What it Takes to Grow the Direct To Consumer Wine Channel
In a recent editorial at Wine Industry Advisor, Brian Rosen, former CEO of SAMS, a large wine retailer in Chicago, and now head of the consulting firm Rosen Retail, said the following:
“The DTC movement is not what you think it is and will not provide the added revenue that wineries around the globe are seeking….The DTC movement is a wonderful idea, and there is no doubt that as regulations soften and technological efficiencies prevail, it will be a sustainable revenue stream going forward. That day is not today.”
His case against the current benefits and utility of direct-to-consumer sales is contrarian. And it requires the reader to look at DTC sales from an unusual angle. I suggest those interested in DTC wine sales read it and come to your own conclusions. However, he does bump up against the questions, what would it take for DTC wine sales to see a significant growth spurt beyond the opening of a new state for winery to consumer shipping like we recently saw in Massachusetts?
In my view, there are four fundamental things that, if they occurred all at once, would result in a tremendous increase in DTC wine sales. If they occurred subsequently and more slowly, they would still result in a tremendous increase in DTC wine sales.
Faster and Cheaper refrigerated Overnight and 2-Day Delivery
Wine is both heavy and easily damaged in warm conditions. These basic facts make the delivery of the stuff more complicated and more expensive. When consumers can feel assured that they can receive those $50 and $100 bottles of wine quickly, undamaged and unaffected by heat and for an economical price, they will be much more willing to purchase it remotely.
Removal or Relaxing of State Laws Meant Only to Hinder Delivery of Wine
Expensive annual fees imposed on retailers and wineries for the privilege to ship direct to a state. Restrictions on the amount of wine a consumer can have delivered in a single year. Requirements that delivery companies get separate licenses for each delivery truck instead of one for their entire fleet. These are just some of the laws and provisions of laws that are in place for a single reason: to hinder the direct shipment of wine and protect state-based sellers and distributors of wine. When these kinds of provisions and restrictions are lifted, more wine will be shipped direct and more wine sold direct to the consumer.
Continued Increase in Interest in Small, Craft-Oriented Wineries
The first adopters and their followers have honed in on the psychic value and quality that comes with purchasing wine from smaller, small batch producers of wine. These producers are the ones that are justified in holding the “artisan”title. From produce to chocolate to beer to meat to wine, certain consumers want to dabble in products that deliver a sense of place and person. As this trend continues to spread (and it will), consumers will be forced to use direct shipping services to obtain these wines.
Judicial Deference To Irrationality
In case after case, federal and state judges have given deference to the most irrational arguments you can imagine in upholding state laws that deter commerce. In one federal court ruling a law allowing one kind of retail store to sell cold beer but prohibiting another kind of store from doing the same was upheld on the grounds that this issue of beer not being cold in one venue would stop underage drinking. Absurd. In another federal court case, judges ruled that wineries that retail wine are protected by the Commerce Clause of the Constitution from state-based discriminatory laws, while wine stores retailing wine are not protected by the same commerce clause. Absurd. Judicial trends change direction. Sometimes in a slow arc. Sometimes with an abrupt turn. When federal judges stop giving in to irrational and absurd arguments and stop upholding state laws meant to deter wine sales and protect local interests, direct shipping of wine will see a big increase.