Industry Reflections on the 2023 Direct-to-Consumer Wine Shipping Report

In the month following the release of the 2023 Direct-to-Consumer Wine Shipping Report, several other data snapshots of the wine industry were also published. In response to the various reports, there has been a swell of commentary on what each one signals for the health of and outlook for the U.S. wine industry.

It can be difficult to make sense of the varying takes because the data represented in each of the different reports are nuanced and often speak about different sectors of the larger industry.  While we might all be talking about “the wine industry,” on careful examination we see that these different sources, and the interpretations of each, are examining different slices of the larger pie.

The wine industry is composed of many channels—local delivery of three-tier distribution sales and direct-to-consumer shipping, other on- and off-premise models, consumers in different age brackets with different buying habits and needs. While it’s tempting to extrapolate from one segment to the rest, there’s much to be gained from looking at each slice of the pie in its own right.

Wine sales data: slices of the pie

Gus Clemens makes a savvy observation in his January 31 column: “Wine sales data is a confusing mix of proprietary data, estimates, modeling, and retail sales numbers that do not include key statistics. Each of the most respected data sources report different and incomplete numbers. It all depends on what beans are counted.”

For example, the Silicon Valley Bank (SVB) annual state of the wine industry report combines proprietary research with analysis of dozens of sources to enable Rob McMillan to provide his assessment of current market conditions and offer SVB’s trends forecast.

A recent bw166 post leans heavily on the Sovos ShipCompliant/Wines Vines Analytics Direct-to-Consumer Wine Shipping Report, along with numbers from the U.S. Census Bureau and some of the firm’s own data, in reaching the conclusion that the wine industry glass is half full.

Nielsen IQ offers data on on-premise sales and trends from point-of-sale data and other sources, and with the acquisition of CGA, aims to integrate off-premise data from casual and fine dining, bar and nightclub to this data view.

Meanwhile, WSWA SipSource uses aggregated and trended wine and spirits distributor depletions, built from unique items sold to individual stores, to predict what consumer trends will bring for both the on- and off-premise in 2023.

As for our own Sovos ShipCompliant data, it is the most comprehensive look at one key channel in the wine industry—direct-to-consumer shipped sales (including tasting room sales that are ordered for shipment, though not those that are picked up or carried out) based on millions of transactions that are extrapolated through the rigorous Wines Vines Analytics model to the entire U.S. DtC shipping channel. The data discussed in the report does not cover on-premise sales or non-DtC-shipped off-premise retail sales.

Different ages mean different buying habits

Wines’ relationship to younger (legal drinking age) consumers has been a topic of ample discussion. Using Sovos ShipCompliant/Customer Vineyard data, the SVB report shows that the proportion of wine sold directly to consumers over age 60 has continued to grow in total share over all other age bands, as consumers younger than 60 are less interested in buying wine today.

Conversely, the bw166 post we mentioned above uses ShipCompliant data to illustrate that when it comes to DtC spending, the per capita spending of 21- to 30-year-olds has been increasing at a faster rate than the 61 to 70 age band. As this data is specific to DtC shipping, other sources covering, for example, the on-premise might find different demographic trends.

W. Blake Gray of Wine Searcher says the wine industry is failing to engage younger consumers, but also notes this outcome could be cyclical. “Whiskey was down and out as an industry 30 years ago, and look at it now. Maybe whoever comes along after Gen-Z will decide to take up wine just because their parents did not. But can the wine industry afford to wait to find out?”

Where we’ve been & where we’re going

Looking specifically at DtC wine shipping in the U.S., from 2011 to 2021, the average change in the volume of winery shipments and the value of the shipping channel is +11.2% and +12.3%, respectively. This trend was disrupted in 2020 and 2021. However, the volatility continued in 2022 when the volume of DtC winery shipments decreased by 10.3% (876,848 cases) from 2021, while the value of winery shipments decreased by 1.6% ($66 million).

Although overall off-premise sales fell by half a billion dollars in 2022, DtC shipments of wine kept pace with 2021 shipments by capturing 12.0% of the off-premise sales of domestic wines, essentially matching the largest ever percentage of domestic off-premise sales recorded by the DtC shipping channel (12.1% in 2021).

While it appears now that inflation in the economy is easing somewhat, it remains far higher than historical averages. Additionally, interest rates continue to rise and are forecast to rise going into 2023, though perhaps at a lower clip than throughout 2022. If these economic conditions maintain their trajectory, the wine industry and its DtC wine shipping channel will continue to be impacted by slower consumer spending and the high costs of goods, services and debt.

None of that is good news for wineries that rely on DtC sales and shipments, but it doesn’t necessarily point to a failing by the industry to produce wines that fit the budgets of younger consumers, or neglecting to reach out to them with targeted marketing campaigns.

Wine isn’t finished, but there is definitely work to be done to ensure that consumers of all ages and in varying tax brackets can find their ideal vintage. Perhaps it’s just a matter of making sure to take in the entire pie as well, not simply one piece at a time.