The 2024 US DTC Wine Market w/ Cathy & Chris Huyghe, Enolytics

Hey listeners, just want to let you know that we've released the latest compilation of show notes in book form, covering episodes from 2022 to 2023. It's full of insights on sustainability, marketing, and even has a few celebrity sightings. Pick it up on Amazon and support the show. Welcome to X-Shadow. The podcast that navigates the business of wine with unique perspectives and insights with your host Robert Vernick and Peter Young. Welcome to the subset of X-Shadow. Today we're going to be digging into the 2024 US DTC wide market, DTC being direct to consumer. And our guests are Kathy Hoyha, co-founder and CEO of Analytics and her husband Chris Hoyha, co-founder and CEO. Welcome to the show guys. Thank you. Can you guys please give me and Peter a brief overview of your backgrounds? Yeah, for sure. So, I'll jump in. Kathy Hoyha, I am actually a journalist by trade. I've been writing about the wine industry for almost 20 years now, primarily for Forbes, about the business and the politics of the wine industry. And it was as I was writing that column that it was focused on technology and innovation that I was like, gee, there's a heck of a lot of wine data, heck of a lot of data in the wine and spirit industry, but not a lot of business intelligence or strategy applied to that data. So that's when the word came up, you know, analytics. I'm a word person and that word seemed to fit. So I'm the, you know, of analytics and Chris is the the lyrics. And will you introduce yourself? Yeah, absolutely. And I'm the lyrics, but this whole team behind the analytics is not just the two of us obviously. My background on medical physical system and nuclear physical by training and worked in radiation therapy for the longest time was running a $500 million business unit and really had to use data to be able to grow that business was not able to beginning. I was able to at least manage expenses based on my gut, but after while when you have a group of 500 people working in your unit, you have to start looking at data and really got into data that way to grow business and then later on got into data really in the healthcare space, well helping predicting outcomes for diseases and cancer, you know, based on a lot of data that we had right. And then I started really data mining and then kind of the front runner of AI. Then I started traveling with Kathy from time to time talking to people in the wine world about what was of interest to all of us and I asked them about data. And most of them were like we have no idea what you're talking about. We don't know what data really means in our industry. We decided that there was a niche there to be filled and in the beginning it really was more about education than about providing solutions. People need to understand that they needed data to grow their businesses. So that's how we decided to start up analytics and really joined it full time in 2020. So for our listeners who aren't that familiar with analytics, can you give us an overview of what it is, how big it is, the scope and size of your customers and what what's on the platform. Thank you for asking and thank you. I didn't say this at the beginning, but thank you for having us and for being interested in this topic. It's amazing to me that we can have this conversation and that this conversation is worth having now compared to where we started from. So you know that it's really is a technology company. We build software specifically for purpose to the wine industry. We build sales analytics software that sits on top of direct to consumer data and we built sales analytics software that sits on top of wholesaler depletion data and then kind of the magic sauce is that we combine the two. So we use DTC data to sell more into wholesale to help a winery sell more into wholesale and vice versa use wholesale data to sell more into DTC. So in terms of the scope of our customer base, we for sure cut our teeth on small and medium size wineries kind of got the proof of concept right and accurate and strong and foundational. And since then have been growing, we still do appeal to small and medium size wineries and also the largest luch of wineries in the industry as well. We count as our customers based on that really solid foundation from the beginning. So just for listeners for the for the small and medium size wineries could you define that just so curious on what size customer using using data is worth wild investment. Yeah, for sure. So we believe that every winery can benefit from leveraging their own data really and truly and that's one of the big reasons why analytics exists is to help them do that. So a small winery we define as up to a million dollars in DTC revenue per year. And so we work with wineries who have a thousand cases, 5000 cases so very small. And we have offerings and products and price levels to appeal and to make it reasonable for those wineries. And then it goes all the way up to multi tenant multi brand wineries who have five and ten or more wineries kind of under their umbrella. So it really is that range that wide of a range. And in terms of geography, is it primarily California is it all 100% US is it spread all across the country. Good question. So US Canada and Australia primarily the US I would say maybe 80% are in California. Good number in Virginia, some in Michigan, some in Oregon and Washington as well. We didn't break into the Texas market, but I feel like that's just around the corner. Would you agree? Yeah, absolutely. I mean, obviously it is very much the way the winery landscape looks right now. Absolutely majority of wineries are in California. So obviously the absolute majority of our customers are in California. For us, we're strong in the central coast, but we're very, very strong in Sonoma area also. So I would say 80% definitely is California. And then some East coast and non coastal and obviously Washington, Oregon. So you have a partnership with wine direct that enables you to access data and analyze the data for customers. Correct. And their great partner wine direct is a great partner in every quarter. We exchange data and we analyze it. And based on that, we're actually able to talk to you today and provide you with some feedback on what the DTC world looks like in 2024. So this is based on our partnership between analytics and wine direct. Because I think between analytics and wine direct, I've seen some of these reports before which are great and a great service for the industry. And I think it's very important to me to bring that data to the public. I think it's very important to me to get the number wrong. So I want you to correct me. Is it something like over 2000 wineries or something of that nature? Like a big scope of data is analyzed to generate trends for the industry. Yeah, for sure. Peter and the and thank you for looking at them. So our software is built natively to wine direct. We started with wine direct. And exclusively to wine direct. We also integrate with other platforms too, but the relationship with wine direct goes way back to the origin of the company really. And so