The Impact of the Internet (to date) on the Liquor Industry

The landscape of this industry has changed pretty significantly in the past 10 to 15 years, since the first websites started to appear. Most every corner of the business now interacts with the internet to give improved product quality, more efficient supply chains, and improved consumer access to products. Following the direction of recent innovations to make predictions about the future impact of technology is fraught with risks, but reviewing trends might provide some insight on how to prepare for possible outcomes.

Given the regulations that accompany the sale of alcoholic beverages, changes tend to come more slowly to this industry, but that doesn’t mean their impact isn’t significant. The following are observations about recent trends with an invitation to post comments about where you think we are headed:

  • Wineries have been exploring new channels for getting their product to market. On visits to the West Coast it is hard to ignore the drumbeat of wineries who want to flip their distribution model in favor of direct to consumer sales. The Granholm decision in 2005 led to legal interstate shipping to several new markets, with the benefit of selling direct to consumers at healthier margins than with the traditional supply chain.

  • Wineries without wholesaler representation in the major markets are experimenting with business models that deliver their wine directly to the trade; whether restaurants or retailers. As a result, logistics companies have emerged to handle the compliant processing of products through the 3-tier system, for both domestic and imported items.

  • The California ABC published an advisory in late 2011 about how unlicensed online marketplaces could legally sell wine direct to consumers. This cleared the way for wineries to participate in third party sites and flash sales without the risk of losing their operating permit.

  • While Granholm opened a majority of states to wineries, the same privileges have not been afforded to retailers and efforts to including language in state shipping bills that would favor retailers have been frustrated. Meanwhile eCommerce has become a basic utility for most liquor stores, and as the online marketplace has become more competitive the opportunities for retailers online have been growing at the local level.

  • The more competitive online retailers have been looking towards their distributors’ inventory for ways to sell items they don’t carry in the store. Very different from consignment sales, virtual inventory exposes the “long tail” of products available in a market that are hidden from consumers.

  • What do you see as being the conclusion of these trends? Which trends do you think point in the direction of the future of this industry? How do you expect a product will gain access to a new market in this future? Who will be the brand builders of the future? How will wineries and suppliers communicate with their trade accounts? As you review these trends do you react with anxiety or with excitement about the impact on your business?

#granholmdecision #longtail

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