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Smartphones And A Familiar Friend Named Gary Are Saving The Wine Industry From Itself


Mobile Apps Can Save The Wine Industry From Itself

“Yes, a bunch of San Francisco engineers went to learn from an industry that, at its heart, is built on purists proudly allergic to technology.”
Christine Lagorio-Chafkin for Inc.

Before helping to start VinePair, I spent five years at a mobile messaging startup. I’ve left the world of mobile, but I still follow it closely. Why? Because mobile phones are the platform where the most fascinating — and valuable — innovations are happening in retail right now. On Wednesday June 18th three deeply interesting developments happened involving mobile commerce and wine:

  1. Jeff Bezos showed off the new Amazon Fire Phone, including the Firefly feature, highlighting wine scanning app Vivino, who have hooked in via the SDK, to identify wines in real time.
  2. Delectable, Vivino’s smaller (but wine-insider-beloved and rapidly growing) competitor released a huge upgrade to their wine scanning/journaling app, adding near instant label recognition1. Vivino has always had this feature, but I believe Delectable leapt past them rather than merely catching up. Their implementation is also perfect for showrooming, something that wine retailers have not had to deal with to date. I doubt showrooming is something local wine shops need to worry about right now, though the long-term effects of recently funded apps doing local delivery of wine, spirits and beer is something to which I’ll return.
  3. WineGlass hit the iOS App Store along with a glowing review on TechCrunch. Give WineGlass a photo of a restaurant’s wine list and within seconds you can tap from wine to wine to view ratings and tasting notes (pulled from CellarTracker’s private API) as well was an estimated ‘marked up fairly for a restaurant’ price range.

The common thread here is what your mobile phone provides to you as a wine drinker and a wine purchaser, whether for on- or off-premise consumption. Your ‘phone’ isn’t what’s important. Rather it’s the apps, the camera, and the data connection. Snap a photo, upload it to a server, where a combination of OCR and automated-human-identification happens, and in seconds you get advice. That’s what’s important. And that’s where the value exists. If you’re a wine geek there is no shortage of information – and these apps provide incredible information for wine geeks. The instantly accessible advice each of these solutions offers is revolutionary for the person who enjoys an occasional glass of wine.

What do these useful apps have to do with saving a $36 billion dollar a year industry that has shown year over year growth for two decades? If you don’t know much about the wine business you’re probably wondering how a $36 billion dollar a year industry that has grown year-over-year for two decades – straight through the financial crisis no less – needs helping?

“Every single day there is an average of 1.5 million organic conversations about wine [on social media].…Over the last five years we have analyzed one BILLION conversations…. To date we have profiled over 16 million social wine customers…To put this in perspective this is approximately 18% of the US wine drinking population that is now talking about wine on social media.”
Paul Mabray, CEO Vintank, ‘Powering Social Intelligence For Business Growth’

In February, my business partner wrote an editorial over at Pando titled ‘The wine industry must adapt or become an anachronism.’ While I encourage you to go read the entire piece, his broad point was this: despite $36 billion dollars or so in sales last year, and two decades of YoY growth, the wine industry doesn’t have a clue how to connect with the next generation of consumers (millennials). This is not a controversial point in the wine industry, at all. Whether it’s worth pursuing the money in millennials’ wallets, along with their brand loyalty now, and down the road as their income increases, is what many are debating. Yes, you read that correctly. The wine industry, broadly, either doesn’t want to, or admittedly, has failed in their attempts at connecting with this next generation of consumers.

In the end it may not matter.

Usable Advice is what everyday wine drinkers are looking for, not just loads of information — information that has historically been delivered in an insidery argot. Wednesday June 18th was a perfect moment to look at all the ways cloud-connected smartphones and well-designed apps are providing that advice, for free, instantly, anywhere. The next step — and this an unfathomably legally tricky step — is taking that neutral provider’s advice on what to buy and allowing you to make a purchase (and take their cut of course). If a third party is willing to step in the middle – and if nothing else, the alcohol business in America is quite good at breeding middlemen – the apps on your phone will step in to the breech and sell the wine industry’s product for them. No wine critics aren’t going anywhere, and yes Robert Parker (and the team replacing him) still move bottles of Bordeaux that cost more than the average American’s monthly mortgage payment. That’s great for the .01% of wine buyers who live in the land of en primeur wine futures. For the average American consumer, Name Brand Wine Critics and the scores they dole out are increasingly irrelevant — and we’ve been collecting the data that proves that. It’s not something everyone wants to hear, but wineries that ignore this do so at their own peril.

What does this mean for restaurants, land of the 3 – 5x wine bottle markup? Sommeliers (often genuinely!) offer advice in terms you’d need a special edition of Rosetta Stone to translate. Thanks but no thanks. I’ll OCR the menu and see what actual wine drinkers had to say on CellarTracker (307,000 users contributing 4.6 million reviews about 1.7 million different wines per the company). Maybe I will take your advice, but I’ll see what sort of markup you’re asking for on the wine you just guided me to. WineGlass might just revolutionize the 2nd cheapest wine rule.

