Another inquiry into the selling power of social media
in which we consider Elaine Chukan Brown’s (Hawk Wakawaka) contention that social media “has…created…a revolution in what it means to sell wine.”
Hawk Wakawaka is one of our finest wine bloggers. She is absolutely correct to state that “social media has dramatically changed how information is shared” and that “Wine experts and consumers alike now more often share information about wine via social media channels such as Facebook, Twitter, Instagram and wine blogs.” She may even be right when she says that, due to social media, “consumers today are swayed far more by the influence of their online peers rather than expert authority,” although that is an allegation and a belief, not a fact, and I don’t see any way to prove it.
But, even allowing that social media is this big, important phenomenon in communication, I don’t think she’s right when she implies (but doesn’t come all the way out and say so directly) that social media actually can sell wine—to a degree where it actually matters, and not just a few bottles here and there. The closest Elaine gets to expressing that is when she says “[social media] engagement can lead to consumer consideration and review of wines that otherwise might not have been seen by the traditional wine critic.”
Can’t argue with that. Yes, if you tweet the heck out of your wine, you’ll get it in front of eyeballs that might not otherwise have seen it (and, by the way, getting seen by lots of eyeballs is not a guarantee of the wine’s quality!). The question is, is social media a reliable way for a winery to actually sell wine? Is it worth the cost? Does it offer a good return on the investments of time and money? After all the rah-rah chatter about social media (most of it on social media), what does it actually accomplish for wineries when it comes to bringing in the bucks?
To begin to answer these important questions, consider that, if you compare a list of the 30 biggest U.S. wineries in 2004 compared to 2014 (and thanks to WineBusiness.com for doing such a fantastic job), it’s amazing to consider that the list practically hasn’t changed at all in eleven years, which is to say: pre-social media and post-social media. Gallo topped the list both years. Constellation and The Wine Group jockeyed for second and third, Bronco veering between fourth and fifth. Also at the top were Trinchero, St. Michelle, Delicato, Jackson Family Wines, Diageo, Treasury, and so on. To quote WineBusiness.com, “Though there are now [2015] 8,287 wineries in the U.S., WBM 30 companies represent nearly 90 percent of the domestic wine sold annually in the U.S. by volume.” In fact, “The three top companies by themselves represent more than half of U.S. case sales.”
I don’t think these top 30 wineries consider social media as the most important of their “how to sell” strategies. Rather, they focus on such traditional things as a trained sales force, pricing strategies, paying attention to consumer trends, forging good relationships with distributors and key accounts (on-premise and off-premise), courting wine writers (including bloggers) and a host of other proven best practices that social media has had barely any impact on. Yes, these wineries practice social media—but the people who run them and are responsible for their bottom lines have always understood that social media—for all the nice things it accomplishes—is not the magic bullet for sales that so many proponents of social media claim it is.
I think Elaine also is misled when she claims that social media has “led to fewer wine critic positions” and to “the near demise of print media.” Those are charges we heard in 2009 and 2010, but we shouldn’t be hearing them today because we now know they’re not true. I don’t know how you would take a census of “wine critic positions” in America: many small papers seem to have a local gadfly, while many of the leading writers are widely syndicated, and just about every regional magazine I’ve ever seen has a wine section. There have never been very many paid wine critics in America, simply because the market for them has been small; but I don’t think there are fewer today than there were in 2004. (And, if you consider all the wine reviewing blogs, you could argue there are more wine critics than ever. Well, actually, there’s at least one fewer critic today than in 2004: Me.)
As for the “near demise of print media,” what’s the evidence for that? Print media did come disastrously close to falling off the cliff in 2009-2010 but that wasn’t because of social media (although social media adherents said it was), it was due to the Great Recession which caused advertising revenues to plunge; and advertising, not sales or subscriptions, is what pays the bills at print publications. Last time I checked, magazines like Wine Spectator, Wine Enthusiast, Food & Wine, The Tasting Panel, Wine & Spirits and others seemed to be doing quite well.
Look, the importance of social media has never been questioned by me on this blog. But I have wondered, and I continue to, just what impact social media has on sales, especially for smaller wineries—the 8,200 that will never make the WBM 30 list. It can’t hurt them; it can help around the edges. It’s fun, and can enable proprietors to think differently about their wineries. It may be helpful in promoting customer loyalty (but so were old-fashioned wine clubs, tasting rooms and newsletters). But social media cannot replace sales teams and all the other traditional best practices I described above. To believe in it so uncritically is to believe in the Easter bunny, Santa Claus and the tooth fairy.
