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Wine: Two sales strategies help keep one vintner going strong

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By Dave McIntyre
Wednesday, June 16, 2010

When the economy tanked in late 2008, many high-end wineries suffered a precipitous drop in sales. Americans suddenly were "buying down," eating at less-expensive restaurants or at home and choosing wines considerably cheaper than those they were accustomed to, favoring value over prestige.

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Yet last year, David Adelsheim, founder of one of the oldest and most revered wineries in Oregon's Willamette Valley, marked an increase in sales of his upper-tier wines. How did he manage to grow in a shrinking economy?

Direct-to-consumer sales.

In 2009, Adelsheim Vineyard saw such sales increase by 25 percent, while traditional sales through the three-tier system of producer-wholesaler-retailer fell by 5 percent, Adelsheim said during a recent visit to Washington. Consumer-direct sales are still just a small part of the winery's bottom line, but they are becoming increasingly important for many reasons.

Most of Adelsheim's consumer-direct sales are through the winery's subscription club. Members receive four shipments a year of a single-vineyard pinot noir. Those are produced in quantities too small for the three-tier system, usually 50 to 300 cases. Members have a month to order more, after which the wines go on sale online and at the winery.

Club members also receive invitations to special events at the winery, but of course only those who live nearby can attend regularly. So Adelsheim came to town to host a dinner for Washington area club members at Proof restaurant in Penn Quarter.

Adelsheim said his consumer-direct sales are important because of the limitations of the three-tier system, but he does not consider them a threat to that traditional way of getting wine to market.

"We purposely sell two product lines so we don't offend our distributor partners," he said. "Distributors have helped us build our brand since the early 1980s. This is not a war on the three-tier system, but rather a recognition that the three-tier system is how wine is sold in this country. That system will be in place for a long time."

Large wholesaler groups feel threatened by small consumer-direct operations, however, and they are indeed treating such programs as an offensive against them. Wholesaler-backed legislation was introduced in Congress in April -- in the same week Adelsheim was in town to thank the loyal customers who'd bolstered his bottom line -- that would make it difficult to challenge state laws restricting direct sales. The measure, H.R. 5034, could also imperil progress over the past five years that has made direct sales legal in 37 states and the District of Columbia (but not in Maryland). Despite strong opposition from consumers and producers, the bill has more than 100 co-sponsors in the House.

Opponents of direct shipping argue that online wine sales are tough to regulate and create a risk of underage drinkers' getting their hands on wine or other alcoholic beverages. And Craig Wolf, president of the Wine and Spirits Wholesalers of America, said the three-tier system "stimulates innovation and competition and provides consumers with unprecedented choice and variety."

Adelsheim disputes those arguments, and his experience demonstrates that the direct-shipping issue is relevant not just to small boutique wineries that have trouble gaining representation through crowded distribution channels. "It's ridiculous to say that it will somehow damage the fabric of American life when teenagers can order $70 bottles of wine two weeks in advance of drinking them," he said.

Consumer-direct sales are ideal for small-production wines, he said. "The complexity of single-vineyard pinots is hard to explain through the three-tier system" when the story must be passed by a distributor to retailers and sommeliers, and from them to customers. "It's like playing telephone," Adelsheim said.

"Selling directly to consumers isn't about taking business away from distributors and retailers," he said. "It's about giving our customers more choices."

McIntyre can be reached at food@washpost.com.



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