August 09, 2021
When you hear the phrase “winery direct” from retailers, it simply means that they offer wines that have been shipped directly from the producer. Generally, wines are distributed through the three-tier wine system, where they go from wine producers to distributors and wholesalers before going to retailers. Winery direct takes out the middleman of distributors, providing a way for wines to go directly from winemakers to retailers.
Benefits of the Winery Direct Model
As you might imagine, a key benefit of the winery direct model is that it reduces costs and enables consumers to get quality wines at a lower price. Many retailers also prefer this model because they’re able to enjoy larger profit margins while still offering consumers quality wines at reasonable prices.
This makes sense because, in the three-tier system, both retailers and distributors have to charge for sales, transportation, and storage costs. By taking distributors out of the process, it becomes more efficient with substantially lower costs.
An added benefit of the winery direct model is that it offers consumers a wider variety of wines, as it provides a way for retailers to work directly with wine producers. This often means getting to sell wines that are not otherwise distributed.
Finally, as an additional benefit, a more efficient model means less transportation which means that wine is better preserved. As the team at Vinfolio explains, “wines that are shipped directly from the vineyard travel fewer miles and experience smoother transfer, which helps preserve perfect provenance.”
Obstacles to Winery Direct Models
Perhaps the biggest obstacle keeping the winery direct model from becoming more mainstream is the challenges that it presents for large winemakers. For companies that produce large quantities of wine, the three-tier system is simply easier. Having to work directly with retailers can mean added work for larger companies as they try to sell large quantities of wine. Additionally, this model means added logistics--typically not appealing for large producers.
These issues are not so problematic for smaller wineries, which can more easily connect with retailers to sell all of their products. That said, advocates of the traditional three-tier system argue that it’s the easiest way for wineries of all sizes to distribute their wine.
Leaders in the Winery-Direct Industry
Total Wine, the fourth largest wine retailer in the country behind only Costco, Albertsons/Safeway, and Kroger, has helped to grow the winery direct industry. Total Wine has over 174 stores across the country and has turned to winery direct to offer their customers more selection and better prices.
Rober Trone, co-founder and co-owner of Total Wine, is a strong advocate of this model, noting that “it’s common sense. It allows great products to get to consumers at a reasonable price at a margin where the retailer can then invest in brands.”
Trone has found that not only has the winery direct model led to better prices and better profit margins but it’s also given Total Wine a competitive advantage, enabling them to offer wines that aren’t available at other retail stores or that otherwise haven’t been distributed.
Even More Efficient: Direct-to-Consumer
While winery direct offers a better model than the three-tier system, it still involves wines going from producers and retailers before going to consumers. In contrast, direct-to-consumer wines cut out an additional step and offer a way for wines to go directly from producers to consumers.
This means wine spends less time in transit and that consumers don’t have to pay retailers’ fees for transport, storage, and sales. Plus, as grocery store traffic declines and more consumers want products delivered directly to their homes, it solves a problem that many retailers are currently addressing - how to offer last-mile delivery for customers.
The direct-to-consumer model offers the best solution by delivering wines directly to the consumer’s door. It’s a less expensive, more efficient, and more convenient way to buy wine.