as we got to know each other, interacting and building the software that sits on top of wine direct natively, we got to know the team there and established this kind of relationship where, of course, that's a very trusting relationship for wine direct to anonymize and de-identify their own customer's data. And transfer it to analytics for us to analyze. I don't know if you have anything more to add about how that actually actually works. Yeah, I mean, definitely important to mention that it is anonymized data. Also, yes, it is 2000 wineries, but just like with any business reporting, we don't just take the data of all 2000 wineries. There's some wineries that are just fairly new to wine direct are not in there because when you look at financial reporting of big companies like Wal-Mart or so, they do same store sales, right? That's what they do same store sales. Same here. So when we go and we compare this over the last three years or over five years, we make sure that this is purely organic growth. And this is not just by adding on more wineries. So this wine is good that there's 2000 wineries because as you start taking out outliers and you start normalizing this, that data set goes down to probably about closer to 1000 ultimately, which is still a great representation of the wine world, especially because we've normalized it. And we made sure that they are having tasting rooms and wine clubs and in the other channels. So with this great set of data that you guys have access to anonymize access to, what are some of the biggest overall trends you're seeing in DTC spending for wine in 2024? Yeah, I love this. And Chris took some time in preparation for this conversation, Peter, to really dive into it. I will leave it to him to do most of the specific responses to the questions, but for me, kind of big picture thinking as a writer, sort of the headline is around the lesser consumption by women, lesser purchases by women, and the different sort of demographically visible ways that we could see sort of the constriction of the DTC market. And we see that in different age groups as well in different price points and in different kinds of wine, white and rosé, relative to red. So let me kind of lead with that headline. I don't know if you want to ask specific questions, Peter or Chris can dive into what he's seeing so far. I would say, hey, you stole my thunder. I kind of stole his thunder. Well, you know what, 2024 is definitely a rough year. It is for sure a rough year. And what we have seen is that why you're just having increased. pricing to try and combat what is going on. So what we're seeing is that due to the increased pricing, the net sales, the revenue is not down as much, right? But the volumes are down quite a bit, right? So volumes have dropped and it is different for each region. Some of the regions, if you look at Virginia, they're actually doing fairly well. You know, when it comes to net sales and, you know, they're down in volume, but they're managing better. The reason that and the hardest hit is California and especially the Napa Sonoma region, they're the hardest hit. And that is because they are depending so much on tourism. 70% of people that are buying in California, minorities are actually coming from outside of California. Now, compared that to the central coast, where it's just flipped and 70% of people that are buying in the central coast are from California. And so they're really less on tourism. You'll actually see that their impact is less. It's still there. All the regions are down. But when you say tourism, you mean tourism from not in the local area because you talk about Virginia being strong and Virginia is heavily relying on tourism. That is like people coming to visit or hospitality, I would say, but not necessarily tourism and that people from outside the state or outside the local area coming. That's correct. And that's a similar central coast versus Napa Sonoma. We generally speaking have got a lot more from outside the region coming. That's what you're saying, right? That's absolutely what I'm saying. Yeah. If we look at Virginia, we're looking at the main consumer for Virginia is coming from the Washington DC area, obviously. So yes. I wanted to jump in just for a moment and say that the Virginia Wine Board is very proactively looking at data. They engaged us to do a DTC research project for them specifically. And so Virginia is top of mind for us. Analytics is based in Atlanta. So it's nice to kind of have that geographical proximity. So kudos to Virginia, though, for really doing a deep dive into their data. Same with the Pasarobles Wine Country Alliance, Benjol Peterson, who's at leadership there. So we have really deep dives into specific parts of the country who are earnestly taking a look and investing. In looking at their data in an anonymized fashion, but as a group, really, that's an exciting development. Peter, I would say over the course of analytics is to see the association level taking an interest in looking at their own data. That's amazing and great leadership on their part. What's the status of those analyses and their efforts in that? Because I think it would be amazing for other associations to learn to say that we did this work. It generated great results and we made these changes and that had XYZ impact or we think it had XYZ impact and then hopefully every other association wants to work with you to do the same thing, right? Yeah, for sure. And so what's exciting about it is that right now what we can do is do a baseline. We do a baseline analysis. This is what we know about the DTC data that we have today. Or within the last six months when we started these different projects. And so we build on it from there and building on it means onboarding more wineries onto the software so that they can have more granular visibility into it. And so we do executive summaries every quarter. We are looking at more and more wineries and it's really important that both of those organizations, the leadership, want to look beyond sort of the big wineries and say we need to find a way to account for the small and medium sized wineries as well. Yes, it's true that in some ways the big wineries steer the ship but that's not the end of the story. And so what's I think part of the development as well that we're seeing and the demand is to say give the small and medium sized wineries a voice not only in the research but also in how these associations respond to the research. And I would like to add to that is like we believe that data overall and knowing about the DTC business is something that should be available to everyone. So what we actually have done is we've actually created a product called ENO Insights, Analytics Insights and it is free. Anyone can have it. It doesn't cost anything and you get from us a daily report with your performance of the previous day by channel and also it will tell you how you're doing month to date and soon coming now that we're now that we're having a big enough customer base we will be adding benchmarking in that so that they actually know how they're doing. So this is the result also of working with