MW Topics of the Week: Direct to Consumer Sales (P4)

Back to Paper 4: This week, we’re focusing on the consumer, specifically direct-to-consumer (DTC) sales. 

2018:  Where are direct to consumer wine sales increasing and why?  

It’s essential here to define DTC — as narrow as winery-direct sales, extend to include more club models and mailing lists? There’s also a need to include relevant market data (for the US: the SOVOS Direct to Consumer Report provides annually updated data). For example, many US wineries sell DTC; but did you know the DTC model accounted for 10% of domestic US retail wine sales in 2017, totaling nearly $2.7 billion (+15.5% annual growth)? [SOVOS 2018] The report predicts that primary growth in off-premise sales will continue to be from DTC channels, as the wine industry as a whole evolves, e-commerce continues to grow, and regulations adapt. Just look at how industries have led that trend (Warby Parker for glasses, Harry's razors, etc.) The Australian winery-direct/cellar door sales industry is enormous as well and important to look at as well.

Knowing data from multiple markets (think back to our China question!) would be necessary as well, as well as whether you’d include other models like wine clubs (Viticole, Winc) and mailing lists (Hawesko in Germany runs massive mailing list programs, buying directly from wineries and selling to consumers — would you include this in your scope?) How do direct to consumer wines sales impact the more traditional channel sales? How are non-domestic brands impacted? What’s the benefit for a large versus small brand? How does legislation impact these sales (shipping is big!)?

Given some of these prompts... How would you define your terms and scope? What examples would you look at? Looking forward to responses!


  • Hoping for some informative replies as this is what we are currently covering in D2

  • Here is my brief overview diving into the topic; note, I homed in on winery-direct sales to focus the argument. 

    What it is: 

    Direct to consumer (DTC) sales are sales that sell directly to the consumer, often bypass traditional import/retail routes to market, which may include cellar door, wine club, mailing lists, winery websites, events, and mail order sales. This DTC model places a winery brand at the center of the sales discussion, rather than at one end of a long supply chain and connects the brand to the end consumers in an intimate way. With the increase in enotourism and investments in hospitality infrastructure and event programming, it can be a way for a winery to see return on these investments in a direct and meaningful way, as well as to increase margin on bottles sold. For the consumer, while it is not more economical especially given high shipping costs per bottle, it provides access, experience, and assured provenance. This essay will take a look at multiple markets where DTC sales have both been historically important and on the rise.   

    Where: Essay takes a look at U.S. market (dominant market driver), Australia (increasing), European market, notes on China as well 

    Why (Pros): 

    • Money – Increased margin on wines – winery direct pricing is tends to be at or just under suggested retail; Makes business viable for small wineries who have harder time finding distribution in crowded markets 
    • Brand Loyalty and Access – Connection with consumer, build brand loyalty, plus every other industry is doing this so tapping into
    • customer purchase habits (e.g. Warby Parker) 
      Consumer Data – Continuity marketing – cellar door sales convert to repeat purchases that are trackable  

    Constraints (Cons): 

    • Legal infrastructure – some places in the world completely block direct shipments of wine (Singapore, states like Utah, Ontario) 
    • Can be seen to take business away from traditional import partners/undercut their routes to market 
    • Investment – takes time and energy to research and implement these sales 

    Market Analyses:

    U.S. Market: 

    • Granholm v. Heald (2005) case in front of the U.S. Supreme Court widely opened up direct-to-consumer shipping from entities with winery licenses across many states (this did not extend to retailers) by declaring that it was unconstitutional for states to allow in-state wineries to ship DTC but not out-of-state wineries. 
    • This has caused a dramatic increase in DTC sales from domestic wineries, reaching over $3 billion in sales in 2018 (up from $2.69 billion in 2017) – this represented +10% of total wine sales in the U.S. market, up from 2% in the early 2000s. According to SOVOS 2018-2019 reports. 
    • Examples:  
      • Price setting: e.g. Hirsch “Bohan Dillon” Pinot Noir -- $39 to the wine club, avg $44 on wine searcher 
      • Wine club v. allocation model:  
        • Wine clubs – consumer signs up to receive a certain number of shipments per year from a winery; immediate/guaranteed income stream (although attrition rates can be high); move a variety of items, e.g. small production, experimental wines (Mauritson includes a port-style wine as part of the wine club shipment; Gallica sells their one barrel of Petite Sirah exclusively DTC), etc.  
        • Some wineries require consumers to sign up for highly allocated wines (e.g. Screaming Eagle, Harlan Estate, Turley Wine Cellars) 
        • Question of balance between loyal/traditional consumers that are aging out and providing access to new, younger consumers 
      • New business opportunities:
        • Macari Vineyards on Long Island, NY – large percentage of the business is at cellar door and through wine clubs rather than through distribution 
        • Some wines channel specific: Helps move high end wines – keep entry level wines off of the shelf in the tasting room/limit to distribution channels 

