How Will Wineries Adapt to Changes in the Restaurant Business?
On April 30, Wine Spectator published a telling story on how restaurants are being forced to adapt to changes in consumer wine buying behavior. Two trends are driving these changes: first, consumers are trading down in the wine they drink; second, consumers are drinking more wine at home and less in restaurants. Restaurants are dealing with a significant decline in revenues as consumers trim their budgets by reducing the number of times they dine out. Many restaurants are reacting by decreasing their corkage fees, reducing plate sizes, emphasizing lower priced wines by the glass, and generally searching for ways to offer more value to their customers. Many restaurant managers are forcing sommeliers to sell from existing inventory to conserve cash, impacting wine sales for distributors and wineries.
For some restaurants, this situation will result in permanent changes in their business, creating opportunities for wineries who respond appropriately to these changes. Recognizing what restaurants will be buying when they replenish their wine inventories and having the appropriate product to satisfy this demand will be critical for capitalizing on these opportunities. Targeting the best restaurants and having the means to present their products to these restaurants will also be necessary to leverage the situation, as will educating the wait staff on the benefits of wines that reach restaurant menus.
Wineries must deal with other changes as well. Distributors can be expected to reduce their restaurant sales staffs in response to the decline in restaurant sales, making it harder for wineries to rely on distributors to push their products into restaurants. Retailers can be expected to buy more wine, but their price points will decline as they react to changes in consumer demand patterns. Retailers will try to offset the decline in average unit prices by pressing wineries and distributors for longer margins on items they sell.
In times like these, wineries would do well to remember the close relationship between danger and opportunity. Making good business decisions about deploying appropriate resources in support of a well thought out business strategy that takes into account the current realities of the market will result in new opportunities and new growth for wineries. The dangers wineries face revolve around their abilities to identify the right strategy and desired outcomes, to assemble the necessary resources, and to monitor the application of resources to achieve the outcomes.
