On this episode of the “VinePair Podcast,” hosts Adam Teeter, Joanna Sciarrino, and Zach Geballe discuss why the boom in direct-to-consumer and online alcohol sales of 2021 and 2022 failed to create a new landscape, with those businesses and channels suffering steep declines in 2022. Plus, the three talk about the consequences of drastic price mark-ups on restaurant wine lists. Tune in for more.
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Adam Teeter: From VinePair’s New York City headquarters, I’m Adam Teeter.
Joanna Sciarrino: I’m Joanna Sciarrino.
Zach Geballe: In Seattle, Washington, I’m Zach Geballe.
A: It’s the Monday, VinePair podcast. Zach, what have you been drinking, man?
Z: I’m back, baby.
J: You’re jumping right in.
A: Yes, might as well.
J: He’s back to drinking.
A: I know. I wasn’t going to acknowledge it.
J: That’s nice for you.
A: I was just going to be like, “What’s he been drinking?” and hoping you didn’t say coffee.
Z: Joanna, when it’s your turn, I want to know what you’re most looking forward to drinking, but I will answer Adam’s question first. My return to alcohol consumption was I had a drink that I’ve made a couple of times during January for my wife that I’ve been meaning to try for myself. It may already exist. It’s possible that I saw this somewhere and I’ve just forgotten about it, but I’m calling it, I think the Golden Negroni is where I’m going with the name, possibly like the Amber Negroni, but I think it’s more gold in color. It’s equal parts of gin, Suze, and Cocchi Americano Bianco, a white vermouth. Not a dry vermouth exactly. It’s got a little sweetness, but the Suze is like another bitter liqueur that’s again, almost neon yellow color. I’m not sure quite where its color comes from. It is very striking.
J: What’s our white Negroni, though? Isn’t that a white Negroni?
Z: Is it? I guess I’m just maybe co-opting. I feel like a white Negroni, though — is it Suze? I thought it was a-
J: It’s Suze.
Z: Oh, no, my brain is not working. I said Suze, but I actually meant Strega. I am saying the wrong thing because I’m looking at-
J: Oh, there you go.
Z: Sorry. Gin, Strega, which is an Italian herbal liqueur that is like yellow Chartreuse, and Cocchi Americano.
Z: No. Yes — sorry. Confusing myself over my Italian liqueurs. You can tell I’m out of practice apparently. It was tasty. Then my cousin came over last night for dinner, who’s a wine salesman and he brought over some open bottles of Etna Rosso, a little bit of just a village Burgundy, some Champagne. It was nice. Tasted a few things, remembered that after not drinking for a month, I need to take it easy because it definitely was a little rough, the 3 a.m. wake-up with my daughter. Anyhow, it’s nice to be back. Next time we talk, I’ll be in Hawaii-
Z: -so I’ll have some things to say about that, about drinking there.
J: That’s exciting.
Z: Maybe when I’ve had something more tropical.
A: How long are you going to be in Hawaii?
Z: We are going to be there for 10 days, somehow. I have no idea how this is going to go. It’s our first trip with the kids, with both of them. It’s a long flight. It’s a long time to be back in-
A: How long is the flight for you?
Z: It’s a five-hour flight.
A: I’ve never been.
J: Me neither.
A: I feel like it’s so much easier for y’all West-coasters.
J: It is.
A: Yes. I’ve never been. You have not been either, Zach?
A: As you said, you never been either?
Z: No. I’ve been. I’ve been to Hawaii, but I was a kid.
A: Oh, you’ve been?
Z: Yes. Hawaii is to the West Coast like the Caribbean is to the East Coast. Obviously, the Caribbean is closer even in New York, but it’s the tropical place you can go that is far enough away that it feels really special. It’s a lot easier obviously to go to Hawaii from Seattle or California or whatever than it is on the East Coast. That, I think, makes a big difference. I was looking at a globe with my son because he wanted to see where we’re going and I was like, it is actually way the f*ck out there in the Pacific. I had forgotten how far it was.
