Online Wine Sales Soared During The Pandemic. Is That About To End?
With a world shut at home, the first few months of the pandemic saw online sales of wines soar. Vivino dubbed it a month bigger than Christmas, with waves of bottles flying out of warehouses and into the arms of house-bound drinkers.
Direct-to-consumer wine club Winc saw an unprecedented 578% increase in new member sign-ups week-over-week, with 20,000 new members since the start of the pandemic. Nielsen data researchers noted off-premise wine sales in the U.S. are up 27.6% across the board in the week ending on March 14 relative to the same week a year ago.
Much of this was largely fueled by a perfect storm of panic buying and a shift in channels—with on-premise locations closed, consumers were shopping online. Brands had to scramble to build their presence in off-premise and direct-to-consumer channels.
But now the world is slowly starting to turn again, and online sales of wine seem to be waning.
Wine-Searcher.com noticed in comparison to year prior, global wine sales are up 17% in July. That’s promising, but take a look at the previous months: In June, wine searches were up 45% from the year prior, but in April wine searches were only up 33%. Nielsen’s FMCG sector noticed online wine sales spiked in March, but are now within 10% of 2019 figures. Searches are rising in comparison to last year, yes, but they are slumping.
Was the explosion of the online wine market just panic buying?
Vivino noticed sales are dropping. But the app’s founder, Heini Zachariassen, thinks the summer months are to blame. He isn’t worried.
“Q2 2020 was our strongest quarter ever, and in April, May and June, we saw 157% 137%, and 140% year-over-year growth, respectively. That number was a bit lower in July, at 114% year-over-year growth, but we believe seasonality is at play there as we continue to bring in new buyers daily at unprecedented rates with solid 30- and 60-day retention numbers. September will be the month to watch as that is when we tend to see things start to pick back up again.”
Wine market research firm Gomberg, Fredrikson & Associates found that while a huge shift has happened in the industry towards online wine sales, sales will in fact slow as on-premise locations start reopening and drinkers toggle between newly opened channels.
Over the first half of the year, the firm estimates wine sales in the U.S. totaled $34.5 billion, with a volume of 213 million 9L cases. (Volume is up 5.7% from year prior, they pointed out, though value was down 6.5%.)
Online sales will likely fall as restaurants, bars, and tasting rooms start reopening in the second half of the year, and drinkers resume drinking in-situ. But general sales might as well. With social distancing, these spots won’t be as busy as the years before, and even if they are, they are operating at lower capacities. Wine brands will likely have to continue pushing e-commerce.
Jon Moramarco, editor with Gomberg, Fredrikson & Associates, noted during a webinar, “Part of [the drop in online sales] is because as people go back to drink on-premise—and we’ve seen this specifically in the Texas data—they’re migrating a degree more to spirits than they are to beer or wine.”
The IWSR noticed in its global trend report that consumers have indeed changed their drinking habits over the pandemic, and this is likely to continue. Portable/convenient beverages, like canned wines and RTDs, have thrived.
Looking at sales data from e-commerce platform Minibar Delivery, consumers have been gravitating to familiar bottles through the pandemic, namely brands like Kim Crawford, Whispering Angel and Veuve Clicquot.
This will be interesting to see play out as drinkers start dining out again. Consumers have spent the last five months buying their own bottles. With that in mind, will restaurant markups feel glaringly apparent? Will restaurant diners be willing to pay the 2x+ markup on bottles, or will they opt for cocktails and other beverages?
Or perhaps, they will spend their money on harder-to-find bottles. Dave Parker, CEO of rare wine online retailer Benchmark Wine Group, has found that online sales of wine continue to perform well in the rare wine sector.
“January was solid, February was about the best month we ever had and we experienced disruption in the latter part of March,” he describes. “From there, things have been steadily improving. Q1 2020 was 5% better than Q1 2019, Q2 2020 was 6% better than Q2 2019 and July 2020 was 9% better than July 2019.”
He continues, “During the rest of 2020 we see sales conditions continuing to improve. Restaurants are very cautiously resuming purchases as are Asian brokers that we work with, both of which have been essentially absent in the market since March. We expect online consumer purchases that jumped up in April to continue at a higher level at least through the end of the year and probably beyond. The trend of consumers having top quality wine delivered to their home is with us to stay as the rest of the market gradually returns.”