Jan and Michael Gibson are wine lovers who don’t go to wine stores. Instead, they go directly to the wineries, and have the wines shipped to their home in Rockville, Md. They are part of the small but rapidly growing “direct to consumer” sales channel that is chipping away at the traditional post-Prohibition distribution system.
“We travel to California at least once a year to visit wineries,” Jan says. They favor small wineries that sell most or all their production at the tasting room or through their wine clubs, and the couple looks for organic and biodynamic producers. “We have not found a good variety or quality of organic wines available in Maryland,” she says. The Gibsons also visit wineries when they travel in New Mexico or Virginia, but their favorites are from Mendocino and Sonoma counties in California.
“It’s fun to have a relationship with the producers, and it’s fun to make new discoveries,” she says.
More than 5 million cases of wine were shipped by U.S. wineries directly to consumers last year, up 17 percent over 2015, according to an annual study published by Wines & Vines magazine and Ship Compliant, a company that helps wineries navigate the labyrinth of state laws and regulations governing direct shipments. Those shipments totaled $2.3 billion in value, with the average price per bottle at $38.69. And they accounted for 8.6 percent of domestic wine sales by value, not including restaurants. (While Americans purchased $26.9 billion in domestic wines last year, the average price per bottle for all sales was $9.29.)
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The direct-sales channel has increased 75 percent in value and 70 percent in volume since 2011, according to the report. And that probably underestimates the amount of wine delivered each year by FedEx and UPS, because it does not include online sales by retailers, who sell imported wines as well as domestic. The growth began after a 2004 Supreme Court ruling gave states flexibility to allow direct shipments outside the traditional three-tier distribution system of producer-wholesaler-retailer. At that time, 12 states allowed some form of direct shipping; today, only six prohibit it.
Certainly, the Internet and the ease of online ordering helps drive the growth of the direct-sales channel. Another major factor is the consolidation over the past decade of wholesalers, giving a handful of companies a stranglehold on the distribution channels to retail shelves.
That consolidation led Cameron Hughes to abandon traditional distribution altogether.
As we become even more accustomed to shopping online, direct wine sales should continue to account for more of our wine purchases. And that growth will transform the market for wine.