drinking wine at sunset with beautiful view
In a piece posted earlier this month readers learned that Direct-to-Consumer (DtC) shipments had captured 10% of the wine retail market. The data was gleaned from the annual DtC wine shipping report produced by ShipCompliant by Sovos, and Wines Vines Analytics. Issued in 2019 that report covered 2018 sales. The latest Direct To Consumer Wine Industry Report covers 2019 sales, and it reinforces the message in the earlier post that DtC relates directly to the need for wineries to invest in digital technology.
According to the report, DtC shipping value grew over the five years preceding 2019 by an average 14%, while the average volume shipped grew during the period by 13%. It was a time of rapid expansion for the retail category. The DtC category had matured by 2019, and so the category slowed—value grew over the previous year by 7.4%, and, although volume shipped was at 6.6 million cases in 2019, it represented only a 4.7% increase over 2018. In addition to the category having matured as an expected reason for the slowdown, it didn’t help that not one of the five states which had not allowed DtC shipping in 2018 made a change to its laws in 2019.
Still, the report cites Jon Moromarco, a managing partner at the consulting firm bw166, who totals 2019 off-premise retail sales of U.S. domestic wine at $29.8 billion. During the same period, DtC winery shipment value was $3.2 billion, representing 10.8% of retail sales—a jump over 2018 of $200 million, or 0.8%.
In 2018, DtC prices averaged a 2.4% increase over the previous year, which was a record that is now topped by the 2.5% average price increase in 2019. What that says about the category seems clear: DtC customers are not shy about buying up. In fact, the report claims that wines priced $100 and up per bottle “…outperformed the overall DtC channel, a trend that goes back to 2013 and tracks with the continued premiumization we have witnessed within the wine industry as a whole.”
According to the report, DtC action is a particularly Pacific Northwest phenomenon: “The 2019 growth in shipments from both Oregon and Washington wineries far outpaced those of other regions tracked in this report…Napa continued to see slow market share erosion.” Though the two states combined equaled 11% of the total value of DtC wine shipments in 2019, Oregon and Washington account for 19% of a $221 million increase in overall DtC shipping over 2018.
In 2019 Napa and Sonoma Counties represented 56% of the volume and 68% of the value of DtC shipping. Sonoma’s performance was in line with the overall DtC performance, but Napa underperformed for the fourth consecutive year.
At 29.1% of all DtC shipments in 2019, Sonoma was the top regional performer for the second consecutive year. For the first time, the 2019 DtC report tracked California’s Central Coast as its own region, instead of counting it within the Rest of California. The change ranks the Central Coast as the third-largest region tracked in overall volume and in value of domestic winery DtC shipments; the Rest of California is ranked second. Oregon and Washington State follow. The report notes that, “Oregon is unique among all regions tracked…no other winery region is so fully dependent upon a single varietal. In 2019, Pinot Noir shipments accounted for 54% of the volume of wine shipped and 67% of the total value…” and, “Despite being the second-largest wine-producing state in the country, Washington ships the least amount of wine directly to consumers of all regions tracked…in 2019, Washington wineries shipped only 5% of the total volume and 4.2% of the total value…” of wine shipped DtC.
The report claims there were 10,445 domestic U.S. wineries in 2019. In 2019, 45% of wineries produced fewer than 1,000 cases annually; 36% produced between 1000-4999 cases; 16% produced 5000-49,999 cases; 2% produced 50,000-499,999 cases; and 1% produced more than 500,000 cases.
The 16% of wineries in the 5000-49,999 case production accounted for 42.4% of DtC shipping volume and 44.7% of value.
Combined, the wineries producing under 1,000 and up to 4,999 cases accounted for 40.9% of DtC volume and 44.9% of value.
Combined, the wineries producing 50,000 to over 500,000 cases accounted for 16.7% of DtC volume and 10.4% of value.
There’s more in the 2020 report of course, but the story it tells does nothing short of reinforcing the need for U.S. domestic wineries to invest in digital technology, which is necessary to enter and maintain a vibrant DtC wine retail program. Again, what that means is investing in apps and computers so that consumers can directly connect to consumer-friendly winery web sites, and wineries can easily manage their wine clubs.
