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July 28, 2009 | Compliance, Demand Generation , Direct-To-Trade , eCommerce , Wine Industry Trends | WineDirect Admin

Wine Technology - The Bridge that will be Built

2 weeks ago I attended my third WITS (Wine Industry Technology Symposium). Though I have yet to earn my badge of ‘seasoned industry veteran’, I feel able to reflect on the impressive in-roads technology has made in the wine industry. Only now am I able to catch a glimpse of the huge transformative effect information technology can have on the industry.

On display at WITS was a lot of cool technology, all with great potential. Yet there was little evidence of truly transformative technology – the kind that radically changes an industry and captures the attention of non-wine folk.

It’s no secret that the wine industry lags far behind others when it comes to living the great economic revolutions information technology is capable of unleashing. IT has completely changed the game in so many other industries, yet for most wine industry vets, that change still remains elusive.

“Technology does not drive change — it enables change”

New technology has already greatly changed the way wine brands are marketed and the traditional function of wine marketing has been revolutionized. For brand building and consumer engagement as key functions of the wine industry, technology has indeed enabled change.

When it comes to the sales function, new technology has revolutionized the way direct sales are conducted. Yet it is worth noting that while the direct sales channel and online sales have risen greatly in the past few years, it still remains a marginal portion of all the wine that is sold in the US. Whereas new technology has already altered the wine marketing function, it has yet to enable dramatic change for the wine sales function.

Contrary to what I once believed, “direct” is no clear salvation, or at least not in the next decade. It will be a long while before the US wine market will ever resemble a free market – there is no realistic mid-term alternative to the 3-tier system, not with what’s currently preoccupying state legislatures…

The “Wine 2.0” movement and the emerging ecosphere of wine marketing agents still face an uphill battle to change the way the industry operates outside of the direct channel. Even as direct sales grow with the astute combination of cool technology and clever marketing, this trend does not yet really change ‘business as usual’ for most of the industry.

Large retailers and large distributors are themselves working through intense and expensive technology projects to create even more efficiencies for the “traditional” system. Believe it or not, the established wine world is not immune to new technology; it’s just not sexy new technology like facebook (think dour SAP). So the big boys integrate large solutions to sell more and better, while the “new tech” folks upstream battle it out on the web to find a way to convert buzz into sales.

If a bridge is built to seamlessly integrate all these new tools into the 3-tier system, only then can the visions of so many wine tech entrepreneurs really take flight. The brave new world of wine technology will come about when the new world of wine tech meets the old 3-tier world.

To paraphrase the great W&S article summarizing WITS (zoom in on the ‘Tech and the three tiers paragraph), I want you to imagine a world where any small winery can participate in the 3-tier EDI (Electronic Data Interchange: the process of connecting trading partners on the same systems so they can communicate seamlessly).

  • I want you to imagine a world where it will actually make economic sense for the regional wine buyer of a large retailer or restaurant chain to actually pay attention to wine social networks and blogs to increase sales.
  • I want you to imagine a world where wholesalers of all stripes will feel comfortable in sourcing new brands whilst following the hum of online demand and user-generated content.
  • I want you to imagine a world where it will make economic sense for large distributors to care about suppliers with no deep pocket and for them to find profit in catering to niche markets.
  • I want you to imagine a world where wine suppliers of all sizes can build elements of control over the whole wine supply chain.
  • I want you to imagine a world were a Kafkaesque regulatory maze and a severely oligopolous distribution system will not severely hinder entry to market for new suppliers.
  • I want you to imagine a world where the long tail can actually work in wine.

Why has this bridge not been built yet? For those familiar with our industry, just ponder this concept and how it relates to 3-tier: path dependence. The barriers guarding the wine market are so complex that until those barriers are tackled effectively, all other efforts will be hobbled in their potential.

On a strictly operational level, this bridge will require a strong foundation of streamlined compliance tools and clearing models, optimized logistics and standardized dynamic product data systems. On these pillars a road will be built: it will be the multitude of plug-ins and APIs that will allow supply from any tier to connect to demand from any tier. The smooth asphalt will be an array of online tools to facilitate wine marketplaces. On that bridge you will see pedestrians, cars, semi-trailers and trains alike, easily go from one side to the other… you get the analogy: selling wine today is like trying to get around the Bay Area with no bridges.

Only once this bridge is (or bridges are) built, will the wine industry live to the full potential that is on display at WITS. The pillars supporting this bridge are still discreet, but the technology, the knowledge, the plans and the vision are in place. It’s just a matter of time.

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