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Nebraska Tightens up Existing Direct Shipping Law

LB 230 passed Nebraska’s unicameral legislature and was signed by the Governor on April 24, 2013. The new law will go into effect on September 6, 2013. Nebraska is currently open to direct shipping from wineries and retailers (although there was some debate recently as to whether retailers should qualify under the current law), with easy-to-navigate regulations. The new law introduces several new restrictions that Nebraska direct shippers should be aware of before the new law goes into effect.

Though the bill’s statement of intent indicated that only manufacturers (wineries) would be able to obtain a license, after amendments to the bill, retailers were added back in and will be eligible for the Nebraska direct shipping license. So, at the end of the day (following a confusing set of hearings and deliberations) currently licensed wineries and retailers will both be able to continue to ship to Nebraska consumers, but with added complexity and requirements.

Direct shippers will see several marked changes to rules and licensing processes. Here’s a quick breakdown of these and other requirements in the new law – additional descriptions follow below:


Item Before
Sept. 6
After
September 6
Nexus status Not required In addition to requiring sales tax payments (common for direct shipping law), the potential to trigger additional tax obligations exists
Brand identification Not required Retailers and manufacturers may "only ship the brands of alcoholic liquor identified on the application
Distributor notification Not required Manufacturers (but not retailers) must notify Nebraska distributors carrying the identified brands, of the manufacturer’s intent to apply for a direct shipping license.
Notification of any violations Not required “…the applicant agrees to notify the commission of any violations in the state in which he or she is domiciled and any violations of the direct shipping laws of any other states…”
Non-sellable products Not required Required. Shippers may “…not ship any alcoholic liquor products that the manufacturers or wholesalers licensed in Nebraska have voluntarily agreed not to bring into Nebraska at the request of the commission;”
Excise tax Annual filing Monthly filing
Common carrier approval Not required Required

Under current regulations, it was somewhat unclear whether or not direct shippers were required to register to pay sales taxes, though most direct shippers did. The establishment of nexus under the new law could also mean that, in addition to requiring sales tax registration (common for direct shipping law), there is a potential to trigger additional tax obligations. Brand listings will be required as part of the licensing process, and wineries (but not retailers) must notify their Nebraska distributors carrying the listed brands of the manufacturer’s intent to apply for a direct shipping license. If a Nebraska manufacturer or wholesaler volunteers not to sell certain products within Nebraska’s borders, direct shippers would also not be allowed to sell those products under the new law. Furthermore, direct shipper applicants will have to notify the Nebraska Liquor Control Commission of any violations of direct shipping laws of any other states and any violations in the state in which the shipper is domiciled.

Many of the new laws will require clarification as to how currently licensed direct shippers should proceed in order to remain licensed and compliant – for example, will existing licensees have to notify distributors of their existing direct shipping license on Sept 6, or will this new requirement take effect once their current license expires in April? As we get closer to the September effective date, we will notify our clients and readers of any published guidelines or additional information.

Variety: The Spice of Life for Direct Shipping?

Among the most revealing facts in the new 2013 Direct Wine Shipping Report we recently released with Wines & Vines is that, given all the various types of wines produced and sold by wineries, a very select few types of wine dominate those shipped direct to the consumer.

Together, Cabernet Sauvignon, Pinot Noir, Red Blends, Chardonnay and Zinfandel represent 70% of the total volume of wine shipped and just over 80% of the value of all specified varietal wines shipped from winery to consumer. This line up of dominant direct-shipped wines is somewhat similar to the dominant wines in the overall wine market where Cabernet, Chardonnay and Pinot Noir are also in the top five varietals.

But take a look what happens when you compare the top five wines shipped direct to the consumer and the top five wines sold in the larger retail marketplace, and when you look at their share of total volume.

