As costs for wine shipments shrink, small wineries would benefit from pro-growth regulations and new logistics strategies.
Running a small winery may seem romantic – an endless parade of wine tastings and strolling through vineyards.
At least, those are the images many of us have from movies and television.
But as is the case with most things, the pictures don’t always match the reality.
That’s especially the case for small wineries that face a seemingly endless list of bewildering regulations governing the shipment and distribution of their products in the United States.
Just a small portion of U.S. wine sales comes from direct-to-consumer purchases.
But to wineries whose output is only a fraction of the largest wineries’, those sales can spell big opportunity.
In 2014, the average cost of a bottle of direct-shipped wine from a small winery dropped to $42.40, down 13 percent from the prior year.
Typically,a significant decrease in average price per bottle results in a healthy volume increase.
However, these onerous regulations stifled growth for smaller wineries looking to expand.
“Getting wine to customers’ doors presents hurdles.”
Those sales can make the difference between successful and marginal profits.
But getting those cases of wine to customers’ front doors presents some hurdles.
Shipping and distribution can eat up a lot of their profits.
At UPS, we help wineries find economical ways to keep costs down.
Beat the Heat
For example, UPS’s Summer Solutions program ships wine in refrigerated trailers during the summer, when high temperatures could damage wine.
This program is especially appealing to wineries shipping their cases from the Napa Valley across desert areas in California and the southern United States.
Trailers keep the wine at an optimum 55 degrees, and shipments are loaded and unloaded at night to avoid the heat.
Many wineries lose up to 25 percent of their sales over the summer because shipments are delayed due to weather conditions.
By delivering wine during the summer — instead of delaying shipments until the fall — wineries can book revenue immediately and avoid lost sales from customers who might lose interest and cancel their purchase before the wine is shipped.
Made in the USA
Smaller wineries also are eager to tap into the enthusiasm for American wine from overseas buyers, particularly in Singapore, Korea, and Japan.
These are countries where California wine is very much in vogue.
However, international shipping can be cost-prohibitive, not to mention slow, thanks to different customs challenges based on the origin and destination of a shipment.
“The ultimate goal is to establish bonds.”
On the federal level alone, there are requirements from the Customs and Border Protection (CBP), Food and Drug Administration (FDA) and the Tax and Trade Bureau.
One way to keep down costs, reduce complexity and adhere to all regulations is to group wine deliveries to the same country in a single shipment using a logistics professional service like UPS’s World Ease program.
With this service, all products can clear customs as one shipment.
That can lower the per-bottle cost of the wine and create savings that can be passed on to consumers.
Once shipments reach their recipients, there’s another hurdle to overcome: the U.S. requirement that an adult sign for the delivery of alcohol.
UPS encourages customers to consider having wine shipped to alternate destinations such as their workplace, so there’s no delay in delivery.
Customers can sign up for delivery notification services, such as UPS My Choice, so they know when their package is arriving and can be available to sign for the delivery.
Bring the Vineyard Home
The ultimate goal for small wineries is to establish long-term bonds with customers.
Wineries love to get to know people who come to their tasting rooms.
Once the winery gets the chance to showcase what it does, the visitor might become a lifelong customer of the winery — and the winery won’t have to compete with the offerings at the customer’s local wine shop to get attention.
This article first appeared on The Wall Street Journal Logistics Report and was republished with permission.
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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.