Direct Sales Grow Steadily

Posted by Alan Boehmer Apr 18, 2008

No sector of retail sales features the labarynthine maze of regulations that wine sales suffers, especially in the United States. One of the legacies of Prohibition was the development of the "Three-Tiered-System." Producer—Distributor—Retailer. Only recently have some state laws softened to allow consumers to order wine directly from the wineries and have it shipped to their homes. States that allow these purchases are known as reciprocity states. At the time of this writing there are 20 of these in addition to Washington D. C.:

• Alaska
• California
• Colorado
• Connecticut
• Idaho
• Illinois
• Iowa
• Michigan
• Missouri
• Nevada
• Hew Hampshire
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oregon
• Washington
• Wisconsin
• Wyoming

As a result of these states relaxing their laws, consumers are flocking to online purchasing. The move to direct sales has had the greatest effect on the high end of the market. Wines costing over $30 comprised 58.5% of the direct sales market in 2007. Direct sales rarely involves wines priced under $10 because these wines, mostly imports, are readily available in most parts of the country and the cost of shipping causes them to compete directly with more expensive wines.

About half the small wineries we have visited in California, Oregon, and Washington are not seeking distributors. To obtain a distributor a winery must produce a certain volume of product which is sold to the distributor at a substantial discount. This is not feasible for the small producer focussing on a high quality product.

So we are seeing a sea change in the way fine wine is marketed. Many of the finest small producers sell only through their tasting room, cellar clubs and online sales. This is becoming an increasing trend. Some of the most desirable wines—Kosta Browne Pinot Noir, for example—are being sold only to members of their mailing list .