Four ways to make a winery more profitable

Delegates at the two-day Wine Industry IMPACT conference, held in Australia this September, heard about practical steps they could take to become more profitable - and take back control from distributors and retail chains. Felicity Carter reports.

Lesley Berglund, WISE Academy
Lesley Berglund, WISE Academy

The balance of power has changed in Australian wine, according to a speaker at the recent Wine Industry IMPACT Conference. Australian producers now have an unprecedented opportunity to “claw margin back” and take control of their own financial future.

Exactly how they could do that was the focus of a packed two-day conference, held in September in Orange, New South Wales—and one which had lessons for wineries everywhere.

The best way for producers to take their power back, said Dean Taylor, CEO of Wine Depot, was to sell direct-to-consumer (DtC). As delegates at the conference heard, DtC can be as simple as an internet ordering service, or as sophisticated as a wine club, or a winery tourism experience that turns visitors into long-term customers.

Understand this one number

Andrew Kamphuis, president of Commerce7, an e-commerce platform for wineries, said that wineries in North America struggle to make sense of their data—or simply don’t collect it in the first place. But he said that having good data was crucial for wineries wanting to improve their customer experience. “We know that the customer experience matters more than ever, more than our product, more than price,” he said. “Having a great customer experience will bring them back to your cellar door and website over and over.”

Yet too many wineries looked inward, focusing solely on how they could make a better product. Kamphuis advised them that if they were feeling overwhelmed, they should concentrate on just one number: the Net Promoter Score.

“It’s pretty simple. You go out and ask the customers what the likelihood is they would recommend you, and you rate it one to ten.” People who rate their experience one to six are unlikely to visit the winery again. “The sevens and eights are passive people who had a good time, but it was just OK.” Anyone scoring nine or ten, on the other hand, is a promoter.

To get the net promoter score, subtract the percentage of detractors from the percentage of promoters. The higher the net promotion score, the more likely the business is to be healthy and in growth, while a low score can flag problems with customer satisfaction and loyalty.

Build a wine club

California-based Lesley Berglund from the WISE (Wine Industry Sales Education) Academy, said that in the US, wine clubs represent about 30% of wineries’ sales—but this can easily reach 50% or more depending on how focused the winery is on attracting and retaining customers. 

The first step to build a healthy business, said Ms Berglund, is to focus on the right metrics. “Information from our business activities has gone from scarce to super abundant,” she said. “Our goal is to turn this data into information and the information into insights and action.”

It’s important to measure what matters, and not get distracted. “First is the internal hard data. It’s real numbers—it can be compared to last year. We can look at trends,” she said. “The next bucket is the external hard data, the benchmarking, where you’re comparing yourself to neighbours and peers. Finally we have soft data, measuring customer satisfaction and loyalty.”

Ms Berglund said that when she’s coaching wineries, she tells them it’s important that the whole team, including cellar door staff, focus on the right numbers, particularly the average order value. It’s also important that staff understand the metrics of the wine club, including conversion rates, attrition rates and amount spent per member.

“Does your team know what the score is?” she ended. “Unless they really understand how to keep score, they don’t know if they’re winning or losing on a daily basis.”

Know what people are saying about you

Melissa Laurie of TripAdvisor said that the travel market is changing dramatically, with people driven by a desire to explore food and memorable experiences. When people find something they enjoy, they’re also likely to share it on social media.

Ms Laurie advised wineries to encourage their cellar door staff to ask visitors how they came to be there. “Did they see amazing pictures on Instagram? Or did they read great reviews and found out you were family friendly?” she said. If so, “feed that back into your strategy. Look at your website. Have a look at how people are landing on your website.” If people are ending up on the website because they’ve found a blog post about dining at your cellar door, make sure you expand the content—add more information about the restaurant to your own website. 

As most people do research on their phones, it’s critical that winery websites are mobile optimised. Plus it’s also “important that you have great photo content,” because people like to see what’s on offer before they commit to a visit. “Video is also key—it helps people understand what your offering is.”

Wineries also need to monitor how they are being spoken about online, and should be constantly checking Google, Facebook and TripAdvisor to see what’s being said about them. “Check key platforms and make sure your details are up to date,” said Ms Laurie, adding that “people are starting to search a lot more via maps”, so it’s important that the winery is correctly listed. “You can use reviews on your own website as well, to enhance the social proof of your business.” 

Ms Laurie said that TripAdvisor had noticed that many people are now looking for family friendly travel experiences, and to consider developing activities for the whole family. “US and UK travel peaks around December and January, so think about crafting experiences that align to these travellers around these periods.”

She said that restaurant pages get huge traffic, so “if you have a restaurant, list it on TripAdvisor in the restaurant section, because it will amplify it.” And if you don’t have a restaurant? “Look at partnering with locals.”

Offer a great ordering experience

Paul Hersbach from Australia Post said that online wine sales in Australia are still under-represented compared to a sector like fashion. (This is a statistic that holds true globally: according to Forrester, a quarter of fashion sales now take place online and are tipped to reach 36% globally, compared to 9% of wine sales in France, which has the highest online share of any country.)

Hersbach said online sales behaviour in Australia is being driven by the fashion industry, which benefits from selling stock that is small, easy to pack and doesn’t cost a lot to send. But this is leading consumers to expect the same level of service from all industries. “Online shoppers increasingly expect faster service with some retailers now offering quicker fulfilment and shipment,” he said. “People think speed is ‘I’ve ordered at 10.30 and I want it at 11.30’, but it’s not. It’s ‘I’ve ordered it and I’m going to get it tonight when I’m home to receive it’.”

Unfortunately, because so many businesses and warehouses close around 5:00pm, the deliveries don’t make it in time to suit customers’ expectations. Another issue is that wine is heavy, and because it’s generally sent from a rural area, it is expensive to ship. It’s a particular problem in Australia, where distances are vast.

This is something that Wine Depot, the sponsors of the conference, believe they’ve solved. In his presentation, Taylor said the company is opening warehouses around the country, where wineries can store stock. When a customer in that area places an order, the fulfilment takes place in their area, making it a local delivery. “Our service basically includes all of the handling and distribution, the management of the inventory and delivery to the end consumer.”

Last thoughts

Monitoring Google and TripAdvisor, creating outstanding visitor experiences, and building a wine club sound like an enormous amount of work. But speakers at the conference made it clear that it’s not just a profitable route to take, but a powerful one.

“In the last two years, the oversupply (of Australian wine) has finally started to dry up,” said Taylor. “China is soaking up an enormous amount of that inventory, but the oversupply conditions have gone.” During the past decade, when Australian wineries struggled to sell all their wine, “retailers have had the opportunity to steal margins from producers.” But now that supply is tightening, “the power is returning to producers.” 

Felicity Carter
 

The Wine Industry IMPACT Conference is organised by WISA (Wine Industry Suppliers Australia). Felicity Carter was a keynote speaker.

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