American wine moves through a structure called the three-tier system: producer to distributor to retailer (or to on-premise like a restaurant or club). The structure is a legacy of post-Prohibition trade policy. It is not the structure the producer would have designed. It is, however, the structure the producer must work within for most domestic sales.
Here is what happens to a $14 bottle of California cabernet on the way to your hand.
Producer side
The grower spent roughly $1.80 on the grapes. The winery spent roughly $1.20 on the production, barrel time, labor, electricity, the bottle, the cork, the label, the COLA filing. The producer is selling the bottle wholesale at roughly $4.00. The producer's margin: $1.00. This is the actual economics of small-production California wine.
Distributor side
The distributor buys at $4.00 and sells to the retailer (or the on-premise account) at roughly $7.50. The distributor's margin per bottle: $3.50. That margin pays for the sales force, the warehouse, the truck, the trade tasting, the back-end software, the case allocations to the producer's hot SKUs, and the management overhead the distributor needs to maintain its license in each state. The number is not unreasonable. It is just nearly equal to the entire producer's economics.
Retail / on-premise side
The retailer or restaurant buys at $7.50 and prices the bottle to the customer at $14 in retail or $40 on a restaurant list. Retail margin: $6.50 per bottle. Restaurant margin: $32.50 per bottle. The full price the customer pays bears very little resemblance to what the wine cost to produce.
What the program changes
Vine Reserve Club is licensed both as a producer and, for custom-label programs sold direct to the consumer or the licensed on-premise account, as a direct seller. We do not go through a wholesale distributor for the custom-label program. The math: producer cost + a margin that lets us operate the press, the bottling line, the design studio, and the delivery van. The distributor's $3.50 cleans up. The retailer's $6.50 or the restaurant's $32.50 either cleans up (direct to consumer) or accrues to the on-premise account (direct to the restaurant).
The customer pays for wine, label, and delivery. Not for the structure between them and the wine. That is what the program changes. The structure is the cost. Cutting the structure is the savings.