Direct-to-consumer sales dropping

Perhaps you, like me, were isolated in your home during the start of the covid virus. You couldn’t even go out to buy a bottle of wine without incurring the wrath of a spouse who insisted on you scrubbing down the bottle and disrobing in the garage. We can laugh at it now, but we were terrified of the unknown.

Retail stores remained open because when it comes to wine and liquor sales, there is nothing like fear to drive profits. When I was in Maryland, the highest day of sales didn’t come on New Year’s Eve — it came on the eve of a snow blizzard.

People stuck indoors and surfing the net also bought cases of wine online. If they didn’t order wines from their favorite West Coast producers, they found importers and clubs to get wine delivered to their doorstep. But as covid has weaved its way through our neighborhoods and people have relaxed their precautions, they are ordering less wine online. According to Wines Vines Analytics/Sovos Ship Complaint, direct-to-consumer sales (those which bypass the distributor and retailer) dropped nearly 13 percent in June when compared to the previous June. Wine sales normally slow in the summer because producers are reluctant to ship wine in warm temperatures, but nonetheless the drop signals a change in consumer habits.

The report also mirrored other research that shows consumers are paying more for a bottle of wine. The average bottle price is now $32.84.

Direct-to-consumer wine sale increasing

Sovos and Wine Vines Analytics, in its annual shipping report, shows that direct-to-consumer wine sales are continuing to play a dominant role in how consumers get their wine.

The report shows that more than 6 million cases of wine were shipped directly to consumers last year, representing about $3 billion in value. That’s a lot of business that is bypassing the distributors and retailers.

Many states have liberalized their out-of-state alcohol shipments in recent years and no doubt this has had an influence on the increase. However threatening the growth is to distributors and retailers, it is a boon for consumers.

More than half of the U.S. wine producers make less than 5,000 cases a year and distributors don’t want to spend the time on them. Couple that with the fact that producers don’t want to spend the money on distributors either and you have a trend that has no end. A wholesaler and retailer combined can take up a third of a bottle’s cost.

I spoke to several high-end wine producers who say a 90-plus rating from a renown wine critic eliminates the need for marketing and national distribution. They can sell the wine through their clubs and tasting rooms.

The same goes for several Oregon wine producers I recently spoke to. Their productions are often under 2,000 cases a year. They are putting money into their tasting room to attract tourists. Steve Lutz of Lenne says he’s doing so well with direct-to-consumer sales that he’ll probably have to allocate his wines next year. Tom Fitzpatrick of Alloro is also seeing an explosion in direct sales.

According to the report, the average cost of a DtC wine in 2018 was $39. That’s pretty high for most consumers, but in line with Oregon pinot noirs. Oregon’s DtC market grew by 19 percent last year — tied with Sonoma County for the lead.

Distributors will always have business from large producers of wine — Gallo, Kendall-Jackson, Constellation, Trinchero, et al — but there is a steady business being lost from small producers.