What will Bay Area wineries look like after coronavirus? 'Very different,' industry expert says

ByLiz Kreutz KGO logo

Sunday, May 10, 2020

Bay Area wineries will look very different after pandemic, expert says

Small wineries in Northern California have lost on average 40-60% of sales during the state shutdown due to COVID-19. Expert says now is the time for wineries to get creative to bring back the business.

SAN FRANCISCO (KGO) -- As California begins reopening, a major question is how the Bay Area's wine industry will bounce back.

Small wineries in Northern California have lost on average 40-60% of sales during the state shutdown, according to Rob McMillan, one of the country's top wine industry analysts from Napa County and founder of Silicon Valley Bank's wine division.

McMillan says there are exceptions, however. For instance, large, wholesale wineries that sell to supermarkets are seeing as much as a 60% increase in sales during the pandemic.

Still, the future of hundreds of small wineries - many of which rely heavily on the profits from their tasting rooms and restaurant sales - is up in the air.

"When it reopens it will be very different," McMillan told ABC7 News about the Bay Area's wine country. "The expectation is you'll be able to have about half the tasting room space available now for people. You'll have to cut the amount of people you have in half and same with restaurants."

We asked McMillan how wineries should adapt and change to survive the pandemic. His advice? Think about marketing toward a younger crowd.

"Some people will not be happy traveling, especially older consumers," McMillan said, "So my expectation is we're actually going to have younger consumer who are invincible and they do want to travel."

McMillan, who does banking for nearly 500 wineries on the West Coast, said he is suggesting his clients consider changing their tasting fees and potentially offer surge pricing. The average tasting fee in Napa, he said, is currently $45.

"You have two people coming up wine country they have to pay on average $90 to taste the wine," he said. "Maybe what we should do is think about surge charging, so like Uber does, if it's super busy you raise the price and if it's not busy you lower the price, so maybe we advertise to the younger consumer."

As McMillan said, demand for wine is up about 10% in year over year sales. "For the first time in 60 years, we actually have family meals again," he explained.

He said in order to succeed, wineries will need to tap into that shifting consumer behavior. For instance, he pointed to wineries that are now doing virtual wine tastings.

"Really, in a lot of ways the wine industry is in a good spot, but it's just channel shifting, and it's impacted different wineries in different ways," he said. "It's zero in some cases, and no sales if you were in restaurants and direct to consumer through your tasting room."

His other advise for wineries moving forward? Focus on the fun.

"I haven't heard people talk about the fun a lot, because really we want to have fun again," he said. "Don't just say, 'Come up and try our wine.' Talk about the fun you can have when you come to the winery."

Cheers to hoping that can happen some time soon.

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