The Embrace of Direct Wine Shipping Has Just Begun

shippingreport2013Here’s what we know:

Today the direct to consumer wine shipping sales channel is the most vibrant. Bar none.

According to the latest ShipCompliant/Wines & Vines 2013 Direct Wine Shipping Report released Tuesday, the value of wine shipped from U.S. wineries to U.S. consumers was greater in 2012 than the value of U.S. wine exports. For years, the export market for U.S. wines has been cheers as an avenue that provide considerable opportunity and growth for the industry.

For years, the federal government has provided financial aid to encourage increased wine exports.

Just this month, California Governor Jerry Brown put California wines front and center during his trade mission to China.

Yet, now we discover that not only is the export market for American wine growing at far slower pace than the direct shipping marketplace, but also the direct shipping channel is greater in size than the export sales channel.

The value of winery to consumer shipped wines is just over $1.46 billion accounting for 3.17 million cases of wine. Keep in mind, these figures only account for wines shipped from wineries to consumers. This is not an accounting of the entire American wine shipping market, nor the entire Winery direct sales channel.

Winery Direct sales also include those wines purchased at the winery and carried out of the winery by the customer. It’s not hard to believe that the value of that activity at American wineries dwarfs the value of winery to consumer shipping.

But going back to winery shipping, consider that the ShipCompliant/Wines & Vines report for 2012 sales does not take directwineexportsinto account the value of wines shipped direct from wine retailers (brick and mortar retailers, Internet retailers, auction houses, wine-of-the-month clubs) to consumers. There is no data available for this particular channel. However, just one online retailer, Wine.com, has reported selling $60 million in wine in a single 12 month period.  And this is but a fraction of the amount of wine shipped by retailers to consumers annually, given the proliferation of wine retailers that ship wine direct to the consumers.

It is not unreasonable to believe that the size of the overall wine shipping marketplace (including retailer shipping) reaches north of $3 Billion annually.

Now, keep in mind that the majority of growth in the direct to consumer shipping channel has occurred over the past eight years since the 2005 Granholm v Heald Supreme Court ruling. And consider still that in that time, various states have only opened slower for winery to consumer shipping. Consider further that even today only 15 states and the District of Columbia allow Retailer to consumer shipping.

Given this, you have to conclude that wine consumers in America have embraced the idea of having wine shipped directly to them (from various sources) with gusto and there is little sign they are ready back away from this embrace.

I’m of the belief that the room for growth within the direct to consumer shipping channel remains tremendous. Americans continue to indulge happily in online and mobile sales, creating a more and more firmly established proclivity to purchase wine remotely, and to receive the wine via shipment. Additionally, a few more states like Pennsylvania and Massachusetts will open their borders for winery to consumer shipping. And finally, retailers will eventually overcome the opposition posed by wholesalers, old school wine stores and some wineries to their own legal right to ship wine.

Is it possible that over the next ten years the total value of the consumer wine shipping channel (winery and retailer) could reach upwards of $8-10 Billion? Yes, it is possible assuming that legislative blockades and special interest concerns to not block progress in this channel. Additionally, there is every reason to believe that technological developments will make the online and mobile purchase of wine more convenient and easier to accomplish.

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7 Responses

  1. Terroirist: A Daily Wine Blog » Daily Wine News: Energy Center - April 19, 2013

    [...] Tom Wark offers his thoughts on the latest ShipCompliant/Wines & Vines Direct Wine Shipping Report.  [...]

  2. Martin Cody - April 19, 2013

    The internet combined with society’s desire for simplicity, has devastated numerous monopolistic industries already–newspaper, print, advertising, movie, publishing, shopping, etc. It will now quickly do the same to three tier monopoly controlled and ancient alcohol distribution system. No longer will 6-8 enormous companies control 50-70% of all wine in the U.S. The consumer should and will be able to order from their tablet and have the wine delivered to their door. Looking forward to the future.

    Cheers,
    Martin

    Martin A. Cody
    President
    Cellar Angels, LLC

    • Rob McMillan, Silicon Valley Bank - April 19, 2013

      Nice piece Tom. Well written. Thanks.

      Martin, I’m not sure I can agree with you. Maybe a little bit if you define “quickly” as something longer than quick.

      I don’t believe for a second the 3-Tier System is going away. If anything, the systems that are going in to place now that help skirt traditional 3-Tier by working within that system to accomplish direct shipping, those efforts only strengthen the foundation of the existing legal system. Secondly, there is an economic reality to large distributors and large producers. They need each other for logistics and there is no way those companies take to a direct model. So ignoring the legalities and disruptive power of the interwebs, as long as their is an economic reason for Distribution, it will continue to represent a large percentage of the volume of wine shipped in the US. You can’t be arguing for taking wine out of grocery stores and that isn’t going to get to your store by a direct to trade model.

      What most of us in the business argue for is a path to market. Today the distributor lobby wants to see legislation passed that protects them against direct shipping, but they really don’t even want to engage with most of the producers who would want to ship direct. Its that economic reality that is helping the growth in direct, but in the end ….. depending how you define quickly ….. we will end up with a distribution system that is an economic necessity, and a direct model that is also an economic necessity. Most of the volume will continue to go through distribution. At least thats how I see it.

      Rob McMillan
      Founder
      Silicon Valley Bank Wine Division

      • Rob McMillan - April 19, 2013

        * sorry for the pour grahammar in the above post.

  3. Robert Gregory - April 19, 2013

    As usual Rob is correct….

    Technology is enabling third part marketers to effect something that resembles Direct to Consumer by working with forward thinking members of the 3T … we call it the “Noble Tier!”

    Not withstanding the recent decision declaring the Ship compliant marketplace approach illegal in New York.

  4. Michele Boyer - April 22, 2013

    Hello Tom!

    A great and well-written article. Thank you!

    I am a direct to consumer strategist specifically for wineries and I really appreciate you writing on this subject! I absolutely don’t think the 3-tier system is going anywhere, nor should it but there is a large demand for and interest in direct to consumer sales.

    This consumer interest is an amazing opportunity for wineries to keep more of their dollars in their own pockets, while creating real connection with their customers and creating loyal brand ambassadors (who repeatedly spend money with them) while taking some of the “pressure” off of the distributors to take and sell more wine.

    There is room for all channels! It’s an exciting time.

    Thanks again for the excellent content.

    All the best,
    Michele Boyer
    Owner/Chief Consultant
    M&B Concepts

  5. VinoShopping - June 24, 2013

    Having a wine shop online is easy. Selling the wines you offer… it’s more difficult!


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