As wine brands compete for consumer attention in an oversaturated market and retail profits diminish, more wineries are trying to sell part—or all—of their products directly to consumers; selling directly from the tasting room and through wine clubs allows wineries to earn significantly more for their wines. This sales channel was the focus of the 2018 Direct to Consumer Wine Symposium (DTCWS), held just outside of San Francisco on 17 to 18 January.
The value of the DtC channel in 2017 was estimated to be $2.69 billion, according to the Colorado-based Larry Cormier, general manger of ShipCompliant by Sovos, a compliance and technology platform.
Who uses DtC
Some smaller-production US wineries may sell exclusively DtC, while most use it as part of their sales agenda. Larger wineries, with strong distribution across the US, often say that one sales tier generally supports another as DtC sales are often strongest in states where wineries have solid distribution.
Jennifer Goodrich, director of sales and marketing at Napa-based Wineshipping added that there is no standard size for a “typical” winery using a DtC sales model. Fans of the sales model can produce anything from 200,000 to 250,000 cases annually.
However it is clear that DtC profit margins are significantly higher than wines sold through standard three-tier—supplier-distributor-retailer—models. While ShipCompliant doesn’t have data on profit margins, Cormier did share that the average price per bottle for DtC wine of $38.75 is almost four times the average price per bottle for retail, alluding to the fact that this sales tier tends to focus on higher-end wines which adds to the profitability of the sales channel.
Generally smaller wineries, that may have less access to and interest in national distributors, benefit most from initial and long-term DtC sales. According to Cormier, small- to medium-sized wineries that produce less than 50,000 cases annually primarily drove the DtC shipping channel in 2017 and accounted for 70% of the value of winery shipping.
Both Cormier and Goodrich agreed that the bulk of US wineries use the DtC sales format to a certain extent. “Medium-sized wineries made up 37% of the overall DtC shipping value growth in 2017, representing 23% of the total value of the shipping channel,” said Cormier.
DtC best practices
Wineries that excel at DtC sales also understand that it needs to be a distribution vehicle for a different type of wine. These are often wines that aren’t available at the local store, so they generate greater consumer interest and markups. Goodrich says her company even creates new SKUs to sell DtC, both to attract consumer interest and so as not to attract the ire of wholesalers who may pride themselves on having access to limited allocations of top-rated wines.
Many of the tech and training programs used by the most successful DtC wineries could benefit vintners all over the world. They include a greater focus on a positive tasting room experience, a laser eye on training to help staff to focus on the needs of individual guests and the use of technology to research clients prior to their visit and make the entire time spent at the winery flows smoothly.
Putting effort and investment in solid tasting room design, effective traffic flow and enthusiastic and incentivised winery hosts tends to pay off regardless of how wineries are trying to sell their wares. Other investments that DtC-focused producers tend to focus on include a profitable eCommerce site, an engaging and dynamic wine club and effective point of sale and compliance systems.
Liza B. Zimmerman