Thursday, November 8, 2012

The role of tourism in the local wine industry

At first glance, wine and tourism may not seem to go hand in hand. The traditional model for wine distribution is through what's called the three-tier system. Since the repeal of Prohibition in 1933, the sale of alcoholic beverages has been dominated and controlled by this model. Wineries sell their wine to a distributor and the distributor in turn resells their portfolio of products to retailers. One of the purposes of this system is to supposedly act like a safety net and protect the general population. In theory, consumers and retailers are unburdened with pressure and coersion from producers. However, in the social media age we now live in, consumers are increasingly more interested in building relationships with the producers whose products they buy. Many wineries have figured this out and are very active via social media channels. Other wineries and wine regions have also become more active in promoting enotourism and developing their direct to consumer sales channel.

Enotourism, or wine tourism, focuses on getting travelers to visit, taste and purchase wine at the source. While it may not seem like a novel idea to most wine enthusiasts, wine tourism is an important activity in the industry, yet has room to become even more important. Most people buy wine at a retail store or a restaurant and that is the extent of their relationship with a winery. A handful of consumers may actually buy wine directly from the producer via their website or mailing list. Actually visiting a winery is not something a majority of wine drinkers do regularly. Developing the wine traveler segment is key to many wineries' business models. Next week, I will be in Santa Rosa, CA to attend the second annual Wine Tourism conference to gather with 200 or so other people looking for ways to enhance the role of tourism in the wine industry. I attended last year and it was very interesting to hear about how wineries in California, New York and Oregon are approaching the tourism market.

In Colorado, tourism is an important sales channel for many of the wineries, but it can also be a double-edged sword. Of the 100+ wineries in the Centennial State, only a dozen or so are sold through a distributor. All of the Colorado wineries are also licensed wholesalers and can sell their products directly to retailers, but many choose to not do so because of the exceptional hard work it takes for family-owned wineries to be successful. A majority of the state's wineries sell most of their wine out of their tasting rooms. This can be a successful model, especially when a small winery is located in a highly-visited wine region, like Napa Valley. Unfortunately (or fortunately depending on how you look at it), Colorado is not necessarily considered a destination wine region filled with bumper-to-bumper traffic with cars and buses filling tasting room parking lots.

In Colorado, most tasting room traffic is limited to the RV crowd of people simply passing through and perhaps looking for wines with a touch of sweetness. That's not to say consumers don't specifically travel to wineries here to seek out "premium" wine, just that the current tourist base is somewhat limited. The same crowd also visits Napa Valley. But Napa also attracts the type of consumer that is not afraid to spend thousands of dollars on a case or two of wine. I have rarely heard a Colorado winery tell me about an instance such as that happening in their winery. A three or six-bottle purchase is often a big deal. Some wineries are thankfully growing their (or just starting) wine clubs, but most still rely on just the drop-in traffic to sell most of their wine. Fortunately, the somewhat limited tourism foundation that currently exists implies that the potential for tourism growth is great. It will be interesting to see how much, if at all, Trip Advisor's Top Ten ranking of Palisade, CO as a wine destination will increase visitor traffic. Wineries need to to everything they can to drive traffic if they are focusing their sales channels on their tasting room. This brings me back to the first paragraph.

While many wineries in Colorado have decided that tourism is their priority, they cannot forget about the traditional model. Only a handful of Colorado wines can be found on retail shelves, and almost all of these producers utilize a distributor. Even fewer local wines can be found on restaurant wine lists. The blame for this does not solely reside on the wineries and some wineries have excelled in this regard. A few have even put all of their energy into the retail tier and have forgone the tasting room/tourist route altogether. However, the wineries who have been less successful (and the local industry as a whole) are going to have work hard to convince retailers and restaurants that they have been wrong to relegate Colorado wine to the bottom shelf at the back of the store or to exclude them from the list altogether. Most people still are introduced to new wines via restaurants and retailers. To reach those new customers (and there are lots of them) local wineries are going to have to start putting more energy (and expense) into developing these sales channels in addition to their own tasting rooms. What role do you think tourism should play in emerging wine regions like Colorado?

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