ShipCompliant by Sovos hosted its annual users conference — rebranded as the ShipCompliant Wine Summit, a part of Sovos’ Global Compliance Series of events — last week at the Napa Valley Marriott. ShipCompliant users gathered for a day of training before hearing from officials and experts to learn about the regulatory and market forces that are shaping the industry.
The annual event, now in its 13th year, is always an exciting time for our team. We enjoy getting together with our clients and so many other wonderful people all working to make this market successful.
This year coincided with the release of our latest tool, which enables efficient, effective compliance with beverage alcohol regulations: Market Ready. As such, we took the opportunity in the conference to expand our focus beyond just the Direct-to-Consumer (DtC) market, to how wineries can better operate in the three-tier channel.
Of course, DtC was still a major topic at the Wine Summit; but, back in Napa after a two-year sojourn and rebrand, we wanted to underscore the gestalt nature of the wine market: from grapes to glass, there are any number of ways for wineries to succeed, but you have to look at the whole system itself to best understand how you can achieve that success.
For those of you who were able to attend, we again want to extend our deepest appreciation for you and your continued support. For those who unfortunately missed the event, we’ve summarized it below. (And be sure to keep an eye out on our blog for more in-depth summaries of some of the panels we hosted in the coming weeks.)
The Sovosian Model of Compliance
Pawel Smolarkiewicz, Chief Product Officer for Sovos, kicked off the event, speaking on how government regulation of businesses are changing and Sovos’s role in making compliance possible. With our global reach experience in all manners of facilitating business to government compliance reporting, Sovos is deeply enmeshed in the latest in overall business compliance needs, not just the unique challenges that the wine industry faces.
Pawel explained how the technology services that are helping businesses scale their compliance needs are a bit of a double-edged sword as it also enables government greater ability to scrutinize these records. Overall, his message was positive, though, seeing more opportunity for both governments and businesses to improve their processes with better technology to create a virtuous cycle of supporting each other’s development. As Pawel remarked, the wine industry is well positioned to handle this changing regulatory environment, as for the past decade they have been handling such compliance requirements. In effect, wineries have already adopted the new processes and tools that other businesses are only beginning to grapple with.
Larry Cormier, General Manager of ShipCompliant by Sovos, spoke next, narrowing Pawel’s message of global compliance to the beverage alcohol experience. He sought to demonstrate Sovos’ deep-seeded commitment to supporting the wine industry’s compliance needs. A reaffirmation of our pledge to provide top-rate performance and customer support, along with enabling our clients’ growth, will shape the immediate and long-term future of ShipCompliant by Sovos. Lexie Schaefer, Product Manager for ShipCompliant by Sovos, also spoke on these commitments detailing how exactly we will meet the challenge.
Updates on the Wine Market
The morning continued with a panel of our partners hosted by Andrew Adams, of Wines & Vines. Also speaking were Jennifer Goodrich of Wineshipping, Paul Thienes of eCellar, and Jerry van Sickle of FedEx. Pawel Smolarkiewicz also returned to the stage to provide the compliance perspective. They spoke on what the consumer experience looks like these days, and what wineries can do to make that experience successful for everyone.
As always, fulfilling customer needs is central to selling wine. But these days, creating a good overall experience for the customer is the key to fulfilling those needs. Customers no longer are satisfied with just a quality product, they want to feel like they’re catered to at every step from when they first think to buy a bottle of wine until they’re actually drinking it.
Good use of data and other technology services can enable wineries to meet these demands. Enabling customers to customize their own experience is also a great way to ensure they can have their unique needs met. Naturally, regulatory issues were discussed, with the overall message being technology can help here too; by enabling all of your systems to talk to each other, from sales to shipping to accounting, minimizing the stress that compliance can bring. Compliance is an inherent part of the wine industry (and in particular DtC sales); by facing regulatory challenges head on, you can ensure that it won’t drag down the rest of your business.
Larry Cormier then took back the stage, joined by Danny Brager of Nielsen, to talk about what the data are showing about wine sales. Though it’s not really news, Danny showed how important eCommerce has become to the entire U.S. retail market, with fast moving goods, like groceries and alcohol, being on the leading end of growth in eCommerce.
The boom in remote selling, along with greater consolidation in the distributor and retailer tiers, means that DtC must become an even greater part of every winery’s business models. And things are looking rather cheery for the DtC wine market; 2017 was another record year in sales, and every indication so far is that 2018 will be even bigger. Larry noted that it was not at all unlikely that we’ll surpass the $3 billion mark this year, up from $2.65 billion in 2017.
Meanwhile, in the broader wine market, there were a few points that Danny stressed. Notably certain things we thought may have just been fads — rosé and wine in cans — are turning into trends. These areas have been trending up so much and so sustainably, that we cannot think they’ll go away.
The ultimate message that Larry and Danny wanted to impart was the importance of using these data points. By understanding what your customers want, and by understanding how well you’re meeting those demands, you can make their experience better and more likely to repeat.