A: It’s just in the middle of nowhere. Because the person will be like, “Is the water cold, or is it warm?” The Caribbean — the whole thing is that it’s very warm water.
Z: You’re pretty close to the equator, so the water is generally quite warm. I believe you have a Pacific current of sorts. Not quite the Gulf current, but similar deal that brings warm water in. Again, I was 12 the last time I was there, but I went swimming in the ocean. I was very comfortable.
J: Nice. That’s-
Z: Looking forward to it. Anyhow, Joanna, speaking of looking forward to it, what are you most excited to drink when you are able to again?
J: I’m most excited to have a full serving of alcohol.
A: Any? That’s it?
J: No. I’ve had sips and tastes here and there over the course of my pregnancy, but I think there have been a lot of times recently where I’m like, “I really wish I could just have a bourbon right now, or just a glass of Champagne would be really nice.” I think in terms of a cocktail, I’d like to have a Manhattan on the rocks. That might be the first thing I drink when I get home.
A: Nice. I love that. I love that for you.
Z: A bottle of Champagne.
J: I love that for me, too, and Champagne.
Z: You want Champagne in the hospital room?
J: Yes, that, too.
A: Do you know that’s a thing at certain hospitals?
J: That what?
A: At Greenwich Hospital, where my friend Ryan was the head anesthesiologist for a while before he couldn’t take it anymore, the way that they would get doctors to go there, especially from the Upper East Side, is they offer the mother, after birth, the package is, a steak dinner with a bottle of Champagne.
J: That’s amazing.
A: I was just — that’s ridiculous. Apparently, it’s a very expensive hospital, but he was like, “Yes, man.” You would have moms from the Upper East Side that would come up to deliver in Greenwich because you get the steak dinner with the bottle of Champagne and like the private room and all that stuff. I was like, “Woah. That’s a lot.”
Z: Yes. They brought sparkling wine in with both our kids.
J: That’s nice.
Z: We were not-
A: -not supposed to do that.
Z: We were not technically supposed to, but that didn’t stop us. I was like, they’re not going to kick you out of the hospital, so whatever.
A: I love it.
J: I feel like I’ll have to take it easy.
J: Like you said, Zach.
A: This has been a lot.
J: Adam, what about you?
A: Okay, so, well we had our staff party last week.
J: Yes. I did have some sips of things there.
A: Yes. Gage & Tollner, obviously known for their classic cocktails. The three cocktails I had were the Perfect Martini, the Vesper, no, the Gibb — sorry.
J: The Gibson.
A: The Gibson. I always get them confused. The Gibson and the Daiquiri. Then we also had, at the end of the meal, everyone got around of Grasshoppers, which was delicious. Like mini Grasshoppers, kind of.
A: They came out in like half wine glasses I think.
J: I thought that was a cocktail glass.
A: It was a full cocktail.
J: They were very delicious.
A: They were delicious. They’re like literally liquid Thin Mints. That was good. Then this week I went out to dinner at Corner Bar, which is Ignacio Mattos.
A: New restaurant in a very trendy hotel in the Lower East Side. I’m not going to call it the neighborhood that people are trying to call it.
J: It’s like Chinatown.
A: It’s Lower East Side/Chinatown. It is not a square with the first name that rhymes with Times. It’s just not. It’s super annoying. First of all, the place was f*cking fire. Just an amazing restaurant. I had a bottle of Elvio Cogno Barbaresco with the main-
J: Your fav.
A: It was the best. With the main course. I will say that like also, huge wine list, to piggyback on what we’ve talked about from last week.
J: Oh, yes affordable.
A: Extremely expensive. I would say the majority of the bottles’ average was $150. There were a few bottles in the under $100 range. Not a lot. It was an expensive list. That is a trend in the majority of New York. The glasses were all $20 and over, and the cocktails were $18.
J: This is a very hot restaurant in New York City right now. Guess who is probably not buying bottles of wine there?
