Direct-to-Consumer Shipments Near $2 Billion

Annual report on DtC shipments charts the sales channel in detail

by Jim Gordon
wine varietals state
Texans prefer Cabernet Sauvignon over red blends, according to destination state data in the 2016 Direct-to-Consumer Wine Shipping Report.
Boulder, Colo.—Ten years after the Supreme Court pried open a legal passage for direct-to-consumer wine shipments, the value of this sales channel nudged the $2 billion mark in 2015. Wineries collected $1,966,668,198 for 4,286,743 cases of domestic wine.

The total was 8.1% higher in value than in 2014, and 8.5% higher in volume, as 427,616 more cases were sold. The annual growth rate was lower than 2014’s 15% but higher than 2013’s 7%.

DtC shipments have grown much faster in recent years than conventional off-premise sales in stores, as wineries rushed to take advantage of the higher margins from direct sales, and in some cases adopted the direct route as their only channel due to distributor consolidation.

A new report available to the public today at shipcompliant.com details the whole DtC market in a 28-page document with dozens of graphics and expert analysis. The 2016 Direct-to-Consumer Wine Shipping Report examines the growth and characteristics of this dynamic sales channel from every angle, including by month, by winery size, by varietal and type, by price category, by winery region and by destination state.

Wines & Vines partnered with ShipCompliant to create the model that calculates the channel’s growth. Since 2010, value of the direct-to-consumer shipping industry has increased 66%, and 2015 proved to be another growth year for the channel.

Growth rates for volume and value in 2015 were similar, and the slight difference of these rates can be attributed to a 0.4% difference from 2014’s average price per bottle of wine shipped. The average price decreased from $38.40 in 2014 to $38.23 in 2015.

“What is striking, though,” said one of the report’s authors, Jeff Carroll, vice president of strategy and compliance for ShipCompliant, “is that this progress outpaces that of the retail wine marketplace.”

The DtC’s 8.5% volume growth exceeds the 2.2% growth the retail wine marketplace experienced in 2015, according to Nielsen. Additionally, the 8.1% growth of the DtC industry in value outpaced what Nielsen found was a 6% increase in value of the wine retail marketplace.

State by state
2015’s most notable addition to the DtC states was Massachusetts. After years of legal and political wrangling, consumers in Massachusetts welcomed DtC shipments into their homes.

The 2015 DtC Wine Shipping Report predicted the entry of this state would result in a $29 million bump for the industry, and the results were close, at $27.5 million. The same model predicts shipments to Massachusetts will more than double in 2016, as more wineries will become permitted to enter the market, and more buyers will become aware of the option to ship direct.

Also notable this year is the continued surge of shipments from Oregon wineries. Shipments of Pinot Noir, the state’s signature grape, outpace the market in every aspect.

More than half of the $1.97 billion worth of wine was shipped to five states in 2015: California, Texas, New York, Florida and Illinois. California continues to outpace other states, receiving 31% of the total volume of wine shipped. However, for the first time since 2012, California’s growth in wine shipped, 0.7%, failed to match industry growth, at 8.5%.

When exploring what varietals were ordered from the different regions, it was evident Cabernet Sauvignon was the favorite. Yet in California, where Cabernet Sauvignon holds the largest portion of its sales, Pinot Noir was the most commonly shipped varietal to California residents. Pinot Noir accounted for 16.9% of all shipments.

The only remaining closed state with significant market opportunity is Pennsylvania, Carroll said. It’s unclear whether and when Pennsylvania will open to wine shipments, but Carroll estimated that the addition of Pennsylvania would represent a significant boost to the winery shipping channel—$100 million in sales within the first four years. (See “State of the States Address” for more information.) 

wine volume dtc
The orange sections clearly show that small wineries producing 5,000 to 49,999 cases per year dominate DtC shipping. Source: 2016 Direct-to-Consumer Wine Shipping Report
Wineries by size
The DtC shipment channel is especially important to smaller wineries, as the report illustrates. Wineries that produce less than 50,000 cases annually commanded 74% of the total DtC value in 2015, while the few large wineries of 500,000 cases or more, whose products dominate supermarket and wine store shelves, sold less than 4%.

Carroll noted that the number of wineries also continues to grow, with a net increase of 415 U.S. wineries joining the industry in the past year. Most of these new wineries will look to the DtC shipping channel as a significant part of their sales and distribution strategy.

“As a result of these factors, being a nimble and strategic DtC winery is critical to growing sales going forward,” Carroll said. “We aim for this report to provide the wine industry with information that not only allows wineries to compare their own DtC shipping channel performance against the rest of the industry, but also identifies opportunities for their businesses to grow.”

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