    European Market: 

    • Winery-owned e-commerce sites and private members clubs that cater to the European customers (e-commerce – Domaine du Pegau in CDP, Emilio Moro in Ribera del Duero); Club Privé (Mas de Daumas Gassac); Drouhin (DTC email offers) 
    • Traditional of picking up an allocation, by car! – at Bartolo Mascarello, customers come to cellar door to pick up their 3 bottles of wine at a designated time of the year; otherwise, they forfeit their access (and if seen to resell, their allocations will be denied as well). 
    • Increased shipments from some European nations – certain companies will ship internationally, with the shipping costs including the fees to clear the wines (get around the laws by having the customer appear to ship to his or herself) 
      • e.g. Podere le Ripi, a new winery in Montalcino started by illy coffee heir Francesco Illy, sells directly from cellar door to customers around the world
      • Customer takes on responsibility of knowing whether or not s/he can receive the shipment 
    • Work-arounds: companies like VinConnect in the U.S. recreate the DTC model for American consumers, helping wineries create mailing lists and offer wines that are inbounded legally through 3-tier licensing in D.C.; Helps wineries move wines that are higher priced, not imported (doesn't always offer same value-add of increased margins, focus is on access and distribution) 
      • e.g. 3L of Tenuta di Trinoro sells for high cost USD retail price; mailing list program helps clear a format that an importer/retailer does not want to take in as inventory due to high cost and limited brand awareness
      • e.g. Castello di Monsanto produces a cabernet sauvignon that its importer Mionetto does not import, so creating a mailing list to help move those products as well as some of their library stock 


    • DTC sales represent 7% of winery income; Cellar door sales drive 44% of DTC revenue in Australian market according to Wine Australia’s 2018 market insights report.  
    • Elderton (Barossa) 
      • Remarkable pick up in American tourism --> Gather customer data and implements cellar door shipments into US 
      • Many wineries implement highly advanced consumer data tracking/audience retargeting technologies. 
      • Pop-up ads on winery-owned e-commerce websites that let you know that you’ve left wine in your cart 
      • CRM systems integrated with visit and sales history 

    China: TBD if the below could be included (perhaps not in the scope defined above, but I've included for review)

    • Digital/DTC/e-commerce 
      • 21MM online wine buyers according to a 2017 WSET study 
      • Opportunity to leverage digital platforms outside of the fragmented distribution network (but must invest in building digital presence in channels like Weibo and WeChat) 
      • The success of your branding efforts depend on the trend in the WeChat conversation, because it’s how Chinese consumers plan, consider and purchase an increasing proportion of their worldly goods – possibly over US$ 1 trillion by 2018, according to a recent forecast from eMarketer, a specialist research agency.  
      • If your brand is weak, or worse, non-existent, this channel will be effectively closed to your business.  
    • Specialty wine sites offer a sort of e-commerce/DTC option 
      • In addition to a huge online storefront for selling wine, also operates 1,500 offline stores in 500 cities across China. The “19” in the company’s name is there for a reason – it signifies that the company can offer 19-minute delivery of alcohol almost anywhere within China. In August 2018, 1919 announced a “sommelier on demand” service, where mobile app users can order sommelier service for banquets or other events at the push of a button. In many ways, 1919 is at the forefront of what is known within China as the “O2O (“Online To Offline”) business model. Basically, customers shop for a product online, and then have it delivered to them in a real world, brick-and-mortar setting. Chinese restaurants have paired up with wine e-commerce sites to make it possible for customers to have wine delivered to the restaurant itself. This makes it possible for restaurants to offer a much wider selection of wines without worrying about inventory. And, on this same theme of O2O, 1919 also offers a 19-minute wine delivery service in cities, where it has its presence.  
      • Vinehoo styles itself as a social network for wine connoisseurs as much as a B2C wine e-commerce play. As a result, there are features available on Vinehoo such as “Flash Purchases,” in which wine consumers can team up to get the best possible price on a wine purchase. 
  • Thanks for this amazing outline, Sarah!  The "why" of this question is pushing my thinking to more structural causes.

    I added in some additional thoughts/data points:

    Why are they growing in the U.S.?

    The more difficult the route to market, the greater the incentive for wineries to invest in direct to consumer sales.

