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Online Wine Purchase Increases for Home Delivery During COVID-19 Crisis Lockdown Are Expected to Continue After the Crisis with the Exception of Generation Z

 

Online Wine Purchase Increases for Home Delivery During the COVID-19 Crisis Lockdown Are Expected to Continue After the Crisis with the Exception of Generation Z.

Lockdown, Reopen and Reversals

On March 15, 2020 Gavin Newsom, Governor of California, required the closure of all California winery tasting rooms, bars, nightclubs and brewpubs (Todorova, 2020). Several days later, on March 19, 2020 the Governor directed California’s residents to stay at home (Arango, 2020). Thirteen weeks later, on May 25, 2020 the California Economy began re-opening (Lee, 2020). On June 5, 2020 Governor Newsom announced a reopening of winery tasting rooms effective June 12, 2020 (The Wine Institute1, June 2020). Bars were closed on June 29, 2020 (The Wine Institute2, June 2020).  Next, indoor winery tasting room operations were ordered closed on July,13 2020 The Wine Institute, July 2020).   

Off-Premise and Direct to Consumer Growth 

Nielsen reports show that that during the COVID-19 pandemic consumers purchased 26.7% more volume of wine on off-premise during the period March 7, 2020 through May 30, 2020, compared to a year ago using their in-store retail measurement (Brager, 2020). It also shows that the wine dollar sales were still growing by +24.4% in the week ending May 30, 2020, compared to the same week last year (Brager, 2020). While off-premise sales were increasing during the lockdown, direct to consumer sales grew significantly. The Direct-to-Consumer Wine Shipping Report from Sovos ShipCompliant and Wines Vines Analytica reported a 29% increase in volume and 15% increase in value during the period January through June 2020 compared to the same period in 2019 (Koral, 2020). Wine industry leaders have observed the rapid growth in online wine purchasing and are recommending that wineries should improve their digital capabilities (Higgins, 2020).  E-commerce during the same period has done extremely well. To be able to face the challenges of this growth, Costco has purchased a logistics company, Innovel Solutions (Cain, 2020). In addition, the coronavirus pandemic has fueled Amazon’s stock increase of more than 60% this year (Klebnikov, 2020). According to the company press release of July 16, 2020, “Wine.com, the nation’s leading online wine retailer, closed the quarter ending June 30 with $106 million in revenue, representing 283% year-over-year growth. This brought trailing 12-month revenue to $244 million, a 79% increase over the comparable year period”.

Two studies among wine consumers conducted during the lockdown found that wine consumers reported increases in online wine purchasing. Thach et. al found that high frequency wine drinkers reported approximately a 50% increase in purchases from online retailers, winery websites and online generic retailers; while occasional drinkers reported purchase increases between 12% to 18% in purchases from online retailers, winery websites and online generic retailers (Thach, 2020). The authors of this research, Wolf et. al., found that 15% of wine consumers reported that online wine purchases for home delivery increased during the COVID-19 lockdown (Wolf et al., 2020).

Identify the Target Market of Consumers for Online Wine Purchases

The purpose of this research is to (1) Identify the consumer demographics of those that reported that online wine purchases for home delivery increased during the COVID-19 lockdown. (2) Examine the price of wine purchased by these consumers. (3) Learn the devices and digital platforms used by consumers to order wine. (4) Examine the desirable wine characteristics that motivate the consumers to purchase. (5) Learn how these wine consumers expect to purchase wine after the COVID-19 pandemic. To answer these questions, a group of researchers from California Polytechnic State University, San Luis Obispo, implemented a study. 

Research Methodology – Online Survey 

In our research, a sample of 947 wine consumers were interviewed through an on-line survey during the COVID-19 pandemic lockdown period from April 29 and May 7, 2020. Most respondents were from California. The wine consumers respondents are from four wine consuming generations: 

  • Generation Z (born 1997 and later), 
  • Millennials (born 1981-1996), 
  • Generation X (born 1965-1980) 
  • and Baby Boomers (1946-1964).

Based on the results of the survey, fifteen percent of the respondents increased online wine purchases for home delivery. 

Demographic Differences of Increased Wine Consumption – Not Generation Z, Higher Education and Workers from Home

Statistical analyses of  consumers that increased online wine purchases for home delivery (compared to those that did not) indicates that the following demographic groups were equally likely to increase online purchasing during the COVID-19 crisis: both males and females, wine consumers of all income levels, married and single consumers, and consumers with and without children in the household.

Among the main findings:

Generation Z (born 1997 and later), were less likely to have increased online wine purchases for home delivery during the COVID-19 lockdown. 

Higher educated wine consumers and those with post graduate degrees were more likely to have increased online wine purchases for home delivery. 

