US direct-to-consumer wine shipments set to top $3bn in 2018

According to a report compiled by Sovos and Wines & Vines, US wineries shipped 5.78 million cases of wine in 2017, valued at over US$2.69 billion, with shipments set to top $3 billion this year.

The ‘Direct-to-Consumer Wine Shipping Report 2017’ found that US wineries increased the volume and value of their direct shipments by 15.3% and 15.5% respectively in 2017, compared to the same period in 2016.

The growth rate was boosted by the increase in the average price per bottle shipped, which rose by $0.06 to $38.75.

The report referred to the progress of direct-to-consumer shipping as “an impressive feat for a channel that only emerged as a significant option in the past decade”.

Wine industry data collection firm Gomberg & Fredrikson reported that direct winery shipments now represent 10% of off-premise retail sales (shop sales, not restaurants and excluding bulk imports) of domestic wine, valuing total sales at $26.7 billion in 2017.

In its first full year of allowing direct-to-consumer wine shipments, Pennsylvania broke into the top 10 destinations, experiencing a 158% rise in shipments compared to 2016. Meanwhile, California retained the top spot for the state that received the most wine, taking 30% of all shipments in 2017, way ahead of Texas with 8%, New York with 6% and Florida with 5%.

The top five destinations based on bottles shipped per capita were California, Oregon, District of Columbia, Washington and Colorado.

Alabama, Delaware, Kentucky, Mississippi and Utah currently do not allow direct-to-consumer wine shipments, however, the report added that given that they “represent a mere 5% of the US population…were they to become legal shipping states, it is unlikely to significantly move the needle”.

In terms of the location of the wineries themselves, Sonoma and Oregon together accounted for 40% of the $361 million increase in the value of shipments in 2017. Napa County, however, continued to dominate the direct-to-consumer channel, with almost half of the entire value of shipments accrued by Napa wineries.

Wineries located outside of California, Oregon and Washington saw a 17% rise in volume and 16% increase in value of their shipments. They represented 11% of total volume of DtC shipments in 2017, but the value of all shipments is almost four times less than the value of Napa County Cabernet Sauvignon shipments alone, the report noted.

Rosé wine and Pinot Noir were the main winners in terms of analysis by wine type. While Cabernet Sauvignon remained the most commonly shipped grape variety, Pinot Noir overtook red blends to come in second.

Shipments of rosé increased by 58% in 2017, the largest annual increase the category has yet experienced. The report found that its share of volume in the DtC channel has increased by 200% since 2010 representing the largest increase in share of any wine tracked. Accounting for 3.1% of all shipments, it now stands alongside Merlot and sparkling wine.

Despite an estimated $20 million depression in sales in Napa County due to the wildfires last year, the report found that DtC shipments nevertheless grew. Since the fires occurred in the most popular month for tourists, and the majority of DtC growth is driven by tasting room and wine club sales, the decline in tourists after the fire “impacted sales and shipments out of key California wine regions, hindering further growth in the DtC channel”.

Addressing some of the changes that took place in 2017, the report found that the regulatory changes implemented by legal shipping states have “occurred primarily by requiring common carriers to report wine shipments to state agencies as to determine unlicensed shippers. It added that these new regulations “have not significantly impeded the growth in direct shipments”.

Commenting on the closure of Amazon Wine, the report said the move “could impact wineries that had significant sales initiated via Amazon platforms”.

It added: “More important, however, is the potential for Amazon.com re-enter online wine sales via its new WholeFoods retail licenses. The easiest way for this to occur would be for Amazon/Whole Foods to deploy a “Wine.com” model whereby online purchasers have access to inventory procured from wholesalers in the purchaser’s shipping state. This would give Amazon near national online exposure”.

It did not comment, however, on the news reported earlier this month that the founder of Woot.com has launched a new online wine outlet in the US in a bid to revive “the best model for online wine deals” after Amazon announced it was axing its wine business, including Woot.com’s Wine.Woot service.

Giving its predictions for the year ahead, the report noted that Oklahoma will allow direct wine shipments in 2018, but not until October. Given its late start date “it is not likely that Oklahoma will contribute much to the anticipated growth in 2018 DtC volumes or values”. It does, however, see potential in shipments to the state over the next two to three years.

“As the wine industry as a whole evolves, e-commerce grows and regulations adapt accordingly, growth of DtC shipments should continue to outpace the overall off-premise channel in the coming years,” it concluded.