DtC Volume and Value on the Rise

ShipCompliant, Nielsen and Wines & Vines present detailed look at U.S. wine sales

by Paul Franson
Click the graphic to watch a video from this event.

Napa, Calif.—At ShipCompliant’s annual Direct Sales Seminar today, Kent Nowlin of ShipCompliant and Danny Brager of The Nielsen Co. presented data developed by Wines & Vines and ShipCompliant with Nielsen research about direct-to-consumer sales.

The survey confirmed that DtC sales are a robust and growing trade. While comprising only 2% of total wine sales, the segment accounted for 11% of total value.

Direct shipments were up 8.2% in volume and 11.5% in value for the year ending in April. DtC sales are very high in value compared to average retail sales, and they’re very important to many small to medium-size wineries and growing at the largest wine producers.

Total wine produced in the United States for domestic consumption was 262 million cases, according to Nielsen. Of that total, 80% was sold through retailers and 20% on premise at restaurants and bars.

The on-premise sector includes 7.5 million cases sold directly to consumers as tasting room carry out, wine club, tasting room consumption and Internet, phone and catalog orders. This latter DtC category represents 1% of all wine sales.

DtC volume, value up over previous years
Total direct-to-consumer sales last year were 3 million cases, a 225,000-case increase over the year before, which in turn was up 11.5% over 2010.

The value of the direct shipments was up even higher than volume, indicating that the average bottle price rose, too. These shipments totaled $1.35 billion, up 11.5%, the same as the preceding year. That’s $139 million more wine shipped to consumers last year.

By contrast, Nielsen off-premise sales were up 3% in volume and 5% in value. The only segments that increased last year were wine, spirits, vitamins and snacks, spreads and dips-dairy—four out of 120 categories.

Nielsen collects point of sale data for the entire wine category from a variety of brick and mortar retailers across the country and projects it to a universe that includes grocery, drug, convenience, dollar stores, military bases, membership clubs like Sam’s, mass merchants and liquor chains and stores in “open” states.

Nielsen directly tracks 54% of off-premise sales and projects other retail sales (which include DtC) at 27% and on-premise at 19%.

The average direct price of bottles shipped rose from $36.58 to $37.69 after dipping last fall. (All data is ongoing and updated throughout the year, not just year-end totals.) That compares to $9.07 in 750ml bottles and $6.42 for all Nielsen wine in 2012. (The industry sells a lot of boxed wine.)

Fully 86% of wines shipped direct cost more than $20. In fact, 20% cost more than $50, and those above $100 grew the most at 20%, though they account for only 4% of shipments. By contrast, 95% of wines Nielsen tracks cost less than $20.

Half of DtC shipments in value (51%) are from mid-size wineries that make 5,000-49,999 cases. Shipments from larger (50,000-499,999 cases wineries) grew faster, however, up 19% compared to 5% for the mid-size wineries.
Not surprisingly, the sales Nielsen measures are concentrated at the largest wineries: The top five represent 48% of sales, and the top 50 represent more than two-thirds of the market. Volume is even more concentrated in the top five with 64% of shipments.

The average bottle prices naturally are inversely proportional to size of wineries, with the smallest wineries—those making less than 1,000 cases—averaging $52.44, though that was down from $54.74 last year.

Popular varieties and destinations
Cabernet Sauvignon, Pinot Noir and Chardonnay are the most popular wines shipped and account for 58% of shipments and 71% of value. Cabernet has the highest average price of $62.38, with Pinot Noir at $41.22, both above the average of $37.69 while all other varieties were lower in price.

The fastest growing varieties being shipped were Zinfandel and Petit Sirah.

California is the most popular destination for shipping DtC wines with 32% of shipments followed by Texas with 9%, New York with 7% and Florida with 6%.

As expected, 84% of DtC shipments are from California, with 34% from Napa, 21% from Sonoma, 18% from the rest of California and a healthy 16% from other states.

By contrast, California represents 94% of Nielsen data, with 4% for Washington and Oregon.

Napa County gets the highest average bottle price at $55.31, followed by Sonoma County with $35.31, the rest of California t $26.39 and the rest of the U.S. $23.75.

Napa County grabs fully half the DtC revenue, partly due to its reputation for Cabernet Sauvignon, the most popular variety shipped direct.

And finally, the survey showed that baby boomers (49-65) buy 56% of direct wines, followed by 41% for generation X (30-48). The much-sought millennial generation represents 3% at present, though that is expected to grow over time.

The data model used represents DtC shipments for all 7,400 U.S. wineries and statistical projections are representative of all wineries by size, location and bottle price level. The representative sample and multiple stratifications are projected into the total market.

During the seminar, which was also a user conference for ShipCompliant users, founder Jason Eckenroth also described the companies work with the Alcohol Tax and Trade Bureau to simplify and optimize online applications for COLAs (Certificate of Label Approvals) as well as new software that lets wineries register product brands online in states that requires registration. ShipCompliant is also working with third-party marketers like flash sites to simplify their compliance and that of their winery suppliers.



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