After 8 years in the US wine industry based on the West Coast it’s interesting to see how the UK wine market has developed since I left and how it differs from the US.
It certainly appears to be an exciting time. English Wine is beginning to find its feet, with growing interest from consumers and especially the media, planting going on apace – the millionth vine planted in English soil this year – and even the beginnings of an export market.
It’s exciting – yes! But it’s also just a bit daunting. Demand is currently keeping pace with, even outstripping, supply. The high price point is being maintained. So far. With all this new planting, there’ll be a flood of new product on the market within just a few years. Can we maintain this momentum?
SAME BUT NOT THE SAME
Just a stones throw away, it is tempting to compare English Wine Country to our nearest neighbours, the great wine regions of France, Germany, Spain and Italy. Tempting to apply the same marketing tactics employed by them and channelled so effectively through London, the traditional centre of the global wine trade.
Our British vineyards are not in the same league. Our land under vine is tiny by comparison, and growing while theirs is shrinking. Their markets are so long established that drinking the local wine is part of their national identity, and the excess is sold to – us. Our domestic wine consumption is founded on drinking imported wine from those same regions.
NEW WORLD WINES – FURTHER AWAY BUT CLOSER
English Wine Country is far more closely aligned with New World wine regions. Especially those who are reasonably close to affluent residential populations or a thoroughfare of affluent tourists – think California, Oregon, Washington State, The Finger Lakes, New Zealand, the South African Cape, Australia. Some of these have strong export markets, but mainly for lower priced product that battles it out on the discount shelves. What they all have in common is strong local markets, where boutique wineries successfully sell high price point wines, despite competing against cheaper imports. How do they do this? By selling direct to the consumer, over the farm gate.
WINE TOURISM AND CLUBS
Some English vineyards welcome visitors with open arms. Others are just beginning to think about it. In the New World it is almost standard practice. Why? It’s time consuming to stop work and welcome visitors onto your property, and very costly to build the facilities. So why make the effort? It’s a simple equation of volume versus margin.
To sell your wine through traditional channels, be it through supermarkets, restaurants, off-licences or distributors, you are selling at a wholesale price and a tight margin. Therefore you have to sell high volumes to cover your costs and perhaps make a profit. Sell direct to the consumer, and you make all the margin on the full retail price – done efficiently, and you can sell less volume, incurring less cost, to achieve the same profit. Important in a marginal climate where yields are desperately low and production costs high. This in itself justifies a Cellar Door strategy.
However, and this is key – while many New World wineries sell a significant amount of wine through the Cellar Door, one of the most important benefits of welcoming punters onto their property is not the immediate sale, but signing them up to join their Wine Club.
Why is this important? The most costly sale you’ll make to a client is the first sale. Whether it’s the cost of supporting a wholesale strategy, or marketing and advertising, or of your Cellar Door overheads, convincing a consumer to buy your product for the first time is expensive. That initial cost is worth it if you get repeat business. Sadly, the British wine consumer is a fickle beast, and the wine market a veritable sweet shop. Even if you get them to buy your product once, and even if they love it, they are likely to wander down the aisle or country lane and choose something new the next time they shop. However, sign them up to your wine club, and a whole other British trait kicks in – inertia.
BENEFITS OF JOINING THE CLUB
The purpose of a Wine Club is to convince a customer to sign up to buy a few bottles once a quarter, and hand over their credit card details. Once signed up, and they start to receive regular communications direct from the wine maker, the owners, and the vineyard workers, they’ll feel a sense of belonging. The occasional invite to a dinner, or an event, and they’ll feel included. However, two or three bottles of something delicious arriving on their door step every so often, without any effort on their part, and they will be so very happy. Tell them they are special, and there’s a waiting list to join their club, and they’ll be yours for years to come. Customer retention, repeat business, and full retail margins are yours.
To talk to Alister about developing your wine club and wine tourism strategy, contact The Business of Drinks today.