DTC sales help wineries rebound, study suggests
“U.S. wineries [are] leveraging social media and multiple direct sales channels to rebound from recession — winery managers forecast continued double-digit growth in 2011,” a new study from Vinquest suggests. The VinQuest™ U.S. Consumer Direct Wine Sales Report is produced annually by VinterActive LLC.
Direct to consumer (DTC) long has been the Holy Grail for wineries, particularly smaller ones that find it difficult to get into the distribution chain. DTC holds other allures, as well: the winery makes 100 cents on the dollar (or close to it), instead of having to sell wholesale.
The challenges confronting DTC sales, however, have been well documented. It’s awfully difficult moving quantities of case goods a bottle at a time. It requires infrastructure and expertise that many wineries simply don’t possess. And there’s still the meddlesome issue of non-reciprocity in various U.S. states.
So it’s good news, as VinQuest reports, “that tasting room, wine club, internet, and event sales grew 12% to a record $3.4 billion in 2010 as wineries adopted new marketing strategies to emerge from the grip of recession.”
However, there are caveats. While $3.4 billion sounds like a lot, you have to compare it to the total of U.S. wine sales in retail value. That’s projected to be just north of $40 billion this year, according to Whole World Wines. So total direct sales still amounts to less than 10% of all sales, and while 62% of winery respondents told VinQuest that DTC sales is their fastest growing sales channel, it’s not the immediate game changer they might be hoping for. At least 13 states do not yet allow direct shipping from out-of-state wineries, (in apparent defiance of the U.S. Supreme Court’s May, 2005 decision), and of course there’s now HR 1161, a resurrected form of last year’s HR 5034, a bill currently making the rounds in Congress that could potentially do an end-run around the Supreme Court’s ruling.
My own feeling, in traveling around California and meeting up with lots of small winery owners, is that they’re challenged enough as it is by the day in, day out routine of producing wine, with all that entails, and don’t have the time or energy to put into adequate oversight of tasting rooms, wine clubs, managing online sales and otherwise succeeding at the whole DTC thing. Many proprietors simply don’t know where to start, and there are surprisingly few resources available to them.
So while the VinQuest report is encouraging, I’m viewing it in context. Distribution remains, and is likely to remain, the chokehold on wine sales in America. Until someone figures out how small wineries can get into the system, there are no magic bullets to ease their plight.