Direct-to-Consumer % of Volume Retail Marketplace % of Volume
Cabernet Sauvignon 20% Chardonnay 21%
Pinot Noir 16% Cabernet Sauvignon 12%
Red Blends 15% Merlot 9%
Chardonnay 12% Pinot Gris/Grigio 8%
Zinfandel 8% Pinot Noir 6%
All Other Varietals 29% All Other Varietals 44%

The direct shipping channel is a much less varietally diverse sales channel than the overall retail marketplace. In fact, some wines that play a key role in the overall marketplace only show up as a blip in the direct shipping channel. In 2012 Moscato held a 6% share of total sales volume in the overall retail sector. In the direct shipping channel, it accounts for a mere .1% of volume. This should be a reminder to wineries and retailers that every sales channel is different. Anyone that has enjoyed success in 3-tier distribution and is considering direct shipping, or vice versa, should review their product mix ahead of marketing efforts.

Beyond those varietals that dominate the direct shipping space, there is the equally important question of which varietals are trending up and trending down in popularity.

In 2012, only four varietals showed a significantly greater increase in shipments than the overall channel average of 7.7%: Rose, Sparkling Wines, Chardonnay and Pinot Noir. It’s important to note that the data we’ve looked at over the past three years has shown a fairly strong correlation between increased sales and movement in a varietal’s average price. When a varietal’s average price goes up, sales tend to go down and vice versa. What we are looking for are examples of varietal wines where shipments have increased despite a price increase or a slowdown in sales despite a price decrease.

Price/ Bottle Change Volume Change
Rose -7.60% 32%
Sparkling Wine -4.80% 20%
Chardonnay -3.80% 10%
Pinot Noir 3.30% 16%

Clearly, we have a winner here. Pinot Noir is on the ascent in the direct shipping channel. In 2012 the wine not only increased in average price per bottle, but it significantly increased in volume sales. This in turn led to Pinot Noir seeing a whopping 19% increase in sales value. The majority of this growth is found in Sonoma, where shipments of Pinot Noir increased by 27% on an average price per bottle that increased by 4.2%.

On the tumbling side of the scale, three wines saw a significant decrease in the volume of wine shipped in 2012 over 2011: Riesling, Merlot and Cabernet Franc. Again looking the change in price per bottle a story unfolds.

Price/Bottle Change Volume Change
Riesling -12.00% 2.80%
Merlot -8.30% -9.40%
Cabernet Franc -7.60% 9.10%

Merlot is not only losing pace in its shipments, but in its average price per bottle. In Napa specifically, the average price per bottle of Merlot fell a whopping 12.4% (more than any other varietal from the region) and volume dropped by 11.2%.

For more complete data on the varietal make-up of the direct shipping channel, including how various specified varietal wines perform on a regional basis, download the 2013 Direct Wine Shipping Report today!

October 1st Brings New Direct Wine Shipping Regulations to Montana

Montana House Bill 402 was signed by Governor Bullock on April 12, 2013 and creates workable direct wine shipping laws in the state. The new law, effective on October 1, 2013, will replace the flawed consumer licensing system presently in place for wine shipping in Montana.

Current regulations require that out-of-state wineries ship only to residents who hold a “Connoisseur’s License“; proof of the consumer license and a special sticker to affix to the shipping box must be provided to the winery before the shipment can be made. The new regulations will require out-of-state wineries to:

  • Register as a Foreign Winery or Importer. Many wineries already hold this license as it allows a winery to sell to a Montana distributor (cost of license is $0 to $400 annually, depending on volume sold in Montana; no-cost product registrations are required as part of becoming licensed)
  • Apply for a $50 annual direct shipping endorsement
  • Supply to Montana the name and address of any utilized fulfillment warehouses
  • Submit written acknowledgement of contracting only with common carriers that agree to deliver wine only to individuals who are of age and who provide a signature upon delivery
  • Ship no more than 18 cases of wine annually to an individual consumer (up from 12 cases/year)
  • Submit excise tax and shipment reports by the 15th of every month

While Montana’s regulations for direct wine shipments are changing, the connoisseur’s licensing system remains in place for shipments of beer from out-of-state breweries. UPS and FedEx, however, do not accept shipments of beer or spirits for delivery to consumers.

