Internet and the wine business: friend or foe?

Internet: a powerful tool to manage your brand and a potentially rewarding one for those wineries that know how to properly handle it. But there are some risks one must be conscious of.

Internet is heavily used in the global economy and the wine sector is no exception. It is used to establish a link between companies (B2B), between companies and the consumer (B2C) and offers a series of ecommerce opportunities. In all these cases, Internet has an impact on the brand building process and on its success (or failure) in the end. A successful brand is one that sees its sales and profit increase, has a good consolidated reputation and is able to attract new customers. Each channel – B2B, B2C, ecommerce – has its risks and rewards, which will be analyzed.

B2B: a channel that must not be forgotten or neglected.

One of the more obvious Internet tools putting businesses in touch with one another are the e-marketplaces. e-marketplaces allow sellers and buyers – in many cases importers and distributors to call for tenders. Information on importers and distributors is available. Through analysis of the distributor’s portfolio, the winery knows in advance if its brand values and positioning will fit into that of the importer / distributor, thus gaining time and saving money. Global wines and spirits and International Beverage Network are two examples of e-marketplaces with an international reach, thus allowing wineries to position themselves on the international markets.

e-wineshops are an opportunity to increase sales and profit. They are a good and useful tool for producers, particularly for those medium and small producers who are looking to build their brand and reach a specific audience. It is one of the scarce places where they can find a specific space and find an audience. Vins-etonnants.com is a French web site specialized in natural wines, featuring small producers. Many wines are presented with a description of soil, viticulture and winemaking details. Moreover, food-pairing advice is also given. In some cases, an interview of the winemaker is also available. It presents the person behind the wine, which allows to establish a very close and emotional relation with the wine. For instance, Chateau Bel Air Marquis d’Aligre, a small Margaux producer, is present in this web site and a series of videos with the owner of the Chateau makes you feel like you have a private conversation with him.

Word of Mouth (WOM) in the Internet also contributes to increased visibility and brand building. Wines of Germany is the official body representing the producers of Germany. It has invested in online marketing (online presentations, social network use to generate positive Word Of Mouth - WOM). As a result, there was an increase in public awareness for Wines of Germany. This effort correlated with a moderate but steady increase in domestic and export value in an extremely competitive market.

Visibility can also be increased through connection sharing. Winery website offers a link to other related players (tourism destinations and activities for instance). In turn, referenced websites also offer a direct link to the winery on their websites. This has the advantage of expanding the area of influence within a region. Azienda Agricola Eredi di Cobelli Aldo in Trentino, Italy generates traffic on the websites and visits to the winery by sharing connections. Links with Vignaioli Indipendenti of Trentino and Strada Vino Trentio and other local players achieve these results.

B2C: an efficient tool as long as the customers are segmented and properly targeted.

Sales increase in a direct relation with the end customer might be achieved through a strong presence in social media, especially Facebook. Millenials are heavier wine consumers in average purchasing an additional bottle of wine per month compared to those who don’t use Facebook for information about wine. They also spend 20 $ more per month on wine. (Source: Successful Social Media and ecommerce strategies in the wine industry. Gergely Szolnoki et alii. 2016). However, all Internet tools aimed at the final consumer do not always work. Here is a QR code example. In a research paper called “Technological change in the wine market? The role of QR codes and wineapps in consumer wine purchases” published in 2014 by Wine Economics and policy, only for 11.7% of consumers there was a relationship between the presence of the QR code and a purchase interest.

Profit increase can also be achieved using the right tools. Having an online sale on the winery website makes that direct sales to consumers allow the winery to make a higher profit, not having to lower the selling price to allow distributors / importers to add their own margin. However, in order to increase profit, each customer segment has to be identified. Each segment reflects a different potential for sales and needs its own person-centered strategy for effective online wine marketing. This takes time and resources (money) to be properly achieved. In a report from 2016, called Millenials, Mindsets & Money: Increasing Online Sales by wineries, Stephen Rappaport segments Millenials in three groups: the ones heavily involved with wine, the ones mainly looking for the best deal and finally those (the larger group) uncertain of willing to buy online from a winery. For each segment, Rappaport recommends a specific strategy.

