Premium Wine

2024 Direct-to-Consumer Wine Survey: Report Results and Benchmarks

Rob McMillan, EVP and founder, Silicon Valley Bank Wine Division

Rob McMillan: Good morning, wine world. Welcome to another edition of Silicon Valley Bank's direct-to-consumer wine report videocast release.

I'm happy to be here. I'm happy to be here every day, actually. We have a great industry that we all work in, and having a great set of panelists to talk to you in the next hour-and-a-half about what's happening in the direct-to-consumer market is kind of exciting for me.

But for those who don't know me, I'm Rob McMillan, I'm the founder and Executive Vice President of Silicon Valley Bank's wine division now celebrating our 30th year believe it or not. Its hard to believe.

I'd like to welcome all the people from around the world. I love this part of it just because I'm surprised when we started this, I was wondering if anybody was gonna listen. But today we have about 2,000 people that are signed up for the videocast. And joining around the world, we have people from Afghanistan, Argentina, Australia, Canada, Chile, France, Georgia, Germany, Greece, Italy, Macedonia, Mexico, Moldova, New Zealand, Portugal, Romania, Singapore, South Africa, Spain, Switzerland, the UK and of course the US as well.

Before I get started, just a couple of housekeeping items I want to take care of. To turn on the closed-captioning feature, please click the live transcription button below the Zoom bar, if that makes sense.

Feel free to submit questions. We have roughly 10 to 12 people that are experts in the wine industry from our division in the background. They'll answer all your questions. It's pretty rare that you get the opportunity to get that kind of engagement, so please feel free to ask whatever you want.

Let's see, what else. From there, let's just start. With the registrants that we had this year, we had a lot of opening questions. And the questions really, more than anything else, kind of centered around, are things good or bad?

And actually, I'm going to stop before I do it because I forgot to introduce my panelists. So Sonyia, why don't you start and then I'll go after that.

Sonyia Grabski, General Manager, Trinitas Cellars: Well, Rob, thank you so much for inviting me back. My name is Sonyia Grabski, and I am the General Manager for Trinitas Cellars. I've got over 2 decades in direct-to-consumer, and I just love being in this business. And it's so exciting to see that we actually have people tuning in from all over the world. And I'll pass it off.

Janiene Ullrich, Vice President of Customer Experience, Silver Oak Cellars: Good morning, and thanks for having me. I'm Janiene Ullrich, Vice President of Customer Experience for Silver Oak. It'll be 3 years in July, went by super fast. And before that, I was with the family of Coppola for 21 years.

Rob: Twenty-one years? Wow.

Janiene: Don't do the math.

[LAUGHTER]

MJ Dale, founder and CEO, Customer Vineyard: I'm MJ Dale, founder and CEO of Customer Vineyard, a consumer insights company focused on the wine industry and wine consumers. Happy to be back, and been working in all types of roles, operational as well as analytic, in the wine industry for 20-plus years.

Rob: I think I'll start, though, by saying the industry itself today is split. It's kind of the high-volume, lower-priced producers versus the, let's just say, plus 12, plus 15 or so premium wineries that are smaller and going direct-to-consumer and largely the under $11 categories, under $12 categories aren't doing as well. I think that's just a continuation of a pattern.

Premium is doing okay. We've had data that we've looked at, Silicon Valley Bank's as an example, our peer group analysis, where we're looking at financial statements. In 2023, the premium segment ended up about 1 percent positive in value. So, you know, that's good.

We'll look at some of the other data points in that, but let's pull up slide 2 just to talk about the alcohol beverage industry for just one moment. And so what you're looking at here is the Census Bureau's data, basically, of inventory position. So we're looking at the bottom of that. The green line is effectively the trend line for sales starting from January 2021 all the way through February 2024. And that's pretty flat.

So you have to say to yourself, how are you going to reduce overall inventory levels in the alc beverage industry? And right now, it's 1.64 times inventory to sales. Average is really below 130 to be conservative. So the basic math, if look at the data for the alc beverage industry now, is that it's going take $1 billion each month, so it's a 5 percent increase each month for a whole year to reach 1.3 where we are now.

So for the alc beverage industry as a whole, we have a ways to go. That being said, the premium wine category is doing okay. Premium wine category, as I'm told from those that are tracking it, especially the Sipsource guys, that premium wine is in the retail segment pretty balanced right now.

So we should expect to see some more pull-through in that plus $12 category in a reasonably short time. Below that, I don't really have great news, I should say. I think it's going to just take a little bit longer. But I think you have to separate that data in your mind to actually understand. The beginning of understanding is that piece of it, to understand that there are two different sections of the industry, and you have to talk about them differently.

Headwinds, balance of year out, premium, so I got that. Oh, important point.

One of the things, if you look at any of the headwinds right now, I think what we can say is that most people are looking for a bottom in almost any of the data. That's what we want to see. If something's declining, it's hard to predict how far that's going to go generally or when it's going to turn, but the data can kind of tell you where there's a bottom. And so if we can pull up slide 4 for just a moment please, Georgia.

So visitation has been something that has been talked about in a lot of circles, and a lot of people are rather nervous about visitation patterns. So what we have here is visitations from May 2022 through December 2023. And actually I have information that goes out another 4 months. And the 4 months in 2024 are not so bad. They're actually trending in this positive way.

Now I have to be clear. You look on the right side, that's change in visitation. It's still in negative territory. Zero is at the top. So we're still in negative territory, but we are starting to trend in a positive way, even though it's negative. So it's possible that we may have found a bottom in visitation. And let me give you another little thought about anyway what's happening with visitation.

First, something I predicted in the state of the industry report in January, revenge travel, or as MJ, she always tells me, can you explain what revenge travel is?

When we came out of Covid, people wanted to go anywhere, go to your neighbors. And we couldn't. So we're gonna get back. We're gonna go to Europe. We're gonna go. And let's be realistic. For most of the industry, we describe our consumers as being affluent, you know, let's say above $75,000 or above $100,000 family incomes, which isn't a lot if you're living in the Bay Area, but for the rest of the United States, that's kind of in the affluent side.

But the visitation patterns are negative today, and as I said before, trending less negative. Revenge travel, I think, is almost through. So to the extent that part of this decline in visitation was due to that revenge travel, I think we should be through that by the data that I'm seeing. And we actually did have, I think, in visitation a pretty good May. So that's as I said, perhaps we're near the bottom there.

And now if we can go to Slide 10, please. So this is what's been happening with by-appointment and walk-in models. So banks started talking about the differences between different models, whether it was stand-up bars versus seated tastings, et cetera. We started talking about that at least a decade ago. So we've been tracking this for quite some time, and what's really noticeable here in 2020, walk-in, the percent of walk-in really dropped.

And prior to that, there were a number of people that said to me they would never ever do by appointment. It's back to the whole idea. We just want to have the most visitors possible come through the tasting room and, you know, just like when we started to move to a direct-to-consumer model, people were saying, well, we just want to have people in the tasting room. Well, not everybody was buying, which is where tasting fees came in, by the way.

So tasting fees can have a tendency to limit the number of people that are coming in. We'll talk a little bit about that I think in a minute. But you can see where we are today, the walk-in model, people that are just in the walk-in model is 8 percent. The greatest majority now are both, they're by appointment and walk-in and that's roughly, I think it was 66, 68 percent. I can't quite read the slide. So most people are, most wineries I should say, have elected for both.

Now, to the extent that more have elected for both post-Covid, and that's what forced this change during Covid, a lot of states said, you will have by-appointment. And coming out of that, a number of wineries that I was talking to at the time said, okay, we're not gonna ever go back to the way we were. We don't wanna have people coming in.

And by the way, during Covid, a bar was not gonna work, right? You're gonna sit next to somebody right next to you with a mask on. That was kind of hard to drink too, by the way. But the walk-in model is kind of going away. You're going to lose a number of visitors from that. So I'm less concerned about that.

