A full 35% of Americans say wine is their drink of choice today, while 36% prefer beer, according to a recent Gallup poll. That compares with the 47% who opted for beer in 1992, versus just 27% who chose wine then.
It’s a statistic that’s not lost on venture capitalists, who are backing a new vintage of wine startups with names like Delectable, Invino, UpRoot Wines, Club W, and Vivino that aim to profit from the beverage’s surging popularity.
Here’s another statistic that VCs are lapping up: The U.S. wine market is expected to reach $33.5 billion in 2013, according to industry research firm RNCOS, yet less than 2% of all wine sales are happening online.
Some view this as a sign the wine industry is ripe for disruption, although others say wine may be one of the few products ill-suited to the Web.
“The best way to make a small fortune in the wine business is to start with a large fortune,” joked Adam Goldenberg, a venture partner at CrossCut Ventures who recently invested in online wine community Club W, and who owns his own boutique winery in Paso Robles, Calif.
It’s true that online wine startups have given more than a few investors a hangover. Industry pioneer Wine.com, for example, raised about $75 million in venture funding over its lifetime, but struggled to make money because of the high shipping costs and complex regulations associated with dispensing it online. The company has been in and out of bankruptcy and is now reportedly being shopped around at a fire sale price by its private equity owner Baker Capital.
Meanwhile, Lot18, another high-profile online wine company, raised $44.5 million in funding from Accel Partners and New Enterprise Associates, but is now reportedly in trouble. The company laid off half of its employees and recently shifted strategy to regain traction.
Steve Schlenker, managing partner at DN Capital, believes this new crop of startups has found a tool that will make all the difference—big data. Unlike many other products, wine is all about discovery and education, he said. Yet, when most people walk into a liquor store or even shop online, they are overwhelmed by the selection.
“There are millions of bottles or wine, but most consumers don’t know which ones are right for them,” he said. “Some wines are great with this food, but lousy with that food. Or some wines were amazing in 2007, but terrible in 2008. Most people need help to understand what they should be consuming. Wine is product that really needs curation to work well as an ecommerce business.”
That’s where his investment in Delectable, a wine app that leverages big data and personalization, comes into play. The company, which recently raised $2 million, boasts a database of more than 2 million wines. Consumers can use their smartphones to snap a picture of the wine they are drinking and receive a treasure trove of information. They can see an interactive map of the wine’s origins, the history of the producer, what foods it pairs well with, the price points, the fruitiness and more.
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