Announcing the 2009 American Wine Blog Awards
Snow in the Vineyard

Succeeding in a poor economy: it's all about the fundamentals

I get questions every day from people asking how our sales are holding up overall and what we're doing to help survive the current struggling economy.  Most people look surprised, and then relieved, to hear we're doing pretty well, all things considered.  Our wholesale sales were down 11% last year because of a decline in the fourth quarter, but our tasting room sales were up 15% for the year and down just 3% in the fourth quarter.  Our traffic was up 5% for the year.  Our sales to our wine club were up 21% for the year, and we ended the year with about 3400 VINsider wine club members: more than 500 more than we had at the beginning of the year.

So far this year, we're holding steady in the tasting room.  Our January sales were up 4.5%, and our traffic up 9.5%.  We signed up 16% more new VINsiders this January than last.  A part of this improvement can be attributed to the day of the week on which New Year's fell (it was a Thursday this year, creating a four-day holiday weekend to begin the year) but we're seeing consistently good traffic out in our tasting room and our average sale per customer and the percentage of our customers who we're converting into wine club members are both at our averages from the past few years. 

So, given all this, I thought it might be helpful if I tried to enumerate what I think that essentials are for a winery who wants to be successful in this economic climate.  I've tried to give some context for my suggestions, as not all of these will apply to everyone's situation.  Most of it is not rocket science.  It's about focusing on the fundamentals and doing them well.

