This story originally appeared in Wine Industry Advisor.
Across the entire wine industry, there are significant challenges, stated Robert McMillan, executive vice president and founder of Silicon Valley Bank’s Wine Division at the recent forum of Santa Barbara’s wine industry.
Premiumization is the dominant trend, but continuing consolidation of distribution is significantly limiting wineries access to consumers. To address this issue, McMillan stressed the need for direct-to-consumer sales. While direct sales are not necessarily more profitable than through wholesalers, explained McMillan, “it is more about necessity.” However, direct to consumer sales have their own constraints and require an investment in hospitality to attract consumers and make the emotional connection.
“In the past year, I’ve seen firsthand the impact of regulations gone haywire. They are frustrating family winery owners across the country, increasing the cost of doing business and reaching the point where some of the regulations will put family-run wineries out of business. The problem can’t be ignored, and it’s not going away by itself.” McMillan wrote in his State of the Wine Industry 2017 report (p55).