Doug at Wino Magazine put a blog post up earlier in the week about the effects of the economic downturn on small wineries. One of his suggestions is to buy directly from the winery. I have mentioned this in the past and couldn’t agree more, especially in tough economic times.
An example I heard a while back has stuck with me. A winemaker said it cost him $13 per bottle to make his wine. It wholesaled at $15 per bottle and retailed at $30 per bottle. So for every bottle he sold through distributors, he made $2. For every bottle he sold through the winery, he made $17. Let’s do some simple math here. Say he makes 200 cases of a wine. The profit margin is $4,800 if sold exclusively through a distributor. $40,800 if bought exclusively through the winery. Needless to say that is quite a difference. It is easy to understand why wineries that do almost all of their business through mailing lists – such as Leonetti, Quilceda, and Cayuse – do quite well. For this reason, buy direct if you can.
That said, one thing for wineries to consider is dropping their shipping costs to a minimal amount. For many consumers, there is a barrier to buying directly through the winery due to the often high shipping costs. Given that the bottle cost is often close to that found in many retail stores, you are adding an often significant cost. If the shipping cost is $24 per case (not uncommon), that’s an extra $2 a bottle. For your $60 wine or a wine that is not available locally, maybe you don’t care. In cases like the present when people are focusing on value, it is a deal breaker, especially given that there are so many options on the shelves. In particular, if someone is just going to buy a bottle or two, adding in a shipping cost of $10-15 (again not uncommon) is completely prohibitive.
The bottom line is that if buying through the winery is cost neutral to positive for the consumer, more will take advantage of it. Ask Columbia Crest how their one penny shipping did in December although the 95 point Wine Spectator review clearly helped there. I would encourage wineries to consider minimal shipping costs combined with an aggressive email campaign to increase sales to help get through the tough times. I’m not suggesting the wineries take it on the chin in terms of shipping costs, but rather look at the overall benefits (decreased shipping cost but increased margin). At least during the economic downturn, it is something for wineries to consider.