We will keep you informed of any updates from the Montana Liquor Control Division regarding the endorsement process once the details become available.

The 2013 Direct Shipping Report: How Will It Change Your Strategy?


Every year, ShipCompliant teams with Wines & Vines to report on the state of the direct-to-consumer wine market. The 2013 Direct Shipping Report is now available! If you are feeling antsy, feel free to click here to download the report! If you’ve got a few minutes, we’ve provided some summary highlights below.

The model, built to project the totality of winery direct-to-consumer shipments, provides a vivid picture of this important distribution channel.The report is based on millions of anonymized transactions in our ShipCompliant Direct software that ultimately led to direct shipments from January 2012 through December 2012. Using the comprehensive Wines & Vines database of all 7,400+ wineries across the United States, these transactions are the basis to project total shipments from all United States wineries using multiple stratifications including location of winery, annual production of winery and destination of shipment.

1. Direct shipping is growing (in volume and value)
According to our data, American wineries have been shipping more wine every year. Direct-to-consumer orders reached a new high of over 3.1 million cases in 2012, representing a 7.7% increase from 2011, and a 17.7% increase from 2010. That equates to over 72 bottles sold per minute, or 1.2 bottles sold every second! It’s not just the volume that’s growing; the average price of a bottle of directly-shipped wine has also risen over 5% in the past two years, which leads us to record sales of over $1.465 billion in 2012.

These figures show that the direct shipping market is quickly becoming a more important (and more profitable) distribution channel for wineries than in years past.

Expand your direct shipping footprint; order licenses for new states here!

2. Direct shipping is outpacing other sales channels

If we compare the annual sales of the direct shipping market to the U.S. Export figures released in February by the Wine Institute, we find that the 2012 value of domestic direct shipping ($1.465 Billion) exceeded the value of wines exported from the United States to Europe, Asia and the rest of the world. In addition, the average price of a direct shipped wine is 26% more than the average bottle of wine exported from the the U.S.

3. More reliance on the fall and winter seasons

The fall and winter rush at wineries is showing no signs of slowing down. Our data from 2012 shows a remarkable skew towards the last four months of the year, and is approaching a level of dependence that usually is only seen by the inflatable Santa Claus lawn ornament industry.

Our research has also shown that the last quarter of the year saw 37% of total sales in 2012, and September sales of direct wine jumped 26% year over year. This should be a call to action for your business– if you aren’t focusing the majority of your energy into fall and holiday season, you should be.

This is just a sample of our findings. We’ll be analyzing additional elements of the report in the coming days. In the meantime, check out the entire report by clicking the link below.

Click here to download the 2013 Direct Shipping Report today!

NCSLA 2013 Conference Presents “COLA Changes on the Horizon”

FOR IMMEDIATE RELEASE – April 11, 2013
CONTACT: Pamela Frantz, Executive Director
847-721-6410

The National Conference of State Liquor Administrators, Incorporated (NCSLA) will assemble June 24-28th on the island of Oahu at the Sheraton Waikiki Resort in Honolulu, Hawaii for its 2013 annual meeting and conference. Serving as conference host is the Honolulu Liquor Commission.

The annual conference theme is “Evolve, Adapt, Endure.” Our business agenda will cover a number of diverse issues that demonstrate the need, application and importance of this philosophy.

What does the future hold for the ubiquitous Certificate of Label Approval—the “COLA”—that single piece of paper upon which every alcohol beverage sold in America depends for its legitimacy and that state liquor authorities also use for their regulation of alcohol sales and distribution? A panel of distinguished regulatory and industry professionals will explore the answers to that very question on Wednesday morning, June 26th, at the NCSLA 2013 conference.

This important panel was created in response to the TTB’s current, ongoing and substantial overhaul of the label pre-approval process. Because suppliers, wholesalers, marketers, vendors, state agencies, and others depend on the COLA for different purposes, any changes being made by TTB to this critical tool will have a substantial impact on how the alcohol beverage industry brings products to markets and regulates those products.