  • Make sure that the customer experience when someone is coming to visit you is a good one.  I think that this point, for small- to medium-sized wineries, is as important as all the others combined.  I am amazed by how many people we get in our tasting room who tell us stories of disinterested servers, overcrowded tasting bars, or salespeople whose only interest is a club sign-up.  A hugely successful tasting room may convert 5%-7% of its customers into club members.  That means that the vast majority of the people coming through your tasting room are not going to sign up on the spot.  Focus on giving everyone a memorable experience, and the wine (and wine club) will sell itself.  This does not mean that wineries should approach sales as though the idea is somehow dirty: sell through education and enthusiasm, and make sure that the customers know the options in front of them.  Every person who leaves your tasting room happy is a source of repeat business and referrals.  An enormous piece of being able to ensure a good customer experience and the sales that result is having sufficient staff on hand to handle your busiest times.  This necessarily means that in slower times you'll be overstaffed, but if you calculate the value over time to your business of a single club sign-up or a single dissatisfied customer who would otherwise have bought a case of wine and told their friends, the cost of labor seems pretty minor.
  • Build and use your lists.  At Tablas Creek, we saw 22,000 people come through our tasting room last year.  Adding just a small percentage to your email lists (let alone your wine club lists) can give you a powerful tool to communicate special offers, share information about events, and generally build an ongoing connection to your base.  Once you have added these people to your lists, it's important to contact them regularly.  An email every few months, with perhaps a print newsletter a couple of times a year, is generally seen as welcome rather than intrusive.  And, for your core customers (read: wine club members) a little extra outreach in times of economic difficulty may well prove rewarding.  We've found that while our wholesale sales have suffered, the responses to our wine club emails are providing a consistent, growing return even over the past four months in this struggling economy.  One final word: there are wineries who fear to contact their club members out of worries that this will remind them that they want to cancel.  I think that this approach is self-defeating in the long run.  You may squeeze an extra shipment out of a few people, but the numbers of dissatisfied members of your base who you create, and the churn of returned or refused shipments, challenged credit card charges, and lost opportunities for between-shipment sales seem to me to far outweigh the gains.
  • Cultivate partnerships.  You are not the only one in your area with an interest in bringing people into town and giving them a good experience.  Reach out to local hotels and bed&breakfasts and create co-marketing opportunities and specials that will give them a reason to be emailing their customers about you.  Work with local restaurants to put together dinners that both you and they will market.  This expands your base, supports your partners in your community, and ensures you stay visible.
  • Stay visible.  This is not the time to cut your marketing budgets and hope to save your way through the economic downturn.  Sure, be selective about what expenses you choose (was that half-page ad in the glossy wine magazine really worth the $10,000 it cost?) but don't disappear.  When overall business is contracting or staying stagnant, you can be assured that your competitors are out there pounding the pavement.  Keep going to festivals.  Keep working in the market with your wholesalers.  Keep supporting the local organizations that are promoting your area and keep supporting the advocacy groups that focus the wines you make.  This will help ensure that you maintain your share of whatever business is out there, and will position you for fast growth when the economy does turn around.
  • Do your part to ensure that you get editorial coverage.  Writers in lifestyle and wine publications are struggling, too.  Newspapers and magazines are both being hit hard by a decline in ad revenues, and many are letting writers go or converting paid positions to contract labor.  This means that everyone in the media is being asked to do more work for less or the same money.  Help them out.  Come up with creative ideas that will make good stories (and relate somehow to your business).  Then pitch the writers who you know on these ideas.  Don't expect every idea, or even most ideas, to pan out, but you'll be surprised what does.  And not contributing ideas is a great way to ensure that they don't get used.  Plus, be sure that you're covering the basics.  Are you sending samples of all your new releases to the 20 or 30 key writers around the country a few times each year?  Figure that the total cost of doing so is somewhere around $2500 plus a few cases of wine.  Calculate what a full-page advertisement is in any of the key wine or lifestyle publications.  Do the math. 
  • Work with new media.  I wrote a little less than a month ago about Facebook and social networking for wineries.  In the month since I wrote that article, Tablas Creek's Facebook page has gained 130 new fans.  Extrapolate this power across months and years, and you will see how potentially valuable these inroads into social networks can be.  And Facebook isn't the only outlet.  A blog is a great way to personalize your business, communicate your core ideas and principals, and drive traffic to your Web site.  Getting involved in online bulletin boards can develop enthusiasm in an important base.  And new wine 2.0 sites like Snooth are just starting to show their power.  If you aren't particularly technologically inclined and are worried about your ability to execute in these new media options, find an intern to do it, or just ask a member of your staff who is recently-graduated from college.  You'd be surprised how easy and inexpensive it is to create a broad online presence.
  • Be more hands-on in managing your relationships with your wholesalers.  We're finding that a major problem in our wholesale efforts is overcoming the nervousness of our gatekeepers.  Clearly wine consumers have not stopped buying Tablas Creek; the people with whom we have direct relationships prove that.  But for a wine to sell in the wholesale market, the distributor manager has to believe in the product enough to maintain a healthy inventory, the distributor rep has to believe he or she can sell the wine enough to pull a sample and show it to his or her accounts, and the buyers at the accounts have to have enough confidence to buy the wine in a crowded marketplace full of people offering them hitherto-unimaginable deals.  That's a lot of people whose confidence you have to win or keep before the consumer even gets the opportunity to buy your wine.  You can overcome many of these hurdles by staying actively involved with your wholesalers.  Make sure you're receiving inventory reports every month, and accounts-sold reports quarterly.  A distributor can't sell wine they don't have in inventory, and won't sell a wine whose inventory is down to a few cases.  Know who you'd like to see the wine sold to, and make suggestions to the distributor.  Offer to support your wines by offering their sales reps (who usually have a limited sample budget) some samples at your expense. These ideas are good even in a strong economy (the wholesale market is a very crowded one, and distributor mergers have guaranteed that most distributors have many more wines in their books than they can realistically focus on) but become essential when times are tough.  And, be sure you're out in the market, working with your distributors.  It's important for you to hear what their customers are saying, and for the distributors to see that you care enough to support their efforts.
  • Focus on giving people value.  Value is an essential concept.  It does not mean that things need to be cheap.  But, it does mean that you need to think about what will remind or convince a potential customer that what you're offering is worth what they will spend.  Offer a special on a specific wine each month.  Or offer free or discounted shipping.  Be generous with events that will bring people out to the winery where a purchase is more likely to happen.  One example: we included a $15 discount coupon in the end-of-year gift that we sent to all our wine club members at the end of last year.  Just a few days later, we started getting orders from people who had received that coupon.  Would we have received those sales had we not sent out the coupon?  Probably a few.  But most, in my opinion, were spurred by people deciding that this little nudge was enough to tip their value scale into the black. 

These are just a few ideas, and nothing here should be earth-shattering for business owners or managers.  But for us they have meant the difference between lamenting the poor economy and being able to continue to grow even as the fundamentals of the economy have deteriorated.  I hope that this has proven helpful, and would love to hear from other business or winery owners out there who have also come up with creative ways of protecting themselves from the economic downturn.