Forced To Reinvent

With tasting rooms shut, some wineries like Testarossa ramped up their telemarketing with third party vendors like VinoPro—and saw record results.

How Small Wineries Are Surviving—and Looking Beyond—the Coronavirus Pandemic

By Betsy Andrews

When word came on March 17 that California’s tasting rooms must shutter, Dan Panella, co-owner and winemaker at Oak Farm Vineyards in Lodi, California, considered his numbers. Sixty percent of his 30,000-case business was through wholesalers, but as restaurants closed, that melted by half. Nearly all his direct-to-consumer (DTC) sales had been in his tasting room. Online orders amounted to a fraction of revenue.

Panella reacted quickly. For cars still bumping up his driveway, he sold wine to go. He emailed his entire mailing list—4,000 strong, including 2,500 wine club members—and offered free shipping on orders of three wines or more. His efforts paid off: online sales shot up.

He also tightened the belt. Part-time workers, about half his 22-person team, received two weeks paid leave, and would then apply for unemployment. “We expect to hire them back when this is over,” Panella says. He expects the shelter-in-place restrictions to last a while, so he’s considering cutting future costs by holding back bottling and rethinking grower contracts.

Some vintners have already made the decision to scale back or halt production. Sam Baron, winemaker at Sonoma’s Kivelstadt Cellars, cancelled future bottlings. “I called my growers and said, ‘We’re not going to do right by you at the expense of going under. So we want to work with you to figure it out.’ We can’t just [buy] fruit if we have a whole back vintage to sell. We don’t have the money to float it.

In Oregon, Hazelfern turned the family Suburban into a delivery truck; on Long Island’s North Fork, Macari Vineyards managed to keep some tasting room staff for outbound sales-pitching, by phone and social media.

Present Pain, Future Doubt

Small wineries across the nation are facing the same harsh realities as Oak Farm and Kivelstadt. A WineAmerica survey completed by 10 percent of the industry in the third week of March showed nearly 4,500 layoffs and a $40.4 million losses. The pandemic hit just as the spring release season was rolling in with pick-up parties, festivals, and winemakers’ market visits. All that evaporated.

For many smaller wineries in and beyond California, business is tourism-first, and the shutdowns hit like a hammer. “Right now, we would be gearing up for our busy time in tasting rooms. Often sales are put back into production as we head into growing season and bottling,” says George Hodson, president of Virginia’s Monticello Wine Trail. “Not having the income is causing wineries to make tough operational decisions.”

And those decisions will trigger more repercussions. Victor Martinez, owner of Ardor, a natural wine shop in Portland, Oregon, sees a massive domino effect: “It’s all a trickle down, from the consumer to me, me to the distributors, the distributors to the winemakers, and the [growers]. They have to farm; fruit’s coming. Is anyone going to buy it?”

Restaurant (Dis)Connection

Oak Farm Vineyards is more fortunate than most small American wineries in that the wine enjoys a foothold in Whole Foods. In Washington state, for example, a few large brands, like Columbia Crest, have grocery store distribution, but more than 96 percent of its wineriesrely on other avenues for sales. Half of the 2,500 cases produced at the Yakima Valley’s Côte Bonneville went to restaurants. The rest of the sales were DTC, split evenly between tasting room and online. That has left the family business with a potential three-quarters loss in sales.

Oregonians are especially gloomy. On the tasting room front, a recent tourism push by the Willamette Valley Wineries Association was working. “We were overperforming in DTC,” says executive director Morgen McLaughlin. “But that’s gone away overnight.” And now, the state’s pricey flagship Pinot Noirs face a rocky road with their on-premise pipeline shut.

On this account, wineries and small distributors are mutually concerned. “For big [wholesalers], on-premise is less important, but for us and others, [restaurants represent] up to 80 percent of business,” says Merritt Olson of Oregon’s Mitchell Wine Group, one of Oregon’s most established fine wine distributors.

“Restaurants are the marketing platform for every small winery that doesn’t have a marketing team,” explains Kivelstadt’s Baron. He makes just 4,000 cases. “When restaurants close down, there’s wine being sold, but it’s bigger, cheaper [brands].”