these ventures associations and Virginia is we wanted to make that available for free so that everyone can sign up and then share their information and now they're everyone will kind of be able to see real time day to day how is the DTC industry doing. All they have to do is just sign up on the enlicks website, look for the enlinsights and they'll start having the report the next day. It doesn't cost anything it's our service that we do into the wine world because we feel that's that's important for everyone to run their business based on data. We're thinking about it as a ticker, Peter, a ticker, right? So this is news from me, right? Like what's a ticker saying? And so that's really exciting development. Yeah, that's great. That's super exciting and hopefully you get a lot of adoption there because I think that's really important for the industry to just have a sense of what's happening and to get a benchmark for free. That's huge. I think that's huge. And the support for Wanders to know by the way that their data is not being compromised in any way it's de-identified so they'll never see anywhere that anyone can actually identify it's my winery in this set of data. Okay? And you mentioned women was the the big headline and the drop off there. How big of a drop has that been and are there other demographic shifts that you've seen being important in terms of you always talk about the large consumption by the boomers and you know millennials or Gen Z and etc. Yeah, it's a great question and so what really the story was in the last five years was that women were really upcoming gender the upcoming gender and the older generations the boomers maybe even the gen X series we see an over the ratio of men versus women is definitely overindexing towards men. The younger generations millennials Gen Z it's definitely overindexing on women right? So what we would have expected to see in 2024 is that women were up because the younger generations are up Gen Z for sure because every year we're adding an extra year into the Gen Z generation right? So but surprisingly what we seeing is that women are down and they're down more than men so on average net sales is down about 3% but women are way higher than that so we were seeing men at 2% women are down 4% and I would not have expected that. I was looking at this more what is causing this right? Is this a is this an economical thing? Is this you know is this just the Gen Z and millennials that are down but millennials and Gen Z are down as much as the other generations are so it's really not a generational thing it's truly women are down and the result of that when we were then started looking at for instance you know wine types red wine versus white wine versus rosé it is white wine and rosé that are affected the most red wine is down now part of that is also wine it did their cheaper wines and and their price increases will have been smaller than red wines but still rosé wine is down 10% in that sales while you know red wine is only down 2% and red wine and white wine is down about 5% in that sales so so we're seeing that kind of playing out at the same time when we're looking at this economic argument is definitely there when we start looking at people that live in areas that are have high affluence right because we track that we link zip codes to the consent to the census data we actually see that you know as far as revenue goes people that live in highly affluent areas they're basically flat that revenue is flat that's good the volume is still down but the revenue is flat while people that live in middle class areas and people that live in very poor areas is down even more so there's definitely proved that part of what is happening here is an economic argument for sure and so the if the volumes down but the revenues the same the average price is going up per bottle then is that factored in for inflation is that just inflation like average cost or growing up is like are those like a rounding error that basically they went down 10% and the prices went up because of inflation or is there it was or something else is there is there a demonstrable per bottle price increase oh there's a demonstrable price increase for sure a big part of the argument from wine is it is indeed inflation they have to increase their prices everything is getting more expensive and therefore prices are going up and and inflation is the major argument but we are seeing that price increases per bottle are the average bottle price in first three quarters is up about 5% right and that's the sold price so when you actually start looking at this and we're looking at is it that affecting the number of people buying wine is actually down and we can talk about it in a second but we'll actually see that the AOV is up because pricing is up right and so this is all kind of leveling out and can you define AOV average order value sorry I'm just I'm saying it all the time so I'm just no just for just for listeners who may not know the some of the industry turns absolutely you mentioned your comparing year over year to year data, how many years of data do you have and when does the data go through? So we got about seven years of data, we do normally analyze five years of data or three years of data based on what we want to take a look at and we have that data, we get that on a quarterly basis. So we exchange that with wine direct on a quarterly basis. So every quarter we do a report with wine direct that we publish for the wine industry. Okay, and let's jump into hospitality and people visiting wineries. Is that declining in 2024? Yes. They look at each other for a while. There's a lot of head shaking for the people who are. I did not want to talk over Kathy. That's the headline. Yes, people visiting tasting rooms are down for sure. Yeah, for sure. It's absolutely, it's down and that has been not just the trend this year but was also the trend last year. It's not something that is unique to 2024. But yes, the tasting room visitation is down. It's down about if we look at that for this year's down about seven percent. So, you know, some regions are harder than others. You know, as I said, Napa Sonoma, I hit harder than the central coast but overall for the US visitation and tasting room is down about seven percent. And so your data set where your account, you're basically able to calculate this because of their zip code is different than the point of sale location. How are you getting to that versus D to C purchases? So in the CRMs, they are tracking the channels. So they're tracking their identifying and tasting room basically within their CRMs. And so part of the data set that we're getting is what channel the products were sold in. So is it more I could say purchasing at wineries is down or you actually seeing that there's even less visitation happening because I'm just wondering what the data would be for a visitation who doesn't purchase. Perfect. Great question. And what I'm telling you when I say, you know, visitation is down. I'm not talking about net sales being down at the at the tasting. Obviously that is down to. But I'm really talking about people that are buying the