2016 U.s. Wine Sales Give Ups And Fedex Reason To Smile

Posted: Jan 23, 2017

Nearly 4% of U.S. wine sales in 2016 ($2.33 billion) was not handled by traditional wholesaling and retailing channels. Instead, the wines were sold by and delivered from wine producers direct to consumers (DtC).

Gathered by ShipCompliant and Wines Vines Analytics, the data was presented at the recent Direct to Consumer Wine Symposium by Kent Nowlin, general manager of Sovos Compliant.

At more than $60 billion in overall wine sales, the wine distribution and retail trade hasn't given up much, but DtC sales in 2016 represents an 18.5% growth over 2015. Moreover, DtC sales have been outpacing overall brick-and-mortar wine retail sales growth, which has been rather fragile at around 5% since 2013.

A half-dozen years ago, about a couple of million cases of wine were sold DtC. Since then, more states passed laws to allow DtC and companies like FedEx and United Parcel Service (UPS) nailed down their compliance responsibilities. Last year’s DtC sales accounted for 5.02 million cases. Dollar value grew, too: consumers spent 3% more per bottle of wines shipped direct to them than they had spent in previous years.

Where is all the action?

Every wine production region saw an increase in DtC sales last year. Forty-five states and the District of Columbia allow wines shipped direct from producer to consumer. The breakdown of shipments to and within the top 10 states is dominated by California (31%) followed by Texas (9%), New York (6%) Washington and Florida (5%), Illinois (4%), Florida, Virginia and Colorado (3%) and Georgia (2%).

Three states that opened up to DtC recently have already highlighted its promise: Pennsylvania began allowing DtC in August 2016 and went to 23rd place in sales. Massachusetts, which opened DtC in 2015 grew in sales by 42% in 2016. Indiana’s DtC sales jumped 40% last year.

According to ShipCompliant, three companies incredibly produce more than 60% of all wine made in the United States, but small wineries (5,000-49,999 cases per year) have dominated DtC sales, accounting for 42% of DtC volume and 47% of its value. Very small wineries (1,000-4,999 cases) account for 17% of volume and 24% in value, and wineries producing less than 1000 cases shipped 2% of volume and reaped 3% of DtC value.

The big wineries (over 500,000 cases) shipped 13% in volume but account for under 6% in value, while medium-sized wineries (50,000-4999,999 cases) shipped under 30% of volume and account for 20% of value.

Sales of wines under $15 grew the most in the DtC market; wines between $15-$30 had lost ground. This points to larger wineries with products that appeal to buyers of lower priced wines becoming active in the DtC trade.

Meanwhile, Silicon Valley Bank (SVB) released its wine industry projections for 2017--the bank is quite involved in financing startups and existing West Coast wineries. Highlights from the report include projected growth in the $12-$25 bottle category as well as in high end so-called luxury wines. The bank expects price increases in these two categories and a price drop for wines under $9. These lower priced wines are usually blended and have been appealing mainly to millennials, but the bank expects as millennials’ income inches up their taste for wine will shift from blends to varietals—and it will cost them more for the change in taste.

SVB apparently does not have an interest in following DtC sales, but the bank says the coming year presents the overall wine industry with strong market conditions and expects overall domestic wine sales growth for 2017 between 10-14%.

Over the past few years, many high-profile West Coast wineries have been sold to larger concerns. SVB expects the trend to continue in 2017, to the feverish level of as much as 30% of wineries the bank surveyed.

by Thomas Pellecchia
January 20,2017
Source: Forbes

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