And if we look at slide 21, that is another indication of why we shouldn't be quite as concerned. If you look at the trended tasting room purchases, this just happens to be by location, the trended purchases have been continuing to go up. Now 2023 is a little bit lower, but on a trend line. One data point does not make a trend. So I think what we're seeing generally speaking across most data points are lower volumes, higher sales values, especially in the direct-to-consumer and the premium side. And then we are also seeing higher tasting room purchases, which lines up with having higher value in the premium segment.

So I'm less concerned about the visitation. I think that we're perhaps near a bottom. What I'm more inclined to look at is what's happening with total revenue, and that seems to be continuing to go up for the direct side.

Okay, I've been blabbing enough. I think MJ, we're going to go to you with the transition.

MJ: Yeah. You know, I have a theory, and I'm looking across this great data set from the wineries that participate. And I feel that there is a correlation happening now between the cumulative pricing that consumers are experiencing when they come to visit wineries. So we've taken bottle price up. Our tasting room fees, I think I was measuring, are up 21 percent year over year across both general and reserve tastings, and that trend is exponentially up in the last 10 years.

Tips now, you've got some great data from your survey. Winery is saying that now 68 percent or so of wineries allow tipping, but the cumulative impact to the customer who comes to visit you is that everything is much more expensive. And especially in those areas that have the highest tasting fees, we're starting to see visitation go the other direction.

So correlation is not necessarily causation, but I think it's something we need to pay attention to, that the overall trended purchase is up, but we've also increased the prices of everything. At a certain point, keep an eye on that.

You want also to welcome people and have visitation in the right direction. So it's a balance. I think we may be at the bottom of visitation concerns, but I think we're at the top of pricing concerns.

Rob: Yeah. If you go back historically to where we've gone way back into the 2000s, we really didn't have tasting fees. I remember this discussion and debate distinctly, and the thing we were measuring—and measurements are important, what are you going to measure, what you're going to measure is the thing that you're going to focus on, the thing that you're probably going to see the change, that's where you're going to strategize—and what we were doing back in the day was we wanted to see how many people were coming into the tasting room.

And I'm sure many people have heard that old statistic about, there's more people coming to the Napa Valley than Disneyland, which I always thought was a dubious statement to begin with. But that's what we were measuring. We were measuring traffic, the number of people. And then at some point we started seeing boorish behavior, with people putting purses on chairs, saving chairs. There was no tasting fee, so it was it was where many people would just kind of hang out all day and take up spots and at some point someone became brave and said, you know what, this isn't gonna work. We're gonna charge a tasting fee. And they said, oh no, you know, you're gonna lose some of your potential customers. And that's when the beginning started with, no, we're gonna lose some of our potential customers, but we're gonna keep maybe the right customers. And it was a point of bravery because we didn't know whether that was gonna work or not. But very soon thereafter, I think everybody figured out it did.

What slide was that that? So 14, if you pull that up.

Janiene: That's gonna show you some of the information that we're talking about, about the drastic change that MJ is speaking to.

Rob: Yeah, yeah, yeah. So year-over-year changes in tasting fees, and you can see over the last several years, just a real acceleration for that. So I think my point would be to the extent that we've seen tasting fees limit visitation in the beginning, why wouldn't it still limit visitation? As MJ said, causation is not necessarily—

MJ: Correlation without causation?

Rob: Thank you, I forgot the word. So, you know, it's a little bit of a guess, but why not? I mean, if it limited the kind of visitation that we saw—and we had better purchases at that point—logically there should be a limit. So I think it's a reasonable question to ask is, how far can we go? And I don't have an answer.

MJ: Yeah, remember it's not just the tasting fee, it's the cost of the hotel room nearby. It's the price of the bottles. We've all taken price in recent years. It's tipping. You put that together, and the overall experience cost has gone up significantly for most customers in many regions.

Sonyia: And we're also dealing with the fact that people are becoming much more tighter with their own budget as inflation happens. And so when you look at the difference between 2018, pre-Covid into, you know, 2023 on this chart, it's a big difference.

And then also, I think if we were to pop over to slide 16, you're seeing these average monthly visitors by region. And I really like this slide because I think it gives you some insight. Napa, Sonoma, we're seeing some drops in visitation to our tasting rooms. However, we're seeing that the hotels are pretty full. But you're seeing lower ADR rates.

And we were talking about this last night, that some of that is you've got group coming in. So you've got hotels, all the corporate travels coming back with a vengeance. So you've got a different type of revenge travel, but now it's the corporate folks getting back out. And so they're coming, but they're busy all day. And so they're not going out wine tasting, so you've got rooms full with less traffic.

And then you're also seeing some big increases actually with Paso and Santa Barbara, and I think that's because the people that want to go to those areas, their tasting fees are not nearly as high as Napa and Sonoma's. And so you've got people who have a budget, and so they're going to go to those areas. And then you've got our folks over in Virginia who are killing it. But they also have a very captive audience, and people aren't having to necessarily travel as far.

And so we're just seeing some different trends by market. We've got to look at each one of them individually. And if you're in that market, you really got to dive in and see what's going on.

MJ: And then look at them together. But I was going to say, Janiene, I think this is a perfect point where we're all talking about metrics, and you made some really good comments about the consumer.

Sonyia: How can they get to the tasting room, because we still have people coming to see. So yeah, what do we do when we get there?

Janiene: Well, it's interesting too because we've been playing around these increased tasting fees even before Covid. I think that exacerbated it. But I remember you talking in 2018 about how visitation was dropping, and part of it was we were doing longer experiences and people were going to fewer wineries because there was more to do. So that was part one.

And then Covid kinda ripped the Band-aid off, and then we all went to appointment-only. And then look at our tasting fees per person. The average tasting room transaction is so much higher. And then we started talking about that a lot.

And I think when it comes to people with your amazing teams that are guest- and consumer-facing, metrics does not belong in the dialogue with that team. They should be focusing on the moment and not the metrics because I think that when you start leading with the metrics, you're totally taking out the scenario that's going behind every consumer walking through the door. You have a captive audience. You have them spending time with you one on one. You have them meeting your team. You have them experiencing the property.

If the first thing that you lead your morning meeting with is, hey, our daily sales goal today is $225 per person, or we wanna hit $10,000 today or we want you to sign up 50 club memberships, you're taking away some of the magic, and you're starting to lose some authenticity. And I think people are feeling that when they're already a little bit stretched. Yeah, you're spending all that money or kind of not trusting the process, and is it really worth it?

And just let those teams focus on that experience because maybe in that moment, they can't buy a bottle of wine. They can only pay for the tasting fee. They're not gonna buy two bottles or even a case. But we have a saying, every bottle counts. So whether it's the bottle that you pour them, the one bottle that they buy or if they go to dinner that night and order you off the wine list, that's great. You wanna capture them in that moment so that the next time they see you, they will convert.

And this oh, this is when you're talking sorry.

Sonyia: When you're talking about the moment, I think one of the slides that we have, which is slide 15, is how many tasting options do you offer? I find that there's a lot of folks that are very kind of nuclear, like we have one, two, three option. I think right now, we've got to meet people where they are.

Janiene: Absolutely, because everyone's in a different part of their journey.

So if you're just giving them a few options and it's really, you know, this medium amount, which has gone up quite a bit or really high, that's not a lot. What about someone who's learning about wine for the first time or exploring with their friends? You need to have more options for them.

Rob: Let's take a look at slide 15. I think that that is a really interesting slide. I was wondering at the beginning of the year, how many options do people have? And this was the answer to that. As you get larger, you end up with more and more and more options. As you're smaller, you're more likely to be in the, I don't know why I have zero options, why anybody would answer zero, but I was wondering about that about myself.

I don't know why I put that option in, but a lot of people answer it that way, I guess. But the smaller you get, the more likely you are to have a single option. But that leads us to the next question of how many options do we need? And are there solutions to this? Are more options? Is that the way we should go? Should we, you know, obviously tasting fees are directly correlated to bottle price. There's no question about that.