A: Millennials. All the people who are going because they want to go because everyone’s covering it and because they still can afford the food. I was pretty blown away by how expensive the wine list was, but that’s the trend here. It’s just getting more and more and more expensive. You don’t find these sections. It’s funny because we are wine people. All of us love wine. We know there are regions of the world that make these wines that I feel like a lot of people in the wine industry right now — this is a little tangent we’re going to go on on this podcast — pretend don’t exist. Right, Zach? It feels like everyone discovered Beaujolais and decided that was cool and that was worth it to be the affordable region. It’s not the only one. Now that Beaujolais is super expensive, I don’t get why there’s not more Spanish wines on these lists or why there’s not more wines from certain areas of Greece or certain areas of — like the Pelavergas and stuff from Italy, they’re not there. I don’t understand. Instead, it’s like lots of Burgundy, huge sections of Burgundy everywhere. Then there’s a decent amount of Etna now on a lot of lists that I’ve seen in New York. Then they’ll have the Barolos, Barbarescos, Super Tuscans, Brunellos, Bordeaux. It’s really interesting. I don’t know what’s happening there at all. I really don’t.
J: It’s a margins thing, right?
A: I think it has to be.
Z: I think it’s this weird thing where the attitude seems to be like, “Oh, you want to drink wine? Well, f*ck you. You’re going to pay for it.” It’s very strange. Again, this is too big of a tangent, I think, otherwise, it’s going to take over the episode, but I just want to say one more time, this is such a f*cking problem. It’s a problem for restaurants kind of, but it’s like the wine industry needs to start having frank conversations with these kinds of restaurants about like, “Okay, great, you want to put our wine on your list, but why is this wine that is wholesaling to you for $27, why is it $130 on your list? What the f*ck are we doing here? This is not good for anyone.” Yet it just seems to be a conversation that is not happening. Again, like I said, the attitude seems to be punitive to people who like to drink wine. When you start charging more for a glass of pretty innocuous wine by the glass and you’re like, custom cocktails are less expensive, something has gone wrong. We’ll talk more about it on a future episode, but something has gone terribly wrong.
A: Yes, totally. This episode we want to talk about is just in the vein of what’s happening in the world, economy, et cetera. I thought what would be really interesting to discuss is, because it’s being discussed in a lot of places, the now-seen effects of the mirage of Covid. I’m not saying that Covid was a mirage, right? I’m not saying that what we all went through was not real. What I’m saying is there were a lot of behaviors that happened because of COVID that caused a lot of money to rush in, and those behaviors did not stick. The biggest after-effect I think we’re seeing is DTC, and DTC in all of its forms. Not just alcohol. We’re seeing this in on-demand delivery of household items in all the DTC startups.
J: The Gopuffs.
A: Yes. That are all struggling right now, that all expanded massively, that are why tech is laying off so many workers. That is why so many of these premium mediocre, for those of you that are regular listeners to the pod know what that is, brands are laying off people and going out of business. I think what everyone forgets is that we were at a time in our culture where everyone was really scared to go out of the house. Of course, you were more than willing to buy things online and have it delivered because it felt safer to do that and have it dropped at your door than to brave going out into the world and trying to get through Target.
J: Safely. Yes.
A: I think what we are seeing is that just because something can be DTC doesn’t mean that it should be DTC. I think that that’s especially true for alcohol. What we’ve always talked about is that there’s this really interesting thing about alcohol where one of the things people like is shopping for it in real life. They like going into the store and for all of the problems we say exist, people are intimidated. They don’t want to talk to the person on the floor. They don’t want to feel like they’re being judged. They all still go and buy alcohol IRL. A lot of that is because, for as many issues as we say there are in the three-tier system, and there are a lot of them, there’s a lot of — it is very easy to find alcohol in our country. It is very easy to buy it. It is very well distributed. Maybe not the crazy grower Champagnes, but for the most part, it’s very easy to find. The idea that everyone’s going to change those behaviors and all of a sudden start buying the bourbon you can find everywhere, with maybe the letter J and the letter B in its names online, is not going to happen. You see a lot of companies now pulling back. I think that that’s something that probably needs to happen a little bit faster in our world is we need to start thinking more about how the average consumer behaves because the average consumer doesn’t see a commercial and then go online and immediately buy the liquor or immediately buy the wine. They walk around, they encounter the brand multiple times through marketing, reading about it, maybe seeing it in a restaurant or whatever, and then the next time they’re in the wine shop, they maybe buy that brand. That’s how most people actually buy alcohol. I think that we need to try to, again, come out of that cloud faster so that we can adapt to what’s happening in the economy right now. I feel like there’s still just this huge concentration on direct-to-consumer that is never going to materialize for alcohol.
