As announced on Facebook late last week, Damien Tscharke is closing his popular Barossa cellar door permanently to focus on vineyard and wines.
It’s a bold move. Bold, but I don’t understand the rationale. Sure, there is a huge time commitment that cellar door involves, which is going to hurt. But I’d argue that it’s worth it to make that customer connection – especially with the many challenges that 2021 will deliver.
Let’s dive into a few of the reasons why I think this is an odd move:
a) Export has just become a lot harder, making domestic sales harder beyond the cellar door. According to Wine Australia stats, China soaked up $1.2B worth of our wine exports last year, taking 123 million litres. While some of that is bulk, which will be excluded, the majority of that amount will now be subject to up to 212%+ tariffs, which will basically stop those exports instantly. According to some estimates, 100 million litres of wine now has nowhere to go, with fears that the resultant wine lake will soon flood the local industry. Already, grape contracts for next year are allegedly being cancelled, and both bottled and bulk wine prices are dropping. The oversupply will then put downward pressure on domestic retail prices, with premium South Australian red wine labels like Penfolds heavily exposed to the Chinese market. While a biodynamic, premium Barossa boutique producer like Tscharke might feel somewhat immune, plenty of Damien’s neighbours will have unsold wine originally destined for China now looking for a home. Expect a huge year of discounting (and fridgeloads of Penfolds Vintec giveaways)
b) While direct-to-consumer sales are booming. In other Wine Australia figures, the direct-to-consumer sales channel grew by 7 per cent in value in 2019–20, outperforming other sales channels. That’s while all channels sales declined by 3 per cent during the same period. Admittedly online was the big driver in this change, those producers who navigated a COVID world typically of lower visitor numbers actually increased their average case sales by 5%. In other words, if you can nail the DTC channel, you’re going to grow your business.
c) Cellar doors may lower overall marketing costs, attract younger consumers AND provide another sales channel. While there is quite limited research on the value of cellar door visits, a comprehensive study was completed by Johan Bruwer, Larry Lockshin, Anthony Saliba and Martin Hirche in 2014 that used cellar door visitor surveys to gather data. Some of the interesting bits to come out included that the Millennial/Gen-Y segment among cellar door visitors is about 6 per cent higher than the Australian average. In other words, younger wine drinkers were over-represented. Further, 74% of visitors purchased, with an average spend of $90.30. In a region like the Barossa, with solid winery tourist numbers, that ultimately translates to a large number of people who won’t be buying a Tscharke wine from the cellar door.
d) In times of a closed border, most cellar door visitors are locals who will buy again. From the same study, visitors lived in an Australian capital city, with only 6% international visitors, making cellar door visitors somewhat immune to international border closures. What’s more, 53% were likely to revisit the cellar door within a year. That’s a whole smorgasbord of good, repeat customers to be giving away right there.
In conclusion, I’m utterly unconvinced that closing a successful cellar door is a smart move. Damien is clever, his wines are typically high quality (though I haven’t tasted the last vintage or so) and I’m not privy to his business enough to cast judgement. But for me personally, I think this is a backwards move.
What do you think?