But my sense is that it's also correlated to the experience levels. We're having an arms race on experiences, and I still threaten to do this blog and I very well may after this, but I have a blog that I've started which is, you know, what are you selling? Are you selling the LP, you know, the record? Are you selling the record? Or are you selling the concert? And I think in some cases, we're looking at how do we get more events, more people into our own tasting rooms? How do we how do we work at it from that angle? I think there might be better ways to do it.

MJ: Well, I think it's all related. So if you ask Taylor Swift, it's both the sales for the music, it's the events and it's the merchandise, and it's the social media promotion all working together. And we are wineries, so wine is at the center of what we do, but we're also—magic moments is what we deliver.

So the right balance in all of those things, and taking that into account I think is great. And some variation of experience, especially by price for different people, is great. Too many experiences now feels like the wine is not at the center of what we do. Balance.

Rob: Yeah, and I think that there are two approaches, and we'll talk about it. I hope we keep them straight in our own mind, but if you're looking for growth right now, if you're looking for growth, it's probably not gonna come through the tasting room. If you look at the number of club members, if you're going to shrink the number of visitations, you're probably going to shrink the number of club members. You're not going replace them quite as quickly perhaps.

If you have fewer visitors, you have fewer tasting fees, of course. So where are the options, you guys? Where can we look? And I think you have a really interesting, it's a little bit of a unique brand, but talk about that brand a little bit.

Sonyia: So I think what's really unique is I like to say that the riches are in the niches, right? So you have to figure out what's different about your brand and what's truly authentic. With Trinitas Sellers, we're a Catholic-owned company, and the family is very devout and they have a lot of followers. And we've actually just went, that's authentic to us.

Every year, we take wine to the Pope. We've actually started really building labels around it. So a couple of months ago, I released the Our Lady of Fatima on the feast day. I've released Our Lady of Lourdes. We've got Our Lady of Guadalupe.

And we have this audience that loves these wines. And we're building and building upon that audience, and we're going to Catholic conferences and we're talking about our wines there. We are doing display ads on Catholic-based websites, and we're getting those first-time orders in for, let's say, a $750 ad for a month. I'm getting first-time orders rolling in from that area of $1,500 for a case of wine. Those are the customers I want.

And it's a unique pond to go fish in, but it's authentic to us. And I think that more wineries need to figure out what separates them out. If you are a cyclist, then figure out how to go find cyclists. And I think, MJ, you do data that finds and differentiates, like, what is that interesting point, and then how do you go after that? You said you found some really interesting successes.

Rob: So in your case, sorry to interrupt. I think you really know your customers because your customers are in this unique set, and so it makes it much of a—I think it's really hard for a lot of, by the way, do you know what the greatest consuming country in the world is for wine?

Sonyia: Italy?

Rob: The Vatican.

Sonyia: Vatican, yes. Yes. Yeah.

[LAUGHTER]

They consume a lot of my wine, which is great.

Rob: Trick question. But how does the typical winery find that kind of understanding of their consumer?

Sonyia: And we still have wines that are not geared towards that. But we're not trying to be everything to everybody. So we have our standard wines. We realized and went, there was a niche, and we decided to dive in much deeper over the last 3 years with great success.

I think once again, you have to know what attracts your customers to you. I think you need to know, you know, what is unique to your brand, your people that work with you. We have a lot of Catholics that work in our company. We have also non. But we all know that we've picked a lane, we're going to go with the lane and we're not going to deviate from that lane. And we're getting more and more hyper-focused on what works for us and talking to those consumers and really segmenting out. So we've got our normal customers, and then we have what I call our faith-based customers. Those emails are completely different, and we talk to them in a completely different way. And the way that we drip campaign them and everything is very different.

MJ: This is so exciting because this tells me our industry is now at a crossroads, and we're ready to be more sophisticated with sales and marketing. For a long time, we've been able to make great wine, and if you build it, they will come. And we're not there anymore. And so it's actually a really interesting time to now figure out how to step up and set your strategy as a brand.

So you say the riches are in the niches. I say, viva la difference. Find out what is unique about your brand, and understand your customers to know and grow your customers. So some of the examples we were talking about. One brand found that they were highly over indexing in tennis and tennis players.

Tennis is something that indexes with high-net-worth people, and wine is a luxury good. But in this case, it was off-the-charts interesting for the brand, and they have decided to now build stronger relationships with the US Tennis Association and really go after that opportunity.

Other brands have found scuba diving, something that is only 1 percent of Americans are interested in, but they were over-indexing. Whatever your brand, classic car racing, it often starts way back in time with your founders and their interests and the cohort that they built, but that's a clue to what makes your brand unique. And when you pick a lane and you learn to speak to your customers where they are, you start to get some exciting ROI results that happen.

Rob: I think it's interesting, you said that whole paragraph and you never once mentioned an age cohort.

MJ: Well, talk by age too, right? I mean, there is, when you break things out and understand your customers by age, by demographics, we look at sometimes as many as 8,000 different pieces of information on individual customers and then help winery brands know who their customers are across the board—their younger customers, their older customers. There's so much to understand. It's really about how do we get profitably to closer one-to-one marketing with them as people, not metrics.

And it's also another struggle, I think, that we—when the boomers came around, marketing was really pretty simple because the homogeneity of the boomer cohort is incredible. So you just market to everybody the same way. Well, today we have greater diversity in in races, ethnicities.

And the thing that we've lost, I think, in the discussion somewhere, but going back into the 1990s, we used to say what we're looking for is the aspiring affluent, right? We're looking for that customer that is aspiring to affluence. They're not affluent yet, they can't really engage fully the way you would like them to. But I do think we have to return to that conversation because the people that can afford wine do skew more wealthy. And they cut across age brackets. But it is kind of a defining mark as you have to be into that affluence curve somewhere and have a desire to aspire to greater wealth or lifestyle, let's put it that way. And so how do we find those people?

MJ: Well, you start with the customers you have, and I don't just mean your club customers, which we've used as a proxy for high-value customers for a long time. I mean all your customers, both the ones that have signed up on a list and visited as well as your high-performing customers. You then understand all of them in great detail to find the different cohorts and what makes sense for how you should reach out to them. What are their interests? It's more about them, and this is what's also exciting to me. We've been really winery-centric for decades now. It's about to turn around where we need to be customer-centric to build bridges with our brands, and that's the opportunity.

And it doesn't have to be a sophisticated thing like Customer Vineyard does. This can be done with a very small brand. Take your customer lists. Have a student intern in the summer. Just Google about your customers, all of them. Learn about them, and you'll get some insights all by yourself.

Sonyia: And I think you bring up the fact too. It's not just about who's coming to our tasting room. It's us getting out there. And you've been hammering this for a decade plus. So I'm not gonna let you say it today. I'll say it for you. And I think we'll all say it. Go on the road. Go find your customers. I think there's a great chart that MJ actually brought into this that, what slide is that?

MJ: Slide 33.

Sonyia: And so it shows, you know, where the customers are. And we need to be going out to the market. And I think you were talking about an anniversary thing that you guys did where you went around. And maybe you can kinda talk to that experience, and I can definitely talk to some of the stuff that we're doing.

Janiene: Yeah. I mean, I think what was great about that was it was kind of an all-in campaign effort across, it was channel-agnostic almost. So we had these tickets that we were selling across the country, all these different restaurants. But we worked in trade. We worked in wholesale. We invited people to come. People went to multiple dinners. They traveled to some of these dinners. They brought guests. And it was wonderful. And so, you know, that night, yes, they're purchasing the ticket price, and they're not necessarily making wine purchases that night. But we followed their trajectory afterwards, and they continue to buy a lot more wine.

And I think that is a great—when you can combine resources like that, where you're working together with your wholesale team and direct-to-consumer. I think that's a really good solution to people that are worried if they're just working with their DTC budget and don't think that they can do that. Find resources within the organization. Work together. It does not have to be channel-specific.

Sonyia: You say tracking, right? That's so important. It's like they go in and they're either a prospect or they're a first-time customer. I'm diligently going, how do we move them up? Because once we've got them in our database, how do you move them up? So my faith-based guys, they come and they do their first order. I'm trying within 30 to 45 days to turn them into a repeat customer. Because then they're now in this cycle and they're buying on a regular basis.