J: We have a few examples of it really not working. We were talking about this for House, and not being able to pivot outside of direct-to-consumer in a way that they could survive. I think that that seems to me to be the most traditional way that people are buying alcohol, is in real life.
Z: I think you have to remember too that not only were you talking about a mindset and a reality where people were afraid to go out the front door and certainly afraid to go into a store with other people, but also a reality where between the direct effects of Covid and some of the knock-on effects, there was a lot of panic buying. People were like, “I don’t know if I’m going to be able to buy the aforementioned whiskey that has a J and B in its name or whatever. What if the stores are out of everything? People stocked up. People at some point maybe were like, “I’m going to just reorder online, et cetera.” Then things didn’t go all the way back to normal right away, but people have adjusted, they’ve adapted, they’ve returned to certain pre-Covid behaviors in a lot of really meaningful ways. The other thing is, a lot of the DTC-specific brands were not really able to make a long-term consistent argument for themselves, because the other thing we’ve seen in alcohol that I think is true in a lot of other areas where DTC has failed and is not true in the areas where it has succeeded, is that people’s preferences and desires change. People don’t like being tied to getting the same product or the same set of products over and over again. I think, you think about another company that’s failed recently, or at least largely failed, Winc. Part of the problem is, in the end, people get sick of the same wine over and over.
J: Yes, that’s a good point.
Z: Even if some people want to drink mostly the same kinds of wine, and yes, there are definitely people out there who are super brand-loyal, maybe to even a specific bottle, but a lot of people who drink wine on the regular want to drink a few different kinds of wine, even if they fall into the same broad category. They might decide what they’re buying based on what’s on sale at the grocery store, or what has the coolest label, or what they saw an ad for, or what their friend recommended, or whatever, but they’re not going to just buy the same bottle over and over again. DTC services rely on a consistent subscription model to survive. I think there are perhaps some of the areas where DTC broadly can offer either enough variety, like perhaps some of the food services and the meal services can offer enough variety for people. Although, I think even those, you see people eventually churn through, and they’re just like, “Yes, it was nice for a while, but do I want the sesame chicken for the 15th time? Maybe I don’t. Maybe I want to try my own thing, or maybe I want a different food.” Certainly, wine, spirits, beer, they can’t offer that kind of variety for the most part in the DTC format. Without variety, people are going to turn to their traditional outlets. They’re going to turn to the grocery store, they’re going to turn to the wine shop, the liquor store, et cetera, because that’s where they can find, as we mentioned, the very well-distributed range of products that are available in every corner of the country.
J: I think also a lot of people realize, after a while, that those services are expensive.
Z: Once you get through the promo period, once you get through the first cheap order or two.
J: Yes. You’ve subscribed now, and you’re like, “Oh, this is very expensive every month.” I would also say, some of the other more successful — honestly, I’m actually not sure. How are the DTC mattress companies doing because-
A: A lot of them have opened a lot of stores and now there’s a lot of competition, so they all have really lowered their prices like crazy, because again, this is another thing that’s, it is hard to say to a consumer, “Please buy this without lying on it.”
J: What I was going to say is that I feel we saw a lot of success with those types of companies in the beginning because they’re one-time purchases, like cookware, mattresses. I feel like Casper was so successful at first because it was like, it’s a very convenient way to get a mattress one time, but you don’t have to go back over and over again like you would with alcohol.
A: I do. I think the thing too with alcohol is, you can see where DTC is failing with alcohol in the same way of — I don’t know if either you are familiar with Stitch Fix?
