Buy Your Wine Direct From the Winery

How wine is sold is subtly changing. Until recent history wine was sold through an arcane system known as Three Tier Distribution that came about when prohibition ended. The winery or brewer or distiller has no choice in how they get their product to market. Gradually however, this is changing as states approve wine being shipped directly from the winery to the consumer.

The 2016 Direct-to-Consumer (DtC) wines sales report has some interesting information. It confirms that wineries are focusing more of their strategies on marketing their wines directly to the consumer. In fact, this method of distribution isn’t just for the smaller wineries; the large wineries are now focusing more attention on this outlet. Greater than 5 million equivalent cases of wine were shipped direct to the consumer and it wasn’t limited to less expensive wines either. Sonoma wineries had the highest grow rate in 2016 of nearly 30%.

Wines and Vines has a 2016 database of 9,069 U.S. wineries that they have divided into 5 categories based upon number of cases produced annually. The largest combined categories are called Limited and Very Small producers, each producing up to 4,999 cases per year. These two categories represent 79% of all wineries shipping direct to consumers, roughly 3,600 wineries in each category. If Small Wineries (totaling 1,570) are added to the prior two categories they represent 96.4% of wineries in the U.S. The take-away from this information is that wineries each producing 49,999 cases of wine and less annually, while selling DtC, have a significant market presence.

The five million cases of wine shipped DtC in 2016 represented a 17% increase over 2015. This was made up of single or multiple bottle shipments. “The value of 2016 shipments rose 18.5 percent over 2015, topping $2 billion for the first time and culminating at $2.33 billion”, as reported by Sovos ShipCompliant/Wines and Vines. The average price of a bottle of wine shipped to the consumer in this format was $38.00; far from the $15.00 per bottle of wine making up the greatest number of bottles shipped. Jon Moramarco, Managing Partner of BW 166 LLC reports that the average bottle of wine sold “off- premise” was $9.29.

This points out that consumers are not shy about buying expensive wine on-line/phone and receiving the wine via FedEx, UPS or contract shipper. With the number of wineries growing at approximately 5% annually, most are in the limited and small producer category, therefore it would appear they are the group most receptive to reaching out directly to customers. With DtC shipment representing 8.7% of domestic wine sales there is plenty of room for growth.

The very large wineries, in 2016, represented 13% of all DtC shipments which was a 183% increase over 2015. However, it appears they did this by reducing the price of their shipped wines. The average price for the wine shipped by the 64 largest wineries (producing >500,000 cases) fell to $16.00 per bottle. Obviously, there is some elasticity in the wine business. There are some exceptions however, some Napa and Sonoma wineries did raise prices and still realized an increase in shipment and therefore values.

The varietals that have seen the greatest increase in shipment volumes since 2011 are: Rosé (+259%), Other White and Other Red (+174% and 172% respectively) and Pinot Gris (+101%). Cabernet Sauvignon and Red Blend wines are still the stellar performers in annual increases in DtC sales. The Red Blends are surprising because they are relatively new for people to try.

In all the good news for direct shipments to almost all states (expect Utah, Kentucky, Alabama, and Mississippi) all regions/states producing wine saw increases. Sonoma County’s 2016 surge is worth noting – “to the tune of $100 million over 2015 – was so impressive that, despite the region representing only 18 percent of the total dollar value of DtC shipments, Sonoma County accounted for 27% of the $363.6 million added to the DtC shipping channel during the year,” as reported by Wines and Vines.

Direct to Consumer, as a channel of distribution is becoming more important to a winery’s success. Yes, technology is an important tool to selling direct, but the ramifications on reducing costs cannot be over stated. This channel allows wineries to respond in real-time to changes in markets, need to promote products; even promoting products geographically. Shipping costs can be less than the discounts required to distributors.

If used correctly, DtC marketing can increase cost effective sales, reduce marketing costs and create brand loyalty by the wineries knowing their customers in more depth.