For many boutique and start-up producers, trying to get placements in out-of-state restaurants can be frustrating. Landing distributors isn't always easy--even when you have an excellent product to sell--and even if a winery manages to do it, getting brand-laden distributors to focus on your products can be an uphill battle. In most states, making your own restaurant placements isn't an option--but it soon could be.

In January, Napa-based Inertia Beverage Group (IBG), provider of wine direct-sales software, announced REThink Wine Trade, a new software program designed to let restaurant wine buyers place wholesale wine orders directly with producers, via the Internet.
 
To ensure legal compliance, the software program was designed to obtain information directly from Alcohol Beverage Control departments in each state.

Rather than working around distributors, the program makes use of the three-tier system and uses technology to streamline the sales process.

The announcement of the system's test launch in New York was widely covered in the wine media, which prompted the New York State Liquor Authority (NYSLA) to request more information about the program before giving it the green light. After meeting with NYSLA in late February, IBG executives were confident that the system would soon gain the necessary approval. At press time,
the projected launch date for New York was set for late May (pushed back from early March), with California, Oregon and Washington to follow soon after.

When--and if--the system finally gains the necessary state approvals, what will it mean for the wine industry?

According to IBG consultant Kenneth Rochford, REThink Wine Trade was designed to bring more efficiency to the distribution process. It will help restaurants by giving them direct access to small-production wines they might not otherwise be aware of; it can help distributors by allowing them to represent more brands, without taking on inventory or marketing duties; the wineries will benefit by getting their products in front of interested buyers and paying only a fraction of full-service distribution costs. The wholesaler will bring only the required legal licensing to the relationship; the REThink software handles all sales, invoicing and payments.

REThink promises to be especially useful to wineries that are either too small or too new to land a distributor in every market. In these cases, IBG will recommend a local wholesaler that it can pair up with to facilitate sales.

"Small, specialty distributors are very interested in this because it gives them an edge," Rochford says. "We augment the traditional sales channels."

How It Works

IBG's easy-to-navigate program simulates a consumer Internet shopping experience, using the winery's own Web site. Wine buyers simply click on a link from the winery's home page to enter the trade shopping area. There, the buyer enters a code to access trade pricing and the online shopping cart. Wines can be added to the shopping cart by the half-case, or by the case. Restaurants must register to use the system, and wines can only be shipped to ABC-approved license addresses.

In order to offer their wines for sale through the system, wineries must be IBG clients that use the company's direct-to-consumer software. REThink Wine Trade can be added to a client's service for a $5,000 set-up fee; a 5% processing/transaction fee is deducted for each sale made through the system.

The per-case cost for restaurants is roughly the same as it would be if they purchased the wine through a full-service distributor.

In New York, IBG's first test market, initial response to REThink was "phenomenal," says Paul Mabray, CEO of IBG. "Restaurants were desperate to find new wines to source, and they wanted to do it directly."

So far, four California wineries have signed up to participate: Whitmore Wine Co., Sonoma; Medlock Ames, Healdsburg; Humanitas, Napa and Chumeia Vineyards, Paso Robles.

Sam Whitmore, head of Whitmore Wine Co., says he believes REThink will help him gain visibility with restaurants. "Restaurants want to connect with the brands," he says. "There are lots of made-up (brand) names out there." Whitmore also likes the fact that he'll be able to connect with restaurant buyers without having to rely on a middleman to do the job. "Distributors don't pay attention to smaller brands," he says. "This will give me a voice with restaurateurs."

John Stipicevich of Chumeia Vineyards is also hoping to expand his winery's reach through the program. "We're not distributed in New York," he says, and REThink will let restaurants in that market buy small quantities of his wines to see how they sell.

Having the ability to sell smaller amounts to restaurants lets wineries experiment with small lots and enables them to offer restaurants unique wines to which they wouldn't otherwise have access.

Controlling the information available to buyers is another benefit to the software. Clients can post and update their own tasting notes and background information, which buyers access directly through the winery Web sites.

Clients can easily manage the information themselves, so they can ensure that it's accurate and up-to-date.

"Clients can change their information anytime," says Ames Morison of Medlock Ames. "You don't have to wait for someone else to update it, or know HTML." Updates take effect instantly.
 
Wineries own their REThink databases, and clients can see exactly who is buying what through the system, and how often. They can access the information via the Internet, or sign up to receive monthly e-mail blasts.

When he sees that a restaurant has placed an order for his Humanitas wine, IBG client Judd Wallenbrock says he will immediately respond with a personal e-mail thanking the buyer. "It's all about customer relations," he says.
 
Enter WineWeb

Another player in the emerging direct-to-trade sales game is Santa Fe-based e-commerce and Web hosting service provider WineWeb Enterprises, Inc., which announced in late February its new service for wineries, restaurants and retailers.

As with IBG's system, WineWeb's online trade portal allows restaurants and retailers to buy wine directly from participating vintners. According to WineWeb founder Ron Kreutzer, recent developments in the Costco court case, as well as last year's Supreme Court ruling on direct shipping, are starting to change the way wineries do business.

"It's all very new--and potentially very large--at least for out-of-state trade sales," Kreutzer says.

Through The WineWeb, wineries can ship direct, where allowed by law, or route orders through a wine fulfillment center that has the necessary distribution relationships. As with WineWeb's consumer shopping portal, wineries specify the states to which they can legally ship. "We believe that technology is an enabler, and it's the responsibility of the participants to conduct their business within the laws," Kreutzer says.

A notice on the page where wineries select shipping destinations recommends that those unsure of the laws check with legal counsel. "We are continuing to look at ways to help our winery clients understand the changing laws--both in the consumer and trade areas--and to increase their market space in compliance with those laws," he says.

The WineWeb uses an online order form and secure shopping cart, which is accessed through the winery's existing Web site. Orders and payments are processed through the system, and orders are shipped by the wineries. The system allows users to automatically print packing lists, invoices and shipping labels.

Once a buyer adds a wine to his or her shopping cart, The WineWeb will suggest additional products of interest and allow the buyer to continue searching the winery's product catalog. At checkout, the system will automatically calculate the shipping cost and tax, based on the wine's destination and the winery's shipping carrier rate schedule.

There are no mandatory setup fees for The WineWeb (there is an optional $150 set-up fee for wineries that prefer not to do it themselves), and no minimum monthly fees. The winery pays a 2% processing fee (before shipping and tax) for each order shipped; once its monthly sales total reaches $3,000, the processing fee drops to 0.5% for subsequent orders. For large orders, the per-order fee is capped at $10.

As new markets open up to direct shipping, we're likely to see more direct-to-trade options coming onto the scene--an equally exciting prospect for small wineries and trade buyers. We'll keep you posted.

For more information about REThink Wine Trade, visit rethinkwinetrade.com or inertiabev.com. For more information about The WineWeb trade portal, visit http:// trade.wineweb.com.