A: Stitch Fix’s stock is tanking.
J: It’s a rental?
A: No. What it originally-
J: It’s curated clothing.
A: What it originally was, was curated clothing for women who didn’t like shopping. You filled out a questionnaire and then a stylist met with you, and they would send you a box of curated clothes.
J: Of clothes, right.
A: Look, I love to shop. I really do.
J: You do?
A: Oh, I love to shop. Ask Naomi. I always have-
J: Adam’s a very fashion-forward.
A: I like to go into the store and look at the clothes. It’s fun for me. I like to browse. I may not always buy something, but I’ve always been into it. I think fashion’s fun, and I think going to a wine store is fun. I guess there are people that don’t like those things.
J: That experience.
A: They don’t like commerce. I love being marketed to. Market to me, it’s awesome. Stitch Fix was going to be that. That was the solve. It was for a very specific person. Then, in Covid, they launched all these other businesses. They were going to just do direct-to-consumer. You could just buy the clothes. Also, they were going to launch Stitch Fix for men, even though there was no research that proved the same large audience of men were out there who wanted to have their clothes picked for them and a stylist. They launched all these things and they tried to be all things for all people. I think that’s the same thing that you, unfortunately, see happening with a lot of the stuff that’s happening in DTC in alcohol is, we can sell all of our alcohol direct to consumer. We can sell our low-end and our high-end. When most research proves that the only DTC that works in alcohol is high-end expensive sh*t that’s hard to get. The winery only releases the bourbons that you would have to search for amongst many stores to find, the really rare single malt Scotches, and the super-high-end wines. That’s where DTC really works because that is actually convenient.
J: Yes, and you’re not going to pay shipping on the thing you can get at the liquor store.
A: You’re willing to wait for it. Whereas, again, the data that everyone always cites is — it’s over 70 percent or some crazy number like this — of people consume the bottle of alcohol within 24 hours of purchasing it. Whether that’s opening it and pouring just one shot or pouring through the whole beer or the wine, et cetera. Who is waiting two days or more for that Wine.com order? Nobody. Which is why Wine.com has had its own issues. I think that’s something that we just fail to think about when we think, well, everyone buys everything else this way, why would they not buy alcohol? Because the alcohol use patterns are different than, for example, waiting two days for your next toilet paper delivery. As long as you know you have enough toilet paper waiting for you. You don’t want to run out. That’s a real emergency. Those are the things.
Z: I come back to this over and over again. There are other reasons besides the thing I’m going to cite, but there’s a reason why the biggest direct-to-consumer, if you want to call it that, retailer in the world, Amazon, doesn’t sell much booze. They know that people’s purchase decisions don’t fit with their format. That goes to a broader like what happened to Amazon Fresh and why they bought Whole Foods instead. Like okay, we want to sell people food, but we know that the grocery delivery model is also tricky for the same reason. People make a lot of decisions in the moment when they’re in the space where the thing is for sale. They can pick it up, look at it, hold it, whatever in the case of produce, like scratch it or smell it or whatever. It’s really difficult to get them to shift that purchasing online. Beverage alcohol is in that same class. As you said, people don’t plan ahead. People don’t go online and say, “Oh, what am I going to want to drink in four days? Let me plan.” That’s just not how people function or not how most people function. Obviously, there are people who behave that way. There are people who go on Wine.com looking for a specific bottle of wine because they want to have it in seven days. Fantastic, but that’s not a big market. It’s very strange to me that there seemed to be a lot of pie-eyed optimism about the potential for DTC in everything. What we all had to acknowledge was presumably going to be temporary circumstances. Now, granted they weren’t as temporary as any of us would’ve liked, but you can’t really look at what was happening in June of 2020 and be like, this is where the future is. We’ve maintained some of those things and some of those things have informed what beverage alcohol will look like going forward. If the argument for the DTC brand or model wasn’t strong in February of 2020, or it was non-existent, I think it’s hard to make it now. Things didn’t change enough through Covid-
A: I agree.