MJ: The art of the second purchase.

Rob: You don't have a customer until you get the second sale.

MJ: That's right.

Sonyia: Exactly.

MJ: And the number of wineries, if you look at purchasing patterns across all your customers, not just sign-up for the club, we find enormous numbers get, sometimes two-thirds of all their business is one purchase customer. What about that opportunity for the second purchase? And thinking about that and how would you invest in them to get that second purchase? It's not the club, but it can be every bit as important to your bottom line.

Sonyia: And there's so many ways to do it. I mean, once again, I'm collect the data, collect the data. So if you've got people coming to your tasting room, make sure that you're getting their email addresses. Try to get their phone numbers. I mean, we've all watched SMS catapult over the last year. And so I work with one brand still on some consulting stuff. And we just tested out a let's, you know, thank the 500 people that came to their tasting room, you know, the prior month with an SMS message and give them a really nice offer and say, thank you so much for making the truck. It's really difficult to get out to this place. It's a little bit more remote. And we saw a really nice return on just an SMS of, thanks, and yes, I will buy some more wine. So just figuring out those different touchpoints, you need lots of different touchpoints. And I think we've done this, like, we wanna do one big thing to each person.

We have to. And, yes, it takes time, but you can automate it. And especially with AI, it can get easier and easier. You've gotta have more small touchpoints and more small groups.

MJ: I think the theme we're all saying is go to where the customer is. So we have that slide that we can go back to for a minute. This is just showing where the top 10 percent of DTC wine spend over the years 2019 through 2023, where the customer is located that's purchasing.

Rob: Let me interject one thing because that looks like a population map.

MJ: It does, but it—

Rob: But it's important to understand that that's the whole picture. And if you're a winery, that's not what your picture is gonna look like.

MJ: That's right. But this correlates and actually directly relates to wine spend. And if this is the top 10 percent of DTC wine spenders, people who ship wine, right, this is more than 1 million, 1.5 million, I believe, consumers, and they spent $7.2 billion in the last 5 years. Your opportunity may not be right near where you are.

We talk a lot to the West Coast and people that are within 300 miles of our wineries. You have enormous opportunity out there. Virginia is capitalizing on it. Go, Virginia. But we all need to meet the customer where they are, and that means not just in our tasting rooms.

Rob: So if I, in my customer map or my wineries map, and I'm looking at the customers where they're focused and I have none in New York, what does that imply for my strategy?

MJ: For your strategy, first I would start with who are your customers? What are your best customers, and where are they? Because it's easiest to connect with them to meet other people like them. So I wouldn't go marching into the Northeast if you have no connection there, but it may turn out to be Texas, like one of our brands over-indexes in Texas. So they're doubling down on Texas and experiences and starting there.

Rob: So when we think about marketing channels, I think Disney is just the master of this. You know, whether it's movies or whether it's toys, amusement parks, I mean they have all of these are different streams of income.

And we can continue to look inside the tasting room, or we can start to look outside. And so if I'm looking at my dots and I see I'm in Poughkeepsie, you know, I got a bunch of people, but I don't have any restaurant accounts, let's say, I probably wanna go do that. We have a tendency, I think, on the direct-to-consumer side of things, eh, wholesale.

You know, there is there is a point of having wholesale, and in the same way that Disney levers on every single channel to actually drive revenue, in each of our markets, we have to figure out how to be in the right stores—not all.

MJ: Not every store.

Rob: Yeah, not every store, but the right stores. Let's just say wine shops as an example, and the right restaurants in that area. So when we go out into that spot in Poughkeepsie or wherever it is, we have an opportunity to call on those kind of customers and start to have the conversations, whether it's a tasting dinner where—many, many wineries already do this—but have a tasting dinner with some of your club. But it's taking it to the next step and making sure that you have an opportunity so that when these people are leaving that party, that club tasting, maybe they signed up for the club, maybe not, but the next time they walk into their favorite restaurant, they can find that wine. And then they can talk about that wine to the people that they brought to that restaurant.

Sonyia: They become advocates.

MJ: Yeah, regardless of channel, Rob, guess what? It's the same customer. They are shopping in retail and restaurants.

Sonyia: You can utilize that that DTC customer. So in the past, when I've gone into market, I will actually send a survey out to my DTC customers and say, what are your favorite restaurants? Where do you eat? And then I will have my distributor take me to those, and I will show them the survey and say, hey, I've got customers that love your restaurant. Can you carry our wine because they're gonna be excited. They're gonna buy it. And then maybe we can also do a wine dinner reception.

MJ: That's a perfect use of data and in a low-tech way to survey your customers and find out what they like. When we do this work with clients, they are using it to get on shelf and wholesale as well. Not just understanding your customers, where they are, you can bring that real data to a target restaurant and say, hey, we should be working together.

Sonyia: And you can also leverage I think what you said, you know, it was an all-team effort of the wholesale team was out. The winemaker was in market. You know, there may be a I've got a whale in market. I'm not gonna go, but my winemaker is gonna be there. Hey, you know what? Would you like to meet our winemaker in his hotel, you know, in the lobby for, you know, a 30-minute quick chat tasting, and you schedule him two or three private tastings, as long as it's legal wherever you're doing it and you're bringing in some wine. And then, you know, you're turning around just building that connection, and then you're shipping them some wine later.

Rob: I actually love this conversation, and I do wanna get back to it. But since I have all three of you sitting here and you each hammer at the industry from different places, I'm curious what you guys think. Are things good or bad?

Sonyia: It's mixed. I mean, I'll be really honest. I feel like Q1 was one of the hardest quarters of my career.

Rob: Don't start being honest.

Sonyia: So I've been in it for 2 decades. It's scary, but I have been. But I also just feel like it's that time to pivot and get creative. And that's one of the things I was saying last night. Covid was hard, but we all got to try new things, and we weren't afraid because we were really just trying to keep the wheels on the bus. It's just the industry's changing. And so we have to change with it, which is why I'm diving deeper into the faith basis.

I'm very excited about how am I building my riches in the niches audience. And that's what folks need to do. So once again, you've got cyclist people, go to a cycling convention and put a booth up and talk about your wines. And you don't necessarily have to pour your wines, but you're at least getting some presence there.

So I think there's a lot of opportunity. It's just shifting, and we're having to figure out how to deal with the shift right now.

Rob: Let's bring up slide 7 for just a moment. It's not one that I was necessarily going to talk about, but if you look in this, you can see, I think it's a green line. During Covid, the interwebs represented 16 percent of total sales.

And since that—and I was thinking to myself at that point, oh my gosh, look, we finally we finally made this, that's another one of those channels, thinking back to Disney and the conversations that I had there. It's another one of those channels, and look what we've done. We've gone from 9 percent in 2018 to 8 percent in 2023. So we're regressing instead of actually doing something.

And everybody has been talking about digital sales for so long, and we seem to be really just going back to what we knew rather than making a new and brave step.

Janiene: Well, one thing I do wanna say is because so many wineries did see the potential of digital during Covid and everyone's kind of going in and trying to boost it, digital is still a great channel. It just, everything takes that much more effort. It takes more effort to have some actually see your email land in their inbox. I don't know if you have this in Outlook. I have the focused inbox and other inbox. So something was in my other inbox—good luck, I might not be responding anytime soon—and I think to go back to your question, are things good or are things bad? I think if you're sitting in the raft and not doing anything and waiting for the storm to blow over, it's bad.

If you're like Sonyia and you're grabbing a paddle and you're working at it, I think there is opportunity there. So I don't necessarily know if this means that wineries aren't doing more in digital, but I do think that there is a bigger effort and people have to know that and accept it and be willing to do the work.

Rob: After Covid, we went right back to what we knew. Zoom went away. And part of that, I think, is just we were tired of Zoom, right?

Sonyia: We did not want to do Zoom.

Rob: Yeah yeah yeah, and it kinda works for situations like this if we, you know, we don't have to come to this, and obviously the whole audience except for all the 1,000 people that are out in front of us today, they're all digital, but that kinda works for this sort of thing. But, yeah, it's really hard to build a relationship on Zoom. I think it's really hard.

