Stories From the Wine Shipping Report You Need To Know
If you ever wanted a precise explanation as to why alcohol wholesalers and some retailers so vociferously opposed winery-to-consumer shipping throughout the 90s, 00’s and up until today, all you have to do is take a cursory look at ShipCompliant and Wines & Vines’ new winery-to-consumer shipping report.
According to these sources, winery to consumer shipping now annually account for $1.35 billion in sales. But what’s remarkable is that those sales represent 8.6% of the total American wine retail marketplace and looks to be set to rise to represent 10% of retail sales in a couple years assuming all goes well.
If my calculations are correct, this $1.35 billion worth of wine shipped from wineries to consumers would have amounted to something in the neighborhood of $225 million in revenue for wholesalers had these wines been sold through wholesalers and the three tier system as they all along claimed was a sufficient channel to get wine to consumers.
Of course the truth here is that not very much of that $1.35 billion in wine would have ever been able to find its way into the the three tier system as much of it comes from brands that wholesalers have never demonstrated they want much to do with. So, if they had their way,much of this wine would not have been sold by wineries, would not have been sold via the three tier system and would not have been available to consumers.
The release of the ShipComplaint/Wines & Vines is cause for celebration among wine producers, grape growers, states that need tax revenue and, of course, consumers. It demonstrates that what was once considered an iffy paradigm for wine sales is in fact growing into a powerhouse of a sales channel, despite efforts to kill it in its crib.
The ShipCompliant/Wines & Vines Report serves to remind us of and point us to some very important facts:
1. The 2005 Granholm v. Heald Supreme Court Decision was a game changer for wineries and consumers. Without this close 5-4 decision ruling that states may not discriminate against out of state wineries that retail their wine, direct shipping laws would have been largely dictated by what wholesalers thought best for consumers.
2. The two primary common carriers of wine, UPS and FedEx have profited substantially from winery shipping and look to profit substantially more as the shipping channel continues to grow. Their cooperation with winery shipping advocates is not only necessary but probably owed.
3. States not currently allow wine to be shipped into their state can now fairly easily see the kind of tax revenue they are leaving on the table. For example, Massachusetts, which has a population roughly equal to Washington State can expect, based on information in this report to see $50,000,000 worth of wine shipped to that state, resulting in over $3,000,000 in tax revenue—were its legislators to change the law to allow direct shipping from wineries. Pennsylvania stands to gain far more than Massachusetts in tax revenue if it opened its borders to direct shipment of wine—even if it applied its bizarre 18% “Jonestown Flood” tax to shipped wine.
4. Alcohol Wholesalers Were Chicken Littles. In a brief to the Supreme Court in 2004 asking the court not to overturn discriminatory direct shipping laws, the Wine & Spirits Wholesalers of America were very blunt: “Direct shipment of wine would sound the death knell of the longstanding liquor distribution system.” Here we are, $1.35 billion later and somehow the “longstanding liquor distribution system” is alive and well.
5. California has challengers in the direct shipping game. According to the ShipCompliant and Wines & Vines report, California wineries are responsible for 83% of all wine shipments, leaving only 17% to wineries outside of California. But if you look into the report you see that wineries outside of California increased their total wines shipped, the value of wines shipped and their average price per bottle of wine shipped at at far greater rate than California wineries, including those in Napa and Sonoma.
The direct shipment channel has a ways to go to make it truly a consumer friendly channel. More state need to open to winery to consumer shipping. There remain very burdensome regulations in some states that make it difficult for wineries to comply. And of course wine stores (retailers) are restricted to legally shipping to only 14 states resulting in the shipment of imported wines illegal for the vast majority of the population and leaving millions upon millions in tax dollars on the table or under it.
Wark Communications was initially consulted on the substance of the ShipCompliant/Wines & Vines report