Despite High Sales, COVID-19 Has Taken a Toll on California’s Independent Wineries
Though the industry at large has fared better than most, smaller vintners face an uphill battle for survival
As some California wineries began reopening to the public around Memorial Day with social-distancing rules in place — often selling a picnic basket with wine for patrons to enjoy somewhere on the winery’s property or back at home — the hard truth is the COVID-19 pandemic has clobbered the wine industry. That statement may seem contradictory, since wine sales were up nearly 36 percent for the week ending May 9 from the same time the year before, and the week ending March 21, when most of us had to shelter in place, saw a 66-percent increase in wine buys over the year before, according to Nielsen.
Most of that wine was sold at large supermarkets and Wine.com, which saw a 350-percent spike in April over the prior year, with sales exploding over $40 million for that month alone. However, according to the Wine Institute, most U.S. wineries will experience a loss between 36 percent and 66 percent due to COVID-19, totaling nearly $6 billion in losses in 2020 for American wineries.
That includes many small- to mid-size California wineries, which often rely on wholesale accounts with restaurants and bars and also direct-to-consumer (DTC) sales often from on-site tasting rooms. With restaurants closed to in-room dining and tasting rooms forced to shutter completely, many of these mom-and-pop shops, which generally produce fewer than 10,000 cases of wine annually, had to scramble to quickly shift their businesses to stay in contact with customers.
“The week [California Governor] Gavin Newsom ordered stay at home, we did an immediate pivot,” says Mark Blatty, proprietor of Los Angeles-based Byron Blatty Wines. “That Friday (March 20) we did our first virtual tasting. We set up free shipping, free local delivery on any order and dropped the price on older vintages and created special pricing to get those wines to people at a value. We wanted to make it easy for people to get our wines and give them a value proposition that wouldn’t hurt our brand.”
Having a smaller winery already comes with hurdles in non-pandemic times. Without large marketing budgets or a big distributor behind you, getting your wine in the public’s hands requires some serious hustle.
“The goal for small wineries in particular is to do as much direct-to-consumer sales as possible,” Blatty adds. “But when you’re a small new winery, you have to reach people because if no one has heard of you and no one has tasted your wine.”
Blatty, who released his initial 2014 vintage in 2017, had planned to open a tasting room in 2020. The crisis-related shutdown prevented that, which turned out to be a blessing. Now, in addition to Blatty’s other tactics, he just introduced at-home flight tastings, a set of four 5-oz. limited-edition wines with tasting notes and a virtual tasting for $35.
It’s moves like this that have helped many smaller wineries throughout the state. In Lodi, in California’s Central Valley, Jeremy Wine Company is almost exclusively direct to consumer. Winemaker Jeremy Trettevik, who opened Jeremy with his wife, Choral, in 2010, says that while Napa sees visitors from around the world, Lodi relies heavily on locals who visit his tasting room on a whim. With COVID-19 forcing people to stay home, he projects a 15- to 20-percent dip in sales for 2020. Before the shutdown, the tasting room would often welcome 300 people on a normal Saturday, each spending an average of $50 per order. Now with curbside pickup, he’s seeing about 50 people on a Saturday spending an average of $150 per order. So at least there’s some upside.
Independent wineries have moved to leaning on wine clubs with built-in customers to keep them afloat during the crisis. Santa Rosa’s Balletto Vineyards sold about 2,000 cases of wine to retail shops in March of 2020, one of its best months ever. April? “It was our worst month in our history, where only about 150 cases were sold on the wholesale level,” says owner and founder John Balletto.
Thankfully Balletto has a wine club 2,700 members strong, which is overseen by John’s daughter, Jacqueline. She and her team quickly realized they needed to reach out to the wine club and implement other online methods to boost sales. In addition to starting home delivery to people in Sonoma, Marin and San Francisco counties, Jacqueline’s team also came up with the idea to deliver a bottle of wine to every healthcare worker at every hospital in Sonoma County — that’s 5,000 bottles. “Our [winery’s] history is tied to our community,” John Balletto says.
Magan Kunin knows about community. As part of Santa Barbara’s urban wine trail in the Funk Zone just blocks off the Pacific Ocean, Kunin Wines lost a majority of its consumer business when its wine shop shuttered. Kunin, which produces about 8,000 cases a year of mostly Rhone-style wines, has an intimate tasting room that doesn’t mesh with the new post-COVID spatial regulations. So Kunin is considering a weekly summer residency, possibly partnering with a restaurant in a parking lot in downtown Santa Barbara where people can gather, drink wine, eat and, according to Kunin, let their hair down.
“There’s no returning to normal,” she says. “We’re not just going to snap back. But this will make us stronger in the future and we’re resolved to go on. This is what we do. It’s been eye opening for sure.”
While business has taken a hit at wineries across the state, it has also forced owners to get creative and take their business online.
“To me, the silver lining is this forces the wineries to get on the bandwagon and amp up their online wine sales and e-commerce,” says Dr. Liz Thach, a master of wine and professor of wine at Sonoma State University. “They were doing so well with people coming to tasting rooms, but this now forces them to focus on online sales. I’m hoping this continues.”
Brook Bannister now runs Healdsburg, CA-based Bannister Wines, which was started by his mother, Marty, in 1989. He relied heavily on wholesale to stores and restaurants, but also to his wine club and private tastings. Producing only 1,100 cases a year, Bannister knows he needs to be able to introduce his wines to new people in order to grow his business. Still, he says, “I’m small enough not to fail.”
Bannister looks back at the devasting fires and floods that have hit Sonoma County over the last few years and views the current situation as just another hurdle he and other winery owners have to get over.
“I think wineries take a pretty optimistic view,” Bannister says. “There’s a feeling that we’ve gotten through the fires — and there’s a good chance we’ll get through this.”
While many of these smaller wineries have faced adversity, they’ve also quickly shifted their businesses in order to survive. And yes, consumers have turned to online behemoths like Wine.com, but they’re also experimenting and buying new things they may not have tried before. Best of all, people have really stepped up efforts to support local businesses, which helps these smaller wineries.
“There’s really a great sense of community right now,” Blatty says. “We’re getting people who are trying our wines — and there’s a willingness to support local business we haven’t seen before at this level.”
And that’s the true silver lining to all of this.
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