Nebraska Tightens up Existing Direct Shipping Law
May 6th, 2013
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?
April 24th, 2013
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
April 22nd, 2013
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.
Does Size Matter? Absolutely, if You’re a Winery
April 22nd, 2013
On April 16th, ShipCompliant, together with Wines & Vines, released our 2013 Direct-to-Consumer Shipping Report, which contains a treasure trove of useful information that could change the strategy of your business. Upon its release, we shared with you that the direct shipping business is growing. If we dig a layer deeper, however, we can see who is growing and who isn’t. And one of the key factors is the size of the winery.
Wines & Vines segregates the population of wineries in America by total production volume. You can see a breakdown here:
When we classify wineries in these tiers, we see can see stark differences in sales channel mix as size increases.
For instance, smaller facilities are much more dependent on the direct shipping sales channel. In limited production vineyards, over 10% of business is sourced through direct-to-consumer sales. Many of these wineries depend on tasting rooms, events, websites, and word of mouth to sell their vintages every year.
Medium and large wineries, who typically enjoy a broader reach due to vast distribution networks, depend much less on direct-to-consumer sales. Seems logical, right?
If we take a look at growth by winery size, we can come to some more groundbreaking conclusions.
The first thing you may notice when we separate volume by tiers is the dominance of “small” wineries in direct shipping. In fact, 51% of all cases shipped through this channel come from wineries producing between 5,000 and 50,000 cases annually. It is astonishing that these wineries represent only 5% of total production, yet take such a commanding lead in this channel.
What is even more interesting, perhaps, is rate in which larger wineries are growing their direct sales channels. It seems as though the previous success of direct-to-consumer shipping has awoken the sleeping giants, who are posting gains that outpace their smaller brethren. These results are similar to those found in our 2012 Direct Shipping Report, so we don’t see this trend going away anytime soon.
You can take a look at our analysis of this and other figures in the 2013 Direct Shipping Report. Click here to download it today!
We’ll be rolling out more conclusions over the next few days, so stay tuned to the blog for more fun facts!
The 2013 Direct Shipping Report: How Will It Change Your Strategy?
April 16th, 2013
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!
