Connecting The Dots

Shakeout and consolidation have come, as they must, to the beverage alcohol industry’s emerging e-commerce sector. Once promising platforms have disappeared, some swallowed by competitors, and promising new partnerships appears the rule of the day.

But as e-commerce coalesces in the business’s consciousness it brings with it the promise of lower B2B costs, a wealth of strategic information, unprecedented customer contact and product variety — in short, a far more efficient industry than ever before.

Earlier this year, a pair of major mergers have helped reshape the landscape, in one instance forming what one communications and technology solutions company is referring to as the first national wine retailer. ecom4


For retailers and brand owners, the web remains many things: a way to hawk wares, establish rapport with old and new customers, learn more about consumer likes and dislikes and bring targeted promotional offers as near as their cell phones.

Now, several of the country’s best-known retailers are going further, coming together to form an enterprise whose package of integrated marketing solutions brings together beverage alcohol industry suppliers, wholesalers and retailers to generate compelling information and buying opportunities for consumers.


Online On Course

The stakes are, of course, high. Wall Street analysts Salomon, Smith, Barney have estimated the online wine retail market will reach $1.5 billion, or 10%, of the estimated $15 billion wine market by 2003. Helping realize that potential have been two recent mergers that should go a long way to tying the disparate parts of this industry together, to the benefit of all.

eVineyard purchased and its assets last September. Then, this past April, it bought, which some months earlier had merged with

New York City-based BevAccess and Indianapolis, IN-based eSkye Solutions Inc., competing communications and technology solutions companies serving the beverage industry, merged in late April of this year, creating a single national platform to address the technology and communication needs of the industry. The combination creates a national private trading exchange through which beverage alcohol retailers, distributors, suppliers and control states can, executives claim, conduct business more efficiently than ever before possible.

BevAccess says it has agreements with distributors in over 40 states to enable their customers to electronically access their products and services. The network is active in major markets, including Illinois, New Jersey, New York, Massachusetts, Michigan and Texas, with pilot programs in Georgia and New Hampshire.

The consolidation comes as anything but a surprise. Analysts have been foretelling major restructuring throughout all of e-commerce for close to two years, beginning, said Brett Lauter, vice president and chief marketing officer for eVineyard Inc. in Portland, OR, “when everyone was just putting a behind their name and getting venture funding.” What wasn’t expected, he added, was “the little fish swallowing the big fish. But we expected it because our business model is really the one that made the most sense when you really drilled down into it.”

“In the internet as a whole there has been a pretty extensive shakeout,” noted Helen Gregory, vice president of marketing for BevAccess., “most recently with and selling its remaining assets to eVineyard.”

The trend is also welcome. When it comes to B2B, said Eric Blanz, web site director for New York City wine retailer Sherry Lehmann, “The problem is that in the wine industry you work with distributors, and for any given wine you may have one, two, three or more. All your distributors have different kinds of computer software, and they’re at different stages of technological development. Some of them, literally, hardly use computers at all, while some of them are extremely sophisticated.”

The result, then, is that “you don’t have a way you can interface with all the myriad distributors you use because everybody’s using something different,” he added. “That part of the industry is definitely antiquated vis-a-vis financial industries, where it might be easy to share information or do business-to-business dealings via the internet. In our industry, that is still something that’s down the road.”

Setting A Standard

The merger of BevAccess and eSkye “is really about creating a single platform, or standard, for the industry,” said Gregory. She sees the industry now in a position to develop a level of standardization “and all the efficiencies and cost reductions that derive from that by working with one company, one technology partner.” ecom11

The merger allows the companies to expand their geographic reach and, more importantly, pass along more efficiencies to customers, retailers, wholesalers and suppliers.

“When you’re looking at retailers, wholesalers and suppliers, it’s not so much e-commerce as it is technology adoption,” Gregory pointed out. “Our company is much more than just an e- commerce channel. I think that’s one interpretation of what’s happening today. Orders are now being placed on line, and that has implications for all three tiers in the way that communications and access to information are changing and evolving very quickly.”

That greater access to communication and information means the industry can make more informed decisions. For retailers, they relate to which products to carry and what type of investments to make. Wholesalers can help make the process more efficient and ultimately more cost effective. Said Gregory, “It’s far less expensive to process and handle an electronic order than it is to process and handle a manual order.”

Such systems do not, she stresses, mean the end of the salesperson, who remains in her estimation a “critical linchpin in the process.” Indeed, that role has been changing with or without technology, becoming more service oriented.

“Basically what we’re doing is consolidating channels to enable an electronic exchange,” explained Gregory. “As in any other industry, an electronic exchange is a fraction of the cost what it currently costs.”

BevAccess has done “an impressive job of integrating their online technology and national publishing services in key markets,” said J. Smoke Wallin, founder and CEO of eSkye Solutions. “It is clear that while the industry is eager to adopt the benefits of an online network, there is an overwhelming demand for a unified effort with common standards.”

The ability to create a single national network serving the entire industry, added Mark Sanders, CEO of BevAccess, is “a powerful proposition. We have both made significant progress working toward this goal on our own, but it is now very clear that the best way to accomplish this is to bring our companies together.”

Four of the top U.S. alcohol wholesalers — Charmer-Sunbelt Group, Glazer’s Wholesale Distributors, Young’s Market company and the Romano Brothers Beverage Company — have closed a strategic investment round with BevAccess.

