> Hard Times Ahead? I’ve been receiving a lot of questions on the impact of Corona virus on alcoholic beverages in the U.S., wine in particular. With two big caveats – your health comes first and we are in uncharted waters economically speaking – here is my quick take as of March 17th. Right now, this is reasoned speculation; there aren’t many hard numbers on the recent impact and things are changing rapidly. There will be a severe short term shock over the next 2-4 months that is easier to estimate, and a longer term shock stretching out for 6-12 months after that is trickier to assess. Short term, the outlook is grim for on-premise. Open Table past week reservations are down 30-65+% in affected cities, and BlackBox Intelligence, which monitors restaurant sales and surveys the sector, is reporting -30% traffic for fine dining restaurants in hard hit places like Seattle. Of course, actual closures are 80-100% drops in alcoholic beverage sales. Specialty channels like cruise lines, resorts and banquet departments will be nearly vaporized in the short term. Off-premise retail may or may not get a short spike in sales from pantry stocking (mixed evidence so far), followed by a moderate decline for the initial weeks that anti-virus measures take place in a market, followed by accelerating growth. Post 9/11 (another psychological shock) and late 2008 (an economic shock), the latter was the pattern. Buying freezes in the distribution system are a real short term threat, both at the wholesale level and retail; this happened both immediately after 9/11 and the 2008 crash, not thawing much until consumers pulled inventory through off-premise retail. Economically we are almost sure of a recession, the severity of which will depend on hard to read consumer psychology and the extent of federal fiscal stimulus. Demographically, beer drinkers are more vulnerable to recession than wine drinkers, with spirits in between. The closure of brewpubs and beer-focused bars with many taps will hurt craft beer in particular. However, the direct-to-consumer channel is more important for wine, as tasting rooms constitute 40-50% of direct sales and most club signups occur there as well. Existing club members will provide some safety net, but wineries will have to step up ad hoc online sales significantly to make up for the huge temporary drops likely in tasting room business. Stay tuned and hope for the best…
> (Data) Power to the People at the Unified Symposium! I’ll be speaking on a panel titled "Data Matters: it’s not your size, it’s how you use it," on Wednesday January 5th in Sacramento. We’ll be suggesting and giving examples of how small craft and medium-sized upscale wineries can gain insights and answers from all kinds of data, just like the big guys.
> Wine tourism, part 3: Winery visitation is a critical sales channel for many small wineries, not only for wine sold on the premises, but research traces most online sales and club memberships to a visit. But the number of wineries open for visitors in some areas has outstripped the growth in tourists. Competition is heating up to offer more elaborate or interesting tasting experiences. (Although our research shows that some wineries need to balance the interests of local and out-of-region visitors). Last Spring in Rioja region, I encountered a variety of really interesting ways to engage the wine tourist. They included a mini-museum in an old wine cellar with extraordinary artifacts spanning BC to early 1900s, mainly excavated from old local cellars and vineyards (Valdelana). an atmospheric recreation of pre-phylloxera Rioja both visually and vinously (Fabulista); a cleverly re-engineered old co-op winery (Amaren); and a visionary melding of nature, terroir and culture at Itsasmendi. At Full Glass Research we have worked to improve winery visitation and DtC with a wide range of clients, from individual wineries up to regional organizations and the Wine Institute. If you are involved in regional planning and promotion, dependent on visitor sales, or interested in the economic or academic aspects of this topic, I’d be happy to answer your questions.
> Zigzagging Zinfandel, deciphering cider: You wouldn’t think these two had much in common, but they share a curious marketing phenomenon. Both of them contain sub-categories that are headed in opposite directions, and in both cases total category trends may be misleading. Low-priced and big brand Zinfandel continues to decay in large chains, but direct-to-consumer sales at higher prices have shown robust growth for several years. The weakening market for some inexpensive big brand hard cider has been a news story for a while, but both Nielsen and American Cider Associations data show smaller producers at higher prices doing well overall. Is it trading up or different consumer segments? Zin-focused wineries and cider-makers would do well to answer that question.
> Cheese, Grommit! You don’t have to be an Aardman Animation fan to be fascinated by the world of fine cheese. The high end of the cheese business, with its artisanal producers and huge variety of flavor, is very reminiscent of the wine industry. But it’s a different world when it comes to packaging. There are important trade-offs between visibility, preservation and the amount of producer information. Not only that, but there are strange variations in perceived value whether priced by pound or piece. We are in the midst of updating our cheese packaging research, including the ground-breaking work with the Oregon Cheese Guild, so stay tuned.
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