WineGlass is magical when it works, but it’s far from perfect, and using manually collected wine lists from Tipsi (or Vivino who is now headed in this direction as well) would help fill the gap where OCR fails and provide a baseline to work against. GPS coordinates & foursquare’s location database could streamline that process. I could throw out hypothetical integrations all day, but there are smarter people already building them. Integrations are the future, and I’ll get back to that topic once I explain one final mobile development that might help bring everything together.

That development being the rise of the local delivery apps. In the last year a number of local delivery apps for alcohol have launched, some receiving significant funding. This is a difficult space, legally. The laws vary from state to state; in New York for example, these companies need to partner, in very specific ways, with traditional retailers. Further, they must charged fixed marketing and/or delivery fees depending on the state, and keep their hands off product selection – two very un-Uber like product and margin issues for on-demand companies who just act as middlemen. Legal changes, or a company willing to flout the law like Uber, could, especially with partners in other parts of the mobile wine app ecosystem, create all sorts of interesting apps and platforms that enable wine discovery and purchasing.

The Delivery Apps:

  • Drizly – $4.3 Million to date, with Gary Vaynerchuk and his Vayner/RSE Ventures both involved. From Boston they’re already in NYC, Chicago & LA.
  • Minibar (NYC), Drinkfly (Chicago), Saucey (Los Angeles), Thirstie (NYC, Chicago, LA), Swill (NYC), Booze Carriage (NYC) and others have all popped up in the last year or so.

Observations On Where We Are Headed:

“We Have A Better View About What’s Happening In Wine Than Anyone Else”
Delectable CEO Alex Fishman (with Gary Vaynerchuk on set @ Bloomberg)

All of these various apps, websites and platforms are converging on similar functionality and many would be better off by merging/buying each other/or in the absence of vertical consolidation (where legal), more API integrations.

While you can purchase wines you scan in Delectable and Drync, the process is still clunky in both apps. Both rely on third party partners with retail licenses to fulfill wine orders. Drync has been around a while but recently shifted toward commerce, with a claimed 30,000 wines available. For many wines it’s impossible to order less than a case (12 bottles), so you really need to love a wine to make an in-app purchase versus finding the wine elsewhere. The economics of shipping wine long distances dictates this, which is what makes the local delivery apps so interesting. That said the demand seems to be there, as Drync claims to have done $320K in sales in Q413.

Some examples of partnerships/integrations:

  • Delectable data is available on the Vintank platform
  • WineGlass accesses CellarTracker reviews via API
  • Cor.kz provides a mobile app frontend to CellarTracker
  • CellarTracker & Wine-Searcher provide reciprocal links for given wines, though Wine-Searcher’s rudimentary API limits the usefulness of this functionality
  • The Potential Big One – Vivino + Amazon: If a partnership with Amazon exists (or the potential for one) around the identification and sale of wine where Vivino acts as some sort of middleman the growth opportunity could be tremendous. Were they just lucky to be on stage as an out-of-the-gate user of the Firefly SDK or is this evidence of Amazon edging back toward wine sales for the zillionth time?

How We Get To The Future aka Where Gary Vaynerchuk Is Putting His Money

If someone is going to pull all these companies together into a truly revolutionary wine selling platform, undoubtedly mobile-first or mobile-only, perhaps it’ll be Gary Vaynerchuk. He already has his hands, and cash, everywhere:

  • He started out at working in sales at his parent’s brick & mortar wine shop in New Jersey and then built it into an online behemoth via social media and his online video series ‘Wine Library TV’ (though the NY SLA sent Wine Library a C&D last year, ordering them to halt online sales to New Yorkers – again the legal issues)
  • He’s an investor in: Vintank, Delectable & Drizly
  • Vintank and Delectable have already formed a data sharing partnership
  • Delectable already allows you to purchase wines inside the app if it’s available from their partners for carrier-based delivery

Whatever that future product looks like, we may not see it soon. The 3-tier system isn’t going away, despite the big hole for Direct To Consumer wine sales that 2005’s Supreme Court decision in Granholm created. And as for a company willing to break the rules, I’ll leave you with this quote via Reason about the trouble web-based local delivery service Ultra (formerly Qwicker Liquor) got into with the D.C. Alcohol Beverage Control Board: “We are not defiant.”

1 – OCR is only so good. Until this release Delectable used a Mechanical Turk like service to verify every scan. Now, like Vivino, they’re confident enough in their OCR engine to offer an instant result. If you add the wine to your library Delectable automatically sends it to what I’m guessing is the same service for human verification over the next 10 – 15 minutes. When Vivino cannot identify a wine they also send it off to a human queue. If you pay for the Pro version of Vivino you can jump that usually short line (among other features).

Header Image via Shutterstock.com

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