Tasting Room Survey Discloses Disparities

Wages and lifetime value of wine club members vary widely by region

by Paul Franson
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Source: Silicon Valley Bank/Wine Business Monthly 2016 Tasting Room Survey

Santa Rosa, Calif.—For their annual survey about trends in tasting rooms, Silicon Valley Bank and Wine Business Monthly query bank customers and other wineries about their practices. The results always seem to turn up some surprises, and the questions are tweaked each year to reflect current trends.

This year, 839 wineries provided valid results—a significant sample of the roughly 8,000 wineries in the United States and Canada.

Those responding generate an average of 60% of total revenue from direct-to-consumer (DtC) sales, with the percentage dropping from 74% for wineries producing fewer than 2,500 cases to 15% for those making more than 250,000 cases.

Overall, an average of 47% of DtC revenues were derived from tasting room sales, 33% from wine club members and allocation lists, 8% by web, mail and phone sales, 5% from events and 5% from other direct channels.

“Wineries don’t make money on events,” said Rob McMillan, executive vice president and founder of Silicon Valley Bank’s Wine Division in a webcast about the report. “They support other sales.”

“Wine clubs let us connect with our guests,” said Carol C. Reber, chief marketing officer for Duckhorn Wine Co. “They’re affordable luxuries, like the country clubs of yesterday.”

U.S. wineries received an average of 1,360 visitors per month from public and appointments, with Anderson Valley seeing the fewest at 421 per month and New York wineries reporting the highest number of visitors at 2,776.

Napa and Sonoma wineries averaged around 1,480 visitors per month. If you counted only tastings open to the public, Napa jumped to 2,763 visitors per month.

But Reber warned, “Napa is an outlier. Look at what’s possible, but be realistic about expectations in your region.”

Wineries offer a number of formats for tasting. The traditional standing tasting bar is offered by 62% of survey respondents, with 16% offering casual or group seated tastings, 10% have a seated tasting bar and 7% said they offer private or formal seated tasting. (Five percent specified “other.”)

But when you look at visitors who bought wine, the private or formal tastings resulted in 71% buying wine, 69% seated at the tasting bar bought wine, 64% of standing tasting bar visitors made purchases and 61% of those in casual seated tastings spent money.

The average purchase was $102, with Napa buyers spending an average of $246 and Sonoma County reporting $124 spent per visitor.

The lowest average buys were at wineries in the Midwest ($36) and New York ($38).

The average fee for a standard tasting was $15, though that also varied widely by region. Napa County wineries charged $32 per visitor, while Midwest wineries asked $5 per tasting.

The average fee for reserve tasting in Napa was $57, and $30 overall.

More than half of wineries (52%) refund the tasting fee if visitors buy a designated number of bottles, join the wine club (35%) or spend a specific amount (18%). Sixteen percent don’t refund tasting fees for any reason, while 8% offer other incentives.

Not surprisingly, the higher the threshold for reimbursing tasting fees, the higher the average purchase.

Wine clubs
Sandra Hess, the founder of DTC Wine Workshops, noted that the days when people signed up for wine clubs on their first visit are fading. “There’s a lot of competition out there. The dedicated collector already belongs to a number of clubs. If you want to sign up members, invite them to a reserve tasting or invite them back.”

Napa had the highest percentage of visitors joining winery clubs (11%), with Sonoma close behind. The average percentage of patrons joining wine clubs was 6%, but only 1% of visitors to Virginia wineries joined wine clubs.

Most wineries report respectable net wine club growth after removing cancellations. The average growth was 16%, with the Livermore, Calif., region reporting the highest growth and other counties in California’s Sacramento-San Joaquin River Delta at 25%.

Private tastings resulted in 17% growth of visitors joining clubs, and the rate for public tastings was 4%.

The growth in club sign-ups was highest at wineries requiring appointments with 21% of visitors, while public tastings resulted in a 15% growth rate.

Seated private tastings had the highest growth in club sign-up rate of 21%.

The average total annual revenue per member of a club was $548 nationally; Napa County wineries reported $1,134 per club member. Wineries report that the average lifetime value of a wine club member is $1,280, but in Napa, it’s $2,587 and in the Midwest, $658.

The average length of club membership is 28 months, but Paso Robles wineries average 39 months.

“You want to extend their time in your club, and one way to do that is offer choices,” said McMillan. “If they get choices, they stay in longer.”

Carol Reber emphasized, however, “We’re not just selling wine. We should be selling luxury, access, lifestyle, a special place. Members want to feel that they’ve made it in life.” Her winery organizes cruises, skiing and fishing trips, too.

Duckhorn makes sure members know the name of someone to call at the winery. That person will make recommendations for restaurants and even make appointments to visit other wineries.

The speakers at the videocast also emphasized how important it is not to discount luxury goods but to provide incentives other ways such as free shipping (if allowed), logo glasses and invitations to events.

“Even better, give them something after they’ve paid,” suggests McMillan. “It’s over delivering.”

Staffing issues
Wineries are finding it difficult to find suitable staff. “Labor issues are coming home to roost,” noted Cyril Penn, the editor of Wine Business Monthly.

It’s become more challenging in the past three years, with 25% of respondents now finding staffing difficult, and 52% saying it’s possible with some effort. The past three years, a consistent 4% have found it almost impossible.

The average hourly starting wage of tasting rooms staff across the country is $13.47, but the Midwest reports only $9.62. California’s minimum wage is slated to rise to $15, but Napa County is already paying $18.35 and Sonoma $15.26.

Wineries commonly boost wages of tasting room staff by offering bonuses. Popular incentives include payment for new club members (65%), reaching team goals (17%), capturing contact data (8%) and residuals for club retention (5%).

The average bonus for a wine club sign up is $20.19, with Napa averaging $27.73 and Sonoma $26.16. Again, the Midwest offers the lowest average bonus at $7.21.

Duckhorn’s Reber noted that the company used to point talented sales staff to the wholesale channel, but now DtC is providing great opportunities. “We’re on the lookout for stars. One good person can do the work of 2.5 average workers.”

The extended tasting room report will be published in the July issue of Wine Business Monthly. The wineries who participated in the survey will get the full report with individual respondents hidden, of course.

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