01.17.2018  
 

DtC Shipment Value Rose 15.5% in 2017

Pennsylvania bounds into top 10 states for shipments; DtC a boon for Northwest producers

 
by Kate Lavin
 
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A preview of the “2018 Direct-to-Consumer Wine Shipping Report” presented Jan. 17 in Concord, Calif.

Concord, Calif.—Direct shipments of wine in the United States increased 15.5% by value and 15.3% by volume in 2017, according to a report preview being shared today during the Direct to Consumer Wine Symposium in Concord. Larry Cormier, general manager of ShipCompliant by Sovos, presented the “2018 Direct-to-Consumer Wine Shipping Report” created in collaboration with Wines Vines Analytics.

A full version of the report is available at shipcompliant.com/dtcreport18.

The 15.5% increase in value over 2016 figures reflects more than $2.69 billion in direct-to-consumer (DtC) shipments during 2017 and outpaces the six-year average of 12% growth calculated by ShipCompliant and Wines Vines Analytics, which have partnered since 2010. Shipment volume saw an even greater increase over the six-year average of 11% growth, clocking more than 5.78 million cases shipped during in 2017.

Cormier identified three factors contributing to success in the DtC channel during the past year: a strong overall economy, Pennsylvania opening to direct wine shipments and “strong organic growth in Sonoma, Washington and Oregon.”

Comparing sales strategies
Market-research firm bw166 calculates off-premise spending on domestic wines at $26.7 billion in 2017; the figure includes retail, restaurant sales and direct shipments. With DtC sales accounting for $2.69 billion during the same period, “Winery direct-to-consumer shipments represent 10% of that total,” the report concludes.

“We are talking about a distribution channel that didn’t even exist 10 years ago,” Cormier says. “So, from zero to 10% of sales, that is a big deal.”

Other key takeaways include Pinot Noir surpassing red blends to become the No. 2 most-shipped wine behind category leader Cabernet Sauvignon. The two varietal wines comprise 45% of shipments to consumers by value, according to the report.

Location, location, location
Cormier says direct Pinot sales are led by growth in Oregon and Sonoma County. The two locations were responsible for 40% of the $361 million increase in direct shipments during 2017.

For its part, Sonoma County saw sales increase 25% by value and 23% by volume. The county is responsible for 26% of all U.S. wine shipments to consumers by volume. In addition to shipments of Cabernet, Chardonnay and red blends, Sonoma County Zinfandel was a popular choice for DtC consumers, with the varietal wine garnering a 39% increase in case sales in 2017 compared to the previous year.

Unsurprisingly, Pinot Noir is the category leader in Oregon, with 70% of DtC sales value coming from the state’s flagship variety. Oregon Pinot saw sales jump 38% by value in 2017 and 35% by volume. DtC sales of Oregon Chardonnay, meanwhile, increased 51% by value and 43% by volume.

Cormier says wineries typically sell the most cases to consumers within their own state, after which states like New York, Texas and Florida offer the most potential for DtC sales.

DtC sales from wineries in Washington state saw significant growth (26%), and the state also is one of the top five in terms of consumers receiving wine shipments. Red blends, Cabernet Sauvignon and Syrah are top sellers with DtC consumers from Washington wineries, with Cabernet Sauvignon commanding a 43% increase in sales by value in 2017 compared to the previous year.

Pennsylvania and across the nation

While regulators in Pennsylvania ushered in legal direct shipping in 2016, it wasn’t until 2017 that the state enjoyed a full year of DtC sales, prompting the sector to experience a 157.9% increase in that state compared to the previous year. The regulatory change also had nationwide implications, as Pennsylvania joined the top 10 states for wine shipments by volume in 2017, edging out Georgia. Although with a higher price per bottle for its DtC shipments, Georgia still outranks Pennsylvania in terms of DtC sales value.

As the sixth most-populous state in the nation, Cormier expects Pennsylvania’s importance to the DtC sector will only grow in the years to come. “We think it will be No. 5 or 6 pretty soon,” he told Wines & Vines.

In addition to dominating U.S. wine production in terms of quantity, California residents also receive the most wine shipments, with 30% of shipments going to addresses inside the golden state. Texas (8%), New York (6%), Florida (5%) and Washington (4.5%) round out the top five states for wine shipments.

Cormier says large population centers tend to have not only the highest number of shipments but also the largest average bottle price.

Looking ahead

Unlike past years, when wine industry trade groups implored their colleagues to contact officials in large states and encourage them to open up to interstate shipping, the most populous states now allow the practice, while the states that don’t condone direct shipping have relatively small populations. In the years to come, Cormier says, “Shipping will just continue to grow.”

To receive a copy of the full report when it is available, visit shipcompliant.com/dtcreport18/.

 

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