Direct cellars were once a popular way for wineries to sell their wine directly to consumers, cutting out the middleman and allowing customers to buy wine straight from the source. However, in recent years, the direct cellar model has declined significantly. There are several factors that have contributed to this shift away from direct cellars.
The rise of wine clubs
One of the biggest reasons for the decline of direct cellars is the rise in popularity of wine clubs. Wine clubs offer many of the same benefits as direct cellars – discounted prices, access to small production wines, and delivery right to your door. However, wine clubs have some advantages that have made them more attractive for both consumers and producers:
| Wine Clubs | Direct Cellars |
|---|---|
| Offer curated shipments rather than having to order each time | Require individual orders for each shipment |
| Often have free shipping | Typically charge for shipping |
| Provide added content like notes about the wines | Usually just send the wine with minimal information |
For consumers, the convenience of automated regular shipments with free shipping makes wine clubs easy and appealing. And for wineries, wine clubs require less administrative work and marketing effort than direct sales.
Increased competition from online wine retailers
Another factor in the decline of direct cellars is the rise of ecommerce wine retailers. Sites like Wine.com, Wine Access, and others offer huge selections of wines at discounted prices, often including many hard-to-find and small production wines. While buying directly from a winery’s cellar may provide access to their most limited wines, most consumers can find what they need through online retailers. And the convenience and brand recognition of these large retailers reduces the demand for purchases directly from wineries.
Challenges of direct-to-consumer shipping laws
The complex and evolving legal environment around interstate wine shipping has also made direct cellars more difficult to operate. While many states now allow out-of-state wineries to ship wine directly to consumers, the permits, reporting requirements, and other rules can make it cumbersome, especially for smaller wineries. Using a retailer simplifies the process since they handle compliance. Failing to correctly follow shipping laws could result in legal penalties.
Higher marketing costs
Running a direct-to-consumer program also requires significant marketing costs for wineries. They have to generate traffic to their website and promotions to drive sales. For small wineries, it can be difficult to get this visibility when consumers have so many options. Retail partners and wine clubs can leverage their broader marketing capabilities to sell a winery’s stock.
The decline of direct cellars
In the early 2000s, when interstate wine shipping was limited, direct-to-consumer sales made up a much more significant portion of winery revenue. As the above factors enabled more consumer choice, direct cellar sales dropped. Here are some key statistics showing the declining share of direct-to-consumer wine sales:
| Year | DTC Sales % of Total Wine Sales |
|---|---|
| 2005 | 26% |
| 2008 | 23% |
| 2013 | 18% |
| 2018 | 13% |
In 2005, over a quarter of all wine sold in the U.S. was through direct cellar sales. By 2018, this number had dropped nearly in half to just 13%. Most wineries saw declines in their direct sales over this period. For example, prominent Napa Valley wineries like Silver Oak and Cakebread both reported drops in direct sales from around 90% to closer to 30-40% of revenue.
While ecommerce and wine clubs made up some of this shift away from direct cellar sales, the majority moved to wholesale retail channels. Brick and mortar wine shops and restaurants now make up close to 80% of wine sales today.
Wineries reducing direct programs
With the costs and challenges of running a direct wine sales program, many smaller wineries have now opted to end their consumer-direct operations. For example, prominent Oregon Pinot Noir producer Eyrie Vineyards shut down their direct sales in 2009. The hassle of compliance, managing the sales platform, and responding to customer inquiries was too much for the small family run winery.
Other wineries have kept direct sales open but narrowed their shipping radius. For example, Williams Selyem winery, known for Russian River Pinot Noir, used to ship to over 30 states. Today they only sell and ship to addresses within California. This reduces their regulatory requirements while still maintaining a modest direct cellar program.
Larger wineries benefitting
While smaller wineries have retreated from direct cellar sales, larger producers have often doubled down by investing in the infrastructure and marketing to make their direct program successful. Wineries like Jordan in Alexander Valley, California have built robust ecommerce sites, wine club membership, and excellent customer service to attract and retain buyers. These larger brands reap the higher margins from direct sales while smaller players struggle to keep up.
Is there a future for direct cellars?
Given the headwinds facing the direct cellar model, this raises questions about its viability long-term. Here are some considerations:
Reduced costs and tighter focus could help
Rather than eliminating direct sales entirely, some smaller producers may benefit by narrowing their program’s scope. Reducing the number of states shipped to, offerings, and marketing investment could make it manageable again. Focusing exclusively on wine club memberships rather than broad ecommerce may also streamline operations.
New technologies can reduce friction
Emerging tools offer the potential to automate and simplify aspects of DTC programs to make them more accessible for smaller businesses. For example, compliance software can track and handle shipping regulations. Marketing automation tools can drive traffic and optimize conversion. Order fulfillment and shipping can also be outsourced. Leveraging solutions like this could remove barriers to maintaining direct cellar sales.
Hybrid models may emerge
Rather than a pure DTC or wholesale strategy, many wineries are finding a hybrid model is optimal. Maintaining some direct-to-consumer sales through a wine club and onsite visits provides higher margins on a portion of stock. Meanwhile, wholesaling the majority of volume provides reach and resources. Finding this balance allows producers to boost overall revenue and profit.
| DTC Program | Wholesale Program |
|---|---|
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Blending these strategies can amplify a winery’s business, even if it moves away from a pure direct cellar model.
Boutique and luxury brands retain advantage
For small, cult wineries producing highly sought-after wines, a direct cellar program remains viable. Their prestige and wine quality allows them to attract and retain buyers without costly marketing. And offering exclusive access to wines through their cellar provides inherent value. While the general trend is away from direct sales, these boutique luxury producers will likely retain direct cellar programs.
Conclusion
Direct cellar wine sales boomed early in the rise of ecommerce but have declined significantly over the past 15 years. This results from a mix of factors making wine clubs, online retail, and wholesale distribution more attractive channels. While smaller wineries have retreated from direct sales, the model remains viable for elite boutique producers and those able to provide a high-touch experience. Balancing some level of direct cellar sales with wholesale distribution seems to be the sweet spot for maximizing revenue for most mid-tier and larger wineries today. The future viability of direct wine sales overall remains uncertain, but by minimizing costs and friction, it can persist as part of a diversified model.