Amazon and wine together? Well yes to a certain extent that exists already. Amazon has had some stops and starts and regrouping on wine.
There were stories last week that eluded to Amazon creating it’s own wine. Then other stories came out like CNBC – “Actually, Amazon now says it’s not developing its own wines” It was a wine featured on Amazon and the producer’s press release confused the matter.
I was searching for wines on Amazon this year and found none of the random entries I completed came up with any wines. An acquaintance had his wines on Amazon for a period of time and asked if I could send Amazon the video that was on my YouTube channel of his wine. In one sense, I hated to do this because I wouldn’t get clicks on my channel but the taller purpose was to help a smaller producer sell his wines. My video was featured while his SKU was on their site until it sold out. I have not seen his wines on Amazon again.
The wine question came up because of the Whole Foods (WFMI) purchase by Amazon (AMZN). It was a good play and I wish I had owned WFMI stock prior to offer but I didn’t. In many senses the writing was on the wall. Could have Amazon developed their own private label programme – yes, of course, they could have and I am surprised they did not do so. I like many people am an Amazon customer–I have never used Amazon Fresh–I was curious at first but the cost ($299 yearly fee) and lack of food stuffs that I need were not available. Why pay a premium when I cannot get what I need?
I think the interesting question was why wasn’t WFMI more active in DTC? With GrubHub, Safeway Grocery Delivery and many small online sites sending pre-prepared foods shows a need and a market for Direct-to-Consumer. But like any organization WFMI choose to not look at their business model as it seems to have been happy in the “Come and Get It” business model. The private label programme at WFMI is outstanding and there was little capitalisation of their own line in marketing. I had a friend involved in the development of 365 brand and it is a well designed, great value orientation and covers nearly all of WFMI’s categories.
The win for AMZN is a brand that is standing up and apart from other food retailers. Has a wide presence in the US with branches in Canada and the United Kingdom. What AMZN does next is not immediately clear but placing dots on a paper it will be easy to line them up soon. AMZN will supplement its food offerings with WFMI brands. It will also have an option to have order online and pick up in person if you want.
Because of this careful and strategic purchase of Whole Foods I think Amazon will take the quality time to integrate Whole Foods: there was speculation about pre-made food delivery providers immediately after AMZN’s announcement. Likewise there is a need for someone to line up AMZN’s strategy on wine. But I put a cautionary brake out there.
Wine is the ultimate category–more difficult than say even pharmaceuticals which Amazon has expressed an interest. The question remains is there profitability in retailing wine, is there value for AMZN to be a full-fledged, full-offering wine retailer? I think the answer is MAYBE (that is strongest assessment I can give). I have mentioned countless times why wine is a unique and is the only product category that has a myriad of complexities:
- Limited quantities produced
- Many, many ABC (alcohol beverage control) laws, regulations, requirements and licensing
- Bottle formats
- Website update of SKUs
- Competition with it’s own brands that it would retail
Perhaps the best model would be to look at Wine.com – they have worked to mapping out all of the peculiarities of ABC requirements and also the delicateness of wine retailing DTC. The question is price if Wine.com were to be on the market and the intrinsic value to AMZN core mission – do they intersect enough for a potential purchase? And it gets me back to MAYBE. Also keep in mind AMZN may keep doing what they are doing with wine today–is to have it available DTC style from each respective producer and no significant changes. And there may never be a “Grand Announcement.” I am skeptical there will be that re-entry or re-interest in wine for AMZN but we’ll have to see.
Until then enjoy a glass of wine.
James the Wine Guy
Demystifying Wine…One Bottle at a Time from all wine regions around the world.
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