Employed consumers and consumers that worked from home were more likely to have increased wine consumption. Approximately three-quarters, 74%, of respondents that increased their online purchases for home delivery worked from home during the COVID-19 pandemic. 

Purchasing and Drinking Behaviors of Consumers During COVID-19 Pandemic

Price of most bottles purchased for consumption at home (off-trade) 

When asked, “Thinking of the wine you purchase for consumption at home, in which of the following price ranges do MOST of the bottles of wine you purchase fall?” Less than a third of all consumers responded that most bottles they purchased were priced $20 and higher.  However, 41% of the consumers that increased their online purchases for home delivery indicted that most bottles they purchased were priced $20 and higher. Therefore, the consumers that increased online purchases tend to spend more for a bottle of wine.

Purchase Pick up or Delivery Ordering Method

Due to shelter in place orders, consumers had to change their habits to purchase wine. They were not permitted to purchase and consume wine at a winery, a bar or a restaurant.

To understand how purchases and orders were made consumers were asked “When ordering wine for pick-up or delivery, how do you typically order?” Websites on computers and mobile devices were used by most consumers. However, Apps were also used by many consumers for ordering wine (Table 1). Research has shown that wineries and wine resellers need to have websites and apps that provide purchasers with a positive purchase experience and use promotions (Pelet et al, 2018). Websites and apps should be easy for consumers to use to take advantage of the increased interest in online purchasing. 

 

 

Desirability Ratings of Wine Characteristics 

Respondents were asked to rate the desirability of eleven characteristics of wine when they make a wine purchasing decision. Respondents were asked: “The following is list of features people may look for when they purchase wine. Please indicate the desirability of each feature using the words: extremely desirable, very desirable, somewhat desirable, not very desirable, not desirable at all.” Mean ratings were calculated based on a five-point scale where extremely desirable was five and not desirable at all was one. The consumers that increased ordering wine online for home delivery rated the following features as more desirable than those that did not increase online ordering: high quality product, varietal I like, good value for the money, donates profits to save endangered wildlife, donates profits to COVID-19 relief efforts, and can be delivered to my home. Consumers that increased their online purchases during COVID-19 lockdown rated the very desirable characteristics to be high quality product, good value for the money, varietal I like, and high wine ratings. The somewhat to very desirable characteristics were: is convenient to pick-up, can be delivered to my home, a brand I know, a wine from a local producer and produced sustainably. The somewhat desirable characteristics were donates profits to save endangered wildlife and donates profits to COVID-19 relief efforts (Table 2). Convenient to pick-up and can be delivered to the home are desirable attributes to the consumers that increased online ordering. These consumers rate pick-up and delivery significantly higher than the consumers that did not increase online ordering. The ease of pick-up and delivery should be effectively communicated on brand websites.

 

Expectations After COVID-19 Crisis 

Our survey asked wine consumers about their expectations concerning purchase behaviors after the COVID-19 crisis. When asked “I expect to continue to order wine for home delivery after the COVID-19 crisis.” 76% of the consumers that increased their online purchases for home delivery agreed. Therefore, most of the consumers that increased their ordering will continue to order online.

Almost a half of wine consumers that increased their online purchases for home delivery agreed, 45%, “I expect to purchase wine at physical retail outlets less often after the COVID-19 crisis than I did before the crisis.” Therefore, retail outlets will need to offer user friendly online sites with home delivery to attract the purchases from these consumers. 

Implications of the Research

This study shows that 15% of wine consumers increased their online purchases for home delivery during the lockdown and approximately 75% of them expect to continue online ordering after the COVID-19 crisis. The wine consumers that increased their online ordering were higher educated, employed and worked from home. Generation Z were less likely to have increased their online purchasing for home delivery, probably because they purchase lower priced wine and don’t want to pay for the shipping fees. Our data show that 64% of Gen Z are paying less than $15 for most bottles (vs $20+ for the typical online consumer). The consumers that increased online purchasing tend to buy more bottles in the $20 and higher category. They are attracted to wines that are perceived to be a high quality product, good value for the money, varietal I like, has high wine ratings, convenient to pick-up, and can be delivered to my home. Brands need to communicate that their products will deliver on those features Online wine purchasing is expected continue for those that increased online purchases. Further, wine purchases at physical retail outlets are expected to decrease after the COVID-19 crisis. In addition, most of the consumers participated in a virtual happy hour. Wineries and other wine resellers will need to make their products easily available through Ecommerce to continue to maintain and increase sales in the future.