Z: -to make those businesses super viable.
J: Are there a lot of DCT brands or even ones trying to pursue DTC now? I feel like I’m not aware of them. Maybe somewhat.
A: Oh, yes. I think there’s a lot of people at least who are still talking about it, and who are still thinking or who are still saying, we want to push this via Drizzly or we want ad campaigns that are DTC focused. Yes. You still hear about it a lot. Or talking about investing in online retail channels, things like that. Absolutely.
J: Like RTDs and things like that without distribution?
A: Exactly. Look, there’s an RTS that launched this past week that we got the press release for that said, “We’re already in 42 states and you can order us.” I’m like, “Who is ordering Via Corota RTS when they never heard of the restaurant in this RTS cocktail brand tomorrow?” It allows them to say they’re national immediately? There’s a lot of this. Look, that might not actually be that company’s ultimate goal. The ultimate goal might be, I don’t know, on-premise sales, but whatever. That has its own issues. I think this idea is still pretty prevalent. I was talking to a head of media at one of the larger alcohol companies. He was saying to me, in every single one of the brands he works within the company, they say like, “We want to do content and advertising that pushes to sales.” He’s like, “Okay, we can do that, but it’s going to cost four times as much as it would to just build the brand through great marketing because we’re going to have to pay for conversions that are massive because most people who buy alcohol don’t immediately buy alcohol upon seeing an ad for it.” That ad reinforces the brand to them over and over and over again until they happen to be standing in the shop and they remember the alcohol or the region or reading the story on VinePair about how amazing Schiava is as an alternative to — Schiava? Schiava, Zach?
A: How amazing Schiava is as an alternative to Beaujolais. Then they buy that when they finally are in the shop when they ask someone if it’s there. They don’t read that article and then say, “Cool, let me transact right now.” That’s what we want to believe can happen with DTC, and especially with alcohol. I don’t think it ever is, but those conversations for sure are still happening because, in Covid, there did feel like there was an immediacy. As Zach said, people were trying to buy everything as fast as possible because there was a fear things would run out. It’s like, “How am I going to get through this? I need cases upon cases upon cases of wine.” Most of that slowed down because people realized that they could go back to their normal way of consumption. I think that’s what we have to think about moving forward is, as we are entering this 2023 world, how do we talk to consumers in their normal way of consumption and not in this way that we think has changed the game when, actually, if you look at all of the fallout now happening, it’s proof that it hasn’t. We’re not going to have that permanent. We’re going to go back to the way things were, and that’s fine.
J: Well, for wine specifically, wine DTC sales volumes have decreased.
J: Dramatically since in 2022, even though we saw extreme growth in 2020 and 2021.
A: If you are a DTC consumer, let us know. Hit us up at email@example.com. If you have other thoughts also, share them with us. If you’ve got questions you want us to try to address in the future, please let us know. I’ll talk to you both on Friday.
Z: Sounds great.
Thanks so much for listening to the “VinePair Podcast,” the flagship podcast of the VinePair Podcast Network. If you love listening to this show or even if you don’t, but I really hope that you do, as much as we really do love making it, then please drop us a review or a rating wherever it is that you get your podcast. Whether that be iTunes, Spotify, Stitcher, anywhere.
If you are listening to this on a device right now through an app, however you got this audio, please drop a review. It really helps everyone else discover the show. And now for some totally awesome credits. So, the VinePair Podcast is recorded in our New York City headquarters and in Seattle, Washington, in Zach Geballe’s basement. It is recorded by Zach, mastered and produced by Zach. He loves all the credit. Keep giving it to him. Drop his name in the reviews. He’s going to love hearing how much you love him. It is also recorded in New York City by our tastings director, Keith Beavers, who is the managing director of the entire VinePair Podcast Network. I’d also love to give a shout-out to our editor-in-chief, Joanna Sciarrino, who joins us on every single podcast as our third and most important host.
Thank you as well to the entire VinePair staff and everyone who’s been involved in making VinePair as special as it’s become. Thanks again for listening and we’ll see you next week.