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mixed case: opinion and advice

No Slowing the Winery Direct Shipping Movement

Direct-to-consumer wine sales jumped dramatically again in 2012, to the tune of $1.46 billion
Photo by: Mark Weinberg

Posted: May 2, 2013 4:45pm ET

By Robert Taylor

The numbers are in and, as expected, 2012 was another banner year for winery direct-to-consumer shipping. American wineries shipped nearly 3.2 million cases of wine directly to consumers’ front doors in 2012, at a value of $1.46 billion.

That’s a 7.7 percent increase in volume and a 10 percent increase in value over 2011. Not only are Americans buying more wine straight from the cellar, we’re buying more expensive wine—at an average price of $38.42 per bottle, up from $37.63 in 2011 and $36.56 in 2010.

$1.46 billion, with a B, is an eye-popping sum. But these numbers, presented in an annual report issued in April by ShipCompliant and Wines & Vines, shouldn’t surprise anyone who’s been following the decade-plus-long fight to make winery direct shipping legal across the United States. Today it’s permitted in 39 states, and a look at a few newcomers confirms that wine lovers love having the option to buy straight from the winery, especially smaller wineries that aren’t carried by local wholesalers.

In Maryland, where direct shipping was legalized in mid-2011, direct sales increased 179 percent in 2012, to $15.6 million. (A report by the state’s comptroller found the practice beneficial to both consumers and the state’s coffers.) In Tennessee, shipments to consumers, legalized in 2009, increased 24 percent in 2012 on the heels of a 44 percent spike in 2011.

California remains both the No. 1 producer and consumer of direct-shipped wines. Thirty-two percent of all wine shipped directly from wineries in 2012 ended up in the hands of a Californian, and Golden State wineries shipped more than 2.6 million cases of wine directly to U.S. consumers last year. Napa alone accounted for 33 percent of direct sales by volume and 49 percent by value, with just over 1 million cases sold at a value of $714 million, or nearly $57 per bottle.

Washington, however, made the most substantial gains in 2012, surging past Oregon. Direct sales from wineries outside the Big 3 states of California, Oregon and Washington are also picking up at an accelerated clip.

Region 2012 Cases Shipped Percent of Total Volume Percent Volume Change 2012 Value of Wine Shipped Percent of Total Value Percent Value Change Avg. Price/ Bottle
Napa 1,046,046 32.9% 3.4% $714 million 48.7% 8.0% $56.87
Rest of California 899,044 28.3% 3.9% $296 million 20.2% 6.2% $27.48
Sonoma 672,597 21.2% 11.4% $286 million 19.5% 10.1% $35.42
Rest of U.S. 340,387 10.7% 23.7% $72 million 4.9% 31.2% $17.68
Washington 116,455 3.7% 18.2% $50 million 3.4% 40.7% $35.82
Oregon 105,074 3.3% 6.8% $47 million 3.2% 10.5% $37.62

So what are we buying direct from all these wineries? Cabernet, of course, although America's most popular wine was one of the only categories, along with Merlot and Riesling, to see a dip in both volume and value. Direct Pinot Noir sales, on the other hand, saw some of the largest gains, with Sonoma leading the way. Sonoma Pinot sales rose 32 percent in value, to $89 million for 155,000 cases sold direct. After Cabernet and Pinot Noir, red blends, Chardonnay, Zinfandel and Syrah round out the top 6 in volume shipped.

Grape 2012 Cases Shipped Percent of Total Volume Percent Volume Change 2012 Value of Wine Shipped Percent of Total Value Percent Value Change Avg. Price/ Bottle
Cabernet Sauvignon 563,594 20.4% -2.0% $424,395,734 31.8% -2.4% $62.75
Pinot Noir 443,467 16.1% 15.5% $222,427,239 16.6% 19.3% $41.80
Red blends 422,219 15.3% NA* $253,961,127 19.0% NA* $50.12
Chardonnay 331,099 12.0% 10.1% $121,270,104 9.1% 5.9% $30.52
Zinfandel 208,536 7.6% 6.9% $68,540,284 5.1% 11.4% $27.39
Syrah 152,658 5.5% -1.2% $56,050,041 4.2% 0.9% $30.60

*2012 was the first year for which red blends were tracked as a separate category.

Making even bigger strides than Pinot Noir were rosé and sparkling wine. The volume of sparkling wine sold was up 20 percent in 2012, and rosé sales rose 23 percent in 2012, representing a 53 percent increase over 2010 rosé sales.

On the surface, $1.46 billion is the kind of number that might confirm every fear wholesalers have about direct shipping, and explain why they’ve fought it at nearly every turn. But a look at the type of wineries selling direct to consumers indicates direct shipping poses no threat to the three-tier system.

Large wineries—defined as those making more than 500,000 cases of wine a year—are wholesalers’ bread and butter, and they sold just 0.1 percent of their production directly. That total of 143,000 cases accounted for less than 5 percent of the volume of winery direct sales in 2012. Small wineries—those making 50,000 cases a year or less—accounted for more than 65 percent of direct wine sales volume, worth more than $1 billion, or over 75 percent of the market value.

