Napa Valley wineries sell more cases of wine directly to consumers than any other grapegrowing region in the U.S., a new report reveals.
In the 12 months ending in March, the county shipped 760,000 cases valued at $481 million. The next closest region was Sonoma County with 581,000 cases worth $258 million.
The average price of a Napa bottle shipped directly to consumers was $52.69, followed by Sonoma at $36.99 per bottle.
Cabernet sauvignon was the most popular Napa varietal at 415,846 cases, followed by pinot noir at 334,599 cases.
The report was prepared by Wines & Vines, an industry trade publication, and ShipCompliant of Colorado, which helps wineries comply with state shipping regulations.
This report comes at a time when major wholesale distributors are supporting House Resolution 5034, federal legislation that would stop direct shipping to consumers.
Jim Gordon, editor of Wines & Vines, said the small- and medium-size wineries do the most direct-to-consumer shipping. These are wineries producing 5,000 to 49,999 cases.
Direct shipping allows the smaller wineries to keep more of the profits and build friendships with their customers.
Gordon was “surprised how much Napa Valley wines dominated and that the per-bottle average was higher than anywhere else.”
Wines sent directly to consumers tend to be on the expensive side and are often varieties that are hard to find.
The report shows that, collectively, wineries across the nation shipped 2.6 million cases directly to consumers and 1.8 million of that total came from small wineries.
“Most small wineries have a hard time finding a distributor,” said Gladys Horiuchi, manager of communications at the Wine Institute in San Francisco. “And there is no way they could carry all the brands that are out there.”
“We are paying lot of attention to this research because it supports our cause to oppose H.R. 5034,” Horiuchi said. Opponents of direct-to-consumer shipping want to squash the idea once and for all.
There needs to be allowances for wineries trying to service their customers — and direct wine shipping helps build brands, Horiuchi added.
Direct shipping is only
1 percent of wine sales nationwide, but that 1 percent is vital source of revenue for small wineries, Horiuchi said.
Eric Sklar, co-founder of Alpha Omega Winery in Rutherford, said they are a relatively new winery. With consolidation of distributors, it is getting harder for them to get someone to distribute their wines, he said.
“So we found a good location (in Napa Valley) and use direct-to-consumer sales as a primary way of selling our wines,” Sklar said.
Sklar describes H.R. 5034 as David vs. Goliath with The Beer Warehouse Association and major distributors coming out against direct-to-consumer shipping.
Many small wineries depend on direct-to-consumer shipping, Sklar said. “If this were to pass it would be devastating. There is no reason for it.” Sklar said more than
50 percent of Alpha Omega wines are sold direct to consumers.
“This has already been to the Supreme Court, which came out against it,” he said. “They are trying to change the law ... and they have the resources.”
Sklar said most of their shipments are of their more unusual wine varietals and tend to be higher priced wines. He said it is a ridiculous argument that the wine will get into the hands of kids. “They are not going to spend $100 for a bottle of wine.”
Bruce Cakebread of Cakebread Cellars said the impact of H.R. 5034 would not only affect wineries, but also web designers and compliance companies.
“We think 5034 is not acceptable. We are thankful to have Rep. Mike Thompson (D-St. Helena) leading the charge against this,” Cakebread said. “The impact on our local economy would be huge.”
Cakebread has seen direct-to-consumer shipping gaining speed during the past 10 years. He estimates it amounts to at least 10 percent of their medium-sized business. “Direct sales are important to us.”
Alex Ryan, president of Duckhorn Wine Company near St. Helena, said they have been doing direct-to-consumer shipping since about 1980. “You could say we were a little ahead of the pack.”
He estimates about
20 percent of Duckhorn’s business is direct shipping to consumers. At the same time, Duckhorn has grown the wholesale side of the business. He believes it complements the direct-to-consumer shipping.
All the shipments at the medium-sized Upvalley winery are done in-house and not through a fulfillment company. “We want to take care of our customers from start to finish,” Ryan said.
A portion of the direct-to-consumer shipments are to customers seeking an unusual wine that a wholesaler most likely would not be willing to handle because of the low volume of sales, he said.
According to Ryan, H.R. 5034 “would turn our industry upside down if it passed. It is trying to put extra burden on a system that is working well.”
The impact would be felt not only in the Napa Valley, but in the newer wine regions that are trying to become established, Ryan said. “It would wipe out a small producer. This is just unfair business ... especially the small guy, and at one time we all were the small guy.”
At Eagle Rock Fulfillment, owner Bill Meyers said many of their clients are small- to medium-size wineries because many of them don’t have the manpower to staff a warehouse, handle the billing and everything that goes along with it.
Meyers said direct shipping has been around for many years, “but over the past 10 years the idea seems to have really taken off. It is still growing. Even in this down economy.”