Leaning In To DTC

For many small wineries, direct-to-consumer has been their bread-and-butter, and because there’s no middleman taking a cut, bottle for bottle, DTC is where the money is. According to Sovos’ Direct-to-Consumer Wine Shipping Report, 6.6 million cases of wine were shipped DTC in 2019, valued at $3.2 billion.

Wine clubs are a driver, and the bigger the winery, the more important its club. At wineries making 1,000 cases or less, clubs bring a quarter of DTC sales on average, while in half-million-case operations, wine clubs amount to 46 percent of DTC. Napa Valley is the long-distance champ, says WineDirect, a consultancy specializing in wine clubs; 81 percent of Napa’s DTC sales happen outside of tasting rooms.

Far Niente, Like Many Napa Valley Wineries, Derives More Than Half Its Revenue From Direct-to-consumer Sales; Inset, Ceo Steve Spadarotto. // Oregon’s Willamette Valley Recently Ran A Big Marketing Campaign Leading Into 2020—then Tourism Came To A Virtual Standstill.

Reaching out to consumers stuck at home, producers are seeing radical spikes in sales. Napa’s Far Niente, which is part of a five-brand, 125,000-case company, has a wine club 10,000 members strong, representing half its revenue. CEO Steve Spadarotto says the winery has been successfully wooing club members with special offers, free shipping, and curbside pickup.

At the telemarketing company VinoPro, whose staff calls the mailing lists of clients like Napa’s Trinitas Cellars and Sonoma’s Iron Horse, outbound calls are resulting in record $60,000 sales days. “People love getting these phone calls,” founder Jeff Stevenson reports. “We get them to stop watching the news for half an hour and have a conversation about their favorite topic, which is drinking wine.”

Permanently Altered Landscape

Free shipping and home delivery have become mainstays. Winery associations and local bloggers feature running lists of the winery deals in their area. “Yep, this is different and hard,” says Mary Jo Dale of the marketing consultancy Customer Vineyard. “But it’s also an incredible opportunity if you’re willing to rethink the model, pivot, and try some stuff.”

For young Oregon producer Hazelfern Cellars, a 3,000-case winery, “It’s all experiences and coming to the winery,” says founder Bryan Laing. “Double-down on content creation and storytelling” is his advice. Taking advantage of a little-known Oregon same-day delivery permit, Laing and his wife Laura rebranded their family Chevrolet Suburban as “the wine truck” and hit different neighborhoods, putting out word on social media via Instagram.

At the same time, state DTC laws are still a morass; wineries must follow 50 different sets of shipping regulations. “There are so many ridiculous regulations around alcohol,” says Meaghan Frank of the New York Finger Lakes’ Dr. Konstantin Frank Winery. “I hope when we come out of this that some of those are relaxed forever. That would be a bright spot from this.”

Hazelfern’s Bryan Laing is similarly sanguine: “The way people get their wine is going to change even after the pandemic because all these new models are popping up. Wineries are doing deliveries, and there’s no reason to stop when this is over.”

At Oak Farm Vineyards, Dan Panella references recent history to stay positive: . “The assumption is that this is a recession, and people won’t consume as much wine. But 2008 to 2010, people did buy wine, just less expensive, so there are opportunities for our less expensive programs.”

Will the nation’s wine regions weather this storm? “If it’s a two-month problem, fine. But if it takes the rest of the year to pull out of this, that’s a different question,” says Spadarotto, “and it’s the not-knowing that’s so difficult to deal with.”

Hazelfern also created a “Drive Thru” for pickup.

Getting Creative

Across the country, wineries are creatively and proactively reaching out:

Long Island’s Macari Vineyards converted furloughed tasting room staff to “digital ambassadors.” Using dedicated discount codes to promote Macari wines on social media, they earn commission on sales.
Mendocino, California’s Testa Vineyards is running trivia contests via Instagram Stories, with discount codes for correct answers.
In Sonoma, Balletto Vineyards is shipping wines for Facebook Live brunches with the Balletto family, and they’ve teamed up with a local shop for online wine and cheese pairings.
Scores of wineries are offering virtual tastings, including big names like Frog’s Leap and Virginia’s historic Barboursville Vineyards, with winemakers leading participants through bottles they’re encouraged to purchase beforehand.
To sell locally, wineries with kitchens or restaurant partners are offering curbside or drop-off pairing dinners.