DIRECT TO CONSUMER SALES – WHERE THE GROWTH IS

As our lives become more integrated with the internet and social media, consumers gain more confidence when it comes to making buying decisions on their own.

In the wine industry, this has been reflected in steady growth in direct to consumer sales.  A recent study by Wines & Vines magazine confirmed this, finding that from May 2010 to April 2011, 7 million cases, or 3 percent of total wine sales by U.S. wineries, were sold direct to U.S. consumers.  Of that, 40 percent (2.75 million cases) were purchased via Internet, phone, clubs or for delivery at the tasting room. The remainder was purchased at the winery for carry-out.  

Though a mere 1 percent of total wine sales, direct-to-consumer sales comprise a significant percentage of sales for small wineries like most in Lodi, Sonoma, and Napa.  Moreover, this amount was up 11.6 percent from 2009-10, and was more than twice the growth rate of the wine market in general, itself a robust 4.5 percent.

This year’s direct to consumer receipts, 2.75 million cases, represent $1.21 billion in sales, an average per bottle price of $36.64 (even though one third of the sales were under $20).

Nearly half of these receipts were from Napa Valley, where the average bottle netted $51.94 per bottle.  But, the rest of California (not Napa or Sonoma) increased by 43 percent whereas Napa increased only 19 percent.  This bodes very well for up-and-coming regions like Lodi, the Sierra Foothills, and Paso Robles, among others.

BOONS TO MORE GROWTH

One harbinger for more growth is that many states are opening up to direct shipping.  Much effort has been made by beverage advocacy groups to simplify state regulations and make shipping easier.  Significant progress, with states such as Maryland opening up their borders in recent months.

These freedoms do not extended to third party sellers:  retail shops and self-styled ‘virtual wineries,’ still cannot legally ship wine they do not make to most states.  However, in a significant step forward for wineries, new construction licenses do allow wine producers to pour at retail shops.  (Wineries should  update their business liability insurance if they do this.)

As long as wine producers take every opportunity to use these new laws to their advantage, there should be no limit to their growth potential in these new markets -- because the direct to consumer trend does not appear to be going away any time soon!

To read more, visit the Napa Valley Register.