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SVB Advocates a Stronger Digital Marketing Strategy in Latest Videocast

by Kerana Todorov
January 17, 2018

Though the wine industry is expected to do well in 2018, wine sales growth is weakening and wineries should invest more money in an integrated digital marketing strategy as customer demographics change. These were among the conclusions Silicon Valley Bank presented Wednesday during its annual report on the wine industry.

While wine sales values are expected to expand by 4 to 8 percent in 2018, wine shipments are flattening out and sales volumes are dropping. Overall wine sales grew by only by 0.3 percent from January through September 2017, according to Silicon Valley Bank.

“That’s kind of alarming,” said Rob McMillan, executive vice president and founder of Silicon Valley Bank’s wine division. “Something is changing underneath.”

Wineries have to invest in digital marketing as consumer trends change, he said. Baby Boomers who retired on fixed income are less likely to spend money on premium wines, and cash-strapped Millennials continue to look for value.

“We’re going to have winners and losers over the next 10 years. We can’t really stay where we are anymore,” McMillan said.

Direct-to-consumer wine sales add up to about 60 percent of the average winery’s revenue, but only 3 percent of the sales are online, according to Silicon Valley Bank. “That’s an extremely small amount,” McMillan said during the one-hour videocast.

By 2021, according to a recent study, 25 percent of all luxury sales will be online. “The Amazon effect is real and it’s taking down brick-and-mortar,” McMillan said. He does not advocate closing tasting rooms. Instead, wineries have to use social media, including targeted Facebook advertisements, Google analytics and Instagram instead of just waiting for customers to stop by tasting rooms.

“The direct-to-consumer model isn’t the roadside tasting stand anymore,” McMillan said. “It’s not the wine club anymore. It’s not the experience model with the integrated tasting room. Now we’re talking about an integrated marketing strategy.”

“Today, it’s version 4.0,” McMillan said. “Your customers aren’t just your wine club. Your consumers are the wine consumers,” said McMillan, who noted wineries in Napa and Sonoma counties welcomed fewer visitors in 2017.

Marketing to Bolster Tourism

Wineries in areas that don’t see high tourism numbers depend on locals for sales. Without online sales, they’re “basically eliminating the other 49 states,” McMillan said.

Paul Mabray, a wine industry digital futurist who also took part in Wednesday’s videocast, said investment in digital marketing is key, yet very few wineries have a dedicated e-commerce expert. There is no budget for digital customer retention.

“If you don’t feed the race horse, it can’t run,” Mabray said.

Napa Valley’s tourism is up, but there are more wineries for them to visit, Mabray said, adding Oregon’s wineries will experience the same trends. “There is no real reason to buy directly from a winery except limited products or the love and passion of the experience you have there,” Mabray said. “So we need to start thinking smart, fast and mobile to get there.”

Up in Oregon, wineries are seeing higher sales, according to McMillan and Gretchen Boock. “I think we’ve got a lot of those things going for us,” said Gretchen Boock, chief executive officer at Dobbes Family Estate in Dundee, Ore., during the videocast. “Our tasting fees are still reasonable. Our region is certainly attracting those younger demographics. But at the same time, we’re really appealing to the boomers still because we make quality wines,” Boock said

Eventually, McMillan said he would love to see 25 percent of all wine sales made via the internet, calling digital marketing the “next frontier.”

Wineries should also use big data to guide their decisions, according to McMillan and another panelist, Mary Jo Dale, marketing director at Vinventions. Vinventions, Sonoma Valley Bank and Sonoma State University are collaborating on a study involving big data from the wine industry. The data include 130,000 customers and $500,000 in sales transactions. Out of those customers, 20,000 seemingly “low value” customers turned out to have “very, very high potential,” Dale said as she emphasized the value of big data. These customers had high discretionary income and net worth along with a love for wine.

The full 2017 SVB wine report will be available in February.

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