“The question is, is social media a reliable way for a winery to actually sell wine? Is it worth the cost? Does it offer a good return on the investments of time and money?”
Direct-To-Consumer programs intrinsically rely on shipping wine to the consumer.
The option of delivering to someone’s residence may be diminishing.
Excerpt from The Wall Street Journal
(published October 21, 2015):
“Web-Shopping Deluge Boxes In Landlords”
Link: http://www.wsj.com/articles/package-gate-big-landlord-blocks-deliveries-after-deluge-of-parcels-1445333401
By Laura Kusisto
Staff Writer
“The biggest landlords in the U.S. are being crushed under a mountain of packages, leading one large apartment operator to stop accepting deliveries and others to experiment with ways to minimize the clutter.
“The moves are at the center of two colliding trends: an increase in apartment living and a surge in online shopping. The result is a rising tide of packages with no good place to go.
“U.S. online retail sales are expected to swell to $334 billion in 2015, up from $263 billion in 2013, according to Forrester Research Inc., a research and advisory firm. Analysts at Forrester expect that number to increase to $480 billion in 2019.
“The onslaught has turned management offices of apartment buildings into de facto receiving centers as landlords grapple with recording packages, tracking tenants down to pick them up and finding places to store the parcels.”
Steve, when you say that social media can’t hurt wineries, it does so by consuming scarce resources better allocated to activities that increase sales (like sales people) or product quality (which, through higher critic scores also increases sales). Maybe that’s a rounding error in a large wine company but for smaller wineries often locked out of distribution, it’s as harmful as the advice to take more echinacea for the pancreatic cancer of growing inventory.
Bob, marketing needn’t drive DTC sales to work. Indeed with 95% of wine sold through the channel, the amount of wine shipped directly from all wineries driven by Instagram posts can probably be easily handled by a single doorman. 😉
Michael,
Landlords curtailing apartment deliveries is undoubtedly a phenomenon of high density urban centers (e.g., Manhattan, San Francisco) . . . not “fly over country” comprising the Midwest and other environs.
Some of those wine enthusiast urbanites are public transit users, for whom schlepping from work delivery to home a 40 pound weight carton of wine on the bus/subway/train would be impractical.
Alternately, not every wine collector has a wine locker in a stand-alone facility in town which will accept deliveries from wineries and wine stores.
For most wine enthusiasts, wine is still a “grab-and-go” retail store purchase.
~~ Bob
(I concur: hiring salespersons to chat up trade account prospects on the phone or via e-mail, scheduling “meet-and-greet” visits to personalize the relation, “closing” opening orders, and conducting post-purchase follow-ups is what moves the sales revenue needle.)
Michael,
“when you say that social media can’t hurt wineries, it does so by consuming scarce resources better allocated to activities that increase sales (like sales people) or product quality (which, through higher critic scores also increases sales)”
Only if that winery isn’t spending the right amount of time on it (too much, in your example), which essentially is lacking a balanced media plan.
Social media is, for some consumers, the only channel that they use to connect with brands, including wineries. So it cannot be totally ignored.
Blame the lack of balance and time management, not the tools.
Joe, I agree it shouldn’t be totally ignored… just 95% ignored. You can spend 5% on social marketing and 5% on animal sacrifice… but please spend the other 90% actually selling wine.
But it’s never presented that way. It’s always presented in a “critics like your grandpa listened to are irrelevant” and consumers “make their buying decisions based on what their friends and apps say.” In the words of Clay Davis: Sheeeeeeeeeeeeit.
That bothers me probably as much as stories about parents not vaccinating their children because it causes autism. Although the above statements have even less factual evidence to support them.
So:
* Wine critics are vitally important to the wine industry – even if a consumer never sees a score – because the entities that channel 95% of the wine in the US care deeply about product attributes that help them sell wine. There is no other source of wine quality that is viewed as credible to people making the decisions about what is put in front of consumers’ eyes. Scores are also very useful tools used by all online retailers, flash sale sites, big box stores, etc.
* I’ve seen no evidence that the way consumers make wine buying decisions has changed in the past decade. The concept that a consumer sees a tweet and a week later is at a store and sees a bottle out of the hundreds and remembers the tweet and decides the buy that wine is a child’s fantasy. The probability that they’re going to pull out their phone and go – one by one – scanning each label to determine if it’s a wine they want to buy is basically zero. Online buyer-driven wine commerce is a rounding error in the Wine Institute’s annual market sizing.
