Tracking every bottle from vineyard to customer
The other place where Naked Wines is innovating is on the distribution side of things.
“An interesting thing happened when prohibition ended,” muses Saunders, suggesting that the seeds of the current state of alcohol distribution were sown in the early 1930s. Very soon after the 18th amendment was repealed, a complicated distribution network was established. Part of the result of this is that with very few exceptions, winemakers cannot sell their wines directly to the public. “It is a very deep-seated distribution network, which is often a problem for alcohol producers. For us, it’s actually a competitive advantage: Because we built our own network, our winemakers’ wines are available in a lot more places than what a small winemaker can typically expect.”
Doing your own alcohol distribution is more disruptive than you would imagine; the distribution market is intensely fragmented, with a large number of small distributors covering relatively small geographic areas. The matter isn’t made any easier by the fact that state laws differ wildly from state to state.
“We ship to 43 different states,” says Saunders, admitting that distributing across the U.S. is challenging on a number of levels. “Every state has slightly different rules. We can only ship a certain number of bottles to Minnesota addresses, for example. For other states, like Pennsylvania, we can only ship to a licensed liquor store. And for some states, such as Utah, we can’t ship anything at all.”
If that sounds complicated, try to imagine the full depths of the logistics of the operation. Because state tax laws vary for alcohol — and in some states, the taxes are different based on the percentage of alcohol — never mind tracking cases of wine. The company had to develop a whole software backend to track the alcoholic grape juice flowing throughout the company’s logistics network. For tax and legal compliance purposes, each individual bottle is tracked from the winery, via the company’s three distribution centers in California, Florida and Ohio, to the consumer.