During a panel for legal professionals at the Sovos ShipCompliant Wine Summit, the company’s regulatory general counsel, Alex Koral, remarked that when it comes to compliance, “the devil really is in the details.” 

With all the rules and regulations, both local and federal, becoming — and remaining — legally compliant is a daunting mission for many wineries. To help wine professionals better understand the nuances of compliance, the company hosted its 19th annual Wine Summit at the Marriot in Napa, Calif., May 8-9. Presentations by legal and wine industry professionals focused on the state of the industry, direct-to-consumer (DTC) logistics and compliance. 

Product Management Director Lexie O’Neill said the company implemented API updates for the California Bottle Bill, integrated with FedEx and UPS to improve shipment tracking and customer service, and debuted a new user interface. The company also has plans to improve customer service with scaling report filings to eliminate the need for manual data entry, launch a chat bot and provide enhanced data analytics to help users make more informed decisions.

O’Neil then introduced Rob McMillan, executive vice president and founder of the Silicon Valley Bank Wine Division, who spoke about the wine industry’s oversupply and what can be done to remedy it. McMillan urged the audience to take the evidence in stride and adapt as a community. 

Data indicates wine inventory increased through 2023 while sales remained flat. Typically, inventory to sales should be at a ratio of 1:1; but according to McMillan, the wine industry is at an unbalanced 1:7. As for a solution for this oversupply, McMillan suggested that wineries reconsider discounting, but only for certain SKUs. “Discounting is the way it moves,” he said. “It’s not ideal but it’s a price reaction.”

But discounting needs to be strategic. McMillan advised against discounting key products, such as flagship SKUS, to maintain the value of the brand. Instead, he suggested, wineries reduce the volume of high-priced SKUs and reallocate wine to new SKUs that can be sold at a lower price. Price slashing can only be a one-time solution, he said, “You can do that once, but then what do you do?”

McMillan also said wineries need to work together. “Adaptation is more successful when collaborating.” 

ShipCompliant’s Koral was later joined onstage by Risa Williams, investigations sergeant for the Arizona Department of Liquor Licenses and Control, and Matthew Botting, general counsel for the California Department of Alcoholic Beverage Control. The panel, led by Koral, covered issues with interstate shipping compliance and what wineries can do to protect themselves. 

“Educate yourself on what needs to be reported, and each state is so different and that’s the biggest challenge,” Williams said. “Call the state, ask the questions.”

She and Botting pointed out that most wineries want to be, and are, compliant, but it’s those who try to operate without proper licensing that can cause legal trouble for the industry. 

Steve Gross, vice president of state relations for the Wine Institute, wrapped up the event with a state-by-state rundown on legislation that will affect the DTC shipments market. 

Gross said the Wine Institute has had success in improving existing laws in New Jersey, Maine, Montana and Alaska. “Wherever we see an opportunity, we try to do it, but it just takes quite a bit of time, and it’s not always successful,” he said. 

Gross said several states are increasing their enforcement of state liquor laws and DTC regulations in response to craft breweries and spirits trying to enter the DTC shipments market. Those efforts to ship their products DTC, energized opposition from groups that had opposed similar laws for wine. Gross said that it’s of utmost importance than wineries stay attuned to new policies and legislation that may affect DTC sales. 

To succeed in the DTC space, Gross encouraged wineries to operate in compliance with existing laws and to cooperate with common carriers and fulfillment houses. He said he believes there are still great opportunities for DTC to grow as consumers want new and interesting wines in their home state if all parties involved do things properly.