Revenue Rises With Private Tastings

In disclosing results from tasting room survey, panelists stress importance of revering wine club members and respecting staff

by Paul Franson
Source: Silicon Valley Bank
St. Helena, Calif.—The way U.S. wineries conduct their tasting-room business varies based on geography and other factors, according to the results of a survey conducted by Silicon Valley Bank and Wine Business Monthly.

Rob McMillan, the founder of SVB’s Wine Division, presented via web broadcast the survey results with a Leslie Berglund, president of WISE Academy; Mary Jo Dale, senior vice president of marketing and consumer sales for Crimson Wine Group, and Cyril Penn, editor of Wine Business Monthly. (Watch the presentation here.)

Survey results
• Private tastings generate big returns. The average purchase from a “by appointment only” tasting is $294 vs. an average purchase of $70 from an “open to the public” tasting experience.

• Seated tastings generate at least 22% more dollars per visitor.

• Tasting room sales continue to rise. The average tasting room revenue in 2013 was up 10%, while overall wine sales were up 3%.

• Wine clubs remain a strong source of cash flow. Clubs grew an average of 20% in total membership from 2012 to 2013, with average annual sales per club member of $483.

• Only 37% of 873 respondents answered “yes” to being PCI compliant. The remaining 63% responded “no” to being compliant or stating they did not know what being PCI compliant meant (Payment Card Industry standards of security).

Dale said of the private tasting results: “You can’t just shift to appointment-only hoping to do better. That approach works best with higher priced wines and more focused customers.”

Berglund added, “We do see wineries adding different levels of experience. You can offer both, but you can’t compare your results with others unless your experiences are similar.”

The panelists focused on reinforcing the need to integrate various direct sales channels: Previously “the tasting room, direct-to-consumer promotions and the wine club were all separate efforts,” Berglund said. “They need to work together.”

Importance of existing club members
She noted that at wineries where staffers get bonuses for signing up club members, they might ignore existing club members since they aren’t bonus prospects. In fact, many club members visit tasting rooms and buy additional wine there. Dale said, “It should be everyone’s job to welcome them. Taking wine to their car can help.”

Berglund, whose company conducts extensive “mystery shopping” visits, said the biggest problem in private vs. public tastings is not asking for the sale. “That’s the problem—not who they get in the door.”

Dale added, “Wineries need to move from focusing on that wine club sign-up to building relationships and retaining them. The cost of signing customers up is high; take advantage of it. Members need to feel they belong.” The typical winery signs up about 30% new club members but loses about 20% per year.

About 80% of wineries surveyed have wine clubs, and members remain active for an average of about 26 months. But those who cancel shipments aren’t necessarily lost—and just because people don’t sign up doesn’t mean they aren’t fans. “Some people aren’t joiners. Or they may feel that they have ‘graduated’ from the club. Ten to 20% of top winery customers aren’t in the club,” Dale said.

She suggested that wineries should take a clue from other businesses that have reward clubs, crediting customers with all sales including at tasting rooms and via mailings, the Internet and phone outreach.

Keep offerings diverse
McMillan added that the more choices you offer, the longer you keep customers. That’s why many wineries offer wines available only to club members (or at the tasting room). “But these can’t just be leftovers from blends; they have to reflect the winery’s strengths.”

Almost 60% of wineries charge tasting room fees, with the average fee being $5 to $10, rising to $25 in Napa Valley and $45 for reserve tastings in that region.

Tasting fees and bottle prices
A similar percentage reimburse customers for tasting fees if they buy wine, but the panelists agreed that it should be for more than one bottle.

In today’s world, visitors can easily compare wine prices on the Internet, and the panelists warned wineries not to penalize visitors for buying wines on-site. “They will be irritated if they find they can buy the wine cheaper,” Berglund said.

McMillan added, “You’re already getting better margins than for sales through distribution, so you can meet prices.”

And finally, all of the panelists agreed that wineries should be treating tasting room personnel more professionally to avoid the high turnover that typically marks the position. “They need to offer training and opportunities for advancement,” Berglund said.

Posted on 05.19.2014 - 12:08:46 PST
One of my pet peeves with wine clubs is they offer "benefits" of things like club pick-up parties, annual bbqs, etc. They always take place at the wineries/regions they reside in. If you live 500 miles away or more, there's a significant cost (plane tickets, days off, hotels, meals, etc.) to take advantage of these so called "benefits." The members who live close by get the special treatment.

Posted on 05.19.2014 - 22:06:20 PST
Sure, seated tastings generate bigger sales, but seated guests stay longer. It would be great to include "time spent by guest" in the analysis in order to make it clearer which mode of tasting is likely to be more profitable.