August 27, 2010 | Matthew Mann
Much has been written about the benefits of direct shipments to consumers since Granholm opened up many states to legal interstate shipping. There is much worthy conversation about the growth in consumer shipments, the growing dependence of smaller boutique wineries and specialty retailers on direct to consumer sales in markets otherwise unavailable to them, and the greater margins to be realized by selling directly to the ultimate consumer rather than through the wholesale tier.
Despite this conversation and the current debate over the possible impact of HR 5034 on the future of direct shipments, many wineries remain unsure as to which states they can ship. Additionally, many other licensees, specifically retailers and importers, are unaware that they are also able to ship to consumers in a number of states. All of this begs the question…to how many states can you ship? And what are they?
The actual number can be a topic of some debate because it can vary depending on your approach. It also will depend on how you are licensed, as direct-to-consumer reach is greater for wineries than it is for retailers. Another issue is whether to include only direct-to-consumer states or also states that can be reached through an established 3-tier network. Some resources like to include any state that has a permit system in place, whether feasible or not, as well as states allowing onsite-only shipments or through consumer-obtained permits.
Under the broadest approach, a licensed winery can ship to 45 states including all permit and open states, onsite-only states (DE,NJ,OK,RI,SD), consumer permit states (AL,MT), and 3-tier (MA,NJ). This broad approach has its issues however. Onsite restrictions and consumer permit systems aren’t workable for online sales. Even some of the permit states have restrictions that may be problematic from a practical perspective.
Indiana would be such a state. The Hoosier state’s permit includes a “face-to-face” requirement, meaning the purchaser must make an initial visit to the winery (ostensibly so that identification can be confirmed) before any future shipments can be made to the consumer under the permit.
The only states completely off limits to direct shipments are AR,KY,MD,MA,MS,PA,UT, which are primarily control or partial control states with no practical permit system in place. In fact, it’s a FELONY to ship to either KY or MD without a permit, which isn’t generally available in either state.
Practically speaking, consumer direct shipments by wineries are available to 36 states: AK,AZ,CA,CO,CT,DC,FL,GA,HI,ID,IA,IL,KS,LA,ME,MI,MN,MO,NE,NV,NH,NY,NC,ND,NM, OH,OR,SC,TN,TX,VT,VA,WA,WV,WI,WY.
The options for retailers and imported brands are less broad but still available for some very desirable states. There are as many as 15 states (AK,CA,DC,ID,LA,ND,NE,NH,NM,NV, MO,OR,VA,WV,WY) that permit retailers to ship directly to consumers, either with or without a permit, although with some restrictions.
The 3-Tier Alternative
There is a 3-tier alternative to shipping to consumers, even to some states that do not have direct shipment permit systems. Through IBG’s Fulfillment Center, we offer a 3-tier network allowing wineries, retailers, and importers to reach up to 23 states, including MA and NJ, which are otherwise unavailable. Through our network of licensed wholesalers and retailers, licensees can reach consumers in CO,DC,CT,FL,IL,MA,NJ,NY,NC,VA, and WI by shipping within the 3-tier system. Combined with our partner’s direct shipment capabilities to most of the retailer direct states shown above, fully 23 states are available without the need for the licensee to acquire direct shipment permits.
We all know the wine industry has been hit as hard as any by the tough economic times. Maximizing potential market access can be a key to growth and continued viability for many wineries and retailers. The decision to ship to some states is easy because of the size of the market and ease of access. Others may be more difficult. Either way, be aware of your options and keep in mind alternative methods are available. I’ll have more to say on accessing consumer direct markets in future posts.