Why You Should Launch a Wine Club
This post is the first in our six-part series: Secrets of Successful Wine Clubs.
Wine is a competitive business—there are lots of wineries producing great wines. So what sets yours apart and why would someone choose your wine over the next one? Knowing the answers to these questions will help you build a successful wine club. Let’s look at some of the data supporting why you should start a wine club.
Wine Clubs = More Profits
While tasting rooms account for 47 percent of Direct-To-Consumer (DTC) sales, wine clubs are a close second at 33 percent, making them one of a winery’s most profitable business channels. You can sign up wine club members right on your property—and turn an occasional visitor into a repeat customer.
That new member ensures revenue with each release, offering a steady cash flow. It’s a guaranteed allocation each release, giving you peace of mind that a certain number of cases will sell. That means spending less time finding distributors or selling to restaurants and wine shops. Instead, you can focus on building a unique experience for your club members.
Boost Profit Margins with DTC
In July 2017, wine club shipments bucked a seasonal trend and increased by 23 percent to $100 million, according to Wines & Vines. Driven by the increasing popularity of Direct-To-Consumer (DTC) sales, wine clubs are flourishing. Customers are enjoying the benefits of feeling connected to the winery and getting access to an exclusive product.
DTC eliminates intermediaries, so you earn more profit on each bottle you sell. As you cater to your wine club members, your profits have a chance to stay strong via repeat purchases, private events, allocations, etc.
One final profit reality to consider—the average time a member remains in a wine club is 28 months. That’s a great customer lifetime value. You can get a lot more out of the unique experience you offer a customer than a single wine visit and a couple of bottles sold. With no wine club, you might expect that you’ll get $100 out of each tasting room visit or wine release. Imagine increasing that by 10x. With a wine club, a visit has the potential to lead to a membership which is 2+ years of continued business.
Enjoy Sustained Growth
While growth rates vary by region, winery club memberships grew at double-digit rates in 2015. According to Wine Business Monthly, across the country, the net average wine club growth rate is 16 percent. What’s more, conversion rates for turning visitors into wine club members tripled to 6 percent in just three years.
Impressive growth to be sure—and signs point to continued expansion.
Naturally, with the highest priced bottles, Napa Valley accounts for the largest revenue per wine club member at $1,134. But the national average is still pretty hefty at $548, meaning there’s still money to be paid outside California. Seize the market opportunity by positioning your wine club as a more personal alternative to traditional wine-buying methods and begin to expand your distribution to profitable states.
There are 45 states that permit DTC. And, according to the 2017 DTC Wine Shipping Report, California, Washington, Texas, New York, and Florida are the top five destinations for DTC wine. By simply starting to sell into these states you have the opportunity to increase your revenue significantly.
Launching a wine club may seem simple at first, but it can quickly grow to be unmanageable if you don’t take the right first steps. There are questions to answer like—How should you structure your club? How will you differentiate your club from your competitors’? What will you do to retain customers? What do you have to do to be compliant?
We’ll take a look at these questions and many others in the rest of this series. In the meantime, if you are looking for guidance about the basics of compliance for a DTC program, check out our recent post, Compliance Considerations for Wineries.