Attendees of “COLA Changes on the Horizon” will be brought up-to-date on the pace of change to the COLA process, hear informed discussions of the implications of potential changes in the COLA process and have the opportunity to join the discussion and ask questions of the panelists.

Serving as moderator is Jeff Carroll, Vice President, ShipCompliant. His panelists include: Susan Evans, Executive Liaison for Industry Matters, Alcohol and Tobacco Tax and Trade Bureau; Deborah Ringo, Senior Regulatory Manager, Diageo North America; and Debbi Beavers, Licensing Supervisor, Kansas Alcoholic Beverage Control Division.

The panelists, in collaboration with NCSLA, will be conducting research and collecting feedback on this important topic in advance of the conference. Feedback is welcome and can be sent to COLApanel@shipcompliant.com.

Start making your plans NOW to come to Honolulu, Hawaii from June 24-28, 2013 for this year’s annual meeting of the NCSLA! Registration is open now so visit www.ncsla.org for details and register early to take advantage of the lowest rates! Watch for more exciting updates on the NCSLA 2013 Annual Conference to be broadcast in the coming weeks.

About National Conference of State Liquor Administrators, Incorporated:

A national organization of state alcohol beverage regulators, founded June 19, 1934, in Chicago, Illinois, whose purposes are to promote the enactment of the most effective and equitable types of state alcoholic beverage control laws; devise and promote the use of methods which provide the best enforcement of the particular alcoholic beverage control laws in each state; work for the adoption of uniform laws insofar they may be practicable; promote harmony with the federal government in its administration of the Federal Alcohol Administration Act; and strive for harmony in the administration of the alcoholic beverage control laws among the several states. Visit www.ncsla.org for more information.

North Dakota Makes Direct Shipping Easier for Wineries and Retailers

North Dakota legislature has passed, and its Governor has signed into law on April 1, new legislation that will allow wine orders to be shipped from any fulfillment house that obtains a North Dakota “logistics shipper” license, require licensure of common carriers, and make other related changes to the state’s direct shipping law. These new requirements will take effect on August 1, 2013.

North Dakota notified direct shippers that wine shipments could only be shipped from the licensee’s premises back in April of 2010. Fulfillment houses, from which almost half of all direct shipments originate, were not allowed to ship on behalf of the licensee, despite the fact that California considers fulfillment houses with public warehouse licenses (Type 14) to be an extension of the winery’s premises. With the passage of this bill, licensed wineries and retailers will once again be able to use this much valued function of wine shipping.

North Dakota isn’t the only state to restrict the use of third party and shipping services —

  • Virginia imposed restrictions on shipments from fulfillment houses in 2009, but established regulations to allow it last November. Virginia now requires out-of-state fulfillment houses to become approved, submit signed winery-fulfillment house contracts to the state, and remit periodic shipment reports.
  • New Hampshire enacted a bill in 2011 that not only created a common carrier license, but also created a “black list” of unauthorized shippers from which FedEx and UPS cannot deliver without penalty.

New regulations and laws in New Hampshire, Virginia and North Dakota give these states additional resources and tools to track shipments, enforce direct shipping rules and collect tax on all shipments.

In addition to becoming licensed, fulfillment houses and common carriers wishing to ship wine into North Dakota will be required to report shipments on a monthly basis and will be subject to penalties if they fulfill and/or ship orders from unlicensed warehouses or suppliers. Also, licensed direct shippers will be required to report their use of fulfillment houses in preparing direct shipments. The Alcohol Tax Section of the North Dakota Office of the State Tax Commissioner has already begun drafting license application and reporting forms and plans to make these available ahead of the August 1 effective date in order to give potential licensees time to review the new requirements.

Until the new law takes effect, out-of-state direct wine shippers should continue to ship from their licensed premises. As the August 1 date gets closer, we will keep our clients and readers informed of specifics related to the new regulations.