number of people buying in the tasting room is down about seven percent. Okay. But so in terms of actual like foot traffic flow, you don't have a metric. You don't keep that for that. No, no, because that doesn't necessarily get tracked in the CRMs. It's an interesting idea and it actually a cool opportunity to think about merging the data that we're looking at with say tourism data and kind of bringing in different streams to make the report, make the analysis even more robust. And that for sure is something that we can see on the roadmap is bringing in multiple streams of data to enhance this kind of thought leadership even further. Yeah. Some e-commerce systems have it. Like, I think offset has some if they use the appointment tracker and I think commerce have in. I think can also do it. And then sometimes it's integrated with talk and talk can have some of that too if they're using talk. Yeah. There is a correlation though between the number of contacts buying and number of visitors. So ultimately, if the number of contacts buying is down, the number of visitors will be the correlation between that is strong enough to make that assumption that the number of visitors is going to be down by a similar percentage. And I'm assuming that there's also like a high level for a visitation. There's a seasonality to it. And in terms of the purchasing. So are the peak times basically during summer travel and like the fall or. Yeah, for sure. So peak times are definitely the summer. Right. You start seeing that the lowest visitation months are for sure November, December, January, February. And then you start seeing a go up all the way through the summer and then you start seeing it slowing down in the fall late fall and going down again. So it's a perfect pattern that we see every. It's probably the opposite with consumption trends. It's drinking during the holidays with your family. You can't travel. Something that's interesting to note too is that because we see the sales through different channels and we can kind of filter it out. The patterns of sales in the tasting room is different than the patterns of sales in the wine club, which is different than the patterns of sales through the website. So for the wine club channel, for example, for sure there's regularly scheduled shipments. You know, for the most part, I realize that's changing, but for the most part still it's regularly scheduled shipments as opposed to the tasting room, which reflects more of what Christus explained. The website and we get on our soapbox about this all the time. The website is the biggest room for growth in terms of DTC sales. Hands down. I would say that kind of recommendation is moving forward. Sure, you know, absolutely pay attention to your wine club because that's the lion's share of the revenue when it comes to DTC for the most part. But the biggest opportunity for growth where there isn't enough yet is through the website channel. Is the trend consistent across the country or does it have a lot of regional variability? No, it's fairly consistent across the country. We see that pretty much everywhere. I mean, we do see like, for instance, Virginian, so their drop in visitation is quite a bit less than others, but the trend that number of buyers is down overall. Visitation is down overall that is quite consistent across the country. And the fact that now for two years in a row visitation is down is going to become problematic because the wine club signups are happening mainly in the tasting room. If we use our traditional ways of growing our wine club and with less visitation means less signups, so people need to start looking at other ways of growing their wine clubs, right? So they need to start doing a better job at managing a nutrition and they need to do a better job at trying to find other ways of growing their wine club. So wine club growth just because it's already two years in a row now that visitation is down, wine club growth is down too. So if we look at wine club growth in the last 12 months, you know, so October 23 to September 24, we actually see that wine club are down, you know, in number of people, about 3%. And have you seen a difference in terms of decline by age groups? Is there more polarized through one demographic? Not really. I think it is more towards who can afford it and who not and it's also which kind of wineries. Wineries with less expensive wines are actually going to see it more than wine reserved more expensive wines because the highly people living in highly affund areas are less affected by the economy. And do you have a hypothesis on the what is driving the decline? General malaise, economic malaise for sure. We don't have a specific way to quantify that Robert. We don't ask those questions. It's not a survey. I don't like to exit survey from there. Like why did you not buy today? That's okay. But what we do see though, what we do see is when we take a look at the reasons for leaving, they haven't changed that much as in two years ago. They're always the same, you know, it's going to be, you know, maybe we see a little bit more financial reasons today, but they're always financial reasons too much wine and you know, moving to a different state. Those are really the big reasons why people are canceling other than people are their credit cards are declining and they're just canceling them automatically then. Right? The reasons haven't really changed. Maybe the ratios of them have changed slightly, but that's still really the big reasons. And I don't know if you have this if you don't have the actual visitors, but has the conversion from the tasting room to the wine club changed at all over the last few years? It has. It has. And it's interesting. So what we saw last year at this time, we saw that wine club was down about 1% for the year. And when we were looking at that, the attrition levels were quite high last year. Within the first nine months of the year, the attrition level was at 20%. So it actually ended the year with 28%. The sign-up rates were only 19%. So that's why you see that's that 1% minus 1% growth. This year attrition's are a little bit lower. They're at 19%. However, sign-up rates are even lower than last year. They're at 17%. So now we're at a 2% drop. Right? So it's a slightly different pattern the years before, you know, in 2020, 2021, 2022, we had healthy growth, right? Even in 2020, we were 7% in 2021. We're 11%. But now we're actually getting for two years and we're going to a negative territory. So there's definitely some rebalancing of what's going on there. And when you say wine club sign-up 17%, 19% are you saying 17%, 19% of the club size? Yeah. So the way we calculate is like the attrition number is we basically look at what, you know, let's say that over this period, over this 9-month period, we had on average 100 people in that club and 20 people canceled, then the attrition rate is basically 20%. So it's basically looking at the average over this period. But the same for the sign-up rate as well? Exactly. Okay. Yeah. Got it. And so you mentioned club sales are down 3% so far. Sorry, I didn't say I said that club growth is down. So