September 11, 2008

Amazon Set To Sell Wine Online

Wine industry insiders say that Amazon.com, the largest global online retailer, plans to start selling U.S.-produced wine on its website within the United States by early October.

Terry Hall, communications director for the Napa Valley Vintners, a nonprofit group representing 315 vintners in the famous California wine-producing region, said they have already begun to set up workshops for wineries interested in selling through the retail giant.

"They have been working for a while on this wine project. Now they are signing up the wineries," Hall said. "They're fast-tracking it right now."

Amazon declined to comment.

Hall said the Seattle-based Amazon is looking to sell wine in approximately 26 states and wine sold on its site will come from all regions of the country.

For the last 14 years, annual wine consumption in the United States has grown as wine has gradually shed its image as an exclusive beverage for the well-heeled. Today, many enthusiasts are coming from all parts of the country and younger Americans are turning to wine-drinking as an alternative to beer.

Barbara Insel, president of Stonebridge Research Group, a research firm for the wine industry, said total U.S. wine sales were between $30 billion and $32 billion in 2007.

Insel said some $2.8 billion is sold through retail formats like wine clubs, tasting rooms and the like, with only 7 percent of that coming from E-commerce, partly due to the expense of shipping wine, and confusing states rules on wine shipments.

Amazon will be working with New Vine Logistics, a Napa, California-based company dealing in wine fulfillment that can deliver to up to 45 states in order to avoid the confusing legal issues over the interstate sale of wine that vary from state to state.

"Amazon is outsourcing to New Vine the logistics of its wine direct business to make sure it's being done properly and legally," Insel said.

Debate over online wine sales has continued despite a 2005 U.S. Supreme Court decision that ruled states could not discriminate against out-of-state wineries.

A group called "Free the Grapes" has been working to streamline legislation and open new states to direct-to-consumer wine shipping.

Offering everything from vacuum cleaners and cars to electronics and bulk foods, Amazon continues to expand into new categories, vowing to become a one-stop shop for consumers.

Wine purchases on Amazon would even qualify for its discount shipping program, Amazon Prime, in which goods are shipped free for a yearly fee of $79.

Amazon's entry into the wine market would be a good counterpoint to the shrinking pool of distributors amid consolidation in their industry, Industry insiders agreed.

"The good news is it (Amazon selling wine) puts some big muscle behind direct-to-consumer so consumers of wine should benefit," Hall said.

Insel said wine's appeal to consumers with money to spend also benefits Amazon, as wine "enhances their product offering for a very attractive group of consumers."

"The step forward with Amazon being a wine retailer is just more testament to the fact that Americans are really becoming a wine drinking economy," Hall said.


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