Q3 2023 US Wine Industry DTC Benchmark Summary
By Ed Thralls, SVP Professional Services at Enolytics
The United States wine industry has experienced dynamic changes through the third quarter of 2023 and has been trying to hold on tight each quarter with demonstrated resilience and adaptability, though with limited success. Through Q3 this year the wine industry, unfortunately, lost another -1.2% in net sales vs. the previous quarter totaling -3.2% drop in net sales YTD vs. the prior year (PY). Total cases sold growth is -6.0% vs. PY.
Inflation is clearly slowing and a surge in consumer spending is fueling strong growth in the U.S. economy. Part of that growth is driven by the most affluent who are still spending on travel and experiences, however, it appears that surge is not including wine lately. Economists have been forecasting a recession for over a year now, but while that prediction remains to be seen, spending may still expect to slow in the coming months.
In the 3rd quarter alone, net sales dropped -4.4% vs. PY. Following a slight rebound in August to the positive side, September net sales then dropped significantly by -8.7%, driven mostly by wine club’s variance of -7.5% and tasting room -8.8% vs. PY. It is important to note that there is anecdotal evidence, which has been substantiated by many wineries recently surveyed, that there are instances of shortened supply due to lower yields, production adjustments and next vintages not being ready for release. Additionally, there are several instances where this may have also caused wineries to move their fall releases from the usual timeframe leading to such drastic variances from last year.
The North Coast in California and Washington are the regions impacted the most with net sales down nearly -5% vs PY, as are luxury wine brands priced $50 and greater with negative growth rates nearing -8% YoY, and it’s clear every region is attempting to counter the economic challenges with price increases and lowered discounting.
The website channel continues its plummet from pandemic levels, yet still remains higher than web sales in 2019, but for how long? Year over year net sales growth in the website channel is down -14%, however, channel AOV is up 3% and bottles per order is up +6.1% giving an indication this channel may once again deserve increased focus. If that wasn’t enough, consider the fact that for every dollar made in the tasting room, the website is capable of garnering three. Perhaps that message is starting to become clear as website sales had its first positive month this year, up 2.1% in September vs. PY. There is anecdotal support from constituents that there was more than usual spend, resource and/or programming applied towards the ecommerce channel in Q3.
While the telemarketing channel still only makes up for 2.1% of all net sales in the US wine industry, it continues to boast an average order value that is five times the amount made in the tasting room.
In 2021, Enolytics partnered with WineDirect to start producing quarterly reports analyzing 200+ million DTC data records from every sales channel going back more than six years. We continue to aim to deliver careful, level-headed analysis of the data, both here and in the annual reports from Enolytics and WineDirect. The next version of the annual report, with its thoughtful and actionable suggestions for “what to do today," will be released in January 2024.
Please give us a call or book an appointment to talk about this Q3 2023 update, the comparison report for your own winery's DTC program, or Enolytics' industry-leading analytical software.
Thank you, as always, for reading.