Online sales climbed 24% year over year, while Best Buy’s overall sales were flat.
Winetasting.com’s CEO is not daunted by the constriction in the online wine market.
If there’s one thing most small wineries are not good at, it’s consumer marketing. Especially in Napa Valley, which has become a tourist Mecca, small wineries are accustomed to letting the customers come to them. Even after they sell wine to those visitors, the wineries do little follow-up marketing, although those buyers would seem to be prime prospects for further sales.
Lesley Berglund and Winetasting.com are out to change that. In fact, she’s already had a sizable impact on the specialty wine business and has demonstrated that online cooperatives are one of the most successful models for online retailing. In a year when almost every other wine-selling site has gone out of business, Winetasting.com’s sales grew to $12 million. In addition, its average ticket is $300 vs. $100 for online wine in general. “We’re selling more than ever before and it’s not so much a consumer tidal wave as it is us helping the wine industry pull the levers and do what is working, which is selling specialty wines online to a customer base that already buys wine regularly at these wineries,” says Berglund, Winetasting’s president and CEO.
Winetasting.com is a cooperative of 50 Napa and Sonoma valley-based wineries. It went online in 1999 and was an outgrowth of Berglund’s successful previous direct wine-selling venture, the Ambrosia wine and wine accessories catalog. Ambrosia sold the output of a number of wineries. “We realized through Ambrosia that wineries don’t develop their contacts with their consumer mailing lists,” Berglund says. “They allowed us to mail our catalog to their lists and we helped them build with what we’d learned about direct marketing.” Winetasting.com is doing the same thing on the web.
In a market that used to be populated by a dozen competitors, online wine sellers are down to two major rivals: Winestasting.com and eVineyard.com, which bought the remains of Wine.com last month, which had recently acquired Wineshopper.com (see story. p. 6). Other wine sites that have joined the dearly departed include Liquor.com, Drinks.com and Send.com. “A model like Winetasting.com that makes the online selling process easier for a wide range of wineries is an intelligent way to go,” says Paul Ritter, managing director of Boston-based Strategic Research Advisors, consultants in online retailing. “Winetasting.com can achieve substantial economies of scale by aggregating web visitors for the 50 or so wineries they do business with.”
Wine in her blood
Berglund is a third-generation Napa resident who hails from a grape-growing family. While wine may be in her blood, Berglund’s expertise in direct marketing comes from consumer product marketing jobs with Procter & Gamble and the Clorox Co. and her stint in the Ivy League. A graduate of Harvard Business School, Berglund laid the groundwork for Ambrosia as part of her Harvard field study.
In that study, Berglund took control of a collection of cabernets and built a business plan to sell them direct to consumers. Berglund recounts: “George Schofield, who had been the CFO at Mondavi for many years, had been purchasing a collection of great cabernet sauvignon with a group of investors, who intended to re-release them when they were 10 years old. By the time George sponsored the field study at Harvard Business School he had amassed a $4 million collection of aged cabernets but he had no sales plan. That’s where I came in.”
She devised a plan to sell the wine to consumers, then used the idea to create the Ambrosia wine catalog. To learn how wineries operate, Berglund made a point of calling on wineries to pitch her catalog, rather than letting the wineries come to Ambrosia to pitch their wines. “I went to the wineries to sell our idea and ask them what they wanted to accomplish with us selling their wines,” she says.
From those experiences she learned that wineries, being growers rather than direct marketers, needed help building wine clubs and other distribution channels. These small wineries did not have the tools to cater to a base of customers who had visited the vineyard and would buy more wine, but were never given the opportunity.
Ambrosia, on the other hand, was chock full of direct marketing. It was already cross-selling products from different wineries and Berglund soon realized what types of customers she was selling to: wine enthusiasts who were looking for specialty wines they could buy only from the vineyards or through Ambrosia. “These are the consumers who have raised their hands and said to the wineries, ‘Yes, I want to buy wine from you,’” Berglund says.
Seeing the developing Internet as a new distribution point to sell wine to wine buyers, Ambrosia launched a web site to support its catalog offerings in September 1999. “When wineries saw what we were doing with Ambrosia, they asked if we could develop their wine club or manage their database, call center or distribution,” Berglund says. “This led naturally to e-commerce services once Ambrosia went online.”
Berglund says the evolution to the web was a natural one-but fast. “I liken the experience to driving at 100 miles per hour and changing the tires at the same time,” she says of the company’s shift from being a retailer that buys and resells specialty wines to becoming an e-commerce service partner.
The experience with Ambrosia made the job of going online less fear-inducing than it might otherwise have been. “By the time we went online with Ambrosia we had been doing direct marketing for eight years and we already had sophisticated direct marketing-we knew about the importance of customer care, database management and distribution,” she says. “For us it was just putting a web face on our catalog business and because of our experience, it was easier to do than if we had been a brick-and-mortar retailer.”
Berglund, who settled on specialty web designers MultiMedia Live, in Petaluma, Calif., say investors put only $350,000 of privately-raised capital in the initial web business instead of the $1million-plus that some advisors said she would have to spend.