Update on Direct-to-Consumer Wine Shipping

DtC shipments expected to reach $3.25 billion within a decade

by Paul Franson
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The states shown in blue currently allow direct shipping from bonded wineries. Massachusetts will open on Jan. 1. Source: Wine Institute.

Napa, Calif.—At the recent Direct to Consumer Seminar organized by the Seminar Group, Jeff Carroll, of ShipCompliant, updated the audience on the latest legal developments in shipping.

Now 45 states allow shipments from sales made at wineries, and 41 states allow shipments even when the buyer isn’t present at the winery.

Only 14 states let retailers, including wine companies holding California 17/20 licenses, often called virtual wineries, ship wine into their borders. None are large markets except California.

On Jan. 1, Massachusetts opens for direct shipment and that will leave Pennsylvania as the only major wine market closed to DtC shipments. “Massachusetts is a really big state for wineries,” Carroll noted at the seminar held Sept. 12 in Napa. “It’s affluent and they like to drink wine.”

Carroll said Massachusetts could quickly become one of the top five states for wine sales and represent $70 million to $100 million in sales within a few years.

To ship wine into Massachusetts, a winery has to have a permit, report sales annually and pay excise taxes. No sales tax has to be collected. A buyer can only receive 12 cases per year. The law also allows shipping companies to deliver wine, a former problem because each truck had to be licensed. The details and difficulties of complying with the Massachusetts regulations overall haven’t been determined yet.

Pennsylvania is also an important target, but there, efforts to loosen direct shipping are affected by a movement to privatize the state operated wine and liquor stores.

The only other significant change announced this year is that Indiana now requires a somewhat obscure electronic method of reporting transactions for both direct shippers and wholesalers.

South Dakota came close to opening this year with a proposed 1% wholesale tax and public posting of brands listed.

The big picture
Carroll also noted that the Wines & Vines/ShipCompliant Model data showed that direct shipments last year amounted to 3.5 million cases, up 9.3%, with a value of $1.6 billion, up 7.5%. “There’s no reason to think these trends will slow,” he said.

The average price for wines shipped to consumers for the year was $37.78, down 1.7% from last year. Carroll added that the price peaked in 2012 at $38.42 and the figure for 2014 to date is $37.14.

DtC shipments from U.S. wineries in August reached $78.4 million, which is a 17% increase from August 2013. The 12-month total rose by 10% through August for a new high of $1.69 billion, according to the Wines & Vines/ShipCompliant model. Carroll predicts the value of direct shipments will double to $3.25 billion within a decade. For more data and analysis on DtC shipments visit the Wine Industry Metrics page.  

Size of state markets
Almost half (48 %) of the value of all wine shipments originates in Napa County. California is by far the biggest recipient of direct-shipped wine, with 33% of the total value, with Texas a distant 9%, New York and Florida accounting for 6% and Illinois 4% (about $70 million in shipments). Carroll said that none of the big five states charge unreasonable costs.

He also highlighted a growing problem: wines that can’t be delivered on the first attempt. “97% of the wines shipped to businesses are delivered on the first attempt, but only 81% to residences,” he said.

He added that shipments to residences are increasing; they now represent 63% of all shipments. He strongly recommends asking customers if they can receive the wine at work, as returned wine can be expensive or even unsellable.

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