DtC Wine Shipments Reach $2.33 Billion

Volume up 17% as large wineries tap into DtC market

by Paul Franson
wines vines analytics shipcompliant report direct to consumer shipments
Small and medium-sized wineries are responsible for 67% of direct shipments by value and volume.

Concord, Calif.—Direct-to-consumer shipments passed 5 million cases shipped in 2016, with value reaching $2.33 billion, Kent Nowlin, general manager of Sovos ShipCompliant, reported today at the Direct to Consumer Wine Symposium held at the Concord Hilton in California. The new figures were part of a preview Nowlin offered from the seventh annual DtC Wine Shipping Report, which provides a comprehensive review of direct-shipment data, including sales, volume and varietal trends in the past year.

The 2016 report and preview was prepared with data generated jointly by ShipCompliant and Wines Vines Analytics. Among its highlights are record growth for the DtC shipping channel, demonstrated positive impact from recent regulatory changes, success for Sonoma County and more activity by large wineries, which until now have mostly shunned direct channels in favor of three-tier distribution.

DtC shipments have shown steady growth during the past six years, growing from less than 3 million cases in 2011 to 5.02 million in 2016. DtC shipment volume was up 17.1% from the previous year, the highest rate of increase since at least 2011.

The growth in value was even stronger, reflecting the rising price per bottle shipped. Total DtC shipments in 2011 were valued at $1.33 billion; they reached to $2.33 billion in 2016, with last year’s growth reaching 18.5% over 2015.

With a growth rate of 18.5%, the DtC market significantly outperformed the overall off-premise market, which has hovered around 5% growth since 2013.

DtC shipments by state
The top 10 destinations for DtC shipping are naturally dominated by California, but surprisingly diverse:
31% - California
9% - Texas
6% - New York
5% - Washington
5% - Florida
4% - Illinois
3% - Oregon
3% - Virginia
3% - Colorado
2% - Georgia

Recent legal changes in three states have had a big impact on the DtC channel. Pennsylvania was opened to DtC shipping in August 2016, and it already ranks 23rd in volume for the partial year. At this rate, it should be in the top 10 for 2017.

Massachusetts was opened in 2015, and it saw 42% growth in 2016. And Indiana removed some burdensome requirements, eliminating the need to order at a winery, resulting in 40% growth in 2016.

All wine regions saw significant increases in volume of wine shipped, with Washington’s 33% increase the highest, followed by states outside the West Coast at 22%.

Price per bottle
Overall average bottle price for DtC shipments is up from $36.56 in 2010 to $38.69 in 2016.

By value, Oregon and Washington actually saw a slight decrease in average price per bottle, while the “rest of California” (the state excluding Napa and Sonoma counties) and the “rest of the U.S.” (not including California, Washington and Oregon) grew more than 5% in bottle price; Sonoma grew 5%, and Napa saw a tiny increase.

Since 2011, wineries in Napa and the rest of the United States enjoyed higher bottle prices, while the other regions were static or even declined. The price per bottle shipped from Napa grew from $54 to $62, while shipments from the rest of the United States grew from about $17 to $21 per bottle. Sonoma’s average DtC bottle price slid from $35 to $30 during the six-year period.

Volume growth for direct shipments differed significantly, with Napa growing from 1 million cases to 1.53 million cases between 2011 and 2016, while Sonoma doubled shipments from about 600,000 cases to more than 1.2 million cases. The rest of the U.S. also did well, rising from about 275,000 cases to just under 565,000 cases.

wines vines analytics shipcompliant report direct to consumer shipments
The direct-to-consumer market incorporates wines sent to consumers as well as carry-out purchases. Shipments comprise about 40% of DtC sales.

How winery size fits in
The DtC shipping market is very different from the overall wine market in market share by winery size. While three companies produce more than 60% of all wine made in the United States, small wineries dominate DtC sales.

Specifically, small wineries (those defined by Wines Vines Analytics as producing 5,000-49,999 cases per year) account for 47.1% of DtC value and 42.2% of volume.

Very small wineries (1,000-4,999 cases) are second in value with 24.1% and 16.8% of volume, while medium-sized wineries (50,000-499,999 cases) ship 25.5% of volume but only 20.3% of value.

Large wineries (more than 500,000 cases) ship 13.2% of volume, but that represents only 5.5% of total DtC value, while limited-size (less than 1,000 cases) ship 2.3% of volume but take in 3.1% of value.

Top-selling varietals
Another new development was the popularity of red blends. They replaced Pinot Noir as the second most popular type of wine shipped, though they still fall well behind Cabernet Sauvignon in terms of dollars spent. Cabernet fetched $668 million in sales, while red blends totaled $396 million and Pinot Noir $378 million.

Not surprisingly, Cabernet was the top wine sold in terms of value and volume for most of the top 10 destinations, but Pinot Noir and red blends did capture some hearts.

Finally, while DtC shipments of expensive wines grew a bit from 2011 to 2016, those selling for less than $15 grew most in market share, jumping from 15% in 2011 to 23% in 2016. The biggest shrinkage came in wines selling for between $15 and $30, dropping about five percentage points from 2011 to 2016. This suggests that larger wineries with their lower priced wines are getting more active in the DtC market.

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