    • The US has a consolidating distribution and retail marketplace where many large markets don’t have a viable wholesale option for many Very Small (1-5k) or Small (5k -50k) independent wineries 
      • Example of PA – state controlled, most difficult to access the market, 81% of winery sales are direct
      • NY - more open and established, 60% of winery sales are direct
      • VA – 76% direct
      • CA- ability to sell direct to accounts  (and of course very large producers with the resources to push through the wholesale channel) makes other channels easier/more important proportionally. Looking for stat on proportion of CA wine production sold direct

    Direct to consumer sales at the tasting room are often regulated– licenses may limit the number of consumers a year, the hours a tasting room can operate, and whether food service or specific types of events are allowed.  

    Visits to wineries in Napa, Sonoma, and other more established regions are slowing while regions such as Virginia with more permissive licensing are growing.  This does NOT correlate with DTC sales directly though as Wines & Vines reports strongest 2018 DTC growth in Sonoma (+19% Volume) and Oregon (+19% Volume)

    U.S. market


    • Allow greater sku complexity, allowing wineries to bottle single site expressions not possible if they had to push all their items through the wholesale channel.  Example: Rochioli Vineyards in RRV puts 3 Estate blended wines into distribution, but has 12-15 block/vineyard specific bottlings at about 2 x's the price only sold direct.
    • Quality control – manages aging at the site of production and allows library releases with more value captured at winery - helps justify investment in aging. Example: 
    • Capture of consumer information that allows targeted and thoughtful e-marketing to continue selling. Example: Scribe hosts events around the country to help gather a consumer following they can market new releases via 


    • Large capital investment in infrastructure to attract and serve consumers
    • Success at the winery can be tied to the surrounding region- if there are other wineries/wine trail or a prestige region. Without this context, can be challenging to attract foot traffic

    High proportion of DTC Sales, example, Virginia:

    • Most of the 300+ wineries are family-owned and small, less than 10,000 case production
    • On a whole, 76% of volume goes through DTC channels; a handful of larger wineries dominate the 24% volume that goes into distribution -
    • Farm winery license (which requires only a small quantity of vines) is very generous and permissive – restaurants, festivals, weddings, polo tournaments are all allowed and help attract consumers
    • Overall tourism also supports winery tourism (10thlargest state for tourism in the U.S.)

    Growing DTC region, example, Bordeaux:

    • While selling through the Place to Bordeaux is still the dominant path to market, an increasing number of Chateau have adjusted their offerings to encourage visitors and sell direct (while being careful not to harm relationship with negociants), for example:
      • Gruaud-Larose, St. Julien:
        • Keep back a significant 25% of their release each year to sell direct and age further
        • Built a modern viewing tower that gives views of the region- attracts 20k tourists a year - sell an array of tours/tastings/cooking classes to help attract and then sell them wine
      • Pichon-Baron, Pauillac
        • host about 10k/year (used to be 20k as they were one of the first in region to allow visitors, but now most others do as well)
        • Protect the retail price - sell at or above the pricing in the market. 
      • Chateau Lynch-Bages, Pauillac
        • very consumer focused- first opened to the public in 1988 and host about 20k per year
        • Have built a tourism destination with shops and market 
        • VINIV- ultimate DTC experience for consumers, have chance to make their own barrel from array of top Bordeaux vineyards.  Cost of $19k-$32k/barrel (not including travel).  Enacted to make very strong consumer connection and explore new model
  • Chiming in on Ontario DTC. There is DTC from many Ontario wineries to Ontario consumers and many Ontario wineries have wine clubs as well. There is some DTC non-Ontario wine as well. Wineonline WineAlign, Gargoyle all ship cases of mixed wine. It’s a grey area. Technically, LCBO and some grocery stores are the only place where you can buy individual bottles of wine. 

  • After an amazing trip to Australia for seminar, which included visits to surrounding wine regions, I wanted to include the following case study from d'Arenberg in McLaren Vale, which built a multi-million dollar "Cube" as tasting room and tourist destination which draws 1,000 visits/day during peak season according to their data since it opened in 2017.

    The company divides their sales as follows: 50% export (90 countries); 30% domestic distribution; 20% cellar door sales (DTC wine club sales and mailing list 35.000 names, which they keep updated by scrubbing periodically).

    At cellar door, they have three different order forms: one for the domestic market, which pulls from on-site inventory; then two with special order forms for mainland China and US visitors (together, their three biggest traffic groups). The forms for the other countries are actually developed with their import partners, with prices and margins decided upon prior to printing of the sales sheets, and shipping directly from the inventory in the home country (they use Old Bridge Cellars in Napa, CA). They fulfill orders from cellar door by actually taking the order, scanning the order form, then share with their partners for fulfillment. The sales form reflects stock that is in that market; this requires an amazing amount of coordination, as they must constantly communicate with the importer about the stock situation. Exact sales figures for sales not shared, but I think this is a tremendously powerful example!