November 18, 2010

Why I Almost Quit The Wine Industry

You may say, quit the wine industry?  Are you crazy?

Many of you know that I was the CEO of Inertia.  It was an amazing and fulfilling journey but fraught with hardship and challenges including (but not limited to) working with predatory VC’s, trying to teach an industry about ecommerce, and the pain that always comes leading a software development company. I watched sadly as some of the subsequent management damaged the company I spent years nurturing through various mistakes and general apathy to the industry I love.

After leaving I analyzed what to do next.  I was fortunate to have quite a few offers but my passion (and my obsession) is working with wine and digital.  I did a lot of soul searching about the wine industry and then (in my typical fashion) some number crunching.  At the beginning of 2009 the numbers told a daunting story:

* In 2007 he US wine industry only spent $3M on online advertising (and in 2009 my estimates were not that much higher).
* Over 5/6 of the 6000 US wine industry had sup-par shopping carts experiences.
* Of the 6K US wineries, approximately only 20 had DEDICATED e-commerce managers.
* The estimated US sales of consumer direct is approximately $3B with less than 20% of that being e-commerce (and over 75% of that number from e-tailers not wineries).
* There are less than 5 VP’s of Consumer Direct in the industry.
* DTC employees often contribute the highest EBITDA and often the most stable revenue channel but their pay scale is incongruent to other parts of the wine industry.
* DTT was a relevant alternative access to market but few wineries were leveraging it (for reasons still unknown to me).
* There is essentially only one technology solution for compliance that is overpriced, over engineered, plays vendor favoritism, and inhibits innovation.
* In most wineries, software solutions are chosen by the accounting dept (even sales and marketing solutions) due to the fact that we essentially are a manufacturing industry.
* There are over 150 POS solutions, most of them glorified cash registers and none of them blazing the trail for innovation.
* Less than 200 wineries were using social media.
* No wineries had any sort of strategy around content management to help online partners better merchandise and market their wines.
* Amazon failed to enter the wine space.  Miserably.
* Regulators were beginning to harangue against the marketing agent model (something desperately needed in our industry).
* Wholesaler groups were (and still are) attacking DTC and DTT with a vengeance.
* Our largest wine e-tailer only did approximately $43M.  Compare that to Zappos who did almost $1B the category looks pretty anemic.
* We just started a brutal recession never before seen in my lifetime.

Wow.  The story looked bleak.  It said through math that the wine industry really wasn’t committed to digital and some key channels of direct.  I stewed on it for two months straight (almost zen-like) troubled by the implications of the knowledge.  But then, on a Monday afternoon, with a glass of wine before Thanksgiving, it was like the sky opened up (Blue’s Brother Style) and the answer came through.  The wine industry, despite not yet embracing online sales and marketing, needs digital to take us to the next level.  All we need is more information, more believers, more passion to make it work.  Giving up would have meant that I quit not only on my dreams, but the hopes of many people in the industry to see online realize its potential for our industry.  As they say in gambling, I decided to “double down.”

Two years later it was the best decision I ever made.  The wine industry is adopting social media like never before.  E-commerce is just starting to flourish and showed the highest growth of any DTC channel for ACTIVE wineries.  CRM is no longer a buzz word, but a key objective for the industry.  We are living through a renaissance of online companies that are entering the industry to help wineries succeed in sales and marketing (hopefully we’ll give them our dollars so they can continue to grow and succeed).  Peer reviews from such great sites as Cellartracker/GrapeStories, Winelog.net, Adegga and bloggers are becoming as relevant as some of the key magazines about wine.  More and more companies like Corkd.com and Palatepress.com are creating great online content about wine.  Mainstream writers (Jancis Robinson, Jon Bonne, Bill Daley, Natalie Maclean, Leslie Sbrocco) are adopting Twitter, Facebook, mobile and blogs to share their thoughts about wine.  More and more services are helping wineries navigate the digital space (Vin65, Cruvee and many more). Mobile platforms are proliferating helping consumers with their wine selections.  And I am having more fun than I ever have in my life seeing the industry change around me catalyzed by digital.

Will wine succeed online?  I believe.  Do you?

  • http://www.indievinos.com Karin

    Re: “It said through math that the wine industry really wasn’t committed to digital and some key channels of direct.” I think there are two ways to interpret that data: A) as you interpreted it, a lack of commitment; or B) an incredible opportunity w/in an industry fraught with slow adopters.

    I prefer B. And I believe, Paul. I believe!

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