References

Arango, Tim and Jill Cowan. “Gov. Gavin Newsom of California Orders Californian to Stay at Home.” New York Times. March 19, 2020. Accessed June 22, 2020.
http://www.nytimes.com/2020/03/19/us/California-stay-at-home-order-virus.html

Cain, Áine. “Costco just bought up a logistics company from Sear’s owner for $1 billion.” Business Insider. March 18, 2020. Accessed August 15, 2020.
https://www.businessinsider.com/costco-acquired-logistics-company-innovel-sears-owner-2020-3

Higgins, Hayden. “Report: Building e-commerce capability vital for future of wine industry.” W winetitles media. August 6, 2020. Accessed August 6, 2020. 
https://winetitles.com.au/report-building-e-commerce-capability-vital-for-future-of-wine-industry/

Klebnikov, Sergei. “5 Big Numbers That Shoe Amazon’s Explosive Growth During the Coronavirus Pandemic.” Forbes. July 23, 2020. Accessed August 15, 2020.
https://www.forbes.com/sites/sergeiklebnikov/2020/07/23/5-big-numbers-that-show-amazons-explosive-growth-during-the-coronavirus-pandemic/#24f01a204137

Koral, Alex. “Insight & Opinoin: The Wine Industry’s Future is Being Delivered Straight Into Our Hands.” Wine Business.com August 6, 2020 Accessed August 6, 2020. 
https://www.winebusiness.com/news/?go=getArticle&dataId=234785

Lee, Jasmine C., Sarah Mervosh, Yuriria Avila, Barbara Harvey and Alex Leeds Mathews.See How All 50 States Are Reopening (and Closing Again).” The New York Times. August 5, 2020. Accessed August 5, 2020. http://www.nytimes.com/interactive/2020/us/states-reopen-map-coronavirus.html

Nielsen Beverage Alcohol Practice, “Wine up 18.2% in dollars and up 12.1% un volume for week ending 7/25/20 in Nielsen off premise channels.” Wine Business.com, August 5, 2020. Accessed August 5, 2020. https://www.winebusiness.com/news/?go=getArticle&dataId=234755

Pelet, J.-E., Lecat, B., Khan, J., Rundle-Thiele, S., Lee, L.W., Ellis, D., Wolf, M.M., Kavoura, A., Katsoni, V. and Wegmann, A.L. (2018), "Winery website loyalty: the role of sales promotion and service attributes." International Journal of Wine Business Research, Vol. 30 No. 2, pp. 138-152. https://doi.org/10.1108/IJWBR-01-2017-0003

Thach L. and Velikova N. “New Study Explores Motivations and Behaviors of U.S. Wine Consumers Before and During COVID-19 Lockdown” Wine Business.Com. June 11, 2020. Accessed June 24, 2020. http://www.winebusiness.com/news/?go=getArticle&dataId=232120

Todorov, Kerena (2020). “Gavin Newsom Calls for Closure of Tasting Rooms and Other "Non-essential" Establishments.” Wine Business.Com. March 16, 2020. Accessed June 22, 2020.
https://www.winebusiness.com/news/?go=getArticle&dataId=227592

The Wine Institute1, “Governor Newsom Says California Winery Tasting Rooms Can Reopen.” June 5, 2020. Accessed August 5, 2020. 
http://wineinstitute.org/press-releases/governor-newsom-says-california-winery-tasting-rooms-can-reopen/

The Wine Institute2, “Governor Newsom Orders “Bars” to Close in Select California Counties-Winery tasting Rooms Not Impacted.” June 29, 2020. Accessed August 5, 2020. 
https://wineinstitute.org/news-alerts/governor-orders-bars-to-close-in-select-california-counties-winery-tasting-rooms-not-impacted/

The Wine Institute, “Governor Announce Statewide Closure of Indoor Tasting Rooms.” July 13, 2020. Accessed August 5, 2020.
https://wineinstitute.org/news-alerts/governor-announces-statewide-closure-of-indoor-tasting-rooms/

Wolf, Marianne McGarry, Mitchell J. Wolf, Benoît Lecat. “Generation Z and Workers from Home Drove the Growth of California Wine Consumption During the COVID-19 Crisis Lockdown.” Wine Business.com. June 29, 2020. Accessed June 29, 2020.
https://www.winebusiness.com/news/?go=getArticle&dataId=232956

by Marianne McGarry Wolf, Mitchell J. Wolf, Benoît Lecat, Shannon W. Montague  

Marianne McGarry Wolf
Agribusiness Department, California Polytechnic State University
mwolf@calpoly.edu

Mitchell J. Wolf
Department of Wine and Viticulture, California Polytechnic State University
mjwolf@calpoly.edu

Benoît Lecat
Department of Wine and Viticulture, California Polytechnic State University
blecat@calpoly.edu

Shannon W. Montague
Hathway Inc. 
Shannon.montague@wearehathway.com


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