Friday, September 8, 2017

Direct Wine Shipping & Local Wine Shops

As we near the holiday season, we approach the time when wine stores generally make their greatest amount of sales, their most profitable period of the year. Consumers tend to buy more wine for holiday parties and gifts. They are more willing to splurge, and purchase more expensive bottles of wine. I've worked at a local wine shop for a number of holiday seasons and have witnessed this consumer surge. Staff recommendations to customers become very important.

It is also during this season that I've written a number of articles, providing advice to consumers on selecting wine. Much of that advice involves choosing the right wine store and relying on the expertise of the wine shop staff in helping make your selections. I've been very supportive of local, independent wine stores however it isn't a blind support. My support, of any person, company of institution, needs to be earned and there will be issues where I hold a different opinion than wine stores. That certainly has come to the forefront this week.

On Monday, I posted Rant: MA Wine Lovers, We Urgently Need Your Help!, throwing my support behind bill, H3891, sponsored by Representative John Lawn, Jr., which would allow Massachusetts residents to "purchase and have shipped to them wine from out-of-state wine stores, Internet retailers, wine auction houses and wine-of-the-month clubs." There is a hearing on this bill scheduled for September 12, and I urged wine lovers to support this bill by sending emails to the Committee members prior to the hearing. And a number of them did so, as well as sharing the post for greater exposure.

However, I also heard, both online and offline, from a number of wine store owners, all essentially opposed to this bill. The basis of their opposition is that they fear they will lose business if this bill becomes law. In addition, so far, none of them has provided any facts or statistics to support their allegations. There is nothing to indicate what percentage of business, if any, they might lose to direct shipments of wine. Are their fears unfounded?

Even if Bill H3891 doesn't become law this time, it is only a matter of time before a similar law will be enacted. Back in 2006, a law was passed that barred many wine shipments from entering Massachusetts but it was later ruled unconstitutional, a decision affirmed by the U.S. 1st Circuit Court of Appeals in 2010. Since that time, Massachusetts alcohol laws have been expanding, making numerous changes to the industry, from expanding the number of liquor licenses a single entity can possess to BYOB in Boston. As well as the recent change that permitted out-of-state wineries to directly ship to Massachusetts consumers. It is inevitable that the law will change to allow all direct wine shipments, and not just from wineries.

Back in 2014, as the bill to allow direct shipment from wineries was being considered, I already indicated that I hoped the law would also change to allow direct wine shipments from out-of-state wineries and online retailers. So, my support of the idea behind Bill H3891 shouldn't surprise anyone.  And in January 2016, I posted Rant: No Predictions, Only Desires, and stated: "Massachusetts has slowly been releasing the reins on wine control so there is much of which to be hopeful. A law was finally passed permitting wineries to ship to consumers in Massachusetts but we still need a law allowing online and out of state, brick & mortar retailers to ship to Massachusetts consumers. Let's see a push for this expansion in the wine shipping law."

Some of the latest statistics behind Direct to Consumer Wine Shipping come from an annual collaboration between ShipCompliant by Sovos and Wines & Vines, in the 2017 Direct To Consumer Wine Shipping Report. DtC wine shipments, despite their growth, still constitute only a small percentage of wine sales. The top five states that avail themselves of DtC wine shipments include California 31%, Texas 9%, New York 6%, Washington 5%, and Florida 5% with only 1.6% of DtC sales from Massachusetts.

In 2015, the first year Massachusetts allowed DtC wine shipments, the total value of those shipments was about $27.5M, and in 2016, that amount increased to about $39M. The average price of the wine shipped to Massachusetts was $41.79, which is higher than the country-wide average of $38.69. Massachusetts wine lovers are tending to purchase higher end wines directly from wineries. The report predicts that, "The state will likely see above average growth in 2017, but nothing astronomical."

The report also notes in its conclusions primary reason for the expansion of DtC channels, "That said, growth in the DtC shipping channel is reflective of changes in the wine industry itself. In particular, the ongoing consolidation of the wholesale distribution tier and the continued difficulty small and medium-sized wineries have in gaining access to wholesale distribution are important factors in wineries’ increased reliance and focus on direct shipments. The wholesaler consolidation will likely drive increased DtC shipping going forward." Over the year, I've spoken to numerous wineries who have indicated their frustration in trying to find a wholesaler who will sell and give sufficient attention to their wines.

As such, there are thousands of wines available in the U.S. which cannot be purchased in Massachusetts. There are plenty of wine lovers who want access to those wines, who want the ability to purchase any wine that is available in the U.S. Why shouldn't they have such access? As the current DtC statistics indicate, DtC shipping is still only a tiny percentage of wine sales and most people are opting for higher end wines. Allowing DtC wine shipping won't shut down local, independent wine shops. Such stores face a far greater threat from local, big-box wine stores than DtC wine shipping.

Good local, independent wine shops are needed, providing experienced staff to help make wine recommendations. And I have long supported such good shops. Over ten years ago, in the second post to my blog, I wrote Choosing a Wine Store, and it remains as relevant now as it did back then. The article provides my criteria for wine stores, from Selection to Service. Each year, in my annual Favorite posts such as 2016: Favorite Wine-Related Items, I provide some specific recommendations for my Favorite Wine Stores and Favorite Discount Wine Stores.

I've also give consumers plenty of advice on purchasing wine. In my Rant: The Best Way To Buy Wine, I state that "... my best advice is to ask the wine store owner, manager or employee for advice on selecting your wines. It is simple advice but can be extremely effective, with the caveat that you need to shop at the right wine store." In my Rant: The Lazy Way Of Buying Wine As A Gift, I continue that advice, "What you should do is stop at your local wine shop and ask for recommendations, for more unusual and different wines, for wines that are excellent values."

And in Rant: Holiday Wines--Don't Be A Cheapskate, I address the question of "How do you find these inexpensive but interesting wines?" First, "...the easiest path is to seek out one of the better discount wine stores," and I provide a few specific recommendations. Second, I mention that,"At whatever wine shop you visit, it might be best to ask the wine store staff for recommendations of value wines. They should be able to direct you toward those inexpensive wines which will be more interesting and delicious than those cheap commercial wines."

I've also jumped into the discussion of big-box wine stores in my Rant: Total Wine, Low Prices & Consumers. "To me, the best alcohol retail stores possess three key elements: a diverse & interesting selection, good service with knowledgeable staff, and reasonable pricing. The only way to find wines, beers, and spirits from such small wineries, breweries and distilleries, is at the smaller, more independent wine stores. We should cherish the diversity that is available at these retailers, expanding our palate beyond just the major national brands. In addition, by supporting these smaller alcohol retailers, you are giving your support to those smaller wineries, breweries and distilleries. They need your support, so they can continue to produce their interesting and diverse beverages."

Direct to Consumer Wine Shipments are inevitable and wine stores must find ways to deal with it. Currently, it doesn't appear that such shipments will have a significant impact on local wine stores, certainly nowhere near as much of an impact as the growth of big-box wine stores. These shipments will help wine lovers gain access to many thousands of previously unavailable wines. However, those same wine lovers will still patronize their local wine shops, and there are multiple reasons why that will occur. Yes, I support local, independent wine stores but I don't see these direct wine shipments as a serious threat to them.

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