Americans are buying more wine than ever without going to a wine store. Direct-to-consumer sales increased 66 percent from 2010 to 2015, with 4.3 million cases valued at nearly $2 billion shipped directly from wineries to consumers last year. That’s according to an annual survey by ShipCompliant, a firm that helps wineries negotiate the legal labyrinth of direct shipping.
The nation’s capital leads the country in these direct-from-the-winery purchases on a per capita basis, narrowly edging out California, Washington state, Colorado and Oregon. (That might be an exaggeration, I’m guessing; the District’s number probably includes people who have wine shipped to their offices and then take it home to the suburbs.)
The very existence of a firm such as ShipCompliant highlights the difficulties of direct shipping. Forty-three states allow it in some form or other, up from 17 in 1998, but state laws and regulations differ, creating paperwork and financial headaches for wineries seeking to use this sales channel. The growth of direct shipping has chipped away at the three-tier system of producer-distributor-retailer that has dominated alcohol beverage sales since the end of Prohibition, although the traditional sales channels remain dominant.
And ShipCompliant’s figures almost certainly underestimate the extent to which wine is being delivered by UPS or FedEx. The company measures only winery-to-consumer sales and does not capture sales by retailers shipped directly to consumers. The nation’s convoluted distribution system and fragmented taxation and regulatory structure allow Washington-area wine lovers to find bargains at stores in New Jersey or Chicago that are unavailable here. And wine fiends elsewhere comb online listings or pick up the phone to find their favorite wines from D.C. stores.
(A caveat: When Maryland legalized direct-to-consumer sales by wineries in 2011, it did not allow out-of-state retailers to ship to Maryland residents. District and Virginia residents may order from retailers in other jurisdictions.)
Direct shipping has provided an opportunity for smaller wineries to circumvent the three-tier system. Those wineries have been squeezed by consolidation in the distribution network, which has favored large national brands and made it hard for smaller labels to earn shelf space. According to the ShipCompliant survey, there were 8,638 wineries in the United States last year; of those, more than 8,000 produce fewer than 50,000 cases of wine a year.
Small wineries (5,000 to 50,000 cases) accounted for 44.3 percent of shipments by volume, while medium-size wineries clocked in with 32.1 percent. When looking at the total value in sales dollars, however, very small wineries (1,000 to 5,000 cases) equaled medium wineries, as the little guys tended to sell higher-priced wines.
Napa Valley led all U.S. wine regions in sales, topping $1 billion. That suggests we are still in love with our cult cabernet sauvignons. But we adore pinot noir as well: The survey noted a continuing surge in direct sales of wines from Oregon. “Shipments of pinot noir, the state’s signature grape, outpace the market in every aspect,” the report said.
The average price per bottle shipped last year was about $38, a level that has remained fairly steady over the few years ShipCompliant has published its survey. Smaller wineries average higher prices, and bottles costing $100 or more rose 19 percent in sales by volume. Although that price category accounts for only 5.8 percent of all wines shipped, it equaled 25.2 percent when measured by value.
But the clearest sign that direct shipping may indeed be a threat to the three-tier system is probably at the low end of the price scale.
Traditionally, lower-priced wines aren’t associated with the direct-to-consumer channel, according to the report. It says further: “But the $15 and under category saw a 27.7 percent increase in volume of shipments in 2015, bringing its share of shipments to 22.5 percent — the highest volume share of any [price] category.”
That’s still a big slice of a small pie. But these are wines we typically buy in a supermarket or a local wine store. If consumers are finding inexpensive wines they are willing to buy direct even with the added cost of shipping, distributors may have an incentive to increase the variety of wines they offer or risk further erosion of their market share.