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?
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10 Comments
Agree, really dopey move. I know he sells his wines at really low prices, increase them by $1 a bottle, to pay for the staff. Damian does not have to be there at all. He can still do his thing. I never see his wines in retail, so he is giving up his main market. Hard to understand.
All very good points Andrew and not something I would consider doing if I were mad enough to own a winery but allow me to play devil’s advocate:
1. I’ve been told on numerous occasions by winemakers about people who turn up to their cellar doors, drink their way through the range and then leave without purchasing anything. That’s not just a waste of the winemaker’s time and money, it must drive them mad. I witnessed a couple of smug looking 20-somethings do just that at the Ross Hill cellar door in Orange a few years back. As they got up to leave, without buying anything, the bloke picked up the order form, waved it at the woman conducting the tasting and said with a smirk on his face “well, we’ve got your order form….”, as if he was going to go home, tabulate all his personal tasting notes and submit an order for a couple of cases. She said nothing but the look on her face was set to kill. I would have throttled the little bastard. I bet those cocky little shits pulled the same stunt all over town.
2. There was that photo that did the rounds on social media a year or so back of all the empty bottles at a winery solely from cellar door tastings. It was a huge pile of bottles which would have put quite a dent in their bottom line.
3. Maybe Tscharke has a loyal and solid mailing list and has calculated that the cellar door is more of a pain &/or cost than the sales derived from it ? Admittedly I couldn’t see this being a long-term proposition.
4. Possibly he doesn’t want his business continuity or repuation threatened by someone bringing COVID to his premises ? I know there was a winery in the Hunter Valley last year that had to close temporarily because a COVID outbreak was traced to it. Would people feel comfortable going back to that winery even now ?
At the end of the day though I hope this is something that doesn’t catch on, not only does wine always taste better at the cellar door but, at the risk of contradicting what I said in point 3 above, by severing that face to face connection with buyers you run the risk of losing those long-term, loyal, repeat customers who will always buy your wines and talk them up to others. A quarterly email and a few Insta posts will only get you so far.
Bingo.
I think the costs to pour for freeloaders would weigh on you for one. Plus staffing, facilities etc. All costs. On the flip side, you get a much higher margin selling DTC, so that evens it out. I’ve had informal discussions with Hunter winemakers recently who’re happily embracing even more structured cellar door experiences – fully paid, sit-down wine flights with matching food that is both profitable AND encourages sales
Ultimately if it’s a business decision based on costs vs return then I totally get it. But if the cellar door is successful and profitable I can’t fathom why you do this…
I’m a fan of Tscharke, good wines at an attractive price point. I’ve also visited the cellar door just after it was completed, which was a highlight of my wine group’s visit to the Barossa. I found the decision curious as most family or small wineries likewise, have to manage the same juggle. I agree with you that it’s a critical brand & sales channel particularly for small producers.
From the message it sounds like it has become too much for Damian to manage. However instead of closing, why not hire a Cellar Door Manager & staff to manage it? Yes it takes time & effort to find the right people however if the economics work then surely it would be worthwhile? Or even reducing opening times from 7 days to Friday-Sunday/Monday to catch the majority of visitors. In relation to Simon’s point re the cost of tasting bottles, charging for tasting is a pretty widely used practice that tends to deter the tire kickers. Regardless, the decision has certainly achieved a huge amount of coverage for them…
With more local tourism due in 2021, because of Covid ,his decision maybe more of a personal one.
If you treat your Cellar Door like a sales hub, you can organize the marketing, sales, logistics through it. Thus offsetting costs.
In my local area, the Yarra Valley, a lot of wineries only open Thurs- Sunday, maximising visitor numbers.
Did a trip to the Yarra Valley before xmas, to three wineries and all had seated booked tastings. The Cellar Door Staff, told me they preferred it, and the wineries, felt it generated more engagement & sales.
Plus they charged for the tasting which is correct.
It maybe Damien will, re-open his C/D at some point..
As a long time Tscharkes customer and cellar door visitor, it’s interesting to read the comments. All too many times have I gone to by one of my favourite Tscharkes drops (at the cellar door or online) only to find it has sold out. It was one of my favourite cellar doors to visit, but I won’t be put off buying his wines by not being able to go there to taste. Indeed, I’m probably more likely to buy a greater variety each release now I can’t sample them before buying – my samples will now just be bottles I have bought. Sure they will miss out on some new customers, but it wouldn’t surprise me if he’s crunched the numbers and that repeat business will see him through for a long time. Goodness knows we’ve got many of our friends onto ordering from them just by serving their wine at dinner parties.
I’ll miss the place, but with all the restrictions that are likely to stay in place for quite some time, it’s not the same, and as long as he keeps producing wine I’ll be happy.
All very good points presented Andrew and the opposite perspective from Simon.
Simple economics play a part. If they can sell all their wines without the cellar door open then its a smart move to save the cost. If not then have to think about how you expand the customer base and the cellar door is a very good way to get long term customers.
I’ve visit the fabulous Tscharke Cellar door 5 times, in fact I am a VIP there with my special Underground Pass. Part of being a tourist is exploring new areas and making a relationship with the winemakers. This would never happen if I simply bought wines at the bottleshop.
A lot of speculating and pontificating about the rationale. Pick up the phone and call them to see if they’ll provide an answer. You call yourself a wine journalist – well do some journalism and a bit more research beyond writing in-depth articles based off a Facebook post you saw last week.
Did you actually read my article before commenting Doug or just fire off that comment for funsies?
You clearly didn’t read it properly because, as I stated, I don’t know the rationale for this decision. I’m not privy to any of the business decisions and they’re not specified. Instead, I’m showing reasons, backed by stats, about why I think this is a backwards move.