The way wine is sold is subtly changing. Until recent history, wine was sold through an arcane system known as three-tier distribution that came about when prohibition ended. The winery, brewer, or distiller has no choice in how they bring their product to market. However, this is gradually changing as states approve wine to be shipped directly from the winery to the consumer.

The 2016 Direct-to-Consumer (DtC) Wine Sales Report has some interesting information. It confirms that the wineries are focusing their strategies more on marketing their wines directly to the consumer. In fact, this distribution method isn’t just for smaller wineries; the large wineries are now paying more attention to this point of sale. More than 5 million equivalent cases of wine were shipped directly to the consumer and it wasn’t limited to less expensive wines either. Sonoma wineries had the highest growth rate in 2016 at nearly 30%.

Wines and Vines has a 2016 database of 9,069 US wineries that they have divided into 5 categories based on the number of cases produced annually. The largest combined categories are called limited and very small producers, each producing up to 4,999 cases per year. These two categories represent 79% of all wineries that ship direct to consumers, approximately 3,600 wineries in each category. If small wineries (a total of 1,570) are added to the above two categories, they represent 96.4% of the wineries in the U.S. The conclusion from this data is that each winery produces 49,999 cases of wine and fewer annually, while selling DtC, market presence.

The five million cases of DtC wine shipped in 2016 represented a 17% increase over 2015. This was made up of single and multi-bottle shipments. “2016 shipment value increased 18.5% over 2015, exceeding $2 billion for the first time and culminating at $2.33 billion,” reports Sovos ShipCompliant/Wines and Vines. The average price of a bottle of wine sent to the consumer in this format was $38.00; far from the $15.00 per bottle of wine that makes up the largest number of bottles shipped. Jon Moramarco, managing partner of BW 166 LLC reports that the average bottle of wine sold “off the premises” was $9.29.

This indicates that consumers are not shy about buying expensive wine online/by phone and having the wine delivered via FedEx, UPS or a contracted carrier. With the number of wineries growing at about 5% a year, most are in the small, limited producer category, so it seems they are the most receptive group to reach customers directly. With DtC shipping accounting for 8.7% of domestic wine sales, there is plenty of room for growth.

Very large wineries, in 2016, accounted for 13% of all DtC shipments, which was an increase of 183% from 2015. However, it appears that they did so by reducing the price of their shipped wines. The average price of wine shipped by the 64 largest wineries (producing more than 500,000 cases) fell to $16.00 per bottle. Obviously, there is a certain elasticity in the wine business. However, there are a few exceptions, some Napa and Sonoma wineries raised prices and still saw increased shipments and therefore values.

The varietals that have seen the largest increase in shipment volumes since 2011 are: Rosé (+259%), Other White and Other Red (+174% and 172% respectively) and Pinot Gris (+101%). Cabernet Sauvignon and Red Blend wines continue to be stellar performers in annual DtC sales increases. Red Blends are amazing because they are relatively new for people to try.

In all good news for direct shipments to almost all states (except Utah, Kentucky, Alabama and Mississippi), all wine-producing regions/states saw increases. It’s worth noting Sonoma County’s increase in 2016, “to the tune of $100 million in 2015, was so impressive that despite the region accounting for only 18 percent of the total dollar value of DtC shipments , Sonoma County accounted for 27% of the $363.6 million added to the DtC shipping channel during the year,” reports Vinos y Vides.

Direct to Consumer, as a distribution channel, is becoming more important to the success of a winery. Yes, technology is an important tool for direct selling, but the cost-cutting ramifications cannot be overstated. This channel allows wineries to respond in real time to changes in the markets, the need to promote products; even promoting products geographically. Shipping costs may be less than required discounts from distributors.

Used correctly, DtC marketing can increase profitable sales, reduce marketing costs, and build brand loyalty for wineries by learning more about their customers.