Barkley Stuart, executive vice president of Glazer’s Wholesale Distributing Co., is quoted in a release as saying that the industry will “benefit greatly from the single online solution created through the merger… We anticipate increased efficiencies and cost reductions associated with electronic order processing…”

National Wine Seller

Lauter said he and his colleagues explored the idea of going into the B2B side as the newly merged eSkye and BevAccess have done. Instead, they decided over the last couple of months to “stay focused, and not battle it out there.”

eVineyard is the only company that “took the time, especially from the B2C perspective, to go and acquire retail licenses for the various states we do business in,” said Lauter.

Being a licensed retailer means it is vital to have a constantly updated inventory. The site presents the inventories of its wholesaler partners. “We actually modified the B2B technology to use it as a supplier extranet,” said Lauter. Wholesaler partners can actually update the inventory in real time. “We’ve just started doing this with a couple of them but we’ll expand it more this year.”

eVineyard can ship wine to 29 states (and Japan), with Hawaii and Wyoming coming aboard in July after opening their direct-shipping laws. At least three more states should be added by year’s end. The site also sells gifts and accessories.

To date, eVineyard has received just over $20 million in funding. The company expects to achieve profitability in 2001.

Lauter feels e-commerce is about to change the face of the industry forever. He pointed out that there has not been a national retailer of wine “because of the different state-to-state laws. We are becoming the first national wine retailer. That is one of the most obvious things it’s offering.” ecom8

With 10 current logistic centers (California, Florida, Massachusetts, New Jersey, New York, North Carolina, Ohio, Oregon, Texas, and Virginia), eVineyard sells premium wines to each of the country’s top 10 wine markets, reaching over 75% of the United States market for off-premise premium wine sales.

Leading Retailers Leading

Retailers are also getting their acts together. is a national marketing company that provides top wine and spirit sellers in the United States with retail channel sales and marketing opportunities and solutions using the Internet. The site offers web hosting and marketing services to selected wine and spirit retailers, who in turn form a network of licensed wine and spirit stores in states capable of receiving and fulfilling orders from both online and in store purchases. ecom10

WineISIT is the brainchild of eight award-winning wine and spirits retailers who collectively own more than 250 individual stores around the country and can boast of, as company literature noted, “gener ations of experience with real customers and real stores.” They are:

  • ABC Fine Wine & Spirits of Orlando, FL (Charles Bailes, III)
  • Applejack Wine & Spirits of Wheatridge, CO (James Shpall)
  • Centennial Liquor Stores of Dallas, TX (Jim Vanderveer)
  • Don’s & Ben’s of San Antonio, TX (James Pfirrmann)
  • Duke of Bourbon of Canoga Park, CA (David Breitstein)
  • Kappy’s Liquor of Everett, MA (Bob Selby)
  • Prime Wines & Spirits of Buffalo, NY (Burton Notarius)
  • Spec’s Wines, Spirits & Finer Foods of Houston, TX (John Rydman)

Using technology and the Internet, WineISIT seeks to strengthen the relationship between merchants and their customers, and will allow online shoppers to learn, chat, find, buy and enjoy all there is about wine, spirits and other beverages in a user-friendly online forum.

The site exists, according to Prime Wines & Spirits’ Notarius, a former Beverage Dynamics Retailer of the Year, in order to promote customer relationship marketing. “This is not just an e-commerce web site, although will be able to do e-commerce on it eventually. Basically, we gather up the e-mails and snail mails from our members. Then we make those names available to receive information and e-mailings from brand owners.”

Basically, he explained, the venture is “a large data-mining model. You make an offer to customers, you have the information about them, you know everything they’ve bought. Then you segment your customers.”

E-commerce “by itself doesn’t work right now because you can’t support it,” said Notarius. “There’s not enough profit in acquiring the names and the cost of getting customers is too costly, so everybody’s going out of business except eVineyard. I still think they will have a tough time with the margins while they’re trying to get enough critical mass.”

Retailers, he continues, “don’t have a way to talk to (customers) individually. You have all these larger stores that are not quite as personal. You may know your best 5% of your customers, but you don’t know much about the rest.” Now, with all this electronic information available, stores can identify a customer’s name and address; you can map it to a database containing as many as 200 characteristics.

Looking Ahead

E-commerce and technology adoption “will accelerate very, very quickly” in the years ahead, BevAccess’s Gregory believes. The next five years should see what she terms a “considerable” adoption at all tiers of the industry.

Lauter sees the internet helping expand America’s overall wine-drinking population. He pointed to Wine Institute research showing large numbers of wine drinkers above the age of 40. But 50% of his customers are under 40, and 70% under 50. “That really goes to show that we are expanding the wine-drinking population for the 25 to 35 year olds, which really helps the industry.”

Blanz said the internet serves his store quite nicely by doing just what it’s doing — presenting consumers with a selection to die for. offers more than 3,000 wines for sale, with about 2,400 active at any one time. Anywhere from 15 to 100 new wines are added per week. Ultimately, the number of wines will probably reach over 4,000.

At present, he added, work on the site consists of “tinkering” with the process to make it more user-friendly. “Right now there are no plans to make a fundamental change — like, say, add a bunch of vintage reports of food recipes. Basically, the philosophy is to keep it a content-heavy web site. People can find and buy wine and not too much extra stuff.”

Strategies vary, and the cyber world in which they are implemented is changing all the time. But even a grand old business like wine and spirits can’t help but be impressed by the efficiencies and economy of motion these changes promise.


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