there's actual people. Club growth is down 3%. How are wine clubs in general doing in 2024? And does this very regionally at all? Well, wine clubs are doing the best out of the major channels. If you're looking at, you know, the major channels, it's club, it's stacing, romance, web, as far as how that is doing as in revenue, wine users are trying to save their year to their wine clubs. So we've seen their sales compared to last year's almost flat. Volumes are still down just because it's mainly because of price increases that they can keep the sales at that. same number, but the club is still the strongest and is saving wineries right now for sure. Is this different regionally at all or pretty consistent across the US? It's pretty consistent across the US. Some regions have a lot more influence of wine club versus others, but ultimately the club is what is saving most wineries right now. Customization of wine club has been a big trend over the last few years and that's really taken off and been seen as a way to get people to buy more wine. At least I see that anecdotally. Do you see that as fact that there's been a lot more customization in wine clubs? It's interesting to me about the customization question, Peter, is that I see it as related to micro segmentation of customer lists. Making the right offer to the right people at the right time and using the data and the filters to segment and find those right people, which is the right offer to make to them and when. To me, customization of the wine club is an extension of that. I think that as people become more confident in creating those more customized offers in general, it's going to overflow into the wine club. You definitely see that in our own customer base, customizations are definitely up. Our software allows you to actually see which wine pairings are very popular and our customers have used that to actually enhance their customizations. We see that about 20% of club shipments right now are being customized and because the customizations are targeted for many of these wineries, they actually see that the uptake that the revenue generated by these customized clubs is quite a bit higher to it. There's very few that are actually customizing down. Most of them are upgrading their cards with more expensive wines or with more wines. Usually there's hopefully in a platform a minimum buy level for the club order otherwise people could customize down. So it's hard to go down and only up. I don't know if you tracked this, but do you see a difference in customization with different e-commerce platforms? Not really. Because the analytics is able to actually provide some of that data which point pairings are really good. Most of our customers which are on the major platforms, wine direct, commerce, seven-vint suite, e-seller, they're all able to customize their clubs in a way that makes sense and that is very successful for them. And you said that people generally buy more when they customize. Do you know about how much more they buy? I don't know it by heart. I would only be guessing right now. I ran the numbers. I just forgot them. I'm happy about it. You mentioned earlier that the reasons for Canstein club memberships are roughly the same as historical reasons a couple of years ago. On the flip side of that, have you seen innovations and things that wineries have done in order to translate to better performance for their wine clubs sales from the data? That's a good question. I would say that wine club sales so much of it starts in the tasting room. And I think that better training and better education of tasting room staff is factoring into that for sure. We can do within the software is look at the sales performance of each associate one at a time. What that does is empower the manager to say, "Okay, so we see that this is your strength." We're going to even schedule you at a certain time of day because we know this group is coming in maybe. That is, to my mind, one of the improvements that I've seen on a sort of boots on the ground basis within the tasting room relying on the data. What would you add to that? Yeah. So it's obvious right. Everyone knows that we're in a tough time right now. And as I said, visitation is down. It affects wine club signups. So what do you need to do? And there's consensus about that. You know, this was also mentioned by Silicon Valley Bank. The best way to combat this is to use data. And you use data for two things. You use data to manage your attrition. And in the analytics, when you use analytics, we have algorithms built in that actually tell you who's at risk of leaving your club. Customers when they use that algorithm, they actually can, customers that use that algorithm can actually get their attrition down by about 20%. So when you're currently seeing we're at 20% or 19% attrition for the year, these wineries would be closer to 15 or 16% right? At the same time, because now you have to replace the recruiting of wine club members in the tasting room with other ways, you can now go into the software also and say, who's my best customers who have never joined the wine club that would benefit from it? Who has bought in the last six months that has maybe already bought at least three times in their lifetime who has spent at least $500 in the winery? Who's those people? Please that list so that I can go and reach out to them and increase my wine club that way. So really using data to grow your wine club, both by managing attrition and finding signups is really the key right now to that wine club growth. You don't have to see your wine club decreasing. You can still grow it and you have the data to do it. And fishing your own pond is how we talk about it. So I'm assuming part of that is also understanding the lifetime value of a consumer, especially with a lot of the boomers aging out or just basically stop buying because they have enough wine is the hypothesis right? And I'm curious if you're seeing that LTV of a customer because of this data starting to get smaller and smaller so wineries can't bank on that length of that LTV as much as they could in the past. Correct. The ten years are going down right? The people, people are staying less long in the wine clubs, they're exiting faster so that LTV is going to go down. And those are all KPIs that we're tracking and you can see the different LTVs between the different clubs. However, you don't want to just push everyone on the club that has the highest LTV because it actually might be the club with the smallest tenure. So you need to take a look at a whole bunch of KPIs and see what balances out. But Robert, I would say that that would be a really interesting study to do is to look at the older consumers and how their churn rate is changing, how much they're spending over time. That's the slice of the data that we haven't looked at specifically yet or done a deep dive into. But that would be really interesting. I think of a really valuable contribution to just general that leadership. Yeah, I think if you had an LTV by age demographics and gender demographics or combination of the two, it would be interesting to see. Because you can