Internet is like any other tool: consistency between global strategy, brand positioning and communication is key. Through the use of their website, Facebook, Instagram and Twitter, Rebel Coast winery, founded by Millenials for Millenials is able to reach its public. Rebel Coast tagline is: “Not Your Parent’s winery” and uses lively and interactive website as the face of their wine. Rebel Coast is consistent in its communication: posts are fun and engaging and their social media use is aligned with the image they have created.

A continuous communication is needed to ensure a brand success. Co-creation is one way to ensure it. It takes the customers through the winemaking process, granting them the right to vote on such decisions as the varietal, the appellation, the vineyard, the barrel type, the name and the label design. This is a technique successfully used by lacrema.com. Lacrema has a Virtual Vintner Program. Only decisions on harvest time are taken by the winery. An interactive website leads participants through their decisions step by step, with the support of pictures, graphics, easy-to understand texts and short videos explaining the process. The main reason for their success is their ability to entertain and educate, allowing customers to feel part of the project. Two-way communication through online discussion forums is another way to build a brand. This tool has nevertheless to be managed carefully. In the case of consumer generated wine communities, these tend to take much of the control over messages away from marketers who are at the mercy of consumers who can create and distribute advertising about their brands. Besides, the unbiased and independent nature of the forum posters make them so believable for consumers and very difficult for marketers to access and influence. Therefore, winery marketers need to contribute to and form alliances with these potentially powerful communities. And this is exactly what verema.com in Spain has done. This platform started like a platform where amateurs could post their own tasting notes. Now they organize tastings, have their own online wine shop, rate restaurants in a similar way as zagat restaurant guide does, …

e-commerce opportunities: an innovative source of new relations.

The Internet allows exploring new financial sources. Crowd funding is a way used mostly by small and medium wineries to have access to cash-flow. Different models do exist. Donation based, with no reward offered, reward model, providing a non-financial return, crowd lending model where funds are provided in a temporary basis and also equity crowd funding model where the contributors receive equity. Generally speaking, these models have many advantages. They reduce not only the transaction costs making financing cheaper, but they also reduce the time in the development of new projects. At the same time, they favor a direct interaction with potential customers and make the contributors backing the project be identified with it, feel part of a community and become ambassadors of the project, contributing to building the winery’s brand. Naked Wines is a successful reward-based crowd funding initiative. Launched in December 2008 by Rowan Gormley in the UK and expanded to Australia and the US in 2012, it collects funds from regular customers that are invested into small independent winemakers. In exchange, customers get preferred access to exclusive wines, a discount on price plus free wine. However, in case of failure or delay of the project, the entrepreneur’s reputation can be damaged and customer disaffection may happen. For instance, this is what Crushpad, a North American wine company based in Sonoma, founded in 2004 and closed in 2012 had to go through.

Another way to take advantage of the Internet is offering cash rebates in selected apps to drive sales. Rebate apps transform the traditional coupon into a way to reward consumers who engage with the App. For instance, Ibotta, Inc., the retail shopping app that gives users cash back when they shop, has partnered with multiple alcohol brands including industry leaders like E&J Gallo, Constellation Brands, Mike’s Hard Lemonade Co. and VEEV to offer shoppers cash rebates when they buy wine and spirits.

Using the Internet as an education tool can powerfully contribute to get close to customers and create successful brands. Educating consumers makes small or unknown brands more likely to be discovered and understood. To be efficient, readers have to be able to comment and exchange on that educational content, thus online discussion forums, Facebook, Twitter, You Tube and other tools have to be associated with traditional wine educational content. A good example is the Sherry regulating body. It has in his web site very valuable educational material aimed at every sherry consumer. Education Materials include consideration on history of Sherry, viticulture, winemaking, ageing and food and wine pairing. Besides, there is a Vinos de Jerez TV showing additional information and recipes to make with the different types of existing Sherries. This well-organized and clear material is a powerful tool to build the Sherry brand, recruit and convince new consumers and overall push sales at the winery level.

As a conclusion, Internet offers a world of possibilities, for companies and customers and also for those willing to find specific projects and educate the client. Under its different forms, Internet contributes to building powerful brands, provided a series of risks are managed and elementary precautions are taken: control customer input in forums, ensure a real information exchange, involve the customer in winery decisions, share values consistent with those of the brand that is being built, …