As many of our followers of this blog are aware, I write about both wine and tech/start-up, but surprisingly I haven’t written on the intersection of the two topics — wine start-ups. Wine entrepreneurs can be the disruptive force for the traditional wine industry, just as new world disrupted the European old world decades ago.
Since there are way more wine consumers in this world than wine producers, intuitively start-ups from earlier years tend to focus on the consumption side. Such website as Wine.com serves as a good example of “networks” that made purchasing wines from all over the world easier, and therefore disrupting the legacy merchant network.
As more of these similar networks emerge, they try to differentiate themselves by focusing on more local and small-medium size wineries that offer premium but limited products. Underground Cellar is a recent YC-backed start-up in this category, with the perk to provide your personal “cloud”-based cellar and offer promotions based on your purchase history.
Another major pain-point in wine consumption is the problem of choice, when you are overwhelmed by all the wines available at the wine stores. Here come the “label-readers” that can identify the wine and give you more background information and pricing guidelines after scanning the label with your phone. Such apps as Delectable and Vivino took off, partially riding the wave of mobile internet, and are now forming huge pools of UGC. Based on these contents they can build their proprietary rating schemes, disrupting the traditional rating institutions, and provide more personalized and better targeted promotions. Also to enhance user stickiness, they provide you with a community of users that have similar tastes.
Seems like the drinkers are having a much easier life now, but how about the producers? Wine production is a significantly capital-intensive process, and the cycle is very long — plantings take at least 3 years before able to produce commercialized quantities and production is once per annum. It is not surprising that winery is a rich-man business — working in finance, I often hear some money managers have some family vineyards or some executives retired to manage their own wine business.
Now as LendingClub and Indiegogo have proved P2P and crowd-funding as successful models, they are applied in the wine industry as well. Cruzu is an SF-based crowd-funding platform for wine-makers, and it seems that the SF bay-area is the avant-garde for some exclusive advantages:
- it’s within 2-hours of driving to Napa and Sonoma, two of the most premium new world wine regions,
- it’s within 2-hours of driving to UC Davis, the research and technology center for viticulture and vinification, and
- it’s at the epicenter of tech entrepreneurship and P2P & crowd-funding talents.
Of course, these wine start-ups are not without challenges, some of which have been lingering for a long time. First and foremost is regulation. Your head will explode if you read the complicated laws on wine production and labeling of many of the EU countries, although they are supposed to give clear indication on the quality of the wine to guide consumers, most the time they are very confusing and overwhelming. Even in the new world, complicated tax terms and trade regulations can be significant barriers for global wine e-commerce.
Second, there is still a lot of space for improvement on the consumer end.
- Food-pairing or event-selection have the room to be more personalized and hassle-free (on-demand service?).
- Involving and educational activities such as Aromatherapy at St Supery Winery and blending sessions at Conn Creek Winery (both in Napa Valley) are quite fun and should have a larger demand if prices are more friendly and accessibility is more convenient.
- There should be a segregation of markets between investment- & collection-focused consumers (who might be older, wealthier, and more laid-back) and “drink-now” or activity-focused consumers (who could be younger, with shallower wallet, but more proactive).
Third, on the supply side, there should be more P2P and on-demand platforms established to serve the needs of land, capital, labor, equipment, and other business services to bring down the cost.
The internet world is newer than the new world. Those who succeed in exploring this frontier will grow to become the new giants in the market.