A new analysis prepared by Stonebridge Research and New Vine Logistics confirms what many have suspected: As the economic environment deteriorated through 2008, the rate of growth of consumer direct wine purchases slowed considerably.

According to the New Vine/Stonebridge Winery Direct Index, the number of bottles wineries shipped directly to consumers increased by 2.4 percent in 2008 compared to 2007, having increased by 13.8 percent from 2006 to 2007.

The number of orders made in the first three quarters of 2008 actually declined by 3.3 percent compared to the same period in 2007, having increased by 13 percent from 2006 to 2007.

The declines in consumer direct follow the slowing in the overall wine industry. This year's expected growth of 1.5 percent represents the industry's smallest increase since 2001, according to The Annual U.S. Wine Market report from Impact Databank. This is compared to 4 percent growth from 2006 to 2007 and 6.9 percent growth from 2005 to 2006.

2008 Quarterly Trend: Orders fell nearly 14 percent and bottles shipped by 6 percent in the second quarter, but the decline slowed in the third quarter, with shipments falling by 7.2 percent and bottle numbers falling by 2.3 percent, suggesting some recovery of consumer confidence. The third quarter is traditionally a strong winery direct
sales period.

Club and Non-Club: Wine club shipments are up slightly for the three quarter period over last year with an overall 2 percent increase. Non-club shipments, with an overall 11 percent decline over the three quarter period, have been hardest hit by this decline in winery direct sales. Non-club shipments start the year strong but show steady and major declines.

The data reflect several key trends including that wineries are seeing somewhat fewer visitors, though those that do visit tend to be more serious buyers. Established customers have so far maintained their loyalty to their favorite wineries. Also, the analysis confirmed that as gas prices rose through 2008, some wineries reduced the number of their annual shipments, while increasing the number of bottles per order, to minimize the impact of rising shipping costs.

"One of the interesting things I'm hearing is that people are working a lot harder to sell the same amount of wine," Barbara Insel of Stonebridge Research said. She added that while tasting rooms are seeing fewer visitors, those that are coming seem to be buying.

In releasing the data, New Vine said it underscored the need to provide creative ways to keep club sales strong and encourage higher tasting room purchases.

"Although we had initially believed that Q1 shipments had declined, further mining of the data as the year progressed showed that first quarter shipments had increased, although at a slower rate of growth than seen in 2007." Several wineries, for example, shifted their usual first quarter shipments to Q2, reacting to the heat spike in March 2008 or to reduce their overall number of shipments.

Based on actual winery-direct shipments, the New Vine/Stonebridge Winery Direct Index provides a quantifiable measure of winery direct sales across the industry. The data includes over 250,000 orders and 1.2 million bottles shipped. The report is created as a service to the industry.

New Vine Logistics calls itself "the wine industry's largest domestic and international shipping and fulfillment partner for direct-to-consumer wine orders."

Stonebridge Research is a wine business consulting firm.

Highlights

2008 Q1-Q3 Winery-Direct shipments are down slightly by 3 percent versus Q1-Q3 2007

Order size is larger in 2008 than 2007

•   Bottles shipped increased by 2.4 percent.

•   Shipments decreased by 3.3 percent.

Key Drivers

•   Club shipments are up 2 percent.

•   Tasting room shipment are down 11 percent.

•   Q1 showed growth but the remaining quarters were impacted by economic and weather conditions.

•   An unusually hot May and June caused thousands of weather held orders to ship in Q3.

•   Rising fuel surcharges impacted tasting room sales declines but bottles per order increases.

Definitions

•   Non-Club are dailies which include tasting room, releases and Web orders.

•   Clubs represent winery loyalty program orders.