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Direct-to-Consumer Skill Building SeminarL a r r y C o r m i e r – S h i p C o m p l i a n t b y S o v o s
About Sovos
About the Model
Limited Production< 1,000 cases
Very Small1,000 - 4,999
Small5,000 - 49,999
Medium50,000 - 499,999
Large500,000+
9,645TOTAL U.S. WINERIES
AGENDA2017 DtC Data Overview2017 Details• By geography• By Winery• By Customer• By Variety
2018 DtC Numbers Compliance
Continued Momentum in DtC Shipping Channel
5.78MVOLUME IN CASES
$2.69BVALUE
Incredible Growth in 2017
Where does DtC fit in?
10%of domestic retail is shipped
DIRECT-TO-CONSUMER
Average Price Per Bottle
12 0 1 7 D e t a i l s
Digging Into the Details
Top Ten Destinations for DtC Shipments
Percent Growth In Volume By Destination
Volume Price per Bottle
Oregon and Washington Lead in Growth
Washington DtC Volume Shipments YTD
0
5000
10000
15000
20000
25000
30000
35000
Jan Feb Mar Apr May June July Aug Sep
2017 2018
13
Washington DtC Shipment Value YTD
0
2000000
4000000
6000000
8000000
10000000
12000000
14000000
16000000
Jan Feb Mar Apr May June July Aug Sep
2017 2018
14
Washington Volume and Value Growth YoY
155000
160000
165000
170000
175000
180000
185000
190000
195000
200000
205000
Volume
Volume YoY
2017 2018
15
0
10000000
20000000
30000000
40000000
50000000
60000000
70000000
80000000
90000000
Value
Value YoY
2017 2018
Avg. Price Per Bottle Holding Steady
30.8433.71
38.04
31.61 3129.35
31.65 31.55
36.6733.2
30.78
35.0738.82
32.0430.35 30.49 30.54
33.4635.94
33.43
JAN FEB MAR APR MAY JUN JUL AUG SEP YTD
Avg Price per Bottle
2017 2018
16
Washington DtC by Top Varietles
44,240
30,882
16,29211,967 10,148
7,838 6,865 2,786 7,047
52,998
38,205
18,403 16,80911,653 9,719
10.099 4,768 8,372
RED BLEND CABERNET SYRAH/SHIRAZ OTHER RED MERLOT ROSE CHARDONAY FUME/SB OTHER WHITE
YTD Top Varietles
2017 2018
17
Washington DtC Top 10 Destinations
9,417
6,279
3,941 3,7492,868 2,536 2,295 2,290 2,026
1,447
9,971
8,238
4,5903,760
2,4493,023
2,294 2,682 2,9251,972
0
2,000
4,000
6,000
8,000
10,000
12,000
CA OR TX FL NY IL ID VA CO AZ
DtC Destination States
2017 2018
18
Percent of DtC Volume and Value By Winery Size
Percent of Volume and Value By Price Category
Boomers Continue to Drive DtC Wine Growth
VolumeValue
22 0 1 8 N u m b e r s
What’s happening this year?
2018 Numbers through April
3W h y C o m p l i a n c e
What’s it all about anyway?
What Does “Compliance” Mean?
What Is Compliance?• Following the rules of the road• Not unique to alcohol – but there are unique rules
Why Compliance?• Because it’s the law• Compliance today = More sales tomorrow• One bad apple ruins the whole bunch
What Kind of Compliance Do We Mean?
Direct to Consumer (DtC) Sales• DtC: when the winery delivers through a shipping service• Onsite: consumer buys at winery, has it shipped home• Offsite: consumer buys over internet, phone, wine club
Where do rules come from?• Law of delivered-to state• Each state unique – makes it complicated
MI = 9 Rules
• License Needed, Age Check, Taxes
• Every order must comply with all
But, MN = 2 Rules
• Every order must still comply
• But compliance needs can vary
Who Cares About Compliance?
Everyone!• Staying compliant is a team effort• Staying compliant sets up future growth
SalesLicensing Accounts
Set Up Reporting
Support/Planning
States Are Cracking Down
Illegal/improper shipments are causing problems• Bad actors make whole market look bad
• Retailers, non-licensed wineries• MI, NY, IL, SD, AZ, PA are particularly active
State checks has knock-on affects• UPS and FedEx ramped up proof of license requirement
A Compliant
SaleEnd-to-End, What It Takes To
Follow The Rules
What’s The State of DtC Wine?
Setting Up Sales
Licensing• DtC states require licenses
• AK, MN, FL, D.C excepted• Carriers require licenses to accept packages• Separate license for each state
Only sell to consumers from states where you have a license
Setting Up Sales
What Products Can Be Sold?• Federal Registration
• Everything sold interstate must have a COLA from TTB• Wineries only selling instate may not have COLAs
• “Wines Not of Own Production”• ~20 states prohibit selling wine not made by license holder
• Limits sales of imports, custom crush, bottling-only• May be facility based – affects wineries with several vineyards
Get your product lists in order – don’t advertise what you can’t sell
At-Sale Compliance
Checking Your Customers• Age Verifications – never sell to anyone under 21
• Carriers should do final check at delivery• But ~10 states require age check at time of sale
• Must use software for offsite sales (IDology, LexisNexis)• *Available through a ShipCompliant account
Take all necessary steps to know your customers’ age
At-Sale Compliance
Tracking Your Sales• Customer Aggregate Volume Limits (CAVL)
• Customer limited to how much to buy in a given term• Can be per person, or per household
• E.g. 9 liters per month; 12 cases per year• IN, MI, NV, TX cap how much winery can sell per year
Track your orders so you don’t exceed a limit
At-Sale Compliance
Shipping Properly• Packaging
• Need a “Contains Alcohol” sticker – but may need more• Use Good Partners – Fulfillment Warehouses & Common Carriers
• Do they need/have a license? • Do they collect necessary data? Are you integrated to get it?• Affects customer experience too – not just compliance
Make sure your package makes it correctly
Taxes
States want to make sure they always get their money• DtC skips distributors, liquor stores, so need to collect from winery• Excise Taxes:
• Based on amount of wine sold• E.g. $0.2292 per liter (WA rate)• Collected from cost of wine
Work with your accounting team so they know what was sold
Taxes
Sales Taxes• Collected at the time of sale from customer
• “as if sale occurred in the state”• Means, local rates can apply to – not just state rate• Each address you sell to can have a different rate• Need to lookup each address
• Always pay to state what you collect – better to undercollect
Make sure you’re set up to collect proper amount at time of sale
350 5th Ave, New York, NY:
138 Eagle St, Albany, NY:
2001 Blake St, Denver, CO:
333 W Camden St, Baltimore, MD:
209 W Fowler Ave, Medicine Lodge, KS:(KS SUT rate = 6.5%)
122 Rockingham Rd, Derry, NH:(NH SUT rate = 0%)
General Reporting
Shipping Reports• Most states require regular reports on what was sold
• Check on volume limits, age checks, products sold• Must file report or face loss of license
• Can get complicated – so get ahead of the game• 97 different reports (includes tax returns)
Good sales records make reporting easier