actually dial in on more customized, "Hey, how much is this person worth to me?" And it's on average versus in terms of fishing in your own pond. If you would need to know where to fish, it could help identify the more likely successful candidates that have higher LTV opportunity. And that's very enough. And so in our software, you can do that. You can look at the LTV by generation or by age group. However, for this bigger approach where we look at all of these wineries, it makes less sense because some of these wineries are not as expensive. So their LTVs are going to be very, fairly small. Others have really expensive wines. So it kind of becomes a lot harder to do in the analysis that actually makes sense. Got it. Okay. So winery themselves could use that. But as a regional or an area focused, it's less credible. Yeah. So you mentioned the web or the online store is a big area of opportunity. We actually saw during the pandemic a big rise in online ordering, which has subsequently reversed itself and fallen back a little bit. How have you seen that channel evolve and what do you think wineries can do to recapture some of that opportunity? Yeah. That's very much our soapbox issue for us, Peter. So we can see really clearly, especially when we look over time, when we look back at 2019 and 2020 and 2021, the spike in website sales was like, "Way high." And it's never recovered. It's never recovered from that. And my initial reaction is to say, "Look, we know we can do it. We know that as an industry, we can sell wine through our website." And so over time, though, as we sort of keep talking to people and keep studying the data, it's not just that the wineries can do it. It's the willingness of the consumer to buy online, of course, when there's other opportunities and not as necessary to buy online as it was during that peak period. Do you think there's also some of the contextual things that make a different, not just the opportunity, but also a lot of the laws around signing for packages were rolled back during the pandemic that made it easier. That worked from home element like Robert and I and San Francisco. So it's easier. More people work from home and get deliveries. But when you're back in the office or if you're in a job that you can't get a wine delivery and that makes it a lot more challenging, I think. Yeah, agreed. But if we're breathing, there's an opportunity to adjust, right? So I feel like we're constantly iterating and we're constantly being creative about how to do this, how to get around these obstacles that are there. I think that now, especially, I'm not going to say that our backs are against the wall, but times are tough. Times are tough now. And there's no kind of sugar coating or being polyannish around it. And so this is the time to get creative. This is the time to be innovative and to do things that you haven't done yet. And maybe that has to do with how you make wine available or how you talk to the customer or how you segment your customer or how you use data. So there's, I feel like this is, the time is right. It's frustrating. that the circumstances are as they are, but it's also those moments like this that open the door by necessity to be creative and innovative. Absolutely. I don't know if you're able to dive into the wide people or how people get into the web store to buy. So if you know, like, if email to terms of customer segmentation, if email sending emails is more effective, I remember back in the pandemic, people are leveraging phones. Phone calls a lot more, although there's a lot of spam calls these days. So maybe people are answering their phone list, but or other ways could be text messaging or social media advertising or anything like that. Have you heard of any examples or best practices that people have used to enable more web sales for themselves? Yeah. So it's a great question. And for so let me say, I was incredibly proud of the wine industry back in 2020. Lacing most clothes and we pivoted on a dime and online sales run up 250%. The website was amazing. It's been going down steadily and we're down about 42% from levels of 2022. We're still up compared to pre-pandemic, but it could be better. Now what we're seeing is that just as you're saying is that we're getting smarter also. We do web sales, but now we're also adding in texting. We're doing red chirps and those campaigns are quite successful because people are starting to see this as concierge services. You're reaching out and you're saying I'm your concierge and they feel like they're talking to someone and they're getting somewhere rather than anonymous email. We're also seeing that people and wineries are getting smarter at their telemarketing. Rather than now creating lists of 3,000 people to call, they're able to hyper segmentation and looking at people that are buying by the case, that are great sponsors of the winery. Now instead of that, they have a list of 150 people that's going to be highly efficient. I love the telemarketing channel because that AOV is about 6 times as high as the facing channel. It's the highest AOV of all channels. I get it if you want to outsource that. You're giving a big commission away and so that might not be the smartest thing. If you use your data, you can actually do that in-house. Your people that are in their tasting room are now less busy. They could make those calls, less commission, but you're still going to be selling by the case. I do believe also that for websites, it is something as Katty said we should focus on. Wineries are still doing too much and definitely the average US wineries. They always email their entire list. What that is doing is it's ultimately resulting in a lot of unsubscribes. I believe that every data record is worth its weight in gold. What you really need to do is you need to do hyper-segmentation. You need to go and find a message that is good for 100-200 people. Send it to them. You'll see that you're a lot more successful and you're going to get a lot less unsubscribes. That is how you're going to go and grow your web channel. I'm curious. Are the events not at the moment becoming more important channel for DDC sales? I'll take this one. One of my favorite examples is Wineries who use their DTC sales to work with their distributors in market to sell out an event at a restaurant. We see this happen time and time again. It's an unexpected application of the software, but for sure. The distributor turns around and says, "What just happened?" I just sold out of this event at 30 seats and I have enough demand for a second event the next night. Basically, being able to hyper-segment that specific neighborhood that whatever the restaurant is in, and then reach out to those specific people and invite them to this event because the Y-Makers is going to be in town or whatever it is. That's my favorite current example of the crossover of data from DTC into wholesale. I would say that events with Wineries closed down. Events were down to minimal levels in 2020 and they recovered quite a bit in 2022. We're still at the same levels as 2022. It hasn't grown a lot. It's fairly flat. I agree with Cathy. I think there's