Wine consumption is still only a fraction of the beer market, but the longtime favorite is losing market share to the 9,000-year-old upstart of fermented beverages. A new generation is developing a discerning palate and showing a preference for wine. Sales are up and a couple dozen companies have emerged to offer the beverage to consumers who want to try new and unusual wines on a regular basis.

A FULL-BODIED GLASS OF GROWTH

In short, the wine business is flourishing. Consider the growing number of wineries:

(Source: Wines & Vines via Statista)

Look at how wine is slowly but steadily gaining market share (at beer’s expense), from 15.7% of the market in 2000 to 17.1% in 2016:

(Source: Discus via Statista)

The retail value of wine sales in the United States more than doubled from 2000 to 2015, from $26.3 billion to $55.8 billion:

(Source: Wine Institute, via Statista)

That’s a huge leap, and my guess is that this data is not adjusted for inflation. If we put everything in 2015 dollars, total retail sales in 2000 were $36.2 billion rising to $55.8 — still an impressive rise over 15 years.

A different source confirms that the U.S. wine industry is growing at something close to the rates seen above:

(Source: Silicon Valley Bank via Statista)

That’s quite high growth in the early Oughties, then a pause for the Great Recession of 2008-09, then average 9.7% annual growth over the last seven years. The wine business has nothing to whine about!

A HINT OF YOUTHFUL DEMOGRAPHICS

Poor, picked-on MIllennials! Always being blamed for the end of everything. In the media recently, several news publishers have been reporting the latest cause for outrage: Millennials “hurting” the beer industry because they like wine. 

HuffPost on 8/1: Millennials’ Love For Wine And Weed Is Hurting The Beer Industry

Business Insider on 8/3: Millennials are killing the beer industry with their rosé obsession

KIAH-TV on 8/9: Millennials, show beer some love! Brewery sales drop as youngsters reach for wine, weed

Yes, the beverage with 1/6 the market share is “killing” the beverage that still has almost half the market. “Lamestream”, media, indeed! But how much wine do Millennials really drink?

(Source: Silicon Valley Bank via Statista)

Just 17%, as reported above? A USA Today report from 2016 says 42%. If the snarky reporting can be believed, there is a trend here, in that Millennials really do favor wine. Whether 17% or 42%, that’s good news for an industry that is looking to expand into subscription wine services.

As I’ve written, Millennials are eager to try new things, and they have a natural inclination toward subscription businesses in general. Combine that with a love of wine, and it seems that wine box businesses, like other subscription box services, should be a natural growth path. And we do see steady growth in the direct-to-consumer wine market, of which subscription wine services are a subset:

(Source: Wines & Vines via Statista)

But despite these growth numbers, there is a big hurdle in the path of wine subscription service companies: state laws regulating and prohibiting wine delivery to homes.

THE COMPLEX FLAVOR OF STATES THAT ARE VERY DRY

Wine’s history as an alcoholic beverage loads the industry down with a lot of baggage. From Prohibition to the rise of Mothers Against Drunk Driving, a certain moral opprobrium still affects the booze biz. Granted, blue laws are not nearly as common as they once were, but regulations and laws restricting wine sales still are a serious consideration for modern wine sellers, especially retailers.

Most states allow wineries to ship directly to consumers. Only five outlaw all direct-to-consumer shipment of wine from wineries to customers:

(Source: Wine Institute, red states do not permit direct shipping to consumers.)

On the other hand, only 14 states allow retailers to ship wine across state lines, direct to consumers:

(Source: National Association of Wine Retailers)

There’s no logical reason to allow direct-to-consumer sales from wineries but not other retailers. A decade ago, the Supreme Court ruled it unconstitutional to restrict shipments of wine from wineries across state lines (see this NPR report from 2005). As Nina Totenberg reported,

• Justice Anthony Kennedy said that the 21st Amendment was never meant to trump the Constitution’s guarantee of nondiscriminatory commerce across state lines. States, he said, are still free to regulate the sale of liquor, but if they choose to allow the direct shipment of wine to consumers, those transactions must be regulated in an evenhanded way, not with preferences for in-state wineries.

That required even-handedness surely should apply equally to wine retailers as well as to wineries, but the battle is still ongoing. The laws on the books still exist because local retailer interests benefit from them and because anti-drinking activists seek to retain them. For more information on activism intended to inspire legislative change, check out FreeTheGrapes.org.

But just how big a deal is this? Well, the direct-to-consumer market is a growing business:

0)](Source: Wines & Vines via Statista)

But this includes one-off shopping and winery sales — the subscription wine club market is but a subset of the growth shown above. Still, the launch of wine box offerings indicates that some online retailers are stepping up to meet demand. Just look at companies such as VineBox, WineAwesomness, Winc, and a bunch more.

How do these businesses work around the legislative hurdles? Some are associations of small wineries, like California Wine Club. Others work to get the right permits but just can’t ship to certain states, like WineDownBox. Many don’t make their policies easy to find. Others partner with local brick-and-mortar stores.

Some think that’s what Amazon is doing with its recent acquisition of Whole Foods, which already has its own wine club. At VinePair, Kathleen Wilcox thinks that the deal is a huge potential problem for small wine merchants. But be that as it may, certainly the same interstate commerce problems that plague wine sellers will hamper Amazon as well.

In an article on Eater.com, Caroline Helper explains those problems:

• The legal intricacies and expenses involved with acquiring the proper licenses required to ship and sell wine can be complicated and exorbitant and may help to explain why wine-focused start-ups have been slower to proliferate and thrive. Essentially, wine is sold and distributed through a three-tier system built of producers, importers/distributors, and retailers. This structure makes it far more costly and complicated to ship a bottle of wine than, say, lipstick or socks.

The battle has recently extended into the shipping business, as reported late last year at BevSite.com:

• Over the past few months both FedEx and UPS have sent “cease and desist” letters to retailers in several states that have shipped alcohol across state lines into New York. The NY State Liquor Authority is putting pressure on the carriers to block out-of-state stores from shipping to NY consumers. While the SLA has no jurisdiction over retailers in other states, they issue permits for the carriers to fulfill wine shipments in NY. Failure by these retailers to halt NY shipments would jeopardize all shipping privileges with the carrier. Meanwhile, retailers in NY enjoy legal intrastate shipping privileges for both wine and spirits.

  Wineries have, of course, had their day in front of the Supreme Court and won a major battle with the 2005 Granholm decision. That decision established the principle (sic) that out-of-state wineries could not be discriminated against by laws that restricted shipping while in-state wineries were permitted to do that same. The Granholm decision also cast doubt on whether reciprocal shipping laws between states is constitutional.

  Retailers have been trying to establish the basis for a similar decision in their favor since it became clear that states were treating them differently from wineries.

The efforts to change the law in New York, as in other states, is ongoing.

Insider Take

There are a number of approaches to the challenge of serving wine lovers who want regular deliveries to the door. For online sellers willing to jump through the permitting and regulatory hoops, there is a growing market for wines by subscription. Sellers can settle for a smaller market of friendly states, and work and wait for laws to change. Or sellers can sneak around the issue in various ways, like those who simply ship goods on behalf of local wineries, or those who define themselves somehow as wineries. Where there are willing customers — and the data show that they are out there — businesses find a way to serve.