U.S. Consumer-Direct Info

Wine Industry Totals

Total consumer-direct sales by domestic wineries grew to nearly $3 billion in 2008, an increase of nearly 7% over 2007.

Total U.S. Consumer-Direct Sales 2004-2008

This is marked in contrast to the decline last year in the total retail value of wine sales in U.S. – the first decline in 15 years.

Since 2004, total U.S. consumer-direct sales by domestic wineries has increased 39% from $1.8 billion to $3.0 billion in 2008.

Granholm v. Heald – Landmark U.S. Supreme Court Decision on Interstate Consumer-Direct Sales

Of particular note was the 2005 U.S. Supreme Court decision regarding state regulation of consumer-direct sales by out-of-state wineries and retailers. Known as Granholm v. Heald, the U.S. Supreme Court ruled that states, under the 21st Amendment, had the right to regulate interstate shipments, including direct-to-consumer sales by wineries and retailers. However, the U.S. Supreme Court also held that the Dormant Commerce Clause of the U.S. Constitution also applied, and that states’ interstate wine shipment regulations must be equal in effect with their intrastate wine shipment regulations, e.g., if in-state wineries are allowed to ship direct to a consumer, the state must also allow out-of-state wineries to do so.

The effect of the Granholm decision has been for more states to permit consumer-direct wine shipments, permitting interstate consumer-direct sales (though some states have banned all consumer-direct shipments in response to the Granholm decision).

The effect has been most sharply felt in increases of internet wine sales to consumers by domestic wineries.

From 2004 to 2008, internet wine sales by domestic wineries have increased 162%. 92% of U.S. wineries have a website, and 70% of those sell wine via a secure online store. 2008 witnessed a growth of 26% over 2007 in internet sales, and wineries now average 15% of their total consumer-direct sales (including tasting room, wine club, direct mail, events, telemarketing, and other forms of consumer-direct sales) from internet sales.

In that same period, consumer-direct sales to U.S. by imports were zero.

Total U.S. Consumer-Direct Sales by Imports 2004-2008

U.S. laws and the ad hock three-tier sales channel – not to mention logistics of shipping and compliance – create an effective barrier preventing imported foreign wineries to selling direct to American consumers.

Even the Granholm decision had no effect on import’s consumer-direct sales.

U.S. Consumers

Demographics in the U.S. are changing, and those changes are affecting the wine industry.

The generation primarily responsible for reviving the U.S. wine industry after Prohibition, the Baby Boomers (born between 1946 – 1964), are entering their senior years. Still active and healthy for their age, Baby Boomers continue to be influential in the wine industry, especially since they are at the age where disposable income allows for more expensive interests.

The following generation, Generation X (born between 1961 – 1981), is smaller in population, and has traditionally been less interested in wine than Baby Boomers. However, aging seems to be making this generation’s interest in wine rise, as well as new forms of communication and marketing are reaching them more effectively.

The latest generation, Millennials (born between 1982 – 2001; AKA Echo Boomers and Generation Y), are currently coming of drinking age and are very interested in wine. This generation is projected to be larger than the Baby Boomer generation, and will make an enormous impact on the U.S. economy. They are the first generation born alongside the internet and hence find it normal and vital to their cultural social life. Their increased communication channels – mobile phones, texting, internet chat, web video, social networking, etc. – is making them far more interconnected, far more open to communication from outsiders, and far more facile with utilizing technology for entertainment, shopping, and social interaction.

U.S. Population Totals by Generations

The effect of the Baby Boomers post-90’s and the Millennials have kept wine consumption increasing steadily over the past decade.

Total U.S. Per Capita Consumption 2000-2008

The combined size of the Millennial generation, their interest in wine reminiscent of the Baby Boomers, and their integration of the internet into their lives and habits create a promise that, once the economic recession is genuinely over, the U.S. wine market will grow to an unprecedented size.

Sources

  • Compiled by Tincknell & Tincknell, Wine Sales and Marketing Consultants
  • The Wine Institute
  • Gomberg, Fredrikson & Associates
  • Wine Business Monthly
  • “Impact: The U.S. Wine Market, Impact Databank Review and Forecast”, M. Shanken Communications, Inc.
  • “VinQuest 2009: U.S. Consumer Direct Wine Sales Report”, VinterActive LLC
  • “Market and Nonmarket Barriers to Internet Wine Sales: The Case of Virginia”, Alan E. Wiseman, Ohio State University, and Jerry Ellig, Mercatus Center at George Mason University