an opportunity here. When people are coming to the Tacing Room, maybe you should take your Tacing Room to the people. Those are events and there's a lot that you can do with your data to go and identify where you should be going and who to invite, who then bring their friends and then they're all going to become ambassadors. There's also the other opportunity with the software you can actually now go and find out who lives within driving distance of the winery. Who are members, who are non-members and let's do events for those people so that when they come in, we can actually go and try and convert them into members, the non-members. I'm a huge fan of events. If you do them very targeted and you have a goal that you all only want to reach with that. Are there any kind of regional guidance? I know at least pre-pandemic a lot of wineries would do a road show in Texas, for example, which is a big market for them and they could hit three major cities fairly closely to each other. But where do you think that that is more worthwhile than other parts of the country? Absolutely. Your data is going to tell you. Your data is actually just going to your data and you're just going to see where those people that are buying from my wine, where are they? Because you want to go to places, not where you have no one, but you want to go to places where you already have some fans that then can go and invite other friends with them. You just go to your data and you just look at which metro areas are the most popular, which cities with zips and if then you have the pollution or wholesale data, you could actually go and say within that area, I also have these restaurants that are already selling my wine. Let's go and do it in that location. So you can bring all that together. Absolutely. I think with some of the ship compliant data too, you can kind of see what your market share is, like how the DTC world in certain segments is in each state and even in each metro area to some degree and then see what your market share is relative to that and gauge opportunities. I've done a calculation before. Here's the opportunity in each market. It's not just, I'm dominant or I have nothing, but what's the difference to Robert's point between how big I am versus the size of the market or what my market share should be like an average market share. Yeah. Something that we're really excited about Peter too is when we combine the DTC data with the wholesaler depletion data, is that if you can sort of imagine a heat map in a specific metro area and you can drop pins where every one of your DTC customer is and who they are and how much they've spent and what their lifetime value is, their demographics, et cetera. So that's kind of layer one on this heat map. Layer two is the on-premise accounts. So that in proximity to your DTC customers and what's sold into those on-premise accounts, layer three is the off-premise, same thing in proximity to those other two layers. Layer four is the lost accounts where you used to be sold in, but no longer are. And then kind of the money shot is that can buy accounts, meaning where you're not yet sold into, but can sell into. And all within proximity to those DTC customers. And so I feel like that is incredibly valuable to a winery, to a distributor, to the people like boots on the ground, looking for new opportunities that they haven't harvested yet. So making all that visible is super valuable. So do you take in all that account data? I know there are several platforms like for on-prem, like some AI or commuter data or off-premise wine searcher. Do you actually take in all that data to present those reports? Great question. So our data partner on the wholesale site Peter is VIP from on information processing. That's our big partner. And the winery gives permission to VIP to send that winery's depletion data to us. And so we use that to combine it with the DTC. Included in that data is those can buy accounts, those lost accounts and those can buy accounts, which is incredibly valuable. And we further enhance it with Google data, so being able to kind of segment by how fancy the restaurant is, how expensive it is, what kind of restaurant it is, et cetera. Awesome. So I think we've talked around the whole time, around different things wineries can do, to improve their business. But if you narrowed it down to the top three things, what are the top three things you'd highly recommend wineries do now to navigate this difficult time in the industry? Yeah, I wonder if our answers would be any different. So one, I mean, of course we're here to advocate for data. Certainly, you wineries have it, it already exists, it's there. And I feel like the light bulb has been going off about how valuable that data is. So I would say pushing that envelope further, getting in there, like dipping your toe in or going full on sort of jumping in the deep end. Specifically, what do you do with that data? My top two suggestions would be working with the wine club to identify members at risk. That's the most clicked on link of the entire software is who is at risk of leaving my club because they're obviously incredibly valuable. And then secondly, the website, the website sales. Yeah, I agree with you, Kathy. I have to, I'm married. So what I, you know, if I really look at this as a business, right? And I want to look at this chronologically, what's going on? My very first thing would be manage your tasting room to staff, figure out what to do and make sure that they're all performing really well so that your wine club conversions or as high as there can be, right? And your cell-true rates and all that are as high can be. Number two would be manage your club. And with that, I mean, as we discussed before, manage attrition and manage new signups. Use your data to do that. As number two, and number three is, then go and do highly segmented marketing campaigns. If you do those three things, you can grow your business. There's no doubt in my mind that you can grow your business. You have the data, and it's so much cheaper to use your own data to go to customers that already know your brand and have them buy more than go and find new customers. And that's really what this is about. It's like, just do these three things and do them well, and you will grow. There's 11,000 wine res out there. If you do things a little bit different, you'll probably be on the winning side here. So I am curious, how does-- how do you think Analytics helps its customers with their business? Like, what are the-- to boil it down? Like, with-- if someone's curious based on this conversation, and they want to reach out, like, what can it all be to do for them? What would you say? Help them sell more wine. We make it easy to help them sell more wine, find the right customers, make the right offer at the right time, and also be more efficient. If you can imagine the number of hours, staff hours, that winery people spend creating reports, for example, or whatever sort of administrative task they can do, Analytics helps with that too. Yeah, I would agree with that. We have developed a software based on customer needs. So the request from