Wine merchant Luca Lobenberg is one of the top players in the German wine industry. He told Raffaella Usai why he has restructured “Good Wines,” how he is coping with the crisis, and where he sees new opportunities.
Luca Lobenberg sees the premium wine trade as not being in danger.
Good Wines LobenbergThe wine industry is undergoing a transformation. How is your company doing in this difficult situation?
Luca Lobenberg: It is always nicer to sail with a tailwind rather than a headwind. The positive thing is that we are not shrinking – and perhaps we are currently one of the luckier merchants. But we still feel the tension in the market. 2023 was not particularly rosy, but this year the growth has definitely stalled.
What impact does this have for you?
Luca Lobenberg: We can see quite well where we are hitting our limits. We are still gaining new customers, but the order frequency from existing customers is decreasing. But we need new customers to compensate for the declining sales from existing customers. We already noticed this trend last year. And we had set the goal for 2024 that the sales from existing customers should remain at the level of the previous year. Unfortunately, that has not materialized.
Have you had to lay off employees?
Luca Lobenberg: No, we are quite solidly positioned. But we have a team that is focused on growth. We have many young people who want to develop further. We worked hard on that during the Corona period. Therefore, it is frustrating when, despite many good ideas and increasing new customer numbers, the overall sales stagnate, even though we have top specialists in the company.
You adjusted your operations during the Corona crisis?
Luca Lobenberg: Before and during. I returned to Bremen at the end of 2018. At that time, we were a solid medium-sized company and had around 15 million euros in sales – with good development, but without significant growth. My father and I thought about the future; he was 60 at the time and wanted to know if I wanted to join the company. I was excited but wanted to shake things up with a great young team. In my previous job at McKinsey, I had dealt a lot with e-commerce and digitalization. I wanted to bring that experience in.
So you focused more on online trading?
Luca Lobenberg: Yes, because before we were a wine merchant who also had a website. We were definitely not an e-commerce company. So we went full throttle and turned everything around. In the year before the Corona crisis, our sales had already grown by 50 percent.
And during the Corona period?
Luca Lobenberg: During the lockdown, we could no longer fulfill all orders. Existing customers had priority with us, so we completely stopped acquiring new customers during this time. Our warehouse simply wasn't big enough. We had a three-shift principle, so we also worked at night. Everything suddenly became too small for our dimensions. We didn't have enough staff, too little space, and the website wasn't designed for that traffic. So we invested and expanded the company.
You benefited enormously from the Corona crisis.
Luca Lobenberg: Not entirely. Sure, we were able to show good sales through strong existing customer growth and thus grew to 50 million euros in sales in 2023, but it would have been more sustainable to gain more new customers to achieve longer-term growth. With the normalization after Corona, existing customer sales are now declining again, and new customer sales only compensate for this. If we could have served more new customers instead of existing customer sales during the Corona crisis, we would be larger today.
Luca and Heiner Lobenberg share the management.
Good Wines LobenbergDo traditional wine shops still have a chance of survival?
Luca Lobenberg: Our franchisee could not survive without a few private high-end regular customers and the gastronomy he supplies. In addition, the rent is low, and the furnishings have long been depreciated. Today, no one can get by in the rather low-margin premium wine business with walk-in customers alone.
Have you increased your marketing budget in recent years?
Luca Lobenberg: Proportionally to sales, no, but absolutely, yes.
That means you are now relying on different strategies. One of them is the wine club. How does it work?
Luca Lobenberg: The wine club is an important customer retention tool alongside the comprehensive content in the shop, the entire customer experience, and the regular mailings. We have many wines in our range that are only available in limited quantities. We work with an automatic limitation system. Regular customers have priority. If someone is a member of the wine club, they have a greater chance of getting rare large growths, such as Morstein from Wittmann or Hermannshöhle from Dönnhoff. On the other hand, as a member, there is a discount, except for German wines and those available by subscription.
Why not on German wines?
Luca Lobenberg: Because the prices of German wines are so tightly calculated. To be honest, many German winemakers have not yet fully understood the principle of distribution through trade. They usually do not give the dealer large discounts, and the margin is then very small. Our prices for German wines are comparable to the farm gate prices.
So the margin on foreign wines is larger?
Luca Lobenberg: In the premium wine segment, the margin is generally smaller than with mass goods. With a retail price of eight euros net, you can assume that the purchase price is a maximum of three euros. Most German winemakers who work artisanally are out of this segment. That is why we work with lower margins and higher-priced products.
What is your entry price?
Luca Lobenberg: In the mass market, it starts at around twelve euros. And German wines at this price are rather rare for us.
Wines from the Mosel are currently less in demand.
123rf.comWhich price segments are performing better: premium wines or the entry category?
Luca Lobenberg: Everything is performing slightly less proportionally. It is not that one price category is disappearing. In times of crisis, people pay more attention to money, even those who could afford it. No one is in a celebratory mood right now. We are at the end of people who make impulse purchases. Many customers have their cellars full of wine, and the desire to acquire more is currently not very high.
Especially red wines are currently the losers in trade. Can you confirm that?
Luca Lobenberg: No, I cannot confirm that for us. Market analyses and statistics usually consider the mass market. You have to look at the premium sector separately.
How is the demand for Bordeaux wines? Is that a concern?
Luca Lobenberg: Not at all. If we see a slight decline in sales this year, it is mainly because 2022 was a stellar year in Bordeaux. The 2023 vintage, which in my opinion is a real bargain and offers top quality, will generate less revenue than the previous year because prices have fallen. This year, for example, I can buy a Pontet Canet for 91.60 euros. It is now at the price level of some top German Pinot Noirs. The upcoming vintage will also have a hard time because the Châteaux have significantly lowered their prices in a qualitatively high vintage. But there are still many and also new customers who subscribe.
Are there origins that are no longer performing well?
Luca Lobenberg: Yes, we currently see a weakness in the Mosel. We are trying to understand that. We have all the top producers in our program who make great wines. But the large growths from the Mosel are the least in demand despite their comparatively low prices.
How is the business with private bottles? Are more and more wine lovers wanting to part with their old treasures?
Luca Lobenberg: With the very expensive Burgundies, we notice a reluctance, but that reflects the general Burgundy trend. The majority of those selling through this platform want to part with wines because they are either too old or they have inherited their cellar stock and do not drink it themselves. Some have also changed their preferences.
Especially young people are reducing their alcohol consumption. Are you losing customers?
Luca Lobenberg: We are no longer dependent on the target group over 60 for a long time. Our largest new customer cohort is between 30 and 40 years old. The most profitable year of birth is 1980. That is not old for premium wine. I see the younger generation absolutely positively.
So you look optimistically into the future?
Luca Lobenberg: Yes, definitely. My father helps me a lot with his attitude because he has already survived several crises. The dirges for the wine industry have been sung before. In the premium sector, it is indeed more about the economy, inflation, and regression.
In 1992, Heiner Lobenberg turned his passion for wine into a profession and founded the wine trade "Good Wines" in Bremen. Today, his company, with a selection of around 900 wineries, is one of the most important sources for top wine in Germany. Since 2019, he has shared management with his son Luca.
© Raffaella Usai