People need to be told what to buy. Wine is sold, not bought. I’m convinced that technology will play a huge part in how wine is sold in the future. It just doesn’t doesn’t today.
Maybe I am in the minority but I buy the wine I want not what someone tries to “sell” me. I do buy wines based on tweets and bloggers and professional critics recommendations. I never buy wine based on advertisements or shelf talkers.
When you are talking about the large wine conglomerates, what sales they have from social media is probably pretty close to zero. When you talk about small wineries the distributors won’t touch I believe there is much more potential. I have purchased wines that I have heard about from other bloggers, I have attended events I learned about on Twitter and purchased wine then too.
When I am doing research to visit a new wine area I often read blog posts to find out what wineries in the area have interesting stories. Small wineries that are not utilizing social media are under the radar and probably won’t be visited.
Conclusion: If you are big and have a big budget, continue using traditional sales techniques. If you are really small and distributors won’t take you on, you should be using social media to get your name out there.
Peter,
You write that you “buy wines based on . . . professional [wine] critics recommendations.”
A statement that seems to be in opposition to this subsequent one: “[you] never buy wine based on advertisements or shelf talkers.”
Most shelf talkers are truncated reproductions of “professional [wine] critics recommendations.”
And a high percentage of print advertisements are reproductions of “professional [wine] critics recommendations.”
~~ Bob
Bob,
Yes it does sound in opposition. I should have said shelf talkers that are the stores own comments or comments without attribution vs. professional critics comments. The exception would be smaller wine shops where I have previously purchased wines and learned their taste is similar to mine.
Citing statistics [*] from David Francke, former managing director of California’s Folio Fine Wine Partners:
“SIXTEEN PERCENT OF CORE WINE DRINKERS consume wine once a week or more frequently, which ACCOUNTS FOR AROUND 96 PERCENT OF CONSUMPTION.
“THIRTY-FIVE MILLION adults drink virtually all of the wine sold in America, Francke said.”
Those 35 million domestic “core wine drinkers” are the “opinion leaders” and “tastemakers” that the “non-core” infrequent wine drinkers (representing their family members and work colleagues and neighbors) turn to for advice.
Recall that Wine Spectator has around 350,000 paid subscribers. (Let’s call them “The One Percenters” at the apex of the demographic pyramid comprising domestic wine enthusiasts.)
Where do the 350,000 Wine Spectator subscribers and the balance of 34.150 million non-subscriber “core wine drinkers” get their wine knowledge?
From print and online media editorial content and paid media ads. From conversations with brick-and-mortar wine merchant staffers. From reading shelf talkers posted in wine stores and in grocery stores’ wine aisle. And from first-hand experience buying wines and sampling them.
Michael declares that “Wine is sold, not bought.”
Wines rarely sell on their own. (Outside of their being priced in the low single digits . . . like “Two Buck Chuck” . . . for which there is no winery marketing budget support.)
A “taste maker” — be it a trusted wine reviewer or wine merchant or friendly wine collector — invariably introduced that specific brand and varietal and vintage bottling to the consumer.
[*Presentation at the Fine Wine 2010 Conference in Ribera del Duero, Spain.
Link: http://www.winebusiness.com/news/?go=getArticle&dataid=73903 ]
Peter,
Understood. A difference with a distinction: reproduced wine press reviews versus the store’s self-penned “in-house” reviews.
~~ Bob
Michael – beware the fallacy of small numbers.
Also, 95% for one winery might be the right mix; for another, it might be 50%.
Generally, social channels need to be thought of first as avenues for outreach. They might be sales channels also, but those are secondary (or tertiary…).
Joe, not sure what small number fallacy you’re referring to. Here, let’s do it this way:
There are 10,000 wineries in the US and probably another 20,000 domestic brands plus let’s say another 20,000 imported brands. Excluding Hardy Wallace, give me three wineries who spend 50% of their effort on social media marketing and derive positive ROI from it.
So all I’m asking for is for 3/50,000 = 0.00006. How’s that for a small number?
Let’s correct a typo:
“Where do the 350,000 Wine Spectator subscribers and the balance of 34.650 million non-subscriber “core wine drinkers” get their wine knowledge?”
More statistics, courtesy of Sonoma State University in the School of Business and the Wine Business Institute.