customers was, we need to grow. This is how we need to grow. Can you help us put these functionalities in there that will help us grow easily? That's number one. Number two is we're always there to help our customers. So we do workshops, and this is all part of subscription. So when you don't know what to do, what's my next step? We just set up a workshop with this and it will help you. It will point you in the right way. Could you break down a little bit your pricing models or end-or-tears of service that customers have? Sure. So smaller wineries pay less for a subscription to the software. Bigger wineries pay more. And so it's tiered out in that way. So that's for the subscription. There's also as Chris mentioned, you know, insights, which is the free model where we onboard winery, and they start receiving the daily reports every 24 hours. So those are two. There's also one called, you know, Time Saver, which is where we onboard the winery. It's a flat fee of $4,000 for the year. And you get a monthly check-in with us live in order to basically have us use the software and tell you and answer your questions. And so that you're set up for the month. So that's kind of a, that's an overview. And then the depletion software is based on number of cases depleted. Great. So bringing it back to the macro discussion around the US Y market, what are your predictions for the Y market in 2025? Boy, you're asking me to play poker here. It is so hard to predict. We will never go back to before. I mean, we do see that customers have a lot more choices. And so I think we've probably peaked at some point as far as like just usage of wine by a consumer. But I do believe that the future is good. I think the economy is going to turn around. People are going to start traveling again. We're going to start seeing some of the trends reversing or are at least flattening. And it will take some time to get back to the levels of 2022 and 2021 because some of that was spent of demand and all that. But I see it with rose color or pink color glasses. But that's a Belgian term, by the way. But I think I'm not sure if it's in 2025 that we're already going to see that recovery. But I know it will come. So I think we're hitting bottom and we'll get back on the horse here. And my input in response to that question is less rose colored. I'm disappointed by the results that we just talked about in 2024 so far. I think it's going to take an effort to recalibrate. I think it's going to take more of an effort to kind of get back on that upswing. I believe in data as a way to lift those boats. But it's going to take an effort, for sure. So I'm hopeful that more of the industry will look to data to help. And I also am not sort of pretending that it's going to be easy. It is the time for innovation. And that takes work. Takes effort. I anecdotally have kind of seen the why market as a tale of two stories. Basically, one being those who are hustling and doing a lot of marketing events and whatnot, still growing, but at low single digits where they might have been double digits in a better macro context. And then those who are just kind of doing the same thing they've always done and declining at 10% to 20%. Is that consistent with what you're seeing across the border? Is that just an anecdote of small importance? I would say it's fairly consistent, Peter. Yeah. There are people who will take advantage of this as an opportunity. This time as an opportunity that people who hustle, the people who learn new things, the people who get in there and try. And we see that, for sure. And maybe their analysts or data people quote unquote heading into it, but maybe they're not. Maybe they're just like, you know what? I'm trying to say it by job here. And I need to do something to show the value that I'm contributing and bringing to this winery. And so that mentality, I'd take that any day over somebody who's just going to kind of come in and do business as usual. So those are the people that we're looking for. And certainly we're all looking for those people. Unfortunately, we're sort of seeing the flywheel turn, start to turn, when it comes to those people using data. Yeah. And I agree with that, Kathy. I agree with what you said earlier also. It's going to take effort. And wineries that are just going to keep doing what they've been doing for years are probably going to be the ones on the losing side. We're not going to go back any more to the where all posts are going to rise. It's not going to happen. But we will see wineries that are going to be innovative. They're going to look at different ways of growing their business. Those are going to be the successful ones. The ones that are just doing what they've always done, they will not be successful. So we'd like to wrap up each episode on a personal note. And so we wanted to ask you each, what is the most cherished bottle in your wine seller and when do you plan on drinking it? You know, Robert, I love this question. And it's sort of one version of it. What's your favorite wine? And so I get that question a lot. And my very cheeky answer is the wine that's in my glass. That's my favorite wine. It's the wine that's in my glass. But I understood about the intention of your question. And I will answer it with a really unusual bottle that I had when I was in Spain recently. You've probably heard of Sherry as a wine. It's made with the Pedro Jimenez grape. I tasted this 100% Pedro Jimenez non-sherry still wine that was totally knocked my socks off. I wrote about it actually as a mic drop moment. Like I tasted this wine. Right, it was a dry wine, right? It wasn't a strong one. Totally dry. Totally dry. Sandra Dwayche is the wine maker, Mustache, in the pre-arot region of Spain. Amazing. I never check a bag when I travel, which means I don't carry bottles home, but I checked a bag in order to carry this bottle home. Like it was unbelievable. I do have a cheeky answer and the real one. The cheeky answer is the one that Kathy cherishes, because then I get to drink it with her, right? But when I came to the United States 27 years ago, I was very much into French wines. And I didn't know anything about American wines. And I thought they could never be good. Now I know better. I think American wines are fantastic. But recently the Belgian, I'm Belgian. Belgian wine industry has started to grow. And I have some Belgian bottles in our collection. And so those are the ones that I'm cherishing the most, because I'm hoping to be surprised. I've had some Belgian wines and they're great. I'm just hoping they're aging really well. So that would be the bottle for me. Awesome. Two interesting answers. Thank you so much. And thank you both for taking your time to explain you know, Lidix and the state of the DDC market in 2024. We really appreciate it. It's been a pleasure. And thank you both very much for having us. And we're being interested. We're going to get there. What Kathy said. And thank you very much. Thanks for joining us. If you loved this episode of X Chateau, we'd love for you to subscribe, rate, and give a review on iTunes, or wherever you get your podcast. Until next time, cheers.