It’s all good news for wine lovers and the wine industry. Americans have more wines than ever before to choose from, and they’re buying more of them than ever before. In fact, for the first time, Americans spent more on direct wine purchases in 2012 than the rest of the world spent on U.S. wine—last year's domestic exports were valued at $1.43 billion, a 3 percent rise over 2011.

If winery direct shipping is legal where you live, have you taken advantage of it yet? And if so, how do your direct-shipping purchases compare with your traditional wine-buying habits?

Martin A. Cody
Chicago, IL Napa/Sonoma CA —  May 3, 2013 1:15pm ET
Robert,
Congratulations on a terrific piece regarding DTC. We can tell you first hand the moment it became legal in Maryland we received inquiries and orders for our Napa/Sonoma winery partners. I think the numbers indicate a strong foundation for the future and that you'll see an acceleration of direct to consumer shipping as more and more sub 50,000 case producers (which is 95% of all 8,000 U.S. wineries) leverage the internet's power and companies like Cellar Angels to reach consumers. And thankfully technology is now so advanced the ability to access great wines is literally in the palm of your hand--provided that palm resides in one of the 39 states.

Cheers,
Martin

Martin A. Cody
President
Cellar Angels, LLC
Robert Seaney
Sylvania, OH —  May 5, 2013 9:50am ET
I've been buying wines direct from the producer very regularly for several years now.

A trend not mentioned here, which I believe will become apparent in the next decade or so, is that producers who ship directly, will find it economically attractive diversify their portfolios. As the economic model proves itself and continues to gain steam, producers will find it more and more feasible to make smaller production runs. Consumers will then find more and more single-vineyard bottlings, more varietals, and more obscure blends. DTC is just a great opportunity for everybody.
Jim Vanbergen
NY, NY —  May 6, 2013 10:21pm ET
DTC is a wonderful option for wineries and consumers alike. I can have a great, real relationship with a small producer and get direct, fast access. The only "wine club" shipment I continue is from one winery, whose work is phenomenal and whose shipments are neither too frequent or expensive.

It is also important to recognize that DTC poses a minor threat to distribution and local sellers in the marketplace, and I hope that consumers don't turn a blind eye and continue to patronize their local providers in addition to their DTC purchases.
ALOK CHANDRA
Bangalore, India —  May 7, 2013 7:45am ET
Is it legal for imported wines to go the DTC route in the US? I'm going to start shipping Indian wines to the US shortly (starting with Chicago) and would like to use this channel to reach a specialised group of consumers (those willing to try something as exotic as an Indian wine!)

Alok Chandra
Gryphonbrands.com
Bangalore
Robert Seaney
Sylvania, OH —  May 7, 2013 10:10pm ET
I don't think it is illegal, Alok, but it's probably not easy. I've bought a few wines DTC from Mexico recently.
John Richardson
Bloomfield hills, Mi usa —  May 8, 2013 10:50am ET
I find buying directly to often be by far the most expensive way to buy as the wineries charge full retail(ususally) and charge expensive shipping. At least with the distributors I don't have to pay shipping and some retailers discount prices. I still buy Carlisle which is otherwise not avail and they give discounts when paying early.
Takeshi Kakizaki
San Mateo CA —  May 10, 2013 4:11am ET
I can only find a few wineries that sell/ship to NJ which are Duckhorn, Peter Michael, and Bedrock. Its seriously hard to find quality wineries that are able to ship to NJ. Are the rest just not moving forward? Or is it just that hard to be qualified to ship to NJ?
David Weisfeld
Kihei, Hawaii —  May 12, 2013 4:02am ET
I buy almost all my wines online now, both directly from the winery and also from online retailers. I find a much better variety of wines at better prices than at local brick & mortar stores. Wineries usually give a discount if you sign up for one of their clubs by agreeing to purchase a minimum quantity and receive a discount (up to 20% off retail) which makes up for shipping. Wineries also typically give club members first shot at purchasing their most popular and highly sought after wines and make special bottlings available to club members. Plus if it is an out of state shipper there are no in state sales tax which further discounts the purchase. I am definitely contributing to the escalating numbers presented in DTC purchases.

Cheers,
Hugh L Sutherland Jr-m
owens cross road,al 35763 —  May 13, 2013 3:05pm ET
I have been trying to educate the wineries and dealers that you can ship wine into Alabama. I do it all the time. There is a simple form that has to be filled out and the wine has to be shipped to an ABC store. There usually is one nearby. The tax that is collected is a fantastic 0.30 cents on each bottle regardless of its price.

There are some wineries and dealers that do ship wine directly to the home. They claim to sell the wine at their store and that they are only helping with the shipping. Since the tax is so low, I prefer to stay strictly legal by using the ABC store.

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