During the height of the pandemic, wineries were forced to shutter their doors to in-person tastings. To try and recoup revenue losses, vineyards offered online wine tastings and beefed up their direct-to-consumer (DTC) sales efforts and infrastructure.
Customers stuck at home happily joined wine clubs and shipped wine to their front doors instead of traveling to a liquor store with a mask on. The success of the DTC channel seemed like it could continue even after government officials lifted pandemic-era restrictions.
However, Silicon Valley Bank’s 2023 report shows that wasn’t the case. Sales through the DTC channel dropped as wine lovers returned to bars and restaurants — and liquor stores.
2022 winery direct-to-consumer shipments represented 12.0% of the total off-premise sales value of domestic wines in the United States, according to the report. Data indicates the volume of wine shipped in 2022 decreased by 3.0%-14.2% from 2021 figures, depending on the region.
Meanwhile, a new report by SOVOS ShipCompliant and Wines Vines Analytics found wine DTC sales volumes decreased by a dramatic 10.3% in 2022 while dropping 1.6% in value over the same period. This is the first time a dip in DTC sales has been recorded in the report’s history.
“While the technology used by the industry continues to improve, it appears that the pandemic-induced increase in internet sales flattened out after reopening. Online sales haven’t grown,” according to the report.
A market correction
“After the all-time high of $4.2 billion in value that the DTC shipping channel experienced in 2021, the declines seen in 2022 were not that surprising,” said Andrew Adams, Wine Analytics Report editor at Wines Vines Analytics, in a press release. “Consumers were spending much more time in restaurants and bars as the on-premise sector rallied.”
According to the report, for an average winery today, direct sales make up nearly 70% of total sales, up from 60% in 2018. “DTC really has become the way of life for a small premium winery,” the report states.
However, in the larger scheme of the wine industry, direct-to-consumer channels are far from becoming a dominant revenue source.
Promising legislation for DTC
DTC struggled to take off in the past because of the laws and regulations around shipping wine across state borders.
“There are now only three states that don’t permit any winery shipments to customers regardless of conditions—Delaware, Utah, and Mississippi,” Alex Koral, the regulatory general counsel for Sovos ShipCompliant, a supplier of compliance software for wineries, told SevenFiftyDaily. “Alabama was a major target, and they passed approval to ship in August 2022.”
Many of the regulatory roadblocks around DTC shipping are now gone, but online-only wine clubs are struggling.
For example, Winc — a large DTC wine club targeting millennials — is currently in bankruptcy.
What this means for distributors
Distributors let out a collective sigh with the DTC numbers dipping and not showing sustained growth.
For distributors to continue having success, analyzing data on shipping routes and costs and stocking liquor stores with what the local consumers want will help maximize revenue. For now, though, it seems that customers will take advantage of the DTC model when they need to, but old habits are proving hard to break.
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