MJ: Well, you know, the one thing I wanted to say about the internet numbers that you were looking at, it's really a proxy in our industry for people sending out email. And you send out email, and then they buy in return. And a lot of times, we're calling that our internet sales. So be really careful. The customer's not in email anymore. They're shifting, just as you said. You've gotta find them where they are.

Sonyia: Well, think that's why SMS is becoming so big, right? Because I don't check my emails, but I buy a lot from SMS. And I was definitely one of the early adopters, over with my friends at, you know, RedChirp.

And so I was a very early adopter with them, but I'm seeing more and more wineries jump on. I'm also seeing wineries jump on where I haven't been there for 5 years, and I'm getting text messages. And I was like, hold up. Let's follow the rules. Let's not get everybody mad. But it is such a great tool for multiple things: event ticket sales, a reminder to pick up your wine club, to drive people to your website to purchase or to reply.

And so we've got to figure out how to talk to people how they want to be talked to. But we're finding more and more people are opting in for SMS, even from our emails, which means they're not wanting to focus on emails. They want something that's just quicker to respond to, and sometimes it's just, send me six bottles.

MJ: I think SMS is awesome. One thing I wanna caution is the same thing's gonna happen there that's happened to the email channel. And real marketing, super-successful marketing, is truly an integrated campaign. Six to eight different types of touches to your customer or prospect will get them to take action. But they shouldn't all be the same, and you should be really attuned to what they want. I think you had a slide, Rob, on social media.

Sonyia: Yeah, I was just gonna say we should go to that one because I think where we're talking to people—

MJ: Slide 34.

Rob: Slide 34. And actually, it's counter to what you say. You know, if you look at the examples of other, it's 6 percent. Any text message.

MJ: Well, what I was saying is this is what the wineries are doing. This isn't what the consumers are doing. And then once again, back to being customer-centered, most of your customers, in fact, the biggest channel is actually LinkedIn. That's not to say you should be marketing and selling them wine on LinkedIn, but if you wanna be where they are and talk about your business successes, you should be there and thinking about that as a way to connect with your customers.

Rob: There's a higher concentration of affluent people on LinkedIn, versus TikTok.

MJ: That's right. That doesn't mean TikTok won't be right for a certain niche brand, but it just means you gotta understand who you are, who your customers are, and tailor your marketing strategies. And to answer your earlier question, Rob, I would say looking across all the clients we work with, mixed. I have the exact same perspective, but I am excited to see people now using data and data insights to start to turn the corner.

Rob: As everybody is aware, I look at macro trends all the time and just try to sort out where things are heading. And it does shove the industry in certain in certain pathways.

But just because you have that macro trend doesn't mean that your winery has to live with that macro trend. We do have control over our operations, and I've said this many, many times over the last, I'm gonna say 8 years, 8, 9, 10 years, that I would be a little concerned about the premium wine business because of the focus, and I said this before Covid, the focus on the tasting room model. Everything's got to run through the tasting room, and it's just such a narrow bottleneck. And by the way, there are some customers that I've run into where they physically can't run more people through their tasting room so they're topped out.

But I've said, I would be really worried except we haven't called on the other 49 states. We have we have an unbelievable opportunity ahead of you know, if we're selling direct-to-consumer because unlike spirits, unlike beer largely, they don't have that direct-to-consumer—I know there's some—but they don't have that same direct-to-consumer opportunity that the wine industry does. We have that that ability to ship direct and connect directly to our customers. A little harder for beer and spirits.

MJ: Much harder. And what we're seeing is people are using this data, understanding where the best customers are, both theirs and the prospects. They're starting to hire staff and place them where the best opportunities are. And their entire job is helping run events and connecting wholesale as well as DTC. So when the winemaker comes to market, just as you said, you're using it as an opportunity all the way around. It's exciting. There's so much more out there. We haven't even scratched the surface.

Rob: Totally agree. Let's go to slide 32 for a moment, if we may. So digital resource, we've been talking a little bit about digital. I don't think this is a big surprise to anybody. If you look at examples of other ChatGPT and AI as an example, that gets a lot of heat right now in discussions.

But I think most people should be aware that you're probably not going to have a huge AI thing in your winery. Some actually will, I know some actually have custom built AI components for their data, but most of the time it ends up being software that puts AI underneath it so you get a different kind of performance. That's where AI is gonna be used. So the fact that we don't, you know, ChatGPT or AI is only 2 percent, 95 percent are still using AI. They just don't know it in a lot of cases. I mean, it shows up in if you're looking at your email data, it shows up in that as an example. So but this to me is starting to get, again, boring. Although SMS text messaging does show up in this one as 24 percent, to your point.

Janiene: I do wanna say one more thing about AI because people were asking about it in the pre-questions that you got. Should I be using it? And one area where it is helpful, and I do like that you mentioned they might already be using it, but there are systems out there where because we have so much data and it can be overwhelming to ingest it. But there are companies that use AI that look at your customer behavior data, how often they're purchasing, how long between purchases, just so that they can then ingest predictive analytics. So then you can turn around and say, oh, I have this group of customers who are at risk of churn. That is when AI becomes really relevant and really powerful.

Sonyia: And I think we've seen some exciting tools like WinePulse's Track DTC, right? Great name. And I love that because I can just run in and put some prompts in. I've gotten some really interesting reports that just spit out, it's like, okay, this is actionable when it used to take weeks to slice and dice that data. Now there's some stuff over that just goes, it drops in your database, does its thing and spits out something like, this is actionable.

MJ: It's instant. And what we do is work with that and deliver it back in a platform. And here's action segment number one, and this is why. Two, three, both for retention as well as preventing churn as well as finding new prospects. It's exciting.

Sonyia: It's getting your team to use it. I think that that's one of the big things. I know I've had some struggles with some of my folks. I'm like, why am I the only one logging in to this? But, you know, if you get people to start using it and saying, no, I want you to play with this and come up with three actionable things, then, you know, you actually can start going, okay, like, we've got some new little things we can test and play with. I mean, always be curious.

Rob: Yeah, and I think always be brave. One of the things that I'm an idea person by nature. So and so over my life, the thing I hate the most is when I have an idea and I mean, if you're an idea person, this always happens by the way, is that everybody says, well, that'll never work. You know, because they automatically go to the things that are wrong with the idea instead of thinking about why it actually might be a good thing.

But the thing I hate most is when people say, well, where has that happened before? Where has that been done? Because, you know, they'd like to figure out if it's been done somewhere else and whether it's been done successful. And my answer is, look, if you always go into this path and where has it been done before, then we'll never have original thought. We will never differentiate ourselves. But that takes bravery because you're walking into the unknown. So we do need to be a little brave at the same time.

Hey, let's go to slide 26 because you Janiene, I think you were starting to head toward that.

Janiene: Oh, when we were talking about churn? Yeah, and this question came up a few times too, and so I do think that people are anxious and kinda wanna talk through this. You know, what is happening with club and club attrition? I think it's 26 percent. I mean, the amount that's churning is higher than the amount that people are actually getting into their club, and that's a problem.

I think, a lot of it has to do with how the club model is built. There are other slides that talk about different things that people are doing to push people into club. It's an average of 16 percent discounts that we're giving people to entice them to join the club, waiving tasting fees, giving them shipping discounts. There's a lot of work that goes into that, yet I forget which slide it was or is this slide oh, 24, 90 percent of the people that come through your tasting room are not signing for the club. So it's a lot of work to get 10 percent of conversion out of people.

MJ: That are leaving within 6 months.

Janiene: Exactly. So what are we doing to address that 90 percent? You know, what are the other options? If you are hammering your team about we need to convert into more club members, we're missing out on a huge opportunity. There's something missing from the strategy.

Rob: There's the slide, slide 24. And conversion rates are, they're not doing much. But if visitation is dropping and conversion rates aren't doing much, can see what—

MJ: Our attrition rates are increasing.

