Direct Delivery From the Cidery — The Future?

cider-barrel-deliveryThe rise of craft cider—meaning small production hard ciders produced by quality-oriented producers using primarily traditional cider apples—has been nothing short of phenomenal. Over the past two years rarely a day goes by in which a new cidery emerges somewhere in the United States. It is great time to be a cider lover with serious tastes.

However, getting one’s hands on many of these new, small production bottlings (many of which are reviewed here at The Cider Journal)  can often be next to impossible unless you live within driving distance of the cideries. The vast majority of craft ciders are only distributed locally. What then is the key to cider aficionados getting their hands on these craft cider gems, save traveling across the country?

Direct to Consumer Shipping.
As the wine industry has shown with its more than $1.57 Billion in wine shipped in 2013 and with that figure expected to double in 10 years, cider producers should be salivating at the opportunities presented by direct shipment of wine to cider lovers across the country. However, for the moment only a precious few cideries will take online orders and ship their cider to consumers.

According to the 2014 Cider Producer Survey produced by CyderMarket.com, of the 245 pure cideries that took part in the survey, only 19% revealed that they will take remote orders and ship their ciders direct to the consumers. There are a number of reasons more cideries don’t offer online sales and shipping.

Often times the laws of the various states concerning the shipment of cider are complex and vague.Fedex Additionally, it can be expensive to purchase shipping permits in all the states to which a cidery would want to ship to consumers. The reporting and compliance tasks imposed by states can be complicated and onerous. Also, some cideries may not feel they have a large enough following outside their local area to justify the cost of creating an online store for their cider products.

In the end, whether or not a cider in one state may legally ship to another state depends largely on the laws of the state into which the cidery may want to send their product. After a 2005 Supreme Court decision (Granholm v Heald) states were told they may not discriminate against out-of-state wineries. It was unconstitutional to allow in-state wineries to ship to residents in their own state, but prohibit out-of-state wineries from shipping into the state. Since then, 41 states have passed laws that allow both in-state and out-of-state wineries to deliver wine via common carrier.

The Complexity of Shipping Wine To The Consumer
For cideries, the first question is whether or not a state allows shipments of alcohol from out-of-state. Most states only allow shipments of wine, not beer or spirits. But since most alcohol shipping laws were passed with wineries in mind, the next question a cider seeking to ship direct to consumers must answer is whether or not their own license to produce cider actually views them as “wineries”. Many states in fact consider cider makers to be producers of apple wine and they are licensed as wineries.

If a state considers cideries to be “wineries” and if the state the cider wants to ship to allows direct to consumer shipments from out-of-state wineries, then the only question is whether the cidery is willing to obtain a permit to ship to that state and do all the associated paperwork that comes with direct shipments.

Direct shipping permits can range from $50 to $500 depending on the state. Additionally, the amount of paperwork and reporting required of shipping permit holders varies by states. Some states require out-of-state shippers to remit reports of what they shipped and to whom it was shipped on a monthly basis. Some require annual reports. And of course there are taxes. Most states require out-of-state shippers to remit both sales tax as well as excise taxes, while others only require sales taxes to be remitted.

Many companies exist to help direct shippers more easily comply with the complex rules for shipping that are different in ever state. A number of “compliance” companies have arisen to help wineries comply with various regulations including state-by-state direct shipping rules. Additionally, ShipCompliant is one company that specializes in helping beverage companies comply with direct shipping rules and regulations, including automating the process.

CiderstoreCider, The “Three Tier System” and the Economics of Selling Direct
Even if a cidery is able to obtain permits in various states allowing them to ship direct to a consumer, they have to decide if the cost and effort to do so makes sense. This is where margins come in along with the “Three Tier System” of alcohol distribution.

Most alcohol in the U.S. is distributed within state-based “Three-Tier Systems”. Producers sell to wholesalers, wholesalers sell to retailers and retailers sell to consumes. It’s common practice for a producer of wine, beer, spirits or cider to sell their products to wholesalers at a 50% discount off their stated retail price. The wholesaler then marks up the product by 40% – 50% from the price they bought it at for sale to the retailer. The retailer then marks the product back up to somewhere near the producer’s original stated retail price. Most states do not allow a producer to sell their product directly to a retailer; they most sell their product to a wholesaler.

Consider the consequences for cidery thinking of selling their ciders direct to the consumers, rather than through a wholesaler. The Cidery that has, for an example, 100 12-bottle cases of cider to sell at a retail price of $10 per bottle can gross $12,000 by selling directly to the consumer at their full retail price. But if they sell those same 100 cases to a wholesaler, they gross $6,000.

There is very impressive incentive for a cidery to consider ways to sell as much as possible of their product directly to the consumer. This is why it seems very likely that despite only 19% of cideries currently shipping wine to consumers, it is likely that more and more cideries will go that route in the future.

Equally important, the cider that sells and ships their craft products directly to consumers has the opportunity to build a relationship with the people who are actually consuming their product. Wineries have found this relationship, if carefully cultivated, yields great dividends in the future with repeat sales and word-of-mouth promotion—the best kind.

Among the great American craft cider producers that do sell online and ship are:

Eve’s Cidery
Foggy Ridge
Eden Ice Cider
EZ Orchards
Finnriver Farm Cidery
Snowdrift Cider Company

 

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