“2015 Survey of American Wine Consumer Preferences”
Link: http://www.winebusiness.com/news/?go=getArticle&dataid=160722
Hello navel!
Michael,
You are misinterpreting the small number logical fallacy to which I’m referring. Have a look at this:
http://www.logicallyfallacious.com/index.php/logical-fallacies/101-hasty-generalization
You are also asking for information that most companies would not willingly provide, wine brands or not. Understandably, I don’t have access to the business plans and finances of any wineries, so I’ve no idea who spends what on social. That doesn’t make the argument invalid that some wineries might spend more – on and see ROI benefit from – social media than other wineries, just as some might spend more on traditional advertising, billboards, whatever, than other wineries.
By way of examples, I do know that Quevedo in Portugal and Cornerstone in Napa Valley spent a significant amount of time (and therefore, probably of marketing budget) on social. At one point, Quevedo did online marketing exclusively, and no traditional marketing, if my memory of what Oscar Quevedo told me is correct. And he got his Douro red into the PLCB, which was huge for them; and in his winery’s example, we are talking about seeing palpable results for a region (Portugal) and some categories (Tawny Port) that are not doing well in the U.S. market.
Small sample size there, so I am not drawing any conclusions from it other than that there is potential in social for some wineries with respect to customer outreach, consumer outreach, and sales.
Joe, 50,000 entities is a small number to you? The only thing small is the number of demonstrable success stories. Let’s say you were running a 10 year clinical trial and you had 50,000 participants. 1 named Hardy Wallace responded extremely well, 3 of them responded well to treatment, 96 had some small benefit and the other 49,900 didn’t respond. That is what we have here.
When you say you’re not drawing conclusions… of course you’re drawing conclusions. Really, how many posts have you written where you roll your eyes at the relics who don’t understand how social has transformed the wine industry? There’s not a questioning in that, but certainly lots of assertion. Look, you’re not alone… I think your perspective is one that is broadly shared and probably one I would share if all of the evidence weren’t to the contrary.
Yes, I’m exaggerating a perspective, but the counter-perspective contraindicated by evidence, slightly harmful and doesn’t advance the cause of small winery survival.
Postscript on apartment house owners curtailing e-commerce deliveries.
Excerpt from The Wall Street Journal “Business & Tech.” Section
(November 13, 2015, Page B1ff):
“7-Eleven Wants to Be your Post Office”
Link: http://www.wsj.com/articles/7-eleven-expands-locker-space-hoping-to-cash-in-on-e-commerce-wave-1447326538
By Loretta Chao
Staff Writer
7-Eleven Inc. is making space for more lockers at a number of its North American stores, in a bet that growing e-commerce volumes will help drive Slurpee sales.
The company has added lockers where customers can pick up packages from FedEx Corp. and United Parcel Service Inc. over the last year, and announced in October that it would install Wal-Mart lockers in six locations in Toronto as well. The additions mark a significant expansion in scope of a program first piloted with Amazon.com Inc. in 2011. Now, any retailer that ships via UPS or FedEx has the lockers as a delivery option.
Customers in the U.S. and Canada who don’t want packages left on their doorsteps can arrange to have online orders from retailers delivered to lockers at 200 locations so far, which they open by scanning bar codes sent over email to their smartphones. The scan automatically opens the locker containing their purchase.
Michael,
“how many posts have you written where you roll your eyes at the relics who don’t understand how social has transformed the wine industry?”
About zero, by my recollection.
Now, how many posts have I written where I “roll my eyes” at many in the wine business who fundamentally misunderstand social media as a business tool? Many.
Interesting points and well laid-out debate. I’d agree that social media is a modern day equivalent of word-of-mouth and that it has great potential from a brand awareness stand-point, but if a company uses social media to primarily drive sales, then they are missing its essential purpose.
I don’t think social media should be used to only generate sales…it should be a platform to engage, interact and connect with consumers and people in general. If sales result from that work, then that is a bonus and welcomed result.
Here’s a new social media trend for 2016 . . .
From The Wall Street Journal “Digits” Blog
(January 5, 2016):
“Twitter to Expand Tweet’s 140-Character Limit to 10,000”
Link: http://blogs.wsj.com/digits/2016/01/05/twitter-to-expand-tweets-140-character-limit-to-10000/?mod=trending_now_2
[No, April Fools’ Day hasn’t come early this new year.]