Rob: And attrition, and as I say in the, you'll read it in the report—the report, by the way, is available right after this this videocast—but the whole thing with churn to me is if you are somebody that is growing by zero percent and you have, you know, 5 percent growth and 5 percent churn, that's one thing. If you have 20 percent growth and 20 percent churn, that's a less effective business model. So churn matters, and we have to figure out how to be more efficient in the way we do that.

How do we find—again, back to taking the experience on the road—how do we find people for clubs that don't come through the tasting room? I know I that I have 100 solutions. No, I don't. I actually don't have that many, but you guys do.

MJ: So starting with your club members and doing events for them where they are and allowing them to invite in their friends or the board of their favorite charity, bringing experience to them is instantly a way to expand a top customer and meet more like them. Birds of a feather flock together, so goes the saying. So thinking about that, taking your experiences and adapting them to go on the road but then building around the friendship groups of your club members is an easy way.

Another suggestion, if you are a club model winery and not everyone is, if you are and you have these club benefits, create more benefits that can be redeemed, not just in the tasting room. Create gift clubs that only club members can purchase, a baby club that they could gift to their children, adult drinking-age children, and share that benefit. Be thinking about the model and extending it out to where the customer is. You also had some great ideas.

Janiene: Well, actually I was thinking about a conversation we had this morning over that quick breakfast. But also not just thinking about your best customers being your club members. You have a lot of people that purchase from you, but they're purchasing based on their time scale, what they want.

So even though they're not in your club, they are very high-value, great potential customers who also should be getting access to space.

MJ: So we advocate measuring the value of every customer and the potential value of every customer. And the club is just an on-off metric that you use because they've just signed up for automatic shipments. You can make club members better but usually not spend a lot more, but you can retain them longer. That's the goal there. But with others, it's the second purchase.

Sonyia: Those customers, you know, we I have a guy who's my VIP guy, and he deals with those folks. And then, you know, someone comes through as a first-time really large order, okay, you're gonna call this person, figure out where they came through, figure out how to build the relationship. And so you build those one-on-ones. And I'm trying to do that more with our tasting room folks too, going, okay, you had this amazing customer walk through the door, you built that relationship. You're gonna own that customer, and we're gonna give you a little bit of office hours and you're gonna start actually reaching out and talking to those folks on a slow day.

MJ: Ninety percent are not in the club. Ninety percent is a huge opportunity that we haven't been paying attention to. I think it's a great point.

Rob: What else should we talk about?

[LAUGHTER]

MJ: I'd like to hear if there's, like, three themes that you think our industry, all of us out there that are working the business, need to be focused on for a successful future. What are those themes, and what should we be thinking about? And Rob, I think you should go first.

Rob: So this is gonna be a little bit out of left field, which is normal for me, but we are in a market, and I've been around long enough, so I remember 1984. I remember working in the industry way back then. And that was the last time that we ended up with having the anti-alcohol movement make a material dent in what we were doing.

So I think part of what we need to do is, and there are some folks, MJ and I in particular with Danny Brager and Dale Stratton tried to put up WineRamp, which was a USDA marketing order back in 2021. It got turned down by the industry after 2 years of work, unfortunately.

But there are now people that have woken up and said, yeah, this is an issue. I think everybody's got to take a role in that. I don't think you can hide your eyes from it. I think there's too much of that. Back in 1994, we saw what happened. The consumer, doesn't matter what age group you're in, you start looking for health ideas. So however we're going to do that, we need to, I think, engage at this point.

But back to the market itself, we're going to right size. Not everybody will win. There'll be winners, and there will be losers. So the wineries that are less brave, that don't want to change, that are over-levered on the edges, those are the ones that—and especially the very small ones that it's hard to say whether they're really in business, they don't have a winery, they don't have, there's nothing by appointment, they make their wine, you know, elsewhere, what's the word I'm looking for?

MJ: Custom crush.

Rob: Custom crush, thank you. Those are the ones that start to, I think, show weakness. But as we go through this next few years, we're going to see opportunities. And the opportunities oftentimes are going to come in lower grape prices—sorry, growers—lower grape prices and lower bulk-wine prices. You know, what we're seeing in the bulk wine market right now is not a lot of movement. All the signs, but again, there's two parts of this, is the big part of the industry and the smaller part of the industry.

But all the industry will play in this. And so there will be opportunities you will see that come through, whether it's Napa Cab or Virginia, Vermentino, I don't know if they make it there, but those opportunities will be available. So my recommendation in terms of opportunity is a little bit strange because it's your greatest opportunity and your greatest threat. Your greatest opportunity is going to be to take in an elevated cost environment and a more competitive cost environment, it's going be able to take your cost of grapes or your cost of bulk wine down. And that makes you more competitive.

But the one thing that I saw in 1984, 1985, 1986, that time period, the biggest mistake was when somebody said to you, look, with great prices like that, you bought Napa Cab for $1,400 a ton?

MJ: Doesn't mean you should bake it.

Rob: Yeah. And I'm making that up, of course. That was just in the cartoon I showed earlier, but it doesn't mean you should take it because unless you have a path to say to selling, you can afford to not take it because you can afford. You shouldn't take it. Let me say it that way. Because it just ends up being a sunk cost and you put more money into something that you don't have a plan for, and then you end up just stripping the labels off and selling it to Trader Joe's or what. You take a huge ... and I saw wineries fail because of that choice. I saw other wineries become hugely successful because they use that as an opportunity to actually grow their brand.

So it's a two-edged sword, and I know it's a little bit out of the DTC thing, and I'm sorry if I happen to drift that way, but that's where we're gonna see the market correct itself, is in numbers of wineries and in those costs, and as we start to right size we'll see those costs return to more normal levels.

So sorry for that, but DTC, let's go back to what we're here for. You guys?

MJ: Yeah. What are you thinking, Sonyia?

Sonyia: So I think I and I said this earlier, it's find what makes you unique and really hone in on building your audience, building your tribe, building your family of wine purchasers. And then also, I think there's so many opportunity for partnerships. And so going and finding those unique partnerships, I'm just about to launch the second round of an in-room tasting for about four different hotels. And so that'll be an in-room amenity where folks get the tube kits and they get to video with the winemaker and they can do a tasting. And then we can also sell those differently. But figuring out these different things to get in front of consumers, because if I can get in front of a consumer in every single one of their hotel rooms, that's a new way to actually drive traffic to my website.

That riches and the niches, I think you did just kind of point on the inventory. If you are going to buy inventory, make new unique things for your direct-to-consumer. Give them reasons to purchase. I think that Joy over at Iron Horse is one of those amazing ones where she's like, I'm going do rainbow cuvee and wedding cuvee, and I'm going to launch a summer's cuvee.

So she does all these small production stuff that the consumers just keep buying and buying and buying. And she's over the last decade gone to being primarily wholesale to being probably about 85 percent DTC now, and it's taken a decade to do it. But she's happy. She's not on the road as much. And she's got all these unique wines and this huge database of consumers that are purchasing.

And so if you get really laser-focused on, this is what I want to do and I want to build my DTC channel, then you have to create new things to buy but be very pragmatic because I've seen it and I've gone to so many wineries where, oh, we have 5,000 cases of 6-year-old Chardonnay. What are you going to do with that? You're just sitting on that. You're trying to figure out how to work with that.

Rob: I'm actually glad you brought up cuvees. Full disclosure, not a client of ours, but I do appreciate the kind of things that they do.

Last night we were talking about taking the experience on the road again and the basic one of having wine dinners at people's houses. That's not new. But as we were talking, I started thinking, well, wait a second. How can we instead of taking, you know, the experience in the road and getting in a plane as an example, how do we change the occasions? How do we start to market to occasions?

And I'm gonna say, it's probably 15 years ago Dale Stratton said to me, you know, wine needs to figure out a way to get into more occasions. And I am starting to see that. If I go again go back to the 1980s, one of the big issues that we faced back then was that wine was being held for special occasions. We were drinking beer and spirits largely as a population back then, but it was being held for special occasions.

