DtC Shipments Grow 13% in 2011
by Jim Gordon
Now that the data are in for direct-to-consumer sales in 2011, and we can compare them to 2010, it’s time to share the good news coming from Wines & Vines' partnership with ShipCompliant, which makes valuable market research available to our readers.
The year that ended Dec. 31, 2011, was a very good one for wine clubs and other direct-shipping efforts. The sector grew 13% in dollars, totaled $1.33 billion in sales and handed over 2.95 million cases to UPS, FedEx and other carriers to deliver to customers across the country.
The DtC sales of $1.33 billion, divided evenly by 7,345 (the latest number of U.S. wineries, as tallied by our research arm, WinesVinesDATA), equals an average of $181,000 in direct-to-consumer sales per winery.
Projecting the market
No one had this kind of information until Wines & Vines began its partnership with ShipCompliant, the leading provider of legal compliance services to U.S. wineries, in 2009. Wines & Vines has the most up-to-date winery information, and ShipCompliant has the widest data for winery shipments, their values, destinations and so on. Together, our two companies built a model to carefully monitor the total DtC market.
The model projects the whole market using a representative sample and multiple stratifications. It uses anonymized transactions from ShipCompliant and data about winery size, location, case production and bottle price from WinesVinesDATA. This assures that the statistical projections are representative of all wineries by winery size, location and bottle price level.
WinesVinesDATA began loading the model in April 2009, and it now holds nearly three years worth of valuable data.
Mining the data
Here are some more ways to look at DtC success in 2011. The value of DtC shipments grew by $149 million from 2010. This growth came as a result of more cases shipped and higher prices per case. Volume in 9-liter cases rose 9%, while dollar sales rose 13%, meaning the price per 750ml bottle rose by an average of $1.07.
It’s interesting to look at what type of winery benefited the most. The winery-size tier that sells the most DtC shipments produces 5,000-49,999 cases annually. That tier enjoyed a modest sales gain of 6% from a big base of $675 million. However, the smallest wineries (those producing less than 1,000 cases) saw average growth of 54% in DtC sales. No tiers lost DtC sales in 2011.
Shipment destinations evolved somewhat in 2011. California kept its lead as the top destination state and grew 17% in dollars. Texas was still No. 2 and grew 16%, while No. 3 New York grew just 2%.
At least one data point reflected the headlines. Maryland’s DtC shipments abruptly rose by 763%. Sales shot from about $700,000 in 2010 to nearly $6 million in 2011, reflecting the July 1, 2011, effective date for the state’s new legislation allowing DtC shipments.
Just to prove that I’m not blind to bad news, the data also show that DtC sparkling wine sales fell 19%, and Sangiovese dipped 3%.
I am sure that many vintners still feel under water. Their restaurant sales probably haven’t recovered to 2008 levels, and their off-premise sales might not be tracking the overall domestic wine growth rate of 8% for 2011 that I am reporting on page 10 of this issue.
Still, the DtC news is too good for pessimists to shrug off. It’s certainly another reason for optimism as 2012 unfolds. Vintners who are not already emphasizing this high-margin sales channel ought to seriously weigh its advantages (full markup, customer relationships) vs. its drawbacks (complicated marketing and shipping.) In the context of other good economic news such as rising employment and rising wine consumption, this might be just the beginning of an extended upward curve for DtC shipments.
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