The restaurant industry has had it rough in the last year, and in
turn so have restaurant wine sales. In 2016 Technomic projected
wine sales in restaurants at just 2% growth, and expects the actual
number to be even lower due to the further drop in same—store sale
and traffic, per Silicon Valley Bank’s (SVB) State of the Industry
report.

Looking at the decline in restaurant wine sales from the consumer
perspective, SVB’s Rob McMillan claims that for millennials, it’s
simply because they don’t want to pay restaurant markups. “They
know they can buy a bottle of wine off-premise for less, so in the
restaurant they are more likely to satisfy their consumption needs
by starting off with a beer or cocktail and having a glass of wine
with dinner,” writes Rob. For baby boomers, Rob says retiring and
living on fixed incomes is affecting their on—premise choices.

V2 Wine Group president Dan Leese said in the annual SVB
webinar that declining sales may have to do with how wine lists are
presented to consumers. “National on-premise chains have not
shown the creativity for wines bv the glass that they’ve shown for
craft beers and cocktails ” he said.

SMALL VS. LARGE SUPPLIERS. But it’s not all bad news,
particularly for large suppliers who sell red varietals and blends.
Wines at a production level of more than 250 000 cases actually
showed improvement in restaurant sales year—over—yfl, largely
thanks to better access to distribution, according to Rob. And the
only category showing growth is red varietals and blends in the
$25+ segment, which shouldn‘t be too surprising after our coverage
of the red blend trend yesterday [see WSD 01—19fl7j. Wente
Vineyards president Amy Hoopes suggested during the SVB
webinar that consumers “want wine that’s going to be consistent
and has some familiarity,” which may be helping the larger
suppliers.

Restaurant sales are a different story for smaller wineries. Mgm
so far as to say that “the small wine producer is being shut out of
restaurant sales entirely_.” The largest obstacle that the small wine
producer faces is attracting distribution, according to Rob. So
what’s a small supplier to do?

SMALL SUPPLIERS MUST LOOK TO DTC. “Small producers
would have been put out of business long ago without the
subsequent evolution of direct shipping,” said Rob. In this context,
a small producer is defined as less than 100,000 cases in annual
sales. Rob says direct—to—consumer sales is a “large and critical
part” of a small winery’s revenue base. All SVB webinar panelists
agreed that emaller wineries can improve in their direct salee
efforts.

The main issue is how to connect with consumers outside of the
winery’s general area, according to Rob. flyou’re thinking at this
point you’re gflgmgmyeur direct [saleslbyacuflygening
more mple within that regio_n,you’re kiddingyourself,” he said.
“That’s the general disconnect we’re looking at,” added Paul
Mabray, vp social media & reputation for Avero, “[small wineries]
are good at selling when [the consumers] are right there, but it gets
harder when they’ve walked out of the tasting room.”

Source:

Wine&SpiritsDaily-1:20:17Article