Want to Increase the Profitability of Your DTC Program? Here's How.

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It’s one of the most pressing concerns of the wine industry, here in the US.

Selling wine directly to consumers, that is.

Last week, we were glad to drill down on that topic by featuring a case study of Medlock Ames Winery in Sonoma, and how they’re using data to address that concern. Medlock Ames’ president, Julie Rothberg, described her attitude toward data analysis, why it makes sense for their business, and her main takeaways from an initial analysis of their sales and product history.

This week, we’re looking at the HOW.

Addie Nichols-Petsu is the analyst Rothberg engaged, when it was time to put Medlock Ames’ historical data to use for the future. I hope you’ll enjoy this Q&A with Addie, as she describes her background (Agribusiness major at Cal Poly), the analysis itself (30+ files, millions of lines of data), and her suggestions for wineries in general as they look to increase the profitability of their DTC programs.

Please describe a bit about your experience in working with data. Do you come from the wine world? If not, do you think your perspective is useful when working with wine data?

I’ve grown up in the wine world, in a sense. I was raised on the Central Coast of California and went to Cal Poly as an Agribusiness major, so I started becoming aware and learning about wine while in college. Post college, I worked for Nielsen (market research company) and was assigned to be an Account Executive for West Coast wine (and beer) clients. Since then, I’ve remained in the wine and spirits industry, working for two large wine and spirits companies in analytical capacities. Julie and I worked together at my last company, which was how she and I knew each other. 

There are actually a lot of similarities between big wine companies and smaller ones, given the increasingly competitive nature of the wine industry with the proliferation of SKUs and brands. Understanding sales patterns, looking for growth opportunities and determining customer unmet needs are objectives of both big and small wine companies. The difference may be that smaller companies may not necessarily think that they can tap into these insights as easily.

Obviously, understanding industry nuances probably helped in working with this data because it likely cut down on the time I used and alleviated a lot of the questions I may have had if I didn’t have the knowledge. That being said, I still had questions since a winery [like Medlock Ames] that is primarily DTC operates very differently than a large corporate entity whose sales are primarily through a distributor in a chain environment.

What can you tell us about the analysis itself?

Can I start by saying I had so much fun with this analysis? Maybe it takes a data geek like me to be handed 30+ Excel files with millions of lines of rows and a puzzle to put together.  

Julie and I had two key introductory conversations where we fleshed out the objectives she wanted to accomplish, while I asked questions and got a general background on the business. That is key with any analysis like this. I was tasked with several different objectives that needed to be accomplished. Julie and her team had a wealth of data that really hadn’t been tapped to the extent it could be. Which, by the way, happens everywhere (even in big companies). I was really excited to work with a client that recognized they maybe had the answers at their finger tips, and had theories, and were open to what could be found and what the truth was.

They had questions around their wine club and the demographics and value behind their wine club members. For example, top level questions around where Club Members were located (and club member average spend by state) led to our seeing the potential to focus on marketing efforts outside of California. I was also able to provide new insights around the frequency of visits and the length and loyalty of some of their club members.  

While working on this project, I learned that club members on average remain with a winery for two years. Medlock Ames has some club members that are incredibly loyal (and spend quite a bit on club shipments), and I recommended that they could grow some of their business by focusing on these members and providing them incremental opportunities for purchasing product.  

During this analysis, we gained an understanding of the value of each type of wine club membership, as well as their behaviors and sales performance. This was key, as the information could be used to help Medlock Ames determine where they could potentially narrow wine club offerings with minimal impact.  

I think that some of the most fun and exciting parts of the analysis were the “surprises,” meaning the unasked parts that just presented themselves by putting the data into a reportable format. What we learned was that the “non club” member sales were quite valuable and could be a key lever to drive future growth within the winery. 

I was also tasked with helping Medlock Ames build some new easy to use reports that updated their business sales in ways not previously looked at (on a monthly basis), as well as some new inventory reporting tools that helped understand run rates and sales by month. 

What have you learned through working with Medlock Ames that you think could be useful for wineries in general, as they look to increase profitability in their DTC programs?  

  • I think that it was a fun and eye-opening exercise for Medlock Ames to "slice and dice” the data behind their club members in new ways. Outsourcing some of their questions, theories and needs CAN prove to be beneficial in finding areas to be tapped further.

  • One theory was that there were club members who were potentially taking advantage of some of the club benefits. What we found was that these club members were a very small part of the universe, but they drove growth in sales at 3X the rate of other club members. They are likely “unofficial ambassadors.”  From a value perspective, it appears to be a beneficial relationship in this particular instance. I can’t say that this would be the case everywhere, as I’m sure it depends on the COGs, the frequencies and the sales generated.

  • It’s important for other wineries to know that the information that they collect from their sales, production, inventory, and club members CAN be used to further drive sales, understand their opportunities for new growth, and keep a fingertip on their current business trends. It doesn’t have to require new headcount resources to make it happen. It just requires a little bit of curiosity and support at the Executive and Management levels.