San Francisco Chronicle - (Sunday)
Esther Mobley
Yes, there’s plenty of wine coming your way.
Bay Area residents under shelterinplace orders can rest assured that there’s one nonessential item that they won’t be forced to go without: wine.
While wine shops, wineries and restaurants are shut down, many local businesses are continuing to offer alcohol delivery — and many are offering drastically reduced shipping rates as an incentive to keep revenue flowing during a time of economic uncertainty.
On Monday afternoon, in the hours after shelterinplace orders were announced for six Bay Area counties, customers swarmed K&L Wine Merchants in San Francisco, apparently assuming it was their last chance to stock up on bottles. “It was a frenzy,” said coowner Trey Beffa. “We had to shut the store down early, at 3 p.m., because it got so chaotic that it was getting unsafe.”
The frenzy was unnecessary: K&L is still delivering wine, like always. “I think the panic buying is going to slow down as people settle in and realize they can still get wine,” Beffa said. “They just have to order it online.” (Other San Francisco wine stores offering delivery or pickup include Gemini, Noe Valley Wine & Spirits, Flatiron, Verve, Tofino, Ferry Plaza Wine Merchant, and Biondivino.)
Nationwide, wine sales have already begun to experience a bump due to social distancing from the novel coronavirus, said Danny Brager, senior vice president of beverage alcohol for Nielsen. In the week leading up to March 7, total U.S. wine sales outside of restaurants were up 1.7% compared with the same period a year earlier. “Boxed wine in particular is on the rise, with 6% total growth — and specifically 8.6% growth in the 3liter box pack size,” Brager said. After Gov. Gavin Newsom advised all winery tasting rooms in California to close, on Sunday afternoon, many wineries scrambled to figure out how they could continue to sell wine without visitors. By Tuesday, many were offering free or dramatically discounted shipping (in some cases, with a minimum bottle purchase) on online wine orders, including Donkey & Goat, Acquiesce, Urban Legend, Grounded, Hamel, Oak Farm, Charles Krug, Benovia, Inglenook, Boisset Collection, JasonStephens, Oceano, Aperture and several Jackson Family Wines brands. Sonoma County winery Belden Barns announced it would handdeliver wine orders to San Francisco residents with no extra charge.
Subsidizing those shipping rates represents a greater cost to the wineries than many consumers might realize. Because wine bottles are heavy and fragile and require temperature control, shipping a 12bottle case can cost as much as $50.
But reducing that cost to the consumer might be necessary to keep wineries afloat during this period of governmentmandated social distancing. That’s because many small California wineries rely disproportionately on their tasting rooms for sales revenue — which many of them now need to change. Fast.
“The average small winery gets roughly 30% of their business from tastingroom activity and then 30% from wine club sales,” said Rob McMillan, executive vice president of Silicon Valley Bank’s wine division. On average, just 3% comes from ecommerce — in other words, sales from their website.
Alameda’s Urban Legend Cellars, which produces 2,500 cases a year, is a typical case. “Twothirds of our business is from directtoconsumer sales,” said coowner and winemaker Marilee Shaffer. With the tasting room now closed, Shaffer said she was willing to bankroll shipping costs in order to get wine into drinkers’ hands.
Directtoconsumer sales — which include sales from the tasting room, wine club and website — are a crucial part of small California wineries’ business models, because the winery gets a higher margin on each bottle. When a winery sells a bottle through the wholesale market, the distributor and retailer or restaurant take cuts, generally reducing the producer’s profit by about half. In 2019, directtoconsumer wine shipments in the U.S. totaled $3.2 billion, according to Sovos Ship Compliant, but the growth of the category is slowing.
Other wineries are even more heavily weighted than average toward directto-consumer sales: Sue Tipton, who owns Acquiesce Winery in Lodi, said she sells the entirety of her 4,000case production direct, with about half going to her wine club. In response to the coronavirus, she was including shipping costs for all case purchases and said anyone who wanted to pick wine up from the winery could grab it in the parking lot without physical contact with an employee.
With tasting room sales completely gone for now, expanding ecommerce isn’t just a convenient service for the consumer — it’s also imperative if small wineries want to survive, McMillan warned.
That’s exactly what John Michael Sweazey, general manager of Anaba Wines in Sonoma, said he intended to do now. “I bought a new video camera, and I’ve been taking some online courses” on how to develop a more interactive digital presence, he said. Anaba sells 85% of its wine directtoconsumer, with the majority of that coming from the tasting room. Sweazey hoped to begin hosting virtual wine tastings as a way to encourage online sales. “It’s an opportunity for us to learn something new,” he said.
Baiocchi Wines, which sells 80% of its inventory through its tasting room in Sutter Creek (Amador County), announced it was offering a “shelterinplace three pack” with three red blends. Shipping was included with all orders, representing about a $20$50 savings for customers, said ownerwinemaker Greg Baiocchi.
Since Gov. Newsom’s order to wineries is not enforceable and since Amador County had not yet instated shelterin place orders, Baiocchi said he planned to keep his tasting room open by limited appointment, maintaining 6feet distances between all people while inside.
Despite, or maybe because of, widespread anxiety over the virus, one thing was clear: People are not abstaining.
“People want wine, and the question is how you get it to them,” McMillan said. The frenzied level of panic buying that K&L saw on Monday afternoon won’t last, and if there is a longterm economic contraction, wine sales will inevitably slow. But that creates what McMillan calls “pentup demand.” “Once you get to the other side, wine sales will spike,” he said.
Chateau Montelena winemaker Matt Crafton, who was providing curbside wine pickup for customers in the Calistoga winery’s parking lot, said he hoped that the coronavirus situation would help people recognize the value of a Californiabased supply chain — not just for wine, but for all goods.
“There’s something to be said for supporting local businesses in times like this,” Crafton said. “We’re here, and we’re still able to get our customers the wine they need.”
“People want wine, and the question is how you get it to them.” Rob McMillan, executive vice president of Silicon Valley Bank’s wine division