YOUNTVILLE - Shipments of wine directly to consumers are growing three times faster than the overall wine market, but many wineries are failing to take the basic steps to profit from the boom, industry leaders heard Thursday.
Nearly two years since the U.S. Supreme Court struck down state laws restricting direct shipments, many wineries are experiencing explosive growth thanks to massive newly opened markets such as New York and Florida.
Individual wineries are seeing annual direct sales increases of between 30 percent and 100 percent, said Barbara Insel, managing director of MKF Research in St. Helena, which hosted the two-day Executive Wine Summit in the Napa Valley.
Insel released a preview of an MKF study on direct shipping practices in the wine industry. The study, due to be released later this year, is "groundbreaking," said Brian Baker, a vice president with Jackson Family Wines.
While some wineries are succeeding at direct shipping, others are failing to capitalize on this growth by not gathering enough data on their customers, not partnering with the right shipping firm, or not understanding the critical role their tasting rooms play.
"In the wine business, almost all direct sales start in the tasting room," Insel said.
And yet the impression persists among many winery owners that they will be able to sell wine directly to their customers simply by building e-commerce Web sites.
Research shows most wine consumers use the Internet not to buy wine, but to learn about wineries, check wine ratings and compare prices, Insel said.
"That's not what the Internet is used for in this industry," she said.
Most of the growth of wines shipped directly to consumers is coming through the growth of wine clubs, she said.
New Vine Logistics, one of the largest wine shipping firms in the country, saw a 31 percent increase in shipments last year, due largely to an increase in wine clubs sales, said Kathleen Hoertkorn, president and chief executive of the Napa-based company.
That's compared with about 10 percent growth in the rest of the industry, she said.
California remains the largest destination for direct wine shipments, but that is changing rapidly, Hoertkorn said. Two years ago, California was 54 percent of her company's sales, but that number has dropped to 45 percent as states such as Illinois, Texas, Florida and New York are gaining steam, she said.
The trick for wineries, she said, is to "to get to all those states and not kill yourself in the process," she said.
That's where technology is revolutionizing the industry with powerful software and shipping systems that track orders and integrate the myriad reporting requirements by the individual states.
Virginia, for example, not only requires quarterly tax reports, but monthly shipping reports whether or not wineries actually shipped anything to that state that month, said Curtis Coleburn, head of Virginia's Alcoholic Beverage Control Board.
Failing to complete such paperwork is what most often gets wineries in trouble, not shipping wine to underage drinkers, Coleburn said.
There are occasions where parents complain that a shipper left a package of wine at their home without the parent's signature and "maybe the child has popped the cork before Dad got home," he said.
While some in the wine industry see such requirements as unnecessary given the additional cost and infrequency of violations, Coleburn said such rules aren't going away.