And it seems like we are seeing younger people that are buying, and wine.com data has been out there for a very long time, now that shows that the younger consumers do buy the most expensive bottle, whether it's for gift, they're not buying in volume, they're buying an expensive bottle.

But how do we take that as an opportunity, whether it's for a younger consumer, how do you know, cuvees as an example, use that as a way to show them different varietals, different things that maybe are, if they're affluent, what's word I was using, aspiring affluent. If they're aspiring affluent, can we target those people? Can we actually figure out occasions? Can we package our wine into a way with something else? And think about it, I mean we've all seen party boxes, where something is sent to you and it's all kind of thought out.

Is there a way that we can use that so that we can instead of doing that one at a time, you know, mass produce that as a, I don't know about mass, but let's just say it, you know, 100, 200, 500, 1,000, whatever. Can we take our thing and then put it on the road and then somehow have that personal connection, whether it's I hate to say Zoom, but, you know, that's an example. Last night I said Skype, and so I really dated myself.

[LAUGHTER]

Sonyia: I think that once again, those were the things people were doing in Covid. I mean, we couldn't do our lobster feed. I shipped live lobsters to people, and we still did boils, and we did the Zoom, and we did steaks and stuff like that. So getting back to, how does it work in a post-pandemic phase now, but what can we do to cause celebrations and relationships and bring that into the home differently?

MJ: Explore new and different partnerships with brands that have nothing to do with wine, but partner well. Go ahead.

Janiene: I was gonna say, have a history of people loving to gift our wines, and so we have people that buy from us every year for holiday. It was organic. The orders come in with a lot of work on the back end from our customer care and warehouse team, by the way.

But we built on that with holiday gift boxes and pre-etched bottles for all sorts of different occasions, just congratulations, a wedding, birthdays, happy anniversary, different holiday messaging. And we saw that that was really great. We had some great vendors that we worked with third party to do our etch bottles. And then we realized we had to stop taking orders because they can't necessarily keep up with the demand either. And so we brought that ability in house. We still work with our third-party vendors, we do appreciate them. But we knew that we had more runway to go with, and so to double down on that capability to help that niche that we saw was working for us, and then we thought, okay, now we need someone in to come in and also reach out to those potential corporate clients that haven't been coming to us organically. There's so much opportunity out there.

MJ: To be customer-centered. You're giving messages and engraving on bottles that's targeting a customer for a certain occasion. That's great.

Janiene: And those customers are great ambassadors. If they're gifting our wine to 50 different people, that's incredible.

Sonyia: You're getting your wine in front of 50 different people.

Janiene: Yeah.

Sonyia: LinkedIn a great place to build that corporate, you know, tasting, kind of our corporate gifting type of thing too. When you go back to kind of those channels.

MJ: And small business gifting, though, it doesn't have to just be large corporate. If you build those relationships with people that are gifting wine, it's a whole other channel or area of business.

Other major points I love, I keep coming back to moments, not just metrics. That's really customer-centered, meeting them where they are. Do you have any other?

Janiene: Well, I think about one thing, one aspect I think about that is something that has been kind of in my mind for the last several years is just how we also need to diversify how we talk about wine to our customers.

It is very easy to go on autopilot when a group comes in. It's like I gotta hit them with these historical facts, this about the winemaking process, these are the things that you're going to smell in the wine. I'm gonna throw in some descriptors that I don't necessarily know what they are.

Rob: Olallieberries.

Janiene: What the heck is that?

Rob: I always throw olallieberries in when somebody does that because I've never had an olallieberry. I don't know what it smells like, tastes like. It has a slight nose of olallieberry.

MJ: Thanks to that wine, you now do.

Rob: Yeah. Yeah.

Janiene: So I think that's something else, especially when you think about it in combination with the price increases.

Rob: Well, and for novice consumers.

Janiene: Yeah, all of that. So how do we make it more fun for them or, you know, where is the step that we're taking to learn about them to understand? How do you want to talk about wine? What do you want to learn about today? For those of you using talk, you can customize your pre-visit questions to people, and you can ask them, what are you most looking forward to today? And we just started using that just so that we know, okay, this is who's coming in today. This person really wants to get into the wine technical geekiness of it all. We're gonna pair them up with this host. So those are some things that people can do as well to kind of prepare for that moment.

Rob: One of the things I've been talking about probably for the last couple years is that we do a better job—and now I'm gonna go away from the taking experience on the road to, you know, back to the tasting room—but we start to do a better job with looking at our ROIs of the tasting room.

There was a period of time where I was talking to one particular client I remember, and they were way up in the foothills, not in the foothills, but in the hills around Napa, and they wanted to build this Taj Mahal. And I suggested that they rethink that because they weren't going to get a lot of visitors up there, certainly not initially, they were a newer winery. I said, you know, two barrels on a plank, you know, be authentic, think about what you're doing. That's part of ROI is thinking about your investment, both in people and facilities.

I'm not saying don't spend, I'm actually saying be more thoughtful. But the other thing I'm saying is look at the times—we have times that we're actually more successful in the tasting room than others. Nine o'clock on Sunday is probably not a time that, you may not even have staff there yet for that matter. But I've been to wineries in the past that had educational-type things. It was an opportunity to go to a component tasting so that we maybe could understand. So people like me that wanted to understand what an olallieberry was could go at 9 o'clock and it's not that I'm, it's maybe early for tasting and drinking, but that was an example of more of an educational experience. And if you're good, you're gonna get those people in. They're gonna be younger. You're gonna have a different tasting fee structure.

And I think that thinking through that part of it, the last of the day on Sunday. I was up in Washington earlier in the year, and one winery up there said that on Sunday, they actually turned that on its head. They didn't try to figure out how to get more people in necessarily. They actually started serving paella, and they had a costume party or something along those lines every Sunday, and it ended up being their most sought-after experience.

They limited the amount of people, they made fresh paella. It's a Spanish-themed winery, Spanish-owned winery actually. And they had an amazing success rate of that. So it's back to how do we be more efficient and effective with those times that aren't in the center of our of our bullseye.

MJ: Okay, so one thing I've always wondered, zoning doesn't require this everywhere that we all shut down by 5 or 4, but the lion's share across all the wine regions do. But the customer patterns, they're traveling in for the weekend or for other places. What about 4 to 7 on Thursdays and Fridays? And why are more people not doing that, being focused on when the customer can come and using that time to shift around the tasting and staffing model? Before dinners, we don't wanna harm our restaurant friends and partners in the area. But a lot of times, they can't get their dinner reservation until 7. That's a golden opportunity.

Sonyia: We stay open later because we're located within a hotel, and so we stay open later. Seven's kind of in the golden cutoff. If we go to 8 or 9, what we found. It also then just because people are coming in to drink, not necessarily like they want a wine bar experience.

They're not necessarily going to convert to a wine club or even a purchase, like, that they wanna buy the glass. And so we've been playing with it, we really monitor. I monitor my sales by the hours. That allows us to kind of feel the flexibility.

I think your point about kind of that midweek tasting, I'm seeing lots I think once again, tasting fees have gone so up. I'm seeing so many Facebook ads for people like Sterling with reduced with midweek prices or two-for-one tastings. So we're getting back to a little bit of that, but creating different reasons to be there. So like you said, I do, you know, a maker series and one Saturday a month at 10 am, we're doing a candle-making class or we're doing a wreath-making or something else and we're tying it into the wines and people love it, it's getting great new customers, it's an activity for people to do first thing in the morning at the hotel.

Rob: Still looking for that new customer build so that we're not looking at just that center, that we're not saying, well this is the way we do it and this is what our tasting fee is, and this is what you're going to pay. We do have to be more thoughtful.

Here's another one—and we have some slides in here, I won't bring them up at this point—but we've separated out the look at urban versus rural tasting rooms. And I was really kind of concerned with how that was going to work out when we first started to see, maybe 10 years ago, more and more people start off to have an urban tasting room. How's this going to work? Because it's not really the same experience.

