How have wine DTC channels fared in Australia in 2019–20?

Market Bulletin | Issue 223
13 Oct 2020
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Direct-to-consumer (DTC) sales make up an estimated 17 per cent of total wine sales value, but for the majority of Australian wine businesses, which produce fewer than 20,000 cases, DTC sales account for more than 50 per cent of wine sales value and are therefore critical to their success and sustainability.

The results of Wine Australia’s Wine Direct-to-Consumer survey 2020, published today, show that the direct-to-consumer channel grew by 7 per cent in value in 2019–20 compared with the previous year, outperforming other sales channels. Overall, survey respondents had a small reduction in total revenue (down 3 per cent), consistent with export data indicating a decline of 1 per cent in export value, combined with significant decreases in the on-premise due to pandemic-related lockdowns and restrictions[1]. The off-trade channel grew by 6 per cent in retail value[2], but it is not known how much of this translated to increased income for wine businesses.

Growth in ‘non-contact’ DTC channels

Wine club, database and online sales all grew in value, with online increasing the most in percentage terms (see Figure 1). Cellar door and events both declined.

Figure 1: Year-on-year change in revenue by DTC category

Source: Wine Australia Wine Direct-to-Consumer Survey 2020 report

The strong growth in online sales is consistent with anecdotal feedback from wineries as well as consumer research showing a strong shift to online purchases as a result of the pandemic restrictions. Wine Intelligence[3] has reported a sustained increase in consumer purchasing of wine online across a number of markets, including Australia, since the first effects of lockdown (Figure 2).

Figure 2: Comparison of wine-buying online vs in-store pre- and post-pandemic

Source: Wine Intelligence

Cellar doors adapt and continue to thrive

Although value of sales declined overall for cellar doors, the average value per case increased by 5 per cent and was the second highest at $241 per 9-litre case (after wine club at $251 per case), according to the survey results. It was also the largest source of DTC revenue, with 35 per cent of total DTC sales value. This indicates the importance of looking at a number of measures in determining success. Wineries reported having made a number of changes in response to COVID-19 (aside from complying with government-regulated requirements on hygiene, signage and social distancing) – most commonly moving to seated tastings only and taking bookings for tastings. These changes appear to have had a positive effect on revenue, as reflected in the increase in average case value.

Visitor numbers down

Average cellar door visitor numbers in 2019–20 were down 23 per cent compared with 2018–19, from approximately 15,000 per annum to 12,000 per annum.

The decline was all in the second half of the financial year (first six months of 2020), which was down by 47 per cent compared the same period in the previous year.

The Hunter region[4] had approximately double the average number of visitors per winery compared with the overall total. However, visits to the Hunter were down by 27 per cent year-on-year and 49 per cent in the second half (Figure 3).

These figures provide a quantitative measure of the net effect of bushfires, loss of international tourism and COVID-19 restrictions on cellar door visits. Unfortunately, this information cannot be provided on other regions due to insufficient responses for statistical reliability.

Figure 3: Average number of visitors to cellar door for Australia and Hunter region in 2018–19 and 2019–20

Source: Wine Australia Wine Direct-to-Consumer Survey 2020 report

Wine club performance strong overall but considerable variation between respondents and lack of complete data

Wine clubs are a very important DTC category. Three-quarters (75 per cent) of survey respondents reported having at least one wine club, and wine club revenue was the second largest overall after cellar door. In 2019–20, this category had a higher average case value than cellar door, which has greater associated costs.

Across all respondents, the average value per shipment in 2019–20 was $202 and the average value per member was $485 – giving an average of 2.4 shipments per year per member. The average 9-litre case value was $254, indicating an average volume of less than 9-litres per shipment. Net member growth rate was 9 per cent.

However, the reported number of club members ranged from less than 20 to several thousand, while calculated net membership growth rates were between –60 per cent and over 1000 per cent. A clear finding from the survey was that many businesses, even among those who completed the survey, did not have accurate wine club statistics and as a result, would not be able to produce key metrics that are essential for measuring performance, setting targets and evaluating strategies.

Wine Australia is committed to supporting wineries in improving their collection of data to help with managing their business. Any Australian wine business that did not complete the survey is invited to request a copy of the survey form from Wine Australia by emailing market.insights@wineaustralia.com and use it as a tool to assist with data collection. Assistance with calculating benchmarks can also be provided.

On Wednesday 14 October, Wine Australia will host the first DTC webinar in a two-part series – you can register here.

The Wine Direct-to-Consumer 2020 survey report can be downloaded here.

 

[1] There are no statistics available to determine the change in volume of the on-trade since the pandemic, but complete shutdown in most states for one-quarter of the year, partially offset by additional take-away sales, is likely to have reduced sales of wine in this channel by at least 20 per cent – not taking into account reduced trade post-lockdown due to additional social distancing requirements

[2] IRI MarketEdge data – year ended 5 July 2020

[3] Wine consumer trends in the COVID-19 era – Wine Intelligence October 2020

[4] Hunter was the only region with sufficient responses to allow limited region-specific reporting of results.


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