Distribution channels of US wine sales changed drastically since Covid-19 outbreak
US wine sales jumped 10% in the first eight weeks of the Coronavirus outbreak, but the wholesale closure of bars, restaurants and winery tasting rooms means that the distribution channels have changed drastically.
According to the SVP of Silicon Valley Bank’s wine division Rob Mc Millan, the industry is growing at a better rate than it was at the end of 2019. “Shipments are way up, and the volume is growing faster than the dollars," he said during an online seminar last week. The biggest growth has been in direct to consumer (DtC),he added, with SVB figures showing that the average Californian winery had lost 44% of its revenue stream because of government mandated closures of tasting rooms and the loss of restaurant sales.
While phone and e-commerce had, pre-Covid, only accounted for around 3% of a winery’s sales, that has since rocketed to over a quarter (26%). Meanwhile, wine club sales have also enjoyed growth, up from around 23% to 35%, while off premise sales have inched up from 18% to 20%.
Paul Leary, founder and principal of Assemblage Consulting Group, warned wineries that “the worst thing we can do is to go back to our old ways” once pandemic restrictions are lifted. Rather than trying to bring customers back to tasting rooms, he said they had "the opportunity to go directly into the customers’ dining rooms.” Leary also advised wineries to find ways to add value without cost cutting during the crisis, including reduced or free shipping and introducing volume discounts.
According to Nielsen, e-commerce sales are being driven by a surge of new customers who are new to online buying. During March and April, DTC shipments jumped by over 35% in volume and more than 15% in value compared to the same period in 2019.
As for bricks-and-mortar businesses, Nielsen reported spirits are leading the growth in the off premise sector, with wine closely behind, and beer lagging. During the weeks of the Covid-19 pandemic compared to the same period a year ago spirits sales were up 35.6% in volume and 27.7% in value, wine was up 30.7% in volume and 27.7% in value and beer was up 21.2% and 17%.