And at first, the wineries—as I recall anyways—they were charging the same tasting fee, but it wasn't the same experience. Now I know there's a slide in here somewhere, anyways, I think it's in this deck, if it's not in another one, where you can see that the tasting fees are different.

You can see that the average purchase is different in an urban tasting room. But the urban, I think, tasting room idea ends up giving you more people if you're in a tourist area, it ends up giving you more people that maybe you're in a hurry, by the way, so you need to have a shorter kind of a program.

And I I've always thought that if in an urban tasting room you start to play Queen of the Stone Age or Eagles of Death Metal instead of Frank Sinatra, that might be a start too. But without having to change your whole wine pricing structure, looking at other wines like white wines or changing out and I'm making this up again, a vermentino. We had one of those left for dinner last night, so that's why it's on my mind. But having something different that somebody else can actually come in that is visiting a region and actually and maybe buy some of those and engage with you, you get their contact. That might be that aspiring wealthy person that you're looking for. How do we attract those aspiring wealthy? And generally, let's call them younger than 60.

MJ: They're there. There are younger, wealthy 30-year-olds and 40-year-olds who like wine. There's not as many of them, but you do wanna find them and make relationships with them.

So I don't know. When I think about it, the goals, my shorthand is always attract new customers like your very best, sell more to the 90 percent of the customers you have and then retain best customers longer. Three things, 20 different action items for your teams underneath each of those levers. But it's simple, but there's a whole bunch of opportunity to be creative. And we're just beginning as an industry, so.

Rob: I would really worry about the wine industry except we haven't called on the other 49 states, and that opportunity is there.

I'm gonna wind this up, I think, it's a little bit early, but I think we've covered the points that we want to cover, and I'm wondering if any of you three have any final thoughts that you'd like to get out.

Janiene: I mean, I would say, a lot of the questions that came in is are things good? Are they bad? What's going to happen next? You know? If I knew what was gonna happen next, I might be in a different line of work. Who knows? I'd be playing the lottery. But I think that the big thing here is just kind of understanding that we just have to be ready to grab that paddle.

You can't just drift through what's happening. You really have to think about what makes sense for you. It needs to be authentic because nothing's gonna turn away a potential customer than being inauthentic.

And really, also, we talked a lot about how you can work with other folks within the organization instead of being strictly DTC-focused. I love I think you said a customer isn't a wholesale customer or DTC customer. That's where we need to focus in on.

MJ: The same customer is purchasing across all channels. So our channel should work together for the customer.

Janiene: Absolutely. That's the mindset we need to adapt.

Sonyia: Well, and I think when you say, like, you know, it's like we all get to be rowing the boat, but you have to, as a leader, be building a team that everyone's rowing with you. Because sometimes you end up having a couple of, you know, key men, and then you've got some people who are just doing, like, everybody has to think through this. And you, as an organization, have to sit down and go, okay, just like we did in Covid, we gotta figure out how to do this together. It's the only way we're gonna get through this. And so everybody has to be contributing in some way. And so I think culturally, you've got to really focus on your business culture as well to make sure that everyone's driving your business forward together.

MJ: I like that. Don't just drift, paddle. Paddle together. And then I'm gonna say, navigate where you're headed. Don't just paddle aimlessly.

Sonyia: See, this is you brought all three of us together, just for my goosebump moment.

[LAUGHTER]

Rob: I can't beat that. I mean, like all that, that sounds good.

So let me wrap up first of all by thanking all of my panelists. As I said, with no disrespect intended for prior panelists, this is the best panel group I've ever had. And I'm grateful for each of your participation, so thank you.

I want to make a pitch for just a moment. We can't do this without participation from wine reason in our survey. We had roughly 600 participants this last year in the DTC survey, and I know people are interested in it because the number of participants went up. And actually the number of viewers in this videocast went up as well, so I know the interest is there.

And I know it's hard to engage in some of these surveys because there just seems to be another survey every day. We've been doing this for 25 years, this whole survey thing, so we have a database that goes back and we can trend, we can look at where things were back in the 1990s as an example. And so, I'd appreciate everyone's help in getting through these.

What you don't see, if you are a participant, the wine report I think this year was, I'm going to say 40 slides, something like that.

Obviously we just went through a short number of those slides, but there are 100 slides that are in there that you can look for each of your own individual wineries' needs—100 slides, this is data that you can't buy, but it is free if you participate, if you can spend that 15 minutes.

So please support what we try to do. We're not doing this to sell it. We're doing this to make the industry hopefully better, and we're delivering information in in a balanced and thoughtful way. Even though it's negative sometimes, sorry, I think we have to be brave. We have to look in the mirror. We have to say, you know, here are the issues. If you don't stake out those issues, you really can't solve for them, obviously. So please participate in that.

As a reminder, the video—pardon me—the videocast will be on replay if you signed up, the link will be sent out to you pretty soon. But the direct-to-consumer wine report is on our website right now at svb.com. So you can go there and actually download that and thumb through some of the other comments that I've made throughout the report.

Before I leave, I want to thank the people that are in Silicon Valley Bank that have done a lot of the work on tearing this stuff apart. People are right now in the background, 10 to 12 people are in the background answering questions.

Paul Dehghani in particular, who this past year is focused on two in a row of our surveys and reports. He's done yeoman's duty because he has a full-time job as well. So thank you, Paul, for all you've done.

So with that, I think I'll wrap it up. We have an opportunity ahead of us. We have to be brave. We have an opportunity ahead of us. We have to do it different. We have an opportunity ahead of us. It's probably in the other 49 states, so open your mind to how you do things.

Think about the ROA of your own individual tasting room. Think about what you can do to get out. Think about what you can do to actually increase the number of occasions. Think about what you can do to use data more effectively, and figure out who those aspiring affluent people are.

Putting balloons on your mailbox, helping people drive by and come into your tasting room—if that's what you're going to rely on, you're not going to be successful in this market. But if you want to succeed, you can. And I encourage you guys all to think about the stuff that my panelist has covered and stuff that you'll read in report. I think it's well worth your time.

So with that, I will thank everybody for tuning in today, and I hope to see you next time at Silicon Valley Bank.

About the Silicon Valley Bank Wine Division

Silicon Valley Bank, a Division of First Citizens Bank, is the premier commercial bank for emerging, growth and mature companies in the technology, life science, venture capital, private equity and premium wine industries. Its Wine Division specializes in commercial banking for premium wineries and vineyards.

Established in 1994, SVB's Wine Division has offices strategically located in Napa, Sonoma and Oregon. It caters to clients in the fine wine-producing regions of California, Oregon and Washington.

By virtue of its dedication to the wine industry, Silicon Valley Bank is able to support its clients consistently through economic and growth cycles, and offer guidance on many aspects of their business beyond traditional banking services. Silicon Valley Bank, a division of First Citizens Bank, is a member of the FDIC. More information on the company can be found at svb.com.

Disclosures

This material, including without limitation to statistical information herein, is provided for informational purposes only. The material is based partly on information from third-party sources that we believe are reliable but have yet to be independently verified. For this reason, we do not represent that the information is accurate or complete. The information should not be viewed as tax, accounting, investment, legal or other advice, nor should it be relied on in making an investment or other decision. You should obtain relevant and specific professional advance before making any investment decision. Nothing relating to the material should be construed as a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction.

Silicon Valley Bank, a division of First Citizens Bank & Trust Company, is not selling or distributing wine or wine-related products. Through the online informational platform SVB Cellar Selections, Silicon Valley Bank provides material to employees about a variety of premium Silicon Valley Bank winery clients and their wines. These communications are for informational purposes only.

Silicon Valley Bank, a division of First Citizens Bank, is not responsible for, nor is it a participant in, the sales of any winery products in any fashion or manner and makes no representations that any promotion or sales of alcoholic beverages will or will not be conducted lawfully. Further, Silicon Valley Bank disclaims any responsibility or warranty for any products sold by wineries or other wine industry service providers.

Silicon Valley Bank provides banking and financial services, along with industry insights to vineyards and wineries.

The views expressed in this report are solely those of the author and do not necessarily reflect the views of Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, or any of its affiliates.

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