DTC Shipments Decline from Record Highs

Annual report finds shipment value and volume drop in 2022

Andrew Adams

The winery direct shipping market appears to have begun a new post-pandemic era as total shipments for the past year declined 1.6 percent by value and 10.3 percent by volume. While the declines are unprecedented in the more than 10 years Wines Vines Analytics and Sovos ShipCompliant have tracked the channel, they are not that surprising given the equally unprecedented 27 percent increase in total volume seen in 2020.

Released just prior to the global outbreak of COVID-19 and the ensuing lockdowns and disruptions of March 2020, the annual report on shipment activity in 2019 described a “mature” market in which growth could be expected to be much more modest than in previous years. At the time, the dominant trend had been strong year-to-year growth thanks to the opening of new states to direct-to-consumer (DTC) shipping. Yet after Pennsylvania fully opened to shipments in 2018, there were no longer any major markets left to open and a period of robust year-to-year growth via legislation came to an end. Shipment data from 2019 confirmed that trend with the channel growing by 7.4 percent in value and 4.7 percent in volume.

But like everything else, the pandemic changed the market and DTC shipments served as a vital lifeline for wineries through 2020 and into 2021 when total shipments enjoyed a 1.4 percent increase in volume on top of the record high set during the worst of the pandemic.

The past year has been a return to what “normal” may have looked like, at least in terms of DTC shipment value and volume, if COVID-19 hadn’t happened. Total shipment value came to $4.1 billion and volume at 7.6 million cases in 2022 compared to total DTC shipment value and volume in 2012 represents an average annual growth of 10 percent and 8 percent, respectively. Total shipment volume in 2022 was 16 percent higher than in 2019 and value was up 28.5 percent.

While the declines seen in the past year don’t suggest a general pullback from direct shipments by both wineries and consumers, the steep drop in December shipment volume coupled with a 10 percent decline in value indicate that inflationary pressures and economic worries crimped the all-important fourth quarter sales period. In 2021, wineries enjoyed a boon in DTC business from holiday gift-giving from individuals and companies, some of which organized virtual tastings as COVID-safe holiday parties, leading to a value increase of more than 14 percent in October and 17 percent in November.

This past year, wineries reported holiday gifting appeared down and many wine club members have paused some club shipments because they accumulated so much wine in 2020 and 2021. Many wineries in Napa and Sonoma counties also need to be strategic with how they allocate wine into the various sales channels because the past three harvests have been lighter than normal. Back in 2020 many had excess inventory because of the bumper crop of 2018.

Those factors will all remain in play during the coming year as the DTC channel begins to reflect the wider U.S. wine market. Sales growth will be a challenge and wineries will need to be even more aggressive in a market that is poised to have fewer consumers than in 2020 or 2021 because of a revived on-premise sector, less demand for lower-priced wines to be shipped direct and layoffs among white collar workers. Shipping and material costs aren’t likely to decline even if price increases moderate through 2023, further reducing margins on direct shipments. The complete 2023 report is available for download at www.DTCwinereport.com.

Cabernet Sauvignon reasserted its dominant position in the channel as the only key varietal to enjoy a significant increase in shipment value and a comparatively small decrease in volume. The varietal accounted for 30 percent of total channel value in 2022 after increasing 6 percent to $1.26 billion for the year. By volume, Cabernet accounted for 17 percent of the total channel with 1.27 million cases followed by Pinot Noir and Red Blends that both had a share of 14 percent after volume declines of 10 percent and 12 percent respectively. Red blends saw a 2 percent increase in total value to $675 million.

While the popular varietals and wine types lead in DTC just as in retail, the significant share of the “other” category in value and volume demonstrates the potential for consumers to acquire the alternative wines that may not be so easy to find in other channels. In 2022 the “other” category accounted for 15 percent of total channel value at $619 million (down 9 percent from 2021) while nearly a quarter of volume at 1.75 million cases (down 13 percent from 2021).

Considering the leading position and value growth of Cabernet and red blends, Napa County was the only major region to see an increase in shipment value, rising 3.2 percent to $1.95 billion. Napa wineries accounted for 47 percent of entire channel value in 2022, while Napa shipment volume declined