In 2011, D-to-C sales were approximately 7 million cases. By 2021, sales are expected to grow to approximately 22 million cases, according to a Wine Intelligence report. Yet this evolving distribution method still only presently accounts for one bottle of every 50 bottles sold in the US.
Online sales of wine grew by 20% in 2011, outperforming overall market growth of 16%, according to a Capgemini study.
What is driving this trend?
First, there is the cumbersome regulatory environment that exists throughout the US, driven by the 21st Amendment (Prohibition) that left regulation of distribution and taxation of wine and spirits to each individual state. The result is, essentially, a network of 50 separate "countries," each leaving its own cumbersome imprint on the marketplace. Overall, most states exist in a Three-Tier environment, where wineries/producers must first sell goods to a licensed wholesaler/distributor. The wholesale tier then sells to the retailer (or restaurant), which in turn then sells to consumers. Not only does this system add costly (and often unnecessary) additional layers of profit margin to the cost of the wine but it often acts as a barrier-to-entry for many new wine products because the large national brands and powerful distributors often have powerful sway over product selection within their borders and on their shelves.
Second, a body of law has emerged in recent years, enabling wine producers to "skip over" the wholesale tier altogether and ship directly to retailers (Direct-to-Trade) and to the public (Direct-to-Consumer).
The onset of Web e-commerce, further, has spawned an entire generation of consumers who routinely purchase products on their computers - without visiting bricks n' mortar stores at all. According to the Wine Intelligence study, approximately 30 million American wine drinkers have purchased wine directly - from winery tasting rooms, from online wine retailers or through a mail order club - since the fall of 2011.
The main growth in this segment, at least for the next 10 years, is expected to come from a growing habit of purchasing wine online and from younger, more "involved" wine drinkers - "Millennials" - for whom e-commerce is already second nature.
Another even more-compelling trend happening here is the onset of "boutique" wine brands, introduced not by traditional wine producers, 'rock star' winemakers or other existing industry groups - but simply by individual brand owners everywhere who want to exploit this new even playing field for their own financial advantage! These brand owners might be rock bands, TV personalities or shows, celebrity chefs, political parties, small restaurants, event planners, charities, universities, country clubs, sports teams - or just people with innovative brand ideas, generally, where the sponsor is seeking a Web-based business.
So, just when you thought that wine distribution was being consolidated even further and the access to market was being choked by powerful wholesalers who protect the dominant, national brands at the expense of the public.....the world of wine has become more democratic! The playing field is being evened again.
KDM Global Partners, a Philadelphia-based wine importer which produces wines in many of the world's major viticulture regions (including domestically in California and Oregon) is at the forefront of the Direct-to-Consumer opportunity for its private label wine clients.
To learn more about building a wine brand in this new environment, please contact: http://www.kdmglobalpartners.com/contact-kdm.
