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Smaller wineries now selling more than half of wine direct to consumer

Published:  28 October, 2014

Smaller Australian, South African and New Zealand wineries are now selling more than half of their wines direct to consumer.

According to new research from Wine Business Solutions, since the 2008 financial crisis, wineries producing fewer than 50,000 cases per year are now selling over 50% of their wine direct to consumers. All aspects of direct sales grew strongly last year - cellar door (+8%), club sales (+23%), web sales (+14%) and events (+7%), says the Taking the Direct Route 2014 report .

Wine Business Solutions chartSmaller Australian, New Zealand and South African wineries now selling more wine directlySource: Wine Business SolutionsThis chart shows the split of where wine is sold by smaller wineries, with a growing percentage now accounted for by direct to consumer sales.

Peter McAtamney, principal of Wine Business Solutions, said strong currency was a driving force for Australian and New Zealand producers looking to sell more domestically. Compounding that, Australia has "major problems" with its brand in the US and is struggling in Europe too, McAtamney said. While in South Africa the rand is favourable and bulk producers are doing well, smaller winemakers "understand the limits of their home market and have become much more sophisticated at working inbound wine tourism markets in order to sell directly to an international audience", he said.

cellar doorCellar door is proving an increasingly lucrative, and popular way to sell winesSource: Angove family wineriesMany wineries, such as Angove in McLaren Vale, are now investing in high end destination tasting rooms and cellar door operations in order to attract tourists and increase sales.

But McAtamney identified a downside of falling out of global distribution: "regional and country brand reputations will suffer".

He added: "It is still vitally important for Australian producers particularly to be talking to sommeliers in London, New York and Tokyo about the outstanding quality of wines being produced by young winemakers as this is where the trends get set for the regions in major markets like the UK, for China and other developing markets and for the wine world more broadly."

Many wineries, such as Angove in McLaren Vale, are now investing in high end destination tasting rooms and cellar door operations in order to attract tourists and increase sales.Angove family wineries

While UK importers are more amenable to working with smaller wineries than their US counterparts, British grocers "have made it almost impossible for any winery to sell profitably" which is another factor pushing smaller producers to explore other sales avenues, said McAtamney.  

Direct sales also offer increased control over all aspects of brand building, which makes for a "compelling" case, he says.

Wine Business Solutions report is mirrored by research carried out by Silicon Valley bank (also released this week) that shows that the average US winery producing less than 10,000 cases sells more than half of its wine direct to consumer.

According to Silicon Valley Bank's wine division founder Rob McMillan: "Wholesalers don't want small wineries. Distribution isn't available for most wineries, so they have had to elect more direct to consumer options."

Email Peter McAtamney for more information here.