A Deeper Dive Into Compliance Issues
After lunch, we hosted breakout panels delving more deeply into certain issues affecting the wine industry. These were divided into two concurrent tracks looking at the DtC and three-tier markets, respectively.
Starting the afternoon were regulatory-focused sessions. Our Industry Outreach Advisor, Alex Koral, hosted a panel on staying compliant within the increasingly-scrutinized DtC market. He was joined by Matt Botting, Chief Counsel for the California Alcohol Beverage Commission, Alex Heckathorn of Compliance Service of America, and Carole Peterson from Wente Vineyards.
They discussed some of the leading compliance issues in the DtC market, such as the importance of conducting age verifications, dealing with trade practice restrictions on wineries advertising their products, and how the taxman may actually be the biggest risk for enforcement action. The main message, speaking of enforcement actions, was how important it is to have an active compliance support team and to respond to any state communications you may receive. The point is one we note often: complacence is not compliance.
The following panel looked more at how wineries can improve their online markets in order to generate more DtC sales. This panel was hosted by our Technology Partner Manager, Curry Wilson, who spoke with Andrea Gonzalez of Treasury Wine Estates, Sandra Hess of DTC Wine Workshops, and Jason Moore from Modus Operandi Cellars.
They explained how necessary it is for wineries to utilize all available digital marketing solutions, such as augmented reality, video tours of the winery, personal email campaigns, and social media analytics. When you’re trying to stand out in a crowded marketplace, it’s necessary to engage your audience with a compelling story of why you’re different. By extending your tasting room into a digital marketplace, you can get ahead of the game.
At the same time, two other panels looked at regulatory and market issues affecting wineries’ three-tier sales. First off, our Regulatory Counsel, Lauren Whitney, hosted Jillyan Ramos of Delicato Family Vineyards and Sara Schorske from Compliance Service of America, in a discussion of how regulatory conditions affect how wineries get their products into new markets. By understanding and getting ahead of complex licensing and registration processes, wineries can ensure their products get onto store shelves faster and more efficiently, and avoid unnecessary delays to their distribution plans.
This panel was followed by a more market-focused discussion on how wineries can expand their three-tier footprints, hosted by our Client Success Advisor, Liz Yount. She spoke with John Hinman from Hinman & Carmichael, David Von Stroh from Zepponi & Company, and Gordon Waggoner form Acumen Wine. They discussed best practices for wineries to manage their sales in the three-tier channel, including how to engage with distributors and strategies for identifying future markets. A notable lesson from this panel was how having a successful DtC sales line can positively influence a winery’s three-tier sales by providing clear proof that that winery’s products are already selling well.
State of the Wine Industry
It wouldn’t have been the ShipCompliant Wine Summit without an annual regulatory update from the inimitable Steve Gross, Vice President, State Relations for Wine Institute. He presented on what states have been up to in 2017 and 2018 regarding regulating DtC wine sales.
The overall theme of Steve’s presentation focused on the surge in enforcement actions that states have been taking within the DtC market. 2017 saw the most enforcement notices ever, with many unlicensed and improper entities being told they cannot continue making DtC sales. This has had knock-on effects for legitimate DtC sellers, especially as many states are also pressuring common carriers to better prevent illegal DtC sales from happening. Steve predicted that more states will add rules requiring reports from common carriers and fulfillment centers to better track DtC sales, following Illinois’s lead.
Steve previewed the next state slated to open to DtC wine sales, Oklahoma, whose DtC law will become effective October 1, 2018. Wine Institute worked hard since the law was first passed in 2016 to correct several regulations that would have severely hampered the DtC market in the state. Currently, Oklahoma seems set to become a DtC state more or less like any other (we will be writing a thorough preview post as the effective date nears, going over all the regulations that wineries should be aware of when entering Oklahoma).
This was in contrast to Kentucky, which passed an interesting DtC bill earlier this year. There are many unresolved questions and unfortunate restrictions, which seem to make the law largely unworkable for wineries. While Steve was optimistic that some of these issues could be worked out in a positive manner, he urged wineries to be cautious when it comes to DtC sales in Kentucky and not to enter that market until things have been worked out.
Steve also discussed other DtC bills, which failed to pass through their respective states’ legislatures this year. These included bills to open up Mississippi and Alabama (though it was notable how far these bills did go this year), and bills to add proper licensing and tax rules for DtC sales in Alaska and Minnesota (in these states, then, the status quo prevails). But a bill to open up Delaware, and one to remove the production cap for wineries selling DtC to New Jersey, are still alive, which Steve mentioned with a note of cautious optimism.
In all, the changes that we see happening with the regulation of DtC sales largely mirrors those highlighted by Pawel at the beginning of the day, with technology becoming ever more central to how governments can regulate businesses. But this should be seen in a positive light, as technology also makes it easier for business to comply with those regulations. By bridging the gaps between government and business and automating compliance needs, technology can smooth those barriers that could so often be a roadblock to a business’s growth.
We again want to thank all the fantastic panelists who participated this year, and all of you wonderful clients, friends, and partners who attended. We’re already looking forward to next year’s event, and hope you will be there!