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WineDirect builds big high-tech Napa Valley DTC fulfillment center
NORTH BAY BUSINESS JOURNAL | November 3, 2016
Napa-based WineDirect is spending millions on a big statement in southern Napa Valley about the Amazon-like future of direct-to-consumer wine sales, as construction starts on a large high-technology fulfillment center.
The new facility will occupy all of a 268,000-square-foot industrial building just underway at 450 Green Island Rd. in American Canyon. Madera-based Stravinski Development Group recently acquired the 10.59-acre property, and sister company Industrial Commercial Contractors started construction at the beginning of September. It is expected to be finished next summer.
“The state-of-the-art handling system will be able to handle three times the volume in half the time,” said Joe Waechter, CEO of WineDirect, after a groundbreaking ceremony Nov. 2.
WineDirect is spending $7 million alone on the automated heart of the new facility, a material-handling system by Hillard, Ohio-based Vargo, which has designed fulfillment center systems for Amazon.com and other retailers. The new facility will be the new home for WineDirect and its Napa Valley fulfillment house. It will have three times the workspace of the current fulfillment center at 125 Mezzetta Ct. in American Canyon. Corporate offices currently are at 1190 Airport Blvd. in south Napa.
This modernizing of systems that get wine from vintners to consumers has been part of what Waechter has wanted to do since he came to the helm of the company seven years ago. The wine business has spawned DTC fulfillment houses, compliance businesses and logistics businesses, ranging in scale from what he calls mom-and-pop operations to big-budget endeavors such as the precursors to WineDirect.
“My vision has been to roll up these functions into one, to invest in technology, because I do not believe the wine business is unlike other industries,” Waechter said.
Goals when the new center is operational are to be able to allow greater customization of wine club shipments and to dynamically distribute customer vintners’ wine in WineDirect’s warehouses to cut delivery times to the two-day standard Amazon has set.
Currently, WineDirect works with vintners to allocate inventory in its fulfillment centers, also located in Paso Robles on the Central Coast, Santa Maria in Southern California and in Ohio. The Santa Barbara County facility opened this fall. Delivery times to the East Coast can be as short as two days for wine forward-staged in Ohio, or up to five days when coming from the California centers. When inventory is bicoastally distributed, the centers are within two delivery days of reaching 90 percent of U.S. consumers, the company said.
With more than $51 billion in DTC sales annually in the U.S., about half is for clothing and shoes, roughly 20 percent for books and music, and wine accounts for just 4 percent.
“Why can’t wine be 20 percent?” Waechter asked. “Our belief is that DTC is going to take off and the lights are going on, and technology going to make that happen.”
About $300 million already went into setting up the software, systems and equipment in the Mezzetta Court fulfillment center in the past 17 years. WineShopper.com set up in the heady dot-com days of 1999. WineShopper and the first iteration of Wine.com merged in 2000 then folded amid the dot-bomb wreckage and challenges with a number of states’ beverage-alcohol DTC laws before the 2005 Granholm court decision. The center was revived by New Vine Logistics, which flamed out in mid-2009 and was sold in an asset sale to Inertia Beverage Group. IBG in a merger formed WineDirect in 2011.
Amazon had chipped $30 million into WineShopper in 2000 and was planning to launch Amazon Wine with New Vine Logistics before it sold.
“It was too early, and there was bad management,” Waechter said of previous iterations of the company.
But as it is, the company has capacity for shipment flows of 2,000 packages a day to peak holiday times of 25,000 a day. Revenue this year is about $60 million.
WineDirect has honed the company focus over the past several years. IBG bought the Call for Wine outbound telemarketing business in 2010 then sold it in the past few years. In 2013, WineDirect bought Ellipsys Winery operations software and merged with Vancouver, British Columbia-based wine e-commerce backbone Vin65. Last year, WineDirect sold its Dynamics NAV enterprise resource planning software to UXC Eclipse and its compliance and tax-reporting solution to Sovos Compliance, which also purchased wine industry regulation clearinghouse ShipCompliant.
Now, WineDirect is focused on just e-commerce and fulfillment, and Waechter thinks the time is right for this big step of the new Napa Valley fulfillment center. DTC executives have moved into higher levels of wine company management in the past few years. Vin65 is on track to handle $1 billion in wine DTC sales this year from about 1,500 customers. Smartphones for wine orders have moved from 9 percent of winery sales handled by Vin65 three years ago to 35 percent this year.
“This year, millennials are buying more wine than baby boomers,” he said.
And that trend appears to have plenty of upside: This generation tends to be more interested in accumulating experiences such as vacations, good meals and great wine than accumulating things and large homes, as baby boomers have trended toward.