Tom's blog

Is the wholesaler in jeopardy?

More and more people are getting their wines directly from producers and that's a trend that should concern wholesalers and retailers who are losing their cuts. 

According to Gomberg, Fredrikson Associates, a wine industry data collection firm, direct-to-consumer sales accounted for 10 percent of the wine retail market in 2017. Volume increased 158 percent over the previous year.  The trend is obvious.

Most of the DtC business is from wineries with limited production and who have a hard time getting attention from distributors who don't want to mess with them. According to Forbes, 80 percent of total domestic wineries produce no more than 5,000 annual cases each.

I was recently talking to Ryan Harris, president of Domaine Serene in the Williamette Valley, about this issue. He said 80 percent of Domaine Serene's revenue is from direct-to-consumer sales and that represents about 50 percent of their volume. Those numbers stunned me because I don't consider Domaine Serene to be small.

It is the same conclusion I've heard from other producers who focus on expensive, high-end wines. Wholesalers focus on large producers -- Constellation, Treasury Wine Estates, Gallo and Kendall-Jackson, for instance -- who can keep the pipeline filled. Expensive wines with small productions can't get the attention of wholesalers focused primarily on quantity and numbers.

Harris' two numbers show the attraction of stronger marketing in DtC sales: you can make more money if you eliminate the middlemen.

Domaine Serene has a strong wine club. West Coast producers have amped up their wine clubs and hospitality centers that attract tourists to their facilities. That, coupled with more liberal laws regarding the shipment of alcoholic beverages, and you have a movement. However, it's not necessary positive for consumers.

DtC sales mean consumers have greater access to hard-to-find wines sold exclusively at wineries. However, they don't come cheap. I recently ordered some Lorenza rose from the winery, thinking it was hard to find in my local market. Later, I discovered Total Wine was selling it for $3 less a bottle and there was no shipping charges.