies so much among regions.

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Out of curiosity, are there any producers who are trying some direct-to-retailer/restaurant marketing? I understand that it’s necessary to go through the three tier system in many states, but sending out the occasional postcard to a retailer that reminds them 'Our XXX just got 92 points from XXX!! Buy it strait from us and… (enter sales promotion here)".

I understand that it might piss-off a distributor or two, but the cost to print and mail 500 postcards is less than $300 and you’re not a the mercy of a distributor sales guy to push your brand…

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Mike, I’ve gotten numerous cards in the past year from wineries outside of Oregon. They cannot sell directly to me but the thought is innovative.

p.s. I didn’t know fine wine was being consumed in Molesto. Just kidding, I grew up there…

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Edit: Mike, rereading your post, you’re talking about just keeping in contact with accounts, right?

Sure, Mike. Until that distributor that moved 2 pallets of wine a year for you drops you, blows your stuff out at clearance and you get calls from friends in that state who saw your wine for $5.99 at Grocery Outlet.

All because you sold a couple cases at a slightly higher margin directly to a restaurant in that distributor’s state/region. God forbid you were using a big one and they decide to show you the door in all their states!

I think you’d have to be ready to go all in on the direct-to-account stuff if you dip your toe in the water at all. Not to mention, it’s a gray area legally in most places. If you’re interested, this is something Inertia Beverage was working on a few years ago, IIRC - direct contact between wineries and accounts in other states.

In many places, you need to do the footwork to make the placement and develop the relationship and the distributor just needs to deliver and take re-orders. I think that might be what you meant? Simply that you need to keep the personal contact with accounts? Not necessarily sell directly to them? I definitely think that’s a good idea. My post at the start of the thread was about just that. Ramping up travel budgets to get some face time with the people selling your wine at the retail/restaurant level.

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My post was really about doing your own marketing to make sure that potential accounts are aware for your presence/newest score. I’m sure it’s a very thin line when you already have a distributor in that area, but there’s nothing to stop a producer from sending the same type of post card with the distributor’s contact info instead of their own.

My company employs outside sales agencies instead of distributors, but the fear is the same: how much face time is our brand getting?? We sometimes wonder if certain sales reps are even leaving their house! But we’ve actually had a fair amount of success with marketing directly to potential and existing accounts, rather than just relying on a sales rep to be our voice in the market.

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There is a very small, yet devoted group of us!

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My post was really about doing your own marketing to make sure that potential accounts are aware for your presence/newest score. I’m sure it’s a very thin line when you already have a distributor in that area, but there’s nothing to stop a producer from sending the same type of post card with the distributor’s contact info instead of their own.

My company employs outside sales agencies instead of distributors, but the fear is the same: how much face time is our brand getting?? We sometimes wonder if certain sales reps are even leaving their house! But we’ve actually had a fair amount of success with marketing directly to potential and existing accounts, rather than just relying on a sales rep to our voice in the market.

My mistake.

Yes, distributors are not missionaries. Neither are their sales forces.

As much as they might like your wines, they can’t/won’t build your brand for you. And not necessarily because they’re evil or dispassionate…it just comes down to dollars and cents. They might have to sell ‘x’ of another wine, even if they make more money on a single case of yours. The reps are under a lot of pressure from all sides.

It’s a great idea to build your own relationships and make placements for them. When I talk to people newer to the business, I can’t stress this enough. It’s not enough to simply ship to a distributor and wipe your hands of that wine. You need to help them and manage them (make sure it’s going to the right accounts, make sure depletions are happening, and if not, why?).

Distributors love those who are willing to work alongside them and make placements. Who would turn down simply delivering the wine and taking a cut? And then, hopefully, taking re-orders?

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Not a mistake at all - I was wondering if producers were marketing with and without distributors in mind. Thanks for the insight.

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I sell private label wine which is considered ‘non-essential’ and therefore has truly been hurt. It’s curious to me because private label wine further strengthens relationships and builds brands and that is what every business in this market is seeking to do…reach out to their existing clients, differentiate, add value, etc. I do appreciate non-essential spending freezes however I find this to be ‘cutting off your nose to spite your face’ mentality. But perception is everything and often those on the sales/marketing end aren’t able to convince the bean-counters to spend right now. I suppose it’s like surfing Todd, got to meet the wave dead-on and then ride it!

I know of people in wine sales, specifically importers who have ended long-term relationships with distributors to go to another. I feel for all parties here.

Personally, I do other things to supplement like tours, event management, etc. I like doing many different things. Further I know…'success is moving from one failure (read economic downturn) to another with enthusiasm."

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Shawnda - good points, and not just because of the surfing association…

My primary business is also non-essential retail, and, like Shawnda, it has been hammered by the economy, as (logically, I guess), non-essential consumer spending is the first to go. One must think of creative ways to get consumers to open their pocketbooks, but they ARE there. Value often sells, but only in large volumes (Read: Costco, Wal-Mart, McDonalds), meaning only if the consumer knows the prices simply can’t be beat, not unless they undergo some significant inconvenience. With smaller entities, value won’t sell in a deflationary recession - one has to go a step further and enable the consumer to feel like he/she is ‘beating’ the system. If the consumer feels he/she is getting a deal that makes them the winner in the transaction - that they are essentially profiting from the recession - they open their wallets.

How to do that with wine, without bastardizing the brand, is a whole new ballgame, and one I’m not qualified to estimate.

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Todd,
The other thing besides making the consumer/customer feel like they have won/beat the system is if they are spending $5.00 or $500, make sure the budget minded ones know that you appreciate them and their business the same no matter what they spend, it builds a strong relationship and when times are better they are the ones that will usually be back with their wallets opened.

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2005 was a cool, late year for us up here, and the varietal wines just didn’t reach the quality we aim for. We decided, after many blending trials, to make a red table wine from all of the Syrah, Zin, ect.= Klamath Cuvee ($12-$15). This wine has been paying the bills for us while the varietal wines trickle out at a slightly slower than normal, yet steady pace. It was perfect timing with the current financial sit., and is allowing our 06 varietals more time in the bottle before being sold, which has always been a goal of mine. So I guess it’s not too bad. I’m focusing more time on home life and my children, which is long overdue after ten years of nose to the grindstone, getting this winery off the ground. Blessing in disguise, I guess. There’s nothing more important than family and friends. [friends.gif]

John

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I’m quite surprised to have not read any answers (I think) from the winemakers here that include two words:

Boxed Wine


I honestly need to know why.

Do all of you sell wine that SHOULD be aged?