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Matthew Mann
 
April 7, 2008 | Compliance | Matthew Mann

Small Wineries, Big Opportunities

Before becoming the compliance specialist with Inertia I worked for a small Santa Barbara County winery producing 6,000 cases of Pinot Noir, Chardonnay, and Syrah a year. When the winery first started in the early 90’s, we thought we could build our brand and reputation by selling to upscale bistros and cafes in southern California. By focusing on wine-by-the-glass programs, we figured we could get our wine into glasses of sophisticated wine drinkers and develop a following willing to seek out our label at specialized wine merchants, eschewing the big supermarkets. It wasn’t a bad stategy in the early 90’s, when the opportunities of the internet weren’t yet apparent and the number of competing wineries was smaller. You could still stand out in the small crowd.

Such a strategy today might be considered foolhardy. The explosion in the number of wineries in California and the rest of the U.S. in the last decade and the continuing growth of the internet have created a new reality for the small winery. Throw in the impact of Granholm and the growth of the number of states accessible to direct shipments and the notion of selling your wine wholesale with skinny margins to restaurant wine-by-the-glass programs seems downright ridiculous. Today, a much better strategy for small wineries is to sell direct to the consumer. Unlike reciprocity of the 90’s when you could ship to about a dozen states, you can now legally ship to at least 35 states, nearly 80% of the wine market. The benefits of consumer direct seem obvious:

  • Larger potential market
  • Higher profit margins (retail v. wholesale)
  • Greater marketing reach and brand building
  • Lower costs

One perceived constraint on shipping wine direct to consumers is the cost and complexity of compliance with state shipment laws. However, when viewed against the costs of developing a wholesale distribution chain and the limited profit margins; or significant infrastructure and overhead costs of a building a brick & mortar retail tasting room; the reality is the costs and effort required to ship to customers in other states is minimal. Even with the costs of compliance.

The growth in the wine industry is good for wineries and consumers alike. By strategically selecting those states offering the highest ROI of time and money to ship direct to consumers, a small start-up winery can vastly broaden their reach into markets previously unavailable. Compliance is merely another cost, not a barrier to entry. Reducing this cost is why we developed REthinkCompliance. Our FREE compliance service makes shipping direct to consumers easier and less expensive than ever. If I were running a small winery today, with cost management and ROI a critical